Bargaining Position
Introduction
Want to achieve the very best price for our home? Then we need to keep our bargaining position in mind at all times. Here I discuss the importance of bargaining position in our efforts to achieve the best price.
What is our ultimate goal?
Our ultimate goal of course is to be able to sell our home for the best price in the current market (and ideally in a timely manner). The best price being the market value or above.
Obviously, we’d want to avoid our home becoming stagnant and stale on the market, leaving ourselves little choice but to sell it for less, assuming that we’re even able to sell at all!
What is the ultimate goal of a property listing?
The ultimate goal of a property listing is to get as many eyes on the property and as many buyers through the door. An effective listing ought to be visible to the maximum number of buyers on the market who are the right type of buyers (i.e. the most likely and promising buyers) for our home and be sufficiently compelling to excite these buyers and stimulate their interest to want to come through our door for a viewing!
We want to be attracting a large volume of buyers because (as I discuss in more detail below), to be able to achieve the best price, we need a strong crowd (large volume) of buyers (in other words, strong buyer engagement) in order to create a strong level of interest, competition and demand amongst themselves!
We also need those buyers to be the right type of buyers, as they will be the ones who are looking for a property of our type and market value, and therefore they will be the ones who will most likely contribute to and strengthen the level of interest, competition and demand we’d need. The wrong type of buyers will not contribute to nor strengthen this, and so we should avoid misplacing our marketing efforts that end up attracting them!
A property listing’s one and only job is to simply encourage buyer engagement and attract buyers through the door - not to sell the property itself! The selling and negotiating only begins once the buyers are through the door - this is when we have the chance to achieve the best price, not before!
Our listing therefore needs to be focused on encouraging strong buyer engagement, in particular, captivating as many of the right buyers as possible (i.e. our likely buyer pool), so that we have as many of those buyers as possible to negotiate with!
Achieving the best price with a strong bargaining position
If we want to achieve the very best price for our home, it is imperative that we create an advantageous situation for ourselves where we end up in a strong bargaining position!
How do we create an advantageous situation?
It all starts with our property listing. Our listing must be captivating enough to attract a strong crowd (large volume) of buyers (who are the right type buyers for our home) through to our door.
Why?
Because:
The stronger the crowd > the stronger the interest
The stronger the interest > the stronger the competition
The stronger the competition > the stronger the demand
The stronger the demand > the stronger and more competitive the offers we receive
STRONG BARGAINING POSITION
Essentially, we want to be creating a strong and competitive bidding war scenario amongst the buyers, which can only be achieved with a strong number of interested participants.
A scenario involving strong interest, competition and demand will instil a sense of urgency and a fear of missing out (FOMO) among those interested participants, which are powerful motivators that compel the participants to push forward strong and competitive offers! Such a scenario leaves no room for the participants to make weak or less competitive offers if they are wanting a chance to secure the property.
Only when we have strong interest, competition and demand for our home leading to strong and competitive offers do we then end up in a strong bargaining position (not to mention, in the driver’s seat) to negotiate for even better offers that meet or even exceed the target price! (i.e. the best price)
In the image below, we can see that the numbers in the bars represent the levels (i.e. strength) of interest, competition and demand for our home: Level 1 being the weakest to Level 5 being the strongest.
Essentially, the stronger the interest, competition and demand is for our home, the higher it pushes up the price. And if the level is strong enough (represented by Level 5), then we have the strong bargaining position to negotiate for an even better price!
The idea is not too dissimilar from an auction, in that a scenario is created where multiple buyers are enticed to participate in bidding for the same thing. Each interested buyer, knowing that they are competing against each other, are compelled to engage in a bidding war in an effort to secure the item for themself - pushing up its price as a result! And if the bidding war is strong and competitive enough, then its price may be pushed up to meet or exceed its target price!
What if buyers only make weak or less competitive offers?
We shouldn’t fear buyers making weak or less competitive offers as long as we have a strong number of interested buyers (i.e. strong buyer engagement) coming through our door.
Thanks to the wealth of property resources and data that are readily and freely available, buyers are informed and savvy to the market and are able to understand and recognise the true value of a property. And when spurred by strong enough competition and demand, buyers are prepared to contest against each other, pushing up the price to meet or exceed a property’s market value, as it’s natural to perceive something as being more valuable the more people that want it!
Buyers will surely be aware that any attempts to make weak or less competitive offers amidst strong competition and demand will be futile, as they will almost certainly be rejected by the seller!
The only scenario where weak or less competitive offers become a concern is if we are in a weak bargaining position!
What is a weak bargaining position?
