When "Common Sense" Fails in Real Estate.

By
Real Estate Agent with Windermere Real Estate N.E.

When "Common Sense" Fails in Real Estate
By Greg Perry
Kirkland, Realtor

Worried_guy There are many examples in life when common sense and following gut instincts lead us in the right direction.  It doesn't always work in real estate.  Here's an example of what I mean.

Mr./Ms. Seller, of course you want to make as much money as you can on the sale of your castle.  Your "common sense" strategy will be to want to start with a higher price and lower the asking price when nothing happens.  You think that there is a chance that someone out there will pay your (over)price........and I understand what you're thinking.  I really do.  But this thinking may undermine your NET proceeds on your sale.

You don't want to market to an exception, you want to market to the masses to get your house SOLD.   If you are overpriced by as little as 2%, nobody will even want to look at it.  You simply have too much competition.  Think of it like a parade.  You put your home on the market and the parade of Buyers and agents marches by.  If someone in the parade likes your house, they'll offer on it.  If it's overpriced, the parade will pass and you are left wondering what the heck happened!

So...you'll lower your price.  Waiting for that first offer.  The trouble is, market time is building.  We do have new buyers entering the market (the parade stragglers), but now they as they look at your castle -- then look at the market time-- they wonder "What's wrong with it?"  You see, we're a funny people.  If someone else wants it....that validates us and we want it even more.  If nobody else offers on it, we think there must be something wrong.

If the market is declining, you may have a HUGE problem in that your price reductions may "chase" the market down, never really catching it.  You reduce, but your price never get to where the market actually is.

Now, because of this law in negotiation, --"Time is the enemy of the Seller", you start getting that feeling of desperation.  You finally get your offer.  The Buyers and the Buyer's agent know by now you are anxious to get it sold and will offer low.  Far lower than you would have achieved if you would have priced it correctly for the parade and you'll feel compelled to take it.

Counter-intuitive thought #1
Starting with a lower price generally NETS you more $$.

Starting with a lower price will create a BUZZ when the parade marches by.  Worst case is that you'll sell your house quickly and most likely NET the most possible.  Best case is that 2 or more Buyers will like your property and create a bidding war, raising the price to more than you wanted to begin with.  You don't want to be in the position where market times eats up your profits!

www.425realty.com

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Rainer
53,452
John Lockwood
Lockwood Real Estate - Sacramento, CA
Nicely done.  There can't be too many different ways to say this, and this is one of the more eloquent.
Aug 01, 2007 02:55 PM #1
Rainmaker
242,151
Brad Snyder
Sierra Vista Realty - Sierra Vista, AZ

Super analogy and great advice. Too many seller's are still living in 2005 and need good advice to bring them into 2007pricing.

Great job.

Aug 01, 2007 03:01 PM #2
Rainmaker
224,121
Laurie Mindnich
Centennial, CO
What a nice way to relay the facts- thank you for the post!
Aug 01, 2007 03:06 PM #3
Rainmaker
49,714
A List Realty Group Inc.
Keller Williams Realty e2pllc - Lake Stevens, WA

Great stuff, I know it all too well, I think I use that line on everey presentation Ive been on ( although some still wont listen to reason:( . Good message all around!

Levi Stearns

Keller Williams Realty e2pllc

425-232-4525 

Aug 01, 2007 03:13 PM #4
Rainmaker
97,136
Greg & Brian Perry
Windermere Real Estate N.E. - Kirkland, WA
Working-for-you

Thanks for the good words, Levi, Laurie, Brad and John.

Greg Perry

Aug 01, 2007 05:09 PM #5
Rainmaker
116,810
Tracey Thomas
BrokerInTrust Real Estate - Calabasas, CA
CA Real Estate Broker
I couldn't agree with you more, this is all so true and so well said.  Thanks!
Aug 02, 2007 02:02 PM #6
Rainer
274,607
Adam Waldman
Westcott Group Real Estate Company - Hauppauge, NY
Realtor - Long Island
Great post!  100% on the money.  No matter what a seller thinks, the first 30 days on the market are the most important.  Better to create a bidding war by pricing low, than to keep reducing by $10,000 at a time and thinking that it's going to make any difference.  The market is what the market is.  If homeowners don't like the factual data, then they should keep their homes off of the market until the prices start rising again.  If you need to sell, price it right and get it done. 
Aug 07, 2007 12:11 AM #7
Rainmaker
97,136
Greg & Brian Perry
Windermere Real Estate N.E. - Kirkland, WA
Working-for-you

Adam,

Yes, the market is what the market is.  Our tools need to be sharp to be able to communicate the right information to the Seller.

Aug 08, 2007 06:39 AM #8
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Rainmaker
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Greg & Brian Perry

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