The BrazzelDazzle Blog: November 2009

When trying to understand the real estate market and why prices are what they are, it may help to think of your house as a commodity - not a product. 

• A product is an item that a seller places a value on and prices it accordingly ... think: a sofa, a jar of peanut butter or a shovel.  There will be differences in quality, differences in features, differences in attractiveness.  There will be sales available and some vendors may charge more or less than others ... but the price is the price as set by the seller.

• A commodity is an item whose price is determined by the buyer who has a perception of it's current value.  Think: stocks, gold, and silver.  The buyer places a value on it and pays accordingly - prices of commodities go up and down.  Commodities' prices are influenced by supply and demand.  The more supply there is, the less the price will be.  The more scarce the commodity, the higher the price will be.

Who cares?  What's the difference?  Why does the distinction matter?

A seller should care, understand the difference, and make the distinction ... then price her home accordingly.  In today's real estate environment (in most areas of the country) where there is a plethora of available homes on the market, the prices are lower than when the inventory is sparse.  The law of "supply and demand" is in control.  In real estate, when the inventory is high, it pushes housing prices downward. 

A savvy seller will hire a Realtor who is educated, experienced, and knowledgeable in their area and who will help them price their house accordingly.  Sellers who position their houses correctly (as the commodity that it is!) sell for more money and in less time than those who treat their house as a product whose perceived value by the potential buyers may be different than theirs! 

THINK OF YOUR HOUSE AS A COMMODITY ... YOU'LL PRICE IT RIGHT AND IT WILL SELL!