LATEST NEWS

The Case For Asking Prices In The Real Estate Industry

Access to market pricing is a necessity to all market participants, and one of our goals is to make it widely available.

By Richard Du April 28, 2014
Credit: Fabian Blank

At Agorafy we have made the case since day one that requiring verified asking prices for all of our listings increases transparency and accountability in the market place. We also believe it helps to create more efficient market by educating principals and clients alike, which leads to more informed conversations, and saves agents and their client’s time confirming availability and pricing.

Access to market pricing is a necessity to all market participants, and one of our goals is to make it widely available. Those looking for a new home for their family or business need to be able to research and compare prices across different buildings and neighborhoods. Real estate agents need to price out new vacancies and potential exclusives as negotiated the best deal for their client. Investors need to spot shifting trends and be able to properly underwrite potential deals.

Having access to data on recent transactions for comparables helps to give a partial picture of the current market environment. However when pricing a potential exclusive or underwriting an asset it’s not enough to know where prices have been, you need to forecast where they are going. This is the case for asking prices.

There are many positive aspects to relying on asking prices when determining market pricing. Not only do they give a starting point for negotiation and establish and expectation between the parties, but they are also a forward looking assumption on what the market can bear.

By focusing on shifting asking prices real estate professionals gain enormous insights into pricing trends. Since they are forward looking by nature, active listings are sensitive to supply and demand and are more responsive to the market. This feed back in real time and can be much more valuable than recent taking rents or closing prices, which degrade in relevance as time goes on.

It is true that asking prices can be inflated by misinformed real estate agents or unrealistic sellers and landlords. However, mispriced listings typically stand out as outliers and get corrected through market feedback. The majority of the time the taking rent or closing price is a small percentage below the asking price. However during periods of short supply deals get done quickly above the starting price, and subsequent asking prices get revised upwards.

Most real estate professionals can use their experience to forecast where the deal will get done in relation to the asking price and can spot changes in pricing by monitoring the spread between asking prices and the taking rent or closing price. Taking rents as a comparable provides a nice clean data point which can be used for pricing listings and underwriting assets. Once verified they provide a nice historical record of a transaction which professionals can point to when making a decision.

However there a number of downsides to relying too heavily on taking rents as comparable. Mentioned earlier, they lose relevance rapidly as time goes on. Especially in periods of market volatility taking rents quickly fail to reflect the current market environment and trends in market pricing. As just a data point they lose the context of the available supply and numerous other factors that led to the deal price.

Most importantly when they are distilled down to a deal price on a per square foot basis, they become stripped away from all of the factors that led to the two parties coming to an agreement. The taking rent per square foot doesn’t reflect the length of time on the market, or landlord concessions such as tenant improvement allowance, free rent, and landlord build out required to secure the deal. Without this context taking rents on a per square foot basis can become somewhat meaningless.

We believe strongly that asking prices are the most important data point for underwriting assets and pricing out new availabilities, not to mention searching for availabilities. For this reason we will continue to expand the reach of Agorafy in the hope of increasing transparency the New York real estate market. Our platform is built on verified asking prices to provide access and value to every market participant in the city.

 

Richard Du

ABOUT THE AUTHOR Richard Du

ABOUT THE AUTHOR Richard Du

Richard Du, founder and CEO of Agorafy, was born in Vietnam and raised in the United States. As a child, he worked to support his family until he had the chance to immigrate to the America. Here, he began his career as an agent at Helmsley Spear, which he eventually parlayed into a lucrative real estate business. More than a decade later, Mr. Du is at the helm of Agorafy.

  • AGORAFY
    Avocado toasts are the reason why millennials can’t afford a home, says one Australian real estate developer. #AvocadoToast #Millennials https://goo.gl/TBCPnv
  • AGORAFY
    Five years on since Superstorm Sandy, Queens’ coastal peninsula is in the midst of a development boom. #Development #Rockaways https://goo.gl/BRKRrD
  • AGORAFY
    It turns out, renters can’t get enough of good ol’ no-doorman-no-frills apartments. Too bad developers aren’t building any. #Doorman #LuxuryRentals https://goo.gl/pdnbo6
The Housing Market In Shenzhen, The Silicon Valley of China, Slows In 2017
The city of Shenzhen has been on the real estate radar for quite some time. It is known as the Silicon Valley of China. Many…
Developers Jump Aboard The Trend To Revamp Transit Hubs And Remake Cities
Never has the often used marketing term, “close to transportation” been more important when attracting home buyers. These days it’s not just homes that are…
Millennials Are Fueling The Current Sizzling Real Estate Market
Ever wondered why the hosts of home improvement shows seem to be getting progressively younger, along with the fresh-faced couples getting their new properties made…
The Best Cities For Recent Grads To Rent – Without Blowing Their Entire Paycheck
What’s next post graduation? For most, the logical answer is to find a job. After the excitement of finishing your studies and the big celebration,…
Luxury Knows No Limit In Malaysia As A Deluge Of New Developments Hit The Market
The amount of newly constructed high-end real estate in Malaysia is almost as abundant as the lush vegetation which covers the tropical landscape. Despite vacant…
Don’t Call It A Commune – Upscale Co-Living Is Attracting Major Development
What may have once been referred to as a commune is today termed a co-living space. The big news that it’s not hippies with hemp…
It’s Official—New York Is Now The Most Expensive City In The World To Build
As if you didn’t already know, it’s expensive to build in New York City. Not just expensive but now officially the most expensive place in…
An Ultimate Destination For The Most Comprehensive Real Estate Data, Agorafy Prepares To Launch Nationwide
In the coming days, Agorafy will be entering a new chapter. It is the beginning of a new growth cycle in real estate technology with…

TOP 10