Pricing Your Ann Arbor Home Ahead of the Market

In the current Ann Arbor real estate market it is so important that your home for sale is priced ahead of the market. This is a very difficult concept for many Washtenaw County home sellers to understand. I’ve always prided myself in providing sellers with data and market stats that would make an economics professor proud and I’ve always done my homework when it comes to preparing the market comparables – both active and solds. What I started to notice was in spite of all my market stats and perfect comparables, many sellers were having a difficult time comprehending how supply and demand can greatly affect the price they will get for their home.

To help them understand supply and demand I share the following story with them:

Three attorneys are getting ready to take their Bar exam. Anyone who has had a friend take the Bar exam, knows how important this exam is. Students will often study many months to prepare for this exam, so you don’t want to miss the opportunity to pass the test. As the 3 law students are ready to enter the exam room, they all realize that they forgot to bring a pen. In total panic, they start asking around if anyone has an extra pen. One of the ushers has an extra pen, so he offers it to the first law student for $1. Immediately the second law student offers $5 for the pen. In desperation, the 3rd law student offers $25 for the pen, and he walks into the exam room, and the other 2 law students are out of luck.

When the exam is completed, the attorneys start talking about their 2 cohorts that couldn’t take the exam because they had forgotten to bring a pen. The buzz among  the law students is – be sure to bring a pen to your Bar exam. Meanwhile, the ushers also all noticed that their friend had made $25 selling a basic pen to one of the law students. They all thought – wow, I can make a lot of money if I bring some extra pens to the next Bar exam.

It’s one month later, and once again the Bar exam is being held. Because of all the buzz from the previous exam, every law student was sure to bring a pen to the exam – except one, who forgot. As he was about to enter the exam room, he realized that he had forgotten to bring a pen, so he desperately started to look for a pen. Just like the law students were all forewarned to bring a pen, all the ushers were prepared to make a killing on selling pens. The first usher noticed that there was a law student without a pen, and offered him a pen for $25. Immediately a second usher offered his pen for $10. Finally, the third usher sold his pen for $1, just to get rid of it.

And so goes the Washtenaw County real estate market.    When there are 3 buyers for 1 house, prices tend to go up.  When there are 3 houses and 1 buyer, prices tend to go down.    And that explains supply and demand in very simple terms.

Until next time-

Martin