Guide Prices – When you’ve got it 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 – after all, some will sell (which pay the bills) 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, details and nearly your inside leg measurement are scattered online and which you have no control over.
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, setting off in a buyer’s mind ‘what is the problem’? Of course there may not be a direct issue with the property and just simply a case of quoting too much money. However buyer caution and mindset will interpret this differently – for example ‘could there be subsidence’ and ‘I heard down the pub that there’s deathwatch beetle throughout’.
It may be that the vendor decides to withdraw the property from the market and come back to it in 6 or 12 months. New agent and a new launch will 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 vendor in a corner on price. This is often less than if they had got the price correct at the outset.
Guide prices should therefore be pitched at a realistic level to encourage viewings, which are the lifeblood of any sale and to start conversations. However, vendors remain concerned they will receive low-ball offers. 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’! However 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 ‘well I have just taken an offer that I am in discussion with the vendor about it. I think we need to get you around’. 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.
Vendors will then say – ‘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 £800k above guide price. This was from one cash buyer who was effectively competing against themselves. Quite a result!
Overall, remember that whilst a guide price is important, it 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 and don’t be one of those properties which languishes in the market.