Should I Leave Lots of Negotiation Room When Selling?
Today I'm going to answer one of the most common questions I get from sellers: Should I price my house higher so that I can leave a lot of room for negotiation with buyers?. Now, everyone in Townsville has heard that it's a bit of a buyer's market, so often I find that people want to price their house 30 to 50,000 dollars higher than the price they actually want to leave room for negotiation. Now, I'm pretty strict with my vendors about where they should price their houses because if a house is priced right, it's likely to sell within the first seven to fourteen days.
Let me explain a little bit. When buyers see a new house to come to market, they often see it on a Wednesday evening or a Thursday morning on their smartphones on realestate.com. They've been looking at hundreds of houses potentially in that suburb, and if they see a house that's priced right, right away, and they see that it's a good bargain, they think to themselves, "Oh, my goodness. I've got to see that house. I don't want to miss out on it. I've got to get there." And they show up in that first weekend of open homes. So, if buyer number one thinks that, on average 600 to 1,000 people are seeing that ad in the first week, you're likely to have 15 to 20 people through your open homes that weekend.
When then happens is during the open homes, it's a crowd. It's busy. There's lots of people in there. Everyone's looking over their shoulder going, "Oh, my goodness. Most of the houses on the market are overpriced, and only two or three people are at the open homes. With this house, it's obviously crowded. It's going to sell this weekend. A good real estate agent will then say to those buyers, "Hey. We're really busy here. This house is likely to sell this weekend. You make sure you call me this afternoon if you want to make another ... if you want to make an offer, rather. Otherwise, there's a good chance this house is going to be gone."
Often, when you have 15 people look at a house the first weekend, you do get an offer. And then, what does your agent do? Well, let's say you wanted 350,000 dollars for your house. If you've priced it very precisely, you might price it at 365,000. Don't worry. That leaves plenty of room for negotiation. Buyers see that house is priced right away, you get a crowd, you get an offer from your agent the first weekend.
Let's say that offer comes in at 350,000, fantastic. A good agent can then get you more money. How? If there's 15 buyers through, buyer number five makes an offer at 350,000. That evening the agent rings back all 14 other buyers and goes, "Hey, mister buyer. That house at number two Smith Street, we've got an offer on it already. Do you want another look at that house because there's a good chance it's going to sell that weekend." When buyers hear that, they think to themselves, "Oh, my goodness. I don't want to miss out on a bargain." They come back, have another look. And then, the agent says to them, "Mister buyer, there's already another offer to purchase on this house. If you don't put in your best and final offer, there's a good change you're going to miss out. So, make an offer on a contract, and make it your best and final price. Otherwise, the owners are going to take this first offer, and the house is gone."
Well, if the agent can do that to two or three buyers in the first weekend, the house is likely to sell that first weekend and for a fantastic price. Last year (2017), Sean and I were be able to sell seven houses at asking price using this same technique. We've been be able to get our days on the market down to just 17 over the entire last quarter, where we sold more than 15 houses. So, if you want your house to sell quickly and for the best price, my highest recommendation is don't leave 30 or 50,000 dollars room for negotiation. Leave 10 to 20 depending on the price of the house. Of course, a house that's 300,000, you'd leave a little bit less, or a house that's 600,000, you'd leave a little bit more that way the buyers see its good value right away, the agent puts them into competition with each other, and the house sells for a great price in the first two weeks.