A lot of attention has been dedicated recently to aggrieved buyers who have been bait priced and hooked into bidding on properties they could never afford to buy.
The respective buyer’s anger at this sales tactic is completely understandable.
There is no need to deliberately under quote the value of a property in order to attract buyers or bidders to an Auction. In boom times in particular, there are already an excess number of buyers around without having to under quote to attract more financially incapable buyers.
The damage caused to buyers by bait pricing has been widely discussed and is well known. Yet, few people understand the damage bait pricing does to a seller. To deliberately allow your home to be promoted at below market value exposes you to two main risks.
The Wrong Crowd
If you sow the thought that your home can be bought for below market value, you will attract a crowd. However, the majority of the crowd who turn up will be the wrong type of buyers, because they cannot afford to buy your home. As a seller, when you allow your home to be advertised at below market price, you are essentially inviting the wrong crowd in the hope that this strategy will bring a few market priced buyers too. What if the market priced buyers don’t turn up? You are then left with a pack of buyers trying unsuccessfully to purchase your home for below its market price. To quote a fair market price and have eager buyers drive the price above market price is simply how the open market works. To quote a low price in the hope of getting up to and above fair market price is a dangerous and flawed strategy.
The digital footprint
The advertised history of every property offered for sale is now recorded for all time on the internet. The sort of information included in the advertised history includes the advertised price or prices, the length of time the property was on market, the auction result and the name of the firm handling the sale. If your auction fails because it started well below the reserve price and never exceeded it, as the agent promised it would, the price at which you passed in for is recorded against that property for all time. Your cards have been marked. Future market price buyers will see the full advertised history of your failed campaign or campaigns and even begin to believe that the price at which your property was passed in (by the wrong buyers) was and is the true market value of your property. For some sellers, this can be a disaster.
All properties now have a digital footprint whether your like it or not. Deliberately advertising your home below market price is only an act of self sabotage.