A weak bargaining position is where we have little or no bargaining position or power to achieve (or negotiate) the best price (or even the market price). In fact, if we are in a weak bargaining position, then we are likely to struggle to sell, and have little or no choice but to accept a price that’s lower (maybe even considerably lower) than the market value to necessitate a sale!
How might we end up in a weak bargaining position?
Essentially, a weak bargaining position is attributed to weak interest, competition and demand.
WEAK BARGAINING POSITION
If our property listing is not geared towards attracting a strong crowd (strong buyer engagement) of the right type of buyers, then we will certainly lack the level of interest, competition and demand we’d need.
Referring to the earlier image once again, if the level of interest, competition and demand isn’t strong enough (represented by Levels 1-4), then the price won’t be pushed high enough to meet our bargaining position or the market value of our home. In other words, if the level isn’t strong enough, then we will not be able to achieve the market value for our home nor have the bargaining position to achieve the best price!
Once again, not too dissimilar from an auction, if there are too few buyers or even no buyers participating in bidding, then there will be no such bidding war that is strong or competitive enough to push up the price to even come close to the target price!
We should avoid empowering the buyers’ bargaining position
I would always strongly urge that we put forth all efforts to strengthen our own bargaining position. As a matter of fact, if we choose not (or neglect) to create an advantageous situation for ourselves that enables us to be in a strong bargaining position, then we end up indirectly empowering our buyers’ bargaining position!
If we choose not (or neglect) to create the pressure of strong interest, competition and demand for buyers to contest against, then the buyers who are prepared to make offers will lack the sense of urgency and FOMO to push forward strong and competitive ones. Instead, these buyers will have the leeway and opportunity to make weak or less competitive offers, or to negotiate the price down, with a decent chance of success. With no other interested buyers to turn to, our bargaining position is not likely to be strong enough to negotiate a better offer!
Or worse, if we attract no interest whatsoever, then we’d have no-one to negotiate with at all!
Ultimately, such a scenario would leave us in a weak bargaining position!
WEAK BARGAINING POSITION
A property becoming stagnant and stale on the market and/or sold for a considerably lower price is often the result of a lack of interest, competition and demand.
How do we create strong competition and demand?
Creating strong competition and demand starts as soon as the interested buyers are through to our door!
At Castor Bay, we conduct our viewings via an Open House under our ‘30-Day Sale Campaign’.
Rather than the traditional private 1-1 viewings (where buyers aren’t likely to see or be aware of each other) - we invite multiple buyers to gather under one roof at the same time; so each attending buyer will not only be viewing our home, they’ll also be seeing competing buyers, and therefore, the level of competition and demand for our home!
Our Open House combined with our 30-Day Sale Campaign work together seamlessly to stoke the fire of competition and stimulate the sense of urgency and FOMO we need to achieve the very best price for our home!
Our Open Houses are usually held for the day, from morning to late afternoon (and sometimes to the evening), with dozens of buyers attending throughout the day!
With multiple buyers attending throughout the day, as well as multiple buyers under the same roof at any one time during the Open House, the message will be loud and clear - that there is strong competition and demand for our home!
Click here to find out more about our Open House and 30-Day Sale Campaign.
Want to discuss with me about hosting an Open House? Click here to get in touch with me.
Taking charge of our own bargaining position
Please remember - achieving the very best price comes down to being able to negotiate from a strong bargaining position. If we’re in a weak bargaining position, we can expect to mostly receive weak or less competitive offers. We would certainly struggle to negotiate for strong and competitive offers from a weak bargaining position. And if we fail to take charge to strengthen our own bargaining position, we end up indirectly strengthening our buyers’ bargaining position!
Our property listing is our launchpad to achieving the best price!
Basically speaking, getting as many eyes on our home and as many buyers through our door is the launchpad for being able to sell it for the best price - which is what our property listing should serve to accomplish!
The strength of our bargaining position all starts with the strength of our property listing. This guide is geared towards perfecting our listing to be able to captivate as many of the right type buyers for our home as possible and be sufficiently compelling to excite these buyers and stimulate their interest to want to come through our door for a viewing!
Simply put, our listing should be all about encouraging the strongest buyer engagement for our home as possible!
And since our listing is our launchpad, we need to consider how we can strengthen it to be able to launch us to where we want to be!
The pricing strategies that you will come across in this guide have been recommended and covered extensively with our bargaining position in mind. In particular, I go over in great detail the pricing strategies we should be implementing that place ourselves in a strong bargaining position, as well as the pricing strategies we should be avoiding that leave ourselves in a weak bargaining position!
Getting in touch with me
If you would like to discuss any of the above points with me further, or if you need help or have any questions in general, click here to get in touch with me.
Come join me in the following sections where I cover the what, why, where, when, who and how of pricing our home for our ultimate goal of achieving the best price!