Pricing your home higher than its market value. This is a strategy that practically every home seller either entertains when coming up with a listing price or actually does with their asking price. The thinking behind such a move is simple: it will bring motivated buyers who can afford the home and will also give the seller room for negotiation. In reality, there’s not a buyer’s agent out there who does not know this pre-purchase offer, pre-negotiation tactic and telling their buyers about it.
What this means, of course, is the strategy isn’t a secret and buyers, along with their agents, are going to come in with their eyes wide open. Secrecy aside, it can backfire as buyers who could afford the home if it was initially priced will pass in their house hunt. This is because most people start their search for a home to buy on the internet and will search in their price range, which will not include your priced above its value property.
However, this isn’t to say the tactic is not without merit. It will entice those who are willing to go a bit over budget, as well as those who are in a higher bracket but want to spend a little less. On the other side of those potential buyers, is those who will see your home as being overpriced, and knowing such as they are looking at your competition.
SETTING A PRICE HIGHER THAN ACTUAL MARKET VALUE
This isn’t necessarily a strategy that will keep your home from getting sold. That said, it will be a roadblock to receiving purchase offers. You also have to think about yourself for a moment when deciding whether or not to price your home a bit above its actual value. That is to say, what will your reaction be when offers come in which are not only lower than your asking price, but lower than the true market value of your property?
“So you’re thinking about selling your house. But how much do you really know about negotiating a home’s sale? Jump into this unprepared and you could leave thousands of dollars — maybe tens of thousands — on the table. You need to go back to school briefly and become a student of the fine art of negotiation.” —MSN Real Estate
It is important to remember, in the current housing market, homes are generally not selling for their listing prices, even if those prices are fair. Because of the dynamics of the market, most of the properties actively listed for sale will go to the settlement table for less than the original asking price and the home’s real market value.
Your effort to create room for negotiation could very well be one that’s going to lead to low ball offers. There will be buyers who are shrewd enough to think that you are in a situation where you not only need to sell your home, but need the proceeds from the sale.
WHAT YOU SHOULD KNOW ABOUT BUYERS AND NEGOTIATION
It should come as no surprise that just because an individual, couple, or family are in the market to buy a home, they nonetheless want to save money. They will have agents which will remind them on a regular basis that asking prices are negotiable and want that to become a reality. Here are some other things to consider about buyers and negotiation:
- Do not make the mistake of going it alone. One thing that’s not a smart choice is to sell your home on your own. It will make matters worse if you don’t have an agent to handle the negotiations, someone that’s not emotionally attached to your home. An experienced agent has seen it all and knows how to navigate every twist and turn.
- Be prepared and willing to give on more than price. Your tactic of pricing your home above its real market value will give you room to allow the negotiate the price, but it’s not the only thing in play. In addition, be prepared to give the buyer some sweetening by offering to pay part or all of the closing costs as well as leaving that beautiful, expensive area rug in the home.
- Treat counter offers smartly as they come. There will be counter offers in most cases and you need to treat them wisely. Don’t make the mistake of jumping on a counter offer just to try and get closer to closing the deal.
- Know your limits and stick with them. You should have an established price you won’t go below and be smart about trying to get the best price without sabotaging your own efforts.
- Be willing to walk away when necessary. If negotiations continue to favor a buyer with a falling selling price, be willing to walk away from that buyer and entertain other offers.
If you handle the negotiations without getting emotional and/or over anxious, you’ll make far better decisions and be happy with the sales price.