When "Common Sense" Fails in Real Estate

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!