Leave Room to Negotiate?

Sometimes, when taking a listing here on the East Side of Providence, the seller will look at the recommended price and suggest taking it up by $10,000 so they will have “room to negotiate”.

The question is, how effective is this really? Are they helped or hurt by this approach?

When it is a small percentage – 1 or 2% – of the overall price, the effect is minimal. No one can precisely pinpoint down to the last $1,000 what the value of a property is – we often speak of a “range of value.” So if a small increase to provide psychological room for maneuver makes your seller more comfortable then it is not terribly significant. On the other hand, if the market responds negatively by no offers or lack of showings, then an adjustment should be made, and QUICKLY. The last thing that a seller wants is to “chase the market down”. In a declining market, each day that passes equates to a small lack of value. The longer a seller waits to make that pricing adjustment, the higher the risk of getting less for the property.

Where small changes do have a larger effect is when you are talking about moving pricing around significant Internet price ranges. Particularly in this declining market, we do not like to see things priced at $205,000 rather than $199,000 or $559,000 rather than $549,000. Buyers shop by “price bands”, and being just a bit over that range can cut off a large number of buyers.

We have found that pricing it as close to where you think it should sell is the best way to create some sense of urgency and certainty among buyers when both those qualities are in short supply.