Guide prices and how to tell when you get them wrong
There are a few taboo subjects when it comes to the property sector and one of the most common seems to be when it comes to guide prices.
Start mentioning this to most vendors and they immediately get stressed and fidgety about an agent’s thoughts.
But why? Of course we all want our properties to be worth millions, however if you get this strategy wrong by overpitching the guide price, it can have implications and a knock-on effect, that results with the vendor potentially losing out even more.
Some agents simply quote high guide prices in order to secure instructions as, after all, some will sell and if the others don’t sell, then so be it. Of course some vendors are equally enthusiastic with their thoughts on price.
The biggest issue with this strategy is that as soon as a property is put online, it’s like confetti, information and nearly your inside leg measurement are scattered online
You then find that the agent wants to reduce the price, because surprisingly the property has had limited viewings, as buyers are very well informed nowadays. If this happens, all the “monitoring” websites will flag up the revised price, which makes a buyer wonder what the problem is.
Of course, there may not be an issue, just simply a case of quoting too much money.
However, buyer caution and mindset will interpret this differently. They may think “could there be subsidence”.
It may be that the vendor decides to withdraw the property from the market and come back to it in six or 12 months with a new agent and a new launch but this will again set off the alarm bells again with the websites, so again the vendor can be on the backfoot.
Down the line when the vendor really does want to sell as the process has been ongoing for such a long time, the market and websites see their chance and then put the seller in a corner on price.
This often results in them getting less than if they had gone for a correct and reasonable price from the outset.
Guide prices should, therefore, be pitched at a realistic level to encourage viewings as these are the lifeblood of any sale and they start conversations.
Vendors may remain concerned that they will receive low-ball offers but let’s be quite clear, in any market there will always be an interested party who tries it on with a low offer, but you and your agent are in control.
The key here is to encourage a formal offer, no matter what the initial level, as you can always say “no”. There is a more significant point to this and that is the psychology that the agent can now use against people that are serious and interested.
When a potential viewer asks “how is the sale going?”, the agent can reply, “I have just taken an offer and I am in discussion with the vendor about it. I think we need to get you around there”.
The agent has not told a lie or a mistruth, but they have used the fact that an offer, albeit low, has been received to their advantage.
Another common vendor comment is “Once your price is set, you can never go above it”. This simply isn’t true. I have recently completed on a sale for a vendor where I achieved well above guide price from just one cash buyer.
Overall, remember that a guide price binds your entire marketing strategy together. Therefore if any element of this is skewed, then you the vendor will lose out in the end.
My advice is to get your guide price right from the outset.