Monday, December 22, 2008

Haggling and Real Estate

Bargaining or haggling is a type of negotiation in which the buyer and seller of a good or service dispute the price which will be paid and the exact nature of the transaction that will take place, and eventually come to an agreement. Bargaining is an alternative pricing strategy to fixed prices. Optimally, if it costs the retailer nothing to engage and allow bargaining, he can divine the buyer's willingness to spend. It allows for capturing more consumer surplus as it allows price discrimination, a process whereby a seller can charge a higher price to one buyer who is more eager (by being richer or more desperate). Wikipedia.

Haggling has largely disappeared in parts of the world where the cost to haggle exceeds the gain to retailers for most common retail items. However, for expensive goods sold to uninformed buyers such as automobiles, bargaining can remain commonplace.

Haggling AHHhhh The Purpose of my existence or the Bain of my Career?

In a Seller's Market, there is no haggling, it is simply a matter of who will pay the most for what is available.

In a Buyer's Market, what will be included. Previously unseen, for more than a decade has been the silent offer with a nod; "Do you think they will take this? You never know they might, depending on how motivated they are. " Now they are asking for paid Land Transfer Tax or even legal fees. Sometimes the snowblower in the garage.

The Outrageous Lowball Offer! Well that just stands alone as incredible. No One responds. They just look at each other and shake their heads. The deal rarely comes together as everyone was too far from reality or their expectations did not meet the market.

That's not surprising, because haggling simply makes many people uncomfortable, said Steve Murray, editor of Real Trends, a real estate industry trends and research company.

Still, in today's challenging real estate markets, the average commission rate is rising, he said. According to Real Trends' analysis, the average commission rate today is 5.2%, up from 5.02% in 2005. The rate was 6.1% in 1991, and had declined every year until 2006.

The rise in rates lately is logical, since homes are taking longer to sell and real estate agents need to spend more money and time selling a home, he said. "When the cost and the time that it takes to market a home goes up, why would anyone expect that those providing that service would charge less?" Murray added.

The Consumer Reports survey also found:
  • 71% of sellers were "very" or "completely" satisfied with their broker, while 12% said they were dissatisfied.
  • 66% of those who used an agent to buy a home paid an average $5,000 less than the listing price.
  • 34% of buyers who didn't use an agent paid close to the asking price.
  • 86% of those who put their homes on the market made a sale, while 8% eventually gave up and took their homes off the market.

Selling advice

Price the home correctly. Homes sell most quickly when they're listed at a price just below other similar homes in the area. Not getting an offer in four to six weeks? Drop the price by 4% to 6%.

Use round numbers. About 80% of people buying and selling homes today use the Internet to search for homes. To conduct a search on, for example, buyers give a price range that begins and ends with round numbers. So make sure you price the home in a way that the maximum amount of buyers will see it. For example, price a home at $350,000 (instead of $349,900) and you'll get interested buyers in both the $325,000 to $350,000 and the $350,000 to $375,000 price ranges.

Pick smart improvements. Don't expect to recoup the whole cost of a kitchen or bathroom update in today's market. Sprucing up the outside of the home with a deck, adding energy efficient windows or replacing the siding might pay off the most.

The most important advice I can offer is "there are four people involved in your real estate transaction; the Seller, The Buyer, and usually two agents. It is inevitable that the person with the strongest arguments, best presented details, negotiation and persuasion skills will take the business to his side.

Your comments are always invited.

1 comment:

pjeary said...

Very nice real estate stuff I ever seen! Thanks for the info.

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