Sale Counterintuitive Nature To Results

List High – Sell Low

The natural tendency in order to get the highest sale price for most sellers is to ask for the highest list price that the realtor will list for and not have to fight too much. There are 2 issues with this, 1. The agent will list for a much higher price than a buyer will purchase for. We have less to lose, and our immediate goal is to get the listing, not to sell it. The term for an agent giving an inflated FMV is "buying the listing" because they are giving a high initial price to get the paperwork signed then following it with a systematic approach of price reductions to get the listing sold. It's a true bait and switch.  2. The highest price is almost invariably a byproduct of demand, and the best way to increase demand is to present a good product at a fair price, and the worst way to do it, is by asking too much.

List Low – Sell High

Buyers comparison shop. For months online, looking at hundreds or even thousands of listings, looking at details, going through tens of thousands of pictures, and eliminating tonnes of “potential” properties. This is followed over a period of weeks or months of viewing the shortlist of homes in person. The average buyer will then go out and view 10 or 12 homes in person and “COMPARISON SHOP” to look for a) the best value b) within the locations and price point of the buyer c) best fitting their tastes, wants, needs, and preferences. In essence, they are looking for the best value (or deal) that fits their criteria. They are not looking to spend the highest price possible on the right home succumbing completely to an emotional buy off the bat. Even if that is what the sellers would like to see happen. Key terms to remember here are Comparison Shopping, and Maximum Value.

Why – Supply and Demand

Price, at its most base level, is a product of supply and demand. The more qualified buyers and the less appropriate and available product, the higher the price. And vice versa. If 10 people are fighting for 5 homes, those homes are going to come at a premium. If 10 homes are fighting for the same 5 buyers, then they will likely be settling for less (or not selling).

Increase demand

So how can you increase your selling price in ANY given market? Easy, increase the demand for your PARTICULAR HOME.

Pricing is a factor of demand

Making your home more appealing and increasing the value both real and perceived, are key elements to increasing your ultimate sale price. It is by design and not by accident that new home builders place very careful care and attention into the staging of their show homes. They don’t stage because they need to store furniture somewhere, they stage because they know that this is an investment that will pay back with a positive ROI. They know that the key to increasing demand is to appeal to the buyer's emotional side. This is largely done by effectively presenting the property as a spot that the buyer would want to be in. Think of it like a spa, the massage is why the person goes there, but the ambiance is a reason the client is willing to pay a premium. Perhaps not exclusively, but it comes into play.

Better property

This one can come into play in 2 ways. Things that are not necessarily obvious and are often overlooked by the seller who has seen that slowly disintegrating baseboard or floorboards getting more and more scratched and worn over time, that they don’t even notice it anymore. These are not obvious to the homeowner that looks at them every day. But it is obvious to the buyer who is about to spend a large sum of money and wants to make sure they do it wisely. The second way is to look at the items that will come up later or in the “back of the mind” of the potential buyer. This involves things like old windows or shingles, furnaces or hot water tanks that are going to need to be replaced in the near future. These items don’t really “add value” per se, but the replacement can “REMOVE a price REDUCTION”, which ultimately ends up being the same thing. Think of your home's value as having a baseline. Sellers tend to think of items that will INCREASE that baseline, but overlook items that DECREASE that baseline. Buyers on the other hand tend to concentrate more the opposite way. They will likely look at all those things that DECREASE it, and start to get scared. Scared never helps a negotiated price

Better perceived property

A lot of this lies back into that staging, but not exclusively. Let's look at 2 things again. First staging can help a property SEEM bigger through effective ways of laying out furniture, it can also help seem better organized, less cluttered and more enjoyable to spend time in.

Second. Let’s take a look at EFFECTIVELY displaying value. This quite often lies with what the buyer's agent will call to the attention of the buyer and how. But buyer's agents are not on your agenda, they are on the buyer's agenda. And while it may seem like an obvious answer is to have the seller's agent present for all showings, to do the proper job, that is neither likely or reasonable and it’s a good way to get the buyer's agent working against you. Nobody wants to be shown up. And buyers don’t want to feel like they are being watched, or can't speak freely. It’s ironic because that does happen at an open house. But for whatever reason, it's different. It just is. But there is a way around it, a good marketing plan will make it easy for a buyers agent to get this info to their clients, and in reasonable amounts, for example, 100 items listed out is completely ignored, but bite-sized chunks of 3 easy to digest and remember high-value points, are much more effective. Properly placed selling benefits can greatly help perceived value. A little note beside the thermostat noting that the home has air conditioning keeping you cool on a hot summer day is much better than a buyer asking and an agent fumbling around trying to find that info and hating that they look like they don’t have a clue. Stainless steel appliances are good, but the dual-fuel professional-grade AGA 3 foot wide stainless steel with oversized electric oven and gas cooktop with easy to clean 1 piece burners is a better-perceived value.

More offers (competitive – 2 buyers fighting each other for right)

When we bought our home, it had been on the market for several months, undergone a couple of price reductions, was vacant. When I submitted the offer I expected to get it for substantially less than the current ask price. When we were in for our 3rd time around, another couple came in for overlapping appointments. I knew we were likely going into multiple offers. Prior to multiples, my top price was X. And right after being alerted to the other offer, my top price increased to just above ask. From significantly below, to a bit above. I have been in this long enough to know what the real value was vs. what it could potentially be gotten for. But let's look at this from a typical buyer's eyes for a second. This is only worth X, (typically pulled out of thin air, with a justification from some article read somewhere about the state of the market) and no one else wants it, or it would have sold. But wait, someone else wants it now, now I am in competition? Now someone else thinks they are going to weasel in and try and pull MY HOME out from underneath me? My perceived value of that same home just went up. Not only that but now my ego, my competitive nature, my future is at risk. Now, I am suddenly in a different mindset. I like to look at it like this: You as a seller, after being on the market for a while and feeling a bit beat up, finally get an offer, and now after feeling a bit tired from the whole process are in a “negotiation” that can leave us in a battle of us against them, my fight to keep the price up, and them fighting for the lowest price, and a bunch of ways to either get out of the sale or just come back to the table and renegotiate for a price reduction for a reduced price. Etc.

The alternative. Is 2 buyers fighting each other for the right to own your home for a premium. Isn’t it nice to be able to sit on the sidelines, watch the fight unfold in your favour and each time either of them takes a hit, it's to your benefit. Be a lover not a fighter, a lover of the outcome.

DOM – Short (hot, new), Long (stale, unsold)

Almost invariably when I am working with a buyer, in any property that interests them even slightly. I always get asked these questions, and in this order. How much are they asking? How long has it been listed? Seriously, If I had a dollar for every time I was asked that question, I would double my money in the bank. DOM affects the sale price in 2 ways.

The launch, the first 2 weeks, is the majority of the traffic your listing will ever get. Period, even price reductions will not get those people back. Or if they didn’t come to begin with, then just plain IN period. Property launches are much like the opening weekends of blockbuster movies. They make or break, the movie will sink, swim, or just do alright based largely on that launch. A great launch can mean a quick offer at close to or at ask. It also means the most likely time, to get multiple offers IF STRATEGIZED PROPERLY. There are a number of marketing tools, beyond the control of the listing agent, that primarily lies with the multitude of buyers agents with clients that are propelled through the real estate boards listing databases. Hot new listings, get put out things like Auto-notifications through to buyers through the agent only database, and also through the thousands of agent websites, directly to consumers, (although still much less). Direct to agents through their “Hot sheets” which are updated daily. All the PENT UP buyers will see this hot new listing when it first comes out. But only new buyers entering the market will see the list of active and stagnant older listings that have been on for a while. Don’t waste that pool of ready to pull the trigger” buyers and hope for the “just starting their search” buyers to be your golden ticket.

Let's talk for a minute about the reality of how most buyers and every agent looks at the negotiation process once the buyer is ready to make an offer. The first thing we do is assess what the FMV of that home is in the current marketplace. Is it fairly priced or not? If not, what is the fair price, is it likely the sellers will get there with us, or are we just going to waste our time so don’t bother! If it is reasonably priced, then are we likely going to be able to negotiate a good deal? This typically boils down to 2 things, motivation and DOM. For motivation, is this a stressful event? Ie. Divorce, High Debt, Foreclosure or forced sale? If it is we're going to attempt low. Second, and much more common. What does the HISTORICAL look like? Have the sellers made multiple attempts over multiple time periods to sell? Have they done price reductions? How much? When last? By how much? How long has this property been on the market? FACTS show the longer on the market, the further from the LAST ASK price they are going to get. And frankly, the more aggressive the agent, the further that is going to be. Higher Days on Market means less interest, less perceived value, less will power on the sellers part. More determination on the buyer's part for a lower price, WAY more determination on the buyer's agent to get a good deal for their clients, more facts to justify a lower price, and as I have often said when I represent buyer clients. “It takes sellers a little bit to come to reality. That their property is not worth as much as they thought it was. If they don’t come to that reality quickly enough, then we are going to go in low and hard, and stick. They are going to pay the price for their inflated ego, and you are going to reap the benefit. Just don’t do like they did, when you go to sell!