Price your Home Lower and Sell it for More
Home Sales in Hot Sellers Markets turn into Blind Bidding Wars
In most parts of the country in a hot sellers market, real estate agents list their clients’ homes in advance of the weekend, then collect offers over the weekend, and then the home seller picks the best offer on that Monday or early part of the next week. The handling process of these collected offers over a short period of time (typically 2-5 days) is typically called “a blind bidding war.” You can see how the National Association of Realtor defines this a bidding war here. This means that each buyers agent doesn’t know what any of the other offers’ terms are. They are dropping an offer (a bid) into a collective hat for the home seller to review after the home sellers chosen collection time period ends.
The lower the price starts at, the more bids will be added.
It is simply a general law of the real estate industry that the lower the starting price is, the more bids (offers) the home seller will receive, and there is no set limit to how high in price the bids could be. Homes priced under market value in a hot market create a feeding frenzy. Buyers are typically not savvy enough to see past this bidding war strategy (for whatever reason) and the, “price it low to sell it for more,” strategy works without fail if the market conditions are right and the home is not unusual (we’ll get to the exceptions later in this article).
The more bids there are, the higher in price the bids get.
Although buyers agents do not know what the other terms of the competing bids are, they can know (and typically do know) how many other bids are in the metaphorical hat before the collection period ends. The more bids there are, the more buyers agents will tell their clients they need to increase their offer in order to win the bid. For example, if there are only two bids in the buyers agent may advise their client full price, or maybe 10K over will likely result in a win. If there are five offers in, the buyers agent may recommend going 20 to 50K over ask. If there are ten or more bids in, the buyers agent will let their client know they simply have to go as high as they can to win the contest. I’ve been licensed since 2003 and my team is approaching 2,000 home sales. I can tell you with absolute confidence that in a hot sellers market, in more cases than not (has to be the right location and home), a home that is priced under market sells for more than a home that is priced at market (or higher).
The Real Estate Market is a Moving Target
Don’t trust the News! Most news reports are making headlines uses data that is 30 days old (or more). The real estate market moves faster than local data reports are produced. Plus, as we all know, the news stations cherry-pick, they look for the most shocking stories they can report on and go with that, they can skew the public’s mindset on what is actually normative in the real estate market. Only a busy real estate agent (in my opinion) who has their thumb on the market at all times and can tell you what is happening today. If you price your home for less in order to get more, and you didn’t assess the market correctly for your home on the day your home went live – oops!
When Pricing your Home Lower to get More won’t Work
- Your home is on a busy street
- Your home is too close to a highway, car repair shop, Firestation, 7-11, etc.
- Your home’s layout is unique
- Your home is a fixer
- Your home is a condo or a townhome
- Your home is in the top 20% of home prices in your local market
- When it is not a sellers market in your area
If you read the list above, you’ve probably already got the right idea. Detached homes that are “normal” and don’t find themselves in the extremes of either location, type, or price are potential candidates for a bidding war strategy (price low to sell for more).
Work the Multiple Offer Bidding War Correctly or Lose
Don’t close the door too fast, don’t leave the door open too long. Whenever I see a home that sold the first day on market my first thought is, oh those poor sellers. If you close the door too fast you’re not allowing the real estate market do its job, you’re not allowing the market to tell you what the home is worth. There is simply no way all the home buyers currently shopping that would write an offer on that home can arrange their schedules to see it in 1 day, not 2 days either. You should leave the window open for at least 3 days and not more than 5. The reason I believe six days is too long is twofold. One, most of the buyer traffic is on the weekend and most of the inventory hits the market late in the week, in advance of the next weekend. If you wait 6 days to make an offer, your risking those buyers finding something else new and shiny and pulling their offer (because you’ve now also made them wait longer than is typical). Two, you’ve made all the buyers anxious and frustrated. Home buyers will start pulling their offers by day 6, if not day by day 5. Sure, the occasional buyer will pull their offer even earlier, but the vast majority will wait 3 to 4 days to hear back. There is a peak moment in a bidding war and that is where the seller needs to draw the line, realize the bids they have in are the best they’re going to get, and pick an offer already. If the seller waits too long to respond to offers they will end up selling their home for less, not more.
Top NW Real Estate Agents
Now, this is all based on experience, but after nearly two thousand home sales, I can write this with confidence. Of course, if you’re in Oregon or Washington and thinking about selling your home, we’d love to talk to you today. The sooner you get advice from a true pro in planning out your home sale, the better. Call us at 503-714-1111 or 360-470-7777.
