Clear Realty Real Estate Blog

Overview

One of the most common questions we get asked by our client, when we’re at a marketing presentation is “what is the best way to market my property?” I am going to break this into 3 posts as there is just too much information for you to absorb in one go.

So I’ll now talk more of marketing your home, by negotiation and I’ll help you discover the some of the benefits and draw backs of this marketing method.

“By Negotiation” has been a common form of marketing in New Zealand for many years (in fact we could say the first ‘by negotiation’ sale was the purchase of 3000 acres of land in Auckland for 341 Pound Sterling in 1858.

Today, “By Negotiation” has a number of methods in itself, which are used for selling a home:

Marketing without a price

This is a method of marketing where you do not set a price to the market nor do you give the market any guidance on the property value. This is useful especially when as a vendor you are trying to establish the value on a property and have difficulty ascertaining it from comparable sales in the area. When you are choosing this type of marketing method, your agent should (and will) seek accurate feedback from the buyers as to where thy see the property value. The benefit of this is that as a vendor, you aren’t revealing your price to the market, without firstly getting some feedback from the buyers themselves. The drawback of this method is that it will not sustain buyer interest after the first few weeks. The reasons for this are generally the buyers do like some guidance on the value or want feedback on the vendor’s expectations. The other drawback is sometimes buyers will wait for some guidance before visiting the property. All-in all this is a good method of sale when your property is new to the market but can’t be seen as a sustainable method for marketing your home.

Marketing with a price

This is another method of sale which vendors have available to them. Placing an asking price on a property allows the market to see the Vendor’s expectation, and the prospective buyers will place an offer on the property based on this asking price. The benefit of this method is that you’re signalling to the market, your expectations on value. Buyers do respond to this and in some circumstances you may find more then one buyer may elect to put an offer in at the same time (*more on this later.)
There are two drawbacks of marketing with a set price. Firstly, if you place too low a value on the property without getting market feedback first, it is difficult to get more than the asking price because the vendor has already “announced” the asking price to the market. The other drawback is where the asking price is relative to when the market perceives the value. If a vendor’s asking price is more than 5% away from the market, then it does become more difficult to attract an offer from buyers. This can be a classic faux-pas and sometimes it can make a sale easier for another vendor who has a more attractively priced property nearby.

Marketing with a guide

This is where the vendor has an “upwards guide” on the property. This typically looks something like “buyer enquiry welcome from $xxxxxx” The reason this is a good method of marketing is that it doesn’t cap the value of a property, whereas marketing with a set-price does frame the value of the property. With an upwards guide it is important that it is set within 10% of the vendor’s goal price, so as the guide does not deceive the buyers. Another benefit of utilising an upwards guide is that it attracts more buyers from the buyer pool, and this gives vendors more opportunities to negotiate with more buyers and create a successful outcome from themselves.  We advocate the method of marketing for our clients as it allows them to set a level where they want buyers to view the property, and it also gives them the best opportunity for getting a premium result for their property, without having to reveal those aspirations to the buyers (who typically never go into a negotiation thinking they’re going to pay the price they end up paying!)

It is important to note that the best way to get a premium price when utilising the “by negotiation” method is to get into a situation what us agents call “a multi-offer” scenario. The reason for this is that the buyers now have to compete for the property and also they have to put their best offer forward at the same time. This is of benefit to vendors as the process doesn’t become about what will buy the property, it becomes about what the other person will pay. It is a powerful position for vendors to be in as they can choose the offer that works for them (it ends up being similar to a tender process which I’ll discuss in my next article.)

I hope that has given you a better insight into the pros and cons of by negotiation. As mentioned above, I’ll talk more tomorrow about the Tender process. Do you have a question about marketing by negotiation? Ask away

Andrew