It's All In The Fingertips
I love to teach. Last week I had a wonderful time leading a pricing and negotiation class for a large group of veteran agents. I was reminded, as I often am when teaching, about the rapidity with which change occurs in our marketplace. Pricing and negotiating strategies evolve on a month to month basis (in fact, pricing the property with the seller is often our first negotiation!) and it is particularly challenging to keep our clients and customers informed and up to date. Here’s what I (and the group) believe is happening at the moment:
Pricing remains the key issue in achieving a quick and profitable sale. Regardless of the property size or quality, there are simply no buyers willing to overpay in the current environment. Since pent up demand increases the likelihood of getting a top price immediately after placing a property on the market, proper initial pricing often drives early sales success. Many sellers believe that it is worth attempting a high price in the first weeks of the sales process, believing that they can take a price reduction if the property fails to command buyer interest. While this is literally true, it’s a poor strategy. Unless the price is right at the beginning, those buyers who have been waiting for the right home will pass it by, and there is no chance of aggressive or competitive bidding. If the initial weeks go by with no deal, the chances are good that the property will then be on the market for weeks or months. And it will STILL require a price reduction to become attractive to buyers.
Once an appropriate price is established, and buyers begin to make offers, negotiating to a best price requires both skill and patience. I always prefer negotiating when there is another agent representing the other side, because few people negotiate effectively on their own behalf, especially for a home. Even if they have done research, buyers will often undervalue the home they hope to buy. Sellers, on the other hand, frequently overvalue the home they own. One side sees only the blemishes, even in a property they want, while the other side minimizes the blemishes or does not perceive them at all. It is our job, as agents, to insert more rational, fact based thinking into the process.
Nowadays, with so many clients and customers who work in the financial world, we often hear them describe themselves as “fact based decision makers.” In our experience, almost no one can be fact based when buying or selling something as personal and important as a home. I know that for myself I would NEVER buy or sell without an agent (and I never have.) The process is too emotionally weighted for the principals to see the facts clearly. And facts cannot account for the intangible connection which can make a buyer so sure that one property rather than another is right for them. As agents we are charged with acknowledging and weighing the intangibles while remaining focused on the facts.
In today’s environment one cannot begin with an extremely low offer, assuming that the property is priced correctly. And it is rarely successful to make ANY offer during the first few days a property is on the market; most sellers require at least a week or ten days of market exposure before they feel confident that enough people have seen the unit to assure a best price. Our observation for 2015 is that, if a property has received sufficient market exposure, a buyer can usually be assured of a response with an offer within 5% of the asking price. It can go to 10% if the property has been on the market for a few months, or even 15% if the property has both been around for a while and still seems incorrectly priced. It is rare to get a counter on an offer more than 15% below ask And if a property is both desirable and well-priced, it is still likely to sell within a week or two. In that case, there will be no negotiation except up.
Buyers must be prepared to present a clear and complete financial statement with their bid to make a compelling case for their candidacy. And both sides need to anticipate that it usually takes two or three offers and counter-offers (sometimes more) to arrive at both price and terms which are acceptable to both sides. Often everyone needs to give a little more than they want to. I have always liked to joke that you know you have made a successful deal when each side is equally unhappy with the outcome!
Over thirty five years in this business, both pricing and negotiating strategies have traveled into my fingertips. I tend to know by instinct how best to proceed in most situations. And from the lively questions which flowed back and forth at the Friday class, it was gratifying to see so many of my colleagues both thoughtful and insightful about the nuances of these critical issues.