Home Seller's: Your Margin For Negotiation Could Cost You The Sale!

Posted by Joe Manausa on Tuesday, February 1st, 2011 at 11:07am.

Home sellers must understand why leaving a margin for negotiation in their asking price is almost certain to cause them to lose money.

An interesting trend appears to be occurring in the reader questions that I receive at the Tallahassee Real Estate Blog. In the past, most questions were submitted by homebuyers, and the questions were usually relating to the purchase of a home. But now, home sellers are starting to spring up with questions of their own. They want to understand the different aspects of selling a home, and determining the asking price is near the top of the list.

Recently, home seller "Shawn" dropped me a note asking:

Joe, how much margin for negotiation should I include in my asking price?

Now, this is a very common question, and in the past there were some defensible opinions on why a home seller should ask for more than they planned on receiving. But with 94% of homebuyers using the internet, there are compelling reasons to eliminate the margin for negotiation when pricing a home to sell. The following Real Estate FAQ Video

Smart Home Pricing In Real Estate FAQ Video

Sellers Should Eliminate Margin For Negotiation

As the real estate video addressed, property searches by home buyers utilize technology designed to eliminate homes that do not meet the needs of the buyer. The first criteria that a buyer enters will be price, and it is critical for home sellers that they do not eliminate their own home by being priced too high. A margin for negotiation only increases an asking price and potentially removes the property from search results of a ready, willing and able homebuyer.

Weaken Competition By Removing Margin For Negotiation

We always advise sellers that "Buyers choose a price range, so sellers get to choose the competition!" This basically means that homebuyers will enter a price range that they want to search. This will automatically eliminate every home seller who's home falls outside of that range. But because we know what buyers are doing, we can be the "uncola" in the group.

Most home sellers add a margin for negotiation, meaning they price their home a little higher than they expect to receive. This just pushes their home up to a higher price range making the following happen:

  1. In home searches, their home is compared to more expensive homes
  2. Their home does not appear in the price range search that they expect to receive
  3. They get fewer online "showings;" higher price ranges have fewer buyers than lower ones.

When sellers understand today's technical pricing strategy, they price their home at the lowest price they are willing to take and then hold firm when they receive offers. If their home is the best in its price range, somebody will buy it at their price (or higher!).

Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.

Leave a Comment