Selling house, strategies around setting price?

With the current hot real estate market in Vancouver, my agent wants to list my townhouse for slightly less than I think it's worth. The reason given is that there will be more people who will put in offers, hopefully leading to a bidding war.

Is this the best strategy?

He/she may just be looking to make a quick sale so they don't have to spend alot of time with you on this. If you aren't in hurry, list it properly and wait it out. There is absolutely no harm in lowering the price if your original one has no hits.

Your agent is smart. Listing below the price is a common strategy but most real estate agents don't do it, because of people like you (no offense). IE: most people, when they hear real estate agents say "List it for XXX,XXX" which sounds rediculous, they will think "this guy doesnt know what he is talking about" and the real estate agent will lose customers.

But listen to your agent! Just make sure you get him to take out any clause that says if he gets an offer meeting your asking price, then you HAVE to sell. If you're house is worth $700,000 and you ask $655,000 you will get 3-4 interested parties that will be so consumed by your "well priced home", that they will completely forget about looking at other places and zoom in on yours.

Then you get all of them to come through your house, look at it, fall in love with it... then you get offers coming in and you can start the bidding war. In Vancouver, it's not unusual for houses to sell for 10% more than the original asking price.

As some one who is currently in the market, i've lost out on a few bidding wars. They were all created by the same strategy that your agent wants to employ. List it late in the week, a few thousand below and have your open house on a weekend. Have all the bids due by Monday evening and watch the biding take place. Of course there is a level of risk involved i.e. people may know what you are upto and avoid your house all togther but in a hot market, i don't think that will be the case.

Good luck,

Nejo

Originally Posted by adamtheman

Your agent is smart. Listing below the price is a common strategy but most real estate agents don't do it, because of people like you (no offense).

Exactly. Listen to adamtheman, and the agent, and you'll do great.

Originally Posted by Ron

Exactly. Listen to adamtheman, and the agent, and you'll do great.

This is what I'll do. I'll update with the results after.

Realtor suggested listing price: $349,900
My suggested listing price: $359,900
A very comparable listing recently sold (listed at $359,900, sold for $380,000).

Going to be listing at $349,900. Let's hope it works out.

I have never used this tactic. My approach has always been to list at a significant premium to previous sales and be prepared to negotiate down to my target price.

No listing agent (I have had 3) has ever suggested otherwise.

The "liability" of such a technique is your realtor is entitled to full comission as soon as you receive an offer at the listing price. Although not a big risk, theoretically, your realtor can ignore you after that $349k offer arrives and still demand his $12,000 or whatever.

This is definitely a risky strategy. We have all heard stories of bidding wars. I have also heard stories of people getting bargains because none of the bidders took the bait and made an over-ask offer. (i.e., they took the asking price at face value and offered less).

If you don't get the price you want in the initial bidding war, then you will have to alter the listing to raise the asking price. This WILL burn your listing a little bit, and your realtor a fair bit. Lots of people don't like being manipulated like this.

If the last comparable sale is $380k, why are you asking only $349k?? Why not list it at at least the same as the last comparable listed for ($359k) so you can attempt to replicate the same situation?

Originally Posted by grant

The "liability" of such a technique is your realtor is entitled to full comission as soon as you receive an offer at the listing price. Although not a big risk, theoretically, your realtor can ignore you after that $349k offer arrives and still demand his $12,000 or whatever.

Where did you get that info from ?

He's entitled to his comission once you ACCEPT the offer

This is apparently a good strategy. I am a real estate investor as well, and when I go to sell, I will likely use this technique.

I was reading an article once about a woman who was broke in New York, so she borrowed $1000 from her boyfriend so she could start her own realty brokerage. She sold the business some years later for $2 billion. It had become one of the premiere brokerages in New York because she employed this particular strategy for selling properties.

She told the readers to get 3 realtors to come in to price your property, then take the lowest one and hack 10% off of that price. Throw it on the market and watch the frenzy begin. She said most of the time, the actual sale price will exceed the price quoted by the highest of the 3 realtors who assessed your place.

Originally Posted by PurpleTiger

With the current hot real estate market in Vancouver, my agent wants to list my townhouse for slightly less than I think it's worth. The reason given is that there will be more people who will put in offers, hopefully leading to a bidding war.

Is this the best strategy?

There's obviously mixed reponses to this strategy so I'll share mine. I bought my house in a similar scenario. The seller listed for about 10% less than the market rate and wanted interested bidders to hold off until the Monday night. We were interested in the house but our agent (who was very familiar with this tactic) instructed us to wait on the sidelines. Monday came and they only had 1 offer, which had tons of conditions. It did not work out. Apparently, other potential buyers were also scared off by this tactic. That Wednesday, my agent received a call from the listing agent to see if we were still interested. We lowballed and got the house for less than the listing price.

So, the tactic may backfire if you scare off potential buyers.

Originally Posted by fly

There's obviously mixed reponses to this strategy so I'll share mine. I bought my house in a similar scenario. The seller listed for about 10% less than the market rate and wanted interested bidders to hold off until the Monday night. We were interested in the house but our agent (who was very familiar with this tactic) instructed us to wait on the sidelines. Monday came and they only had 1 offer, which had tons of conditions. It did not work out. Apparently, other potential buyers were also scared off by this tactic. That Wednesday, my agent received a call from the listing agent to see if we were still interested. We lowballed and got the house for less than the listing price.

So, the tactic may backfire if you scare off potential buyers.

You're correct the tactic of holding off offers until a certain date can have pitfalls as well - it normally workd in a high demand area or where the house really show very weel compared to others.

Sometimes buyers do not want to be in a bidding war - sometimes buyers see other house that they like in the time between seeing your house and being able to make an offer

Originally Posted by rb

You're correct the tactic of holding off offers until a certain date can have pitfalls as well - it normally workd in a high demand area or where the house really show very weel compared to others.

Sometimes buyers do not want to be in a bidding war - sometimes buyers see other house that they like in the time between seeing your house and being able to make an offer

Yup, we knew if they didn't sell the house that Monday night, they'd be at our mercy. We told them we were thinking of bidding on another property (which we were) so they either had to take it or retract the listing and try again months later after everyone forgets how snotty they were.

Originally Posted by grant

I have never used this tactic. My approach has always been to list at a significant premium to previous sales

That's a great way to scare away potential buyers. They think you are crazy, and they don't even bother looking at your property.

Originally Posted by fly

Monday came and they only had 1 offer, which had tons of conditions. It did not work out. Apparently, other potential buyers were also scared off by this tactic. That Wednesday, my agent received a call from the listing agent to see if we were still interested. We lowballed and got the house for less than the listing price.

So, the tactic may backfire if you scare off potential buyers.

Sounds like the only reason it did not work for the seller is that the seller was in a big rush to sell. Otherwise, they could have just waited for the multiple offers.

Originally Posted by rb

Where did you get that info from ?

He's entitled to his comission once you ACCEPT the offer

From realtors. The usual contract states the commission is due once the realtor finds a "ready, willing, and able" purchaser.

Originally Posted by ron

That's a great way to scare away potential buyers. They think you are crazy, and they don't even bother looking at your property.

Nonsense. I have never had a shortage of viewings for my properties. Every sale of mine has set a new benchmark for $/sf in its respective strata.

It's not hard to do, when I know the market is rising and I have the patience to wait for the offer I want. Sometimes I sell within a week and sometimes it takes 6 weeks.

If I wanted to sell in a flat or falling market, then I would have to be more creative in my marketing, just like everyone else. But also in such a market this "bait & switch" technique would probably be the least effective method to sell.