Avoiding bait prices
Bait Prices hook sellers more than buyers
Price Ranges are ‘Bait’ strategies which use a false low price to attract buyers.
The Price Range method comes in a variety of names – By Negotiation; Offers Above; Price Guide. They are all similar and they all undersell your home.
Say you want $300,000 for your home. The agent will suggest that your home display ‘Price Range $275,000 – $325,000’.
The agent will say that “lots of buyers” will be attracted by this lower price and then willingly pay the higher price.
Bait prices, which are supposed to hook buyers, actually hook sellers into underselling their homes.
‘Price Ranges’ have quickly fallen out of favour as most homesellers are quick to realise that buyers are not so gullible as to fall for such a transparent trick.
Agents who suggest using a Price Range are not skilled negotiators. If they were, they wouldn’t use such a financially damaging strategy.
Two BIG Reasons to Reject ‘Bait’ Prices
There are two reasons why you must never allow an agent to display bait prices for your home.
The first reason is that the lowest price the buyers see is the highest price they will want to pay.
How would you feel if you saw a home advertised with the words, ‘Offers above $250,000’, – would you offer $320,000 just because it is “above” $250,000? Of course not. You would look at the $250,000 and do what most buyers do – offer $250,000. Or less.
The second reason you must avoid bait prices is that most of the buyers you attract will only be able to afford the lowest price displayed.
If a buyer has a maximum limit of $250,000 and sees your home advertised “from $250,000” (when you want $300,000), the buyer is going to be attracted to your home. You then have a buyer who cannot afford to pay what your home is worth. It makes no sense – unless the agent intends to talk you down in price, which is precisely why agents use ‘bait’ prices.
One of the principles of negotiation is that the person you are negotiating with should be able to afford what you are selling. If you want $300,000 for your home, the first thing you want is a buyer who can afford $300,000. It’s such an obvious point it is amazing so many agents don’t see it.
Agents claim that the more buyers who are attracted to your home, the better it is for you.
But what would you prefer: dozens of buyers who can’t afford to buy your home or one buyer who can?
The quality of the buyers is much more important than the quantity.
Agents want you to see lots of activity because it makes it easier to convince you to lower your selling price.
The agent will say, “Look at all these people who have come through. The reason they haven’t bought your home is because the price is too high.”
Or, when crowds of people who cannot afford the price you want are looking at your home, they will offer what they can afford. And then the agent will say: “The buyers are all telling us that the most they will pay is $250,000. This is what the market is saying. You have to meet the market.”
It is the same as the Auction System – your agent is looking in the wrong market.
If your home is worth more than $300,000, your agent must show it to people who can afford to pay more than $300,000. This will mean less crowds and less activity. But at least you won’t be under-sold.
You won’t receive the highest price if you are attracting the lowest price buyers. Do not fall for this activity trap.
Never market your home without a price.
When you hide the price, the buyers will hide too. Displaying no price – or using the words ‘Price on Application’ – makes it look as if your home is over-priced. You lose the most genuine buyers.
Research shows that when you hide the price you lose at least half the enquiry; and this could be your best enquiry. If buyers see your home and its price and then they enquire, these buyers are sure to be genuine.
Time and Patience
When your home first goes for sale, the right buyer may see it immediately and pay the highest price on the spot. This is great news; it is one of the best things that can happen to you.
But, if your home does not sell in the first couple of weeks, you may have to wait until your agent finds you the best buyer at the highest price.
Some homesellers get agitated unless lots of people inspect their home. But it is better to have silence and wait for the right buyer at the highest price, than activity and sell to the wrong buyer at the lowest price.
It can take time to get the highest price for your home. That extra time – and that better agent -means you receive the highest price possible. And that’s exactly what you want.
The important points of Price Ranges
- Price Ranges attract buyers who cannot afford your home.
- The lowest price you display will be the highest the buyers want to pay.
- Price Ranges force your price down
- If you display no price, you lose half the best buyers.
- Agents who use Price Ranges are not skilled negotiators.
The above is an extract from the book Real Estate Mistakes.