by Neil Jenman
Real Estate Support you can trust
A while ago, a home was being auctioned. Like most auctions, the buyers had been lured along with bait pricing. The home was promoted “between $590,000 and $630,000”. But the sellers wanted at least $680,000.
Why do agents advertise a home for $590,000 when the owner wants $680,000? Surely, it just wastes buyers’ time plus reports and legal fees for a home they have no chance of buying?
And why do sellers allow their home to be advertised below a price they are willing to accept?
Well, it is seldom the sellers’ idea to use bait pricing, it’s the agents. Agents say to sellers: “If we promote your home at a lower price, we attract more buyers.”
Now, to be sure, this is true. If you want $680,000 and the agents advertise your home as low as $590,000, they will indeed attract more buyers. The agent will assure you that more buyers can create a “buying frenzy” and push the price up.
It rarely happens. Instead of buyers being pushed up, sellers get pushed down. The pressure on sellers, especially at auctions, is intense. Agents say, “This is what the market is telling us.”
But here’s the truth. If you want to sell your home for $680,000, the first thing you need is buyers who can afford $680,000. But when you advertise a lower price, you attract buyers at the lower price.
The agent will urge the sellers: “This is what the market is telling us your home is worth.”
If only the sellers knew enough to say to the agent: “You have been looking in the wrong market. You advertised my home for $590,000 to $630,000. So, all you have done is attract buyers who can only afford $590,000 to $630,000. If you wanted to sell my home at the price I wanted, you should have advertised it for $680,000.”
Yes, bait pricing attracts more buyers and it enables agents to say to sellers, “Look at all these buyers, meet the market and sell your home now.”
Don’t do it. The agent is looking in the wrong market!
Never allow an agent to promote your home at a lower price than you are willing to accept. Low bait prices lead to low offers.
Although bait pricing is illegal, most agents do it. They have more chance of being prosecuted for jaywalking than bait pricing. They do it to push the sellers down and make faster sales. They tell you to “trust” them, they “know what we are doing”.
Well, there is an old saying: “If a person will steal for me, that person will steal from me,” which means this: If an agent suggests you cheat buyers with a bait price, you can be sure of one thing, the agent will cheat you too.”
Don’t deal with agents who use bait pricing, no matter how persuasive they might be or how tempted you feel.
Find yourself an honest agent who uses honest negotiation methods. You’ll get a much better price with much less pressure.
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