The Last Bid
Psychologies learned as children effect us now
Sense of urgency
Do you know what the following numbers mean? (I can promise you will want to save this). Leave the #1 space open at the point. Move #4 to #2, #6 to #4, #1 to #6, #7 to #2, #13 to #4, #10 to #8, #2 to #7, #7 to #9, #15 to #13, #12 to #14, #6 to #13, #14 to #12, and #11 to #13. Finished and Victorious! (see next page)
I travel the length and width of this state seeking out clients that have learned or are learning how to take the guesswork out of selling real estate. Like many travelers, I find myself stopping to eat at a roadside chain that has locations on the interstate system and has a theme that caters to "days gone bye."
If you have ever stopped at one of these restaurants, you have probably picked up a triangular golf tee game at your table and you began to play the "process of elimination game" to have the fewest tees left standing. (I bet you felt you lucky when you did get down to one or two remaining tees, but I'll also bet those results have been few and far between.).
As I was playing this game, it struck me how often a seller may take a similar approach in offering their real estate "for sale". By playing the guessing game with numbers (called a price-tag), the seller may have committed to a dangerous game with himself or herself. This is a game that many real estate people never tell the seller because the traditional real estate broker is driven to get the seller's listing by getting the seller's opinion.
You may have previously read in The Last Bid that placing a price tag (really calculated guesses) on anything up for sale, including real estate, makes two "statements' to the buying public. Those two statements are….
1) it will not take a penny more to purchase than the seller's guess/pricetag
2) and now that the seller has valued the property (and placed a ceiling of value on the property), the seller is ready to entertain DOWNWARD negotiation with counteroffers that can have contingencies.
Any seller that takes the above route now knows two certainties.
A) the final selling price is unknown as all final prices are determined by ready, willing and able buyers (he who brings the gold will make the rules is the golden rule of all business transactions). If the seller's opinion was the end-all to determining value, why would we even need a buyer? Because a buyer brings the true asset, cash, to purchase the real estate, which is often and some times mistakenly called, an asset.
B) the known date of sale is a mystery. (if a property sells quickly under the guessing plan then how much of the purchase price was left on the table. If you want to have a sick feeling just receive a quick full acceptance of the guess you placed on the property. Did you receive your price or did the buyer receive their price? If a number of offers come in quickly, whom do you sell to first? You guessed too low.
Human nature usually leads most sellers to price property with a guess that typically leads to downward negotiation or in other words… price it too high. To wait and wait and wait
So what's the answer…
Eliminate price tags.
If you could assemble many genuine and remotely interested buyers in your property at one time and in one place and on the date you selected, would that be a good thing? Yes
If you could set the terms of the sale, for instance
1) no contingences, - financial or inspection wise
2) all bidders must be ready, willing and able
3) exact date of sale
4) no closing or survey costs
5) purchaser pays all or part of the selling fee and
6) no pre-set ceiling of value imposed by the seller (lure of the bargain)
Could you imagine how less complicated your selling your real estate could be? You can.
The competitors have trained for the event and await the starting whistle. They know the rules of the game and have studied the lay of the land. (They know every transaction that has occurred in the area just as you would if you were a contestant). From the beginning whistle of the event, they will compete for victory(right of ownership) until exhausted.
As you can imagine this is the same occurrence that happens at an auction. This sense of urgency does not usually exist in the "price and wait" strategy.
One of the common errors made by the "occasional" seller is to take the same approach to selling land or commercial property as if that property was a conventional residence. Most folks have some experience in selling a residence, (price and wait), and depending on the price range of the house, contingencies may have been expected from the purchaser.
Land and commercial property, however, is non-contingency real estate that does not need a "guess" applied. (I promise you, everyone in the area already knows or will learn the values). Those markets just need to be pointed toward your property and assembled to let the bidding competition begin.
Let's talk about "validation of opinion" psychology.
Have you ever watched children not playing with a particular toy and then one child picked up that toy and then all the other children all wanted to play with the toy? Simple as it may sound, that is a form of validation of opinion. In other words, we are "wired" from an early age to desire what others may have or own. (Any economist will explain that the only motivating factors that make us do anything financially or otherwise, are greed and fear).
Savvy sellers know to stay away from pricing/guessing on their own property for two reasons.
1) The seller is not objective toward himself and not part of the market
2) "the person who speaks price first loses". (Old adage)
He who brings the gold makes the rules.
Let's make the market bring their gold to us on the date we select and let the competition between them begin. Knowing the date of sale is great satisfaction.