One of the age-old quandaries in this business is how to price a property when you decide to sell. In my early years I had a running battle with my dad over this… he always wanted to ask a very high price for a property, thinking he could always come down, but would never be able to go up. (I’ve got a different take on this too, but that’s another post.)
I countered that by pricing the property so far above the market, serious buyers wouldn’t even call for more information because the price was so high it didn’t matter; a deal that had to start with an offer 30% or more below asking price is bound to be too difficult to get done. Why bother? But back then my dad called the shots, and we had a lot of property on the market for a very long time with very few calls of interest.
(Click to view larger image)
My argument was to price the property just below the market in order to gain maximum response. That way I was likely to get two or more buyers interested, and as any auctioneer will tell you, the only thing it takes to make an auction is at least two parties wanting something there is only one of. I used this philosophy to run bidding wars in the boom when we were selling credit-tenant retail properties… the most fun I’ve ever had in the real estate business.
One of the largest brokerages in the country, Marcus and Millichap, uses this same strategy in preparing sellers to list their properties.
The graphic above is from an M and M listing proposal, and depicts the effects of pricing on buyer response.
This is not just a sales ploy… my own experience bears out the premise. Price the property to get looks from the maximum number of people and your chances of a fast sale increase exponentially.
Remember that sales is a numbers game… the closing ratio for any product may vary, but regardless of whether it is 10% or 25%, the odds that it will sell are increased by increasing the audience to start with. Think about his next time you’re placing a property on the market.