In a seller’s or even balanced market, one strategy to get the best price is to offer the property below its estimated market value.
The idea is that a low asking price will engender competitive bidding, otherwise known by a term I don’t much like — a bidding war.
However, wise is the seller who gives due consideration to the consequences, and they are not necessarily bad.
It could happen that the tactic won’t produce more than a single offer, maybe none. So, sellers need to appreciate that they can reject an offer outright or decline to counter it. That’s true if the bid is on or below the listing price.
The risk, of course, is that the lone bidder reacts emotionally and walks away without volunteering a higher number.
There’s another much more serious risk: If the listing contract guarantees the broker a commission in the event of a full-price offer from a ready, willing and able buyer with acceptable terms, the seller may well be out a boatload of money.
Sellers also need to consider just how little they would accept for their property. Easy to say, but many sellers don’t know their bottom line until they come to grips with how long it takes to attract serious interest and just how serious (as in how high the price) that interest proves to be.
The reason they are well advised to focus on their lowest acceptable price is that the number may well be any buyer’s highest tolerable price. List the property too low, and the bids may not approach the seller’s true minimum. Ever.
In most housing markets, I tend to favor listing properties somewhat below my estimation of what the market might bear.
The least that doing so can achieve, I think, is generate the highest number of viewings. When the number of showings approaches significance after a reasonable amount of time has passed and no offers arrive, then broker and seller have to understand that even the low price hasn’t been low enough.
As always, it is the market alone that determines a property’s value.
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Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022