Game theory only sounds like it has something to do with how to win in some weekend sports outing or family board game. It’s a seriously studied logical field that mathematicians delve into. Interestingly, when you study how to develop successful negotiation tactics—Novi real estate negotiations included—you can look at them via game theory.
There is a problem, though. The further you get into the subject, the more it tends to become more and more abstract. Unless you are someone who looks forward to curling up by a roaring fire with a favorite math textbook, you won’t get very far into game theory before your eyes will begin to glaze over.
In real life, Novi real estate negotiations are anything but academic exercises, so I can’t recommend spending hours studying “The Prisoner’s Dilemma” or any of the other highly studied game theory games. But even if you’ve been able to stay tuned for only a few of the most rudimentary basics, it seems that in order to develop a winning game plan in any negotiation, there has to be one pre-condition (in game theory, it’s called an assumption).
The assumption that’s necessary for developing a successful negotiation strategy is that all the parties must be rational. They have to be trying to make decisions (game moves) that are intended to benefit themselves. In Novi real estate negotiations, that usually consists of paying or receiving the least or most money in the most favorable time frame.
Novi Real Estate Negotiations Needn’t be a Puzzler
So the takeaway from game theory’s application to Novi real estate negotiations is both simple and useful in the real world:
First, remain rational yourself. In the course of negotiations, if your thoughtful proposal isn’t accepted, don’t get mad—even if it’s maddening. Stay cool; acknowledge that you’ve considered the response, and develop the best counter that is in your interest. I’ll help!
Second, as much as possible, foster rationality in the other party. Even if they fly off the handle for what seems to be no reason, assume there IS a reason—but it may not be one that’s rational or even directly connected to the bargain under discussion. It can even be due to misconstrued communication. In the heat of the moment, it’s easy to forget that emotions can block self-interest—but even fiery emotions can be quelled when met with calm and reason.
One of the great advantages to having me as your Realtor is the experience I bring to the Novi real estate negotiations that complete every sale. There are many steps that precede that “endgame” moment—call me whenever you’re ready to discuss getting started!
When it comes to pricing your home to sell in Greater Oakland County, you’ll find lots of “experts.” The neighbors may want you to set a high price, thinking it will make their homes more valuable. Your company may encourage you to set a lower price so the home will sell quickly and you can move to your new assignment. You might be thinking in terms of what you paid for your home, how much you’ve spent on it, or how much profit you want from it.
But who sets the price? When you put your house on the market in Greater Oakland County, you set the asking price. But it is the market that determines the selling price. If the asking price is set correctly, the house is likely to sell fairly quickly. If set too high, the house may languish on the market, unseen by the right buyers.
Pricing It Right
A correct asking price is crucial to a timely sale. That’s where we come in. But how do we know how to advise you on price?
- First, we look at the prices brought by similar homes recently sold in the area, and compare their features to those in your home.
- Then we survey the competition, seeing what homes are currently on the market, how they compare to yours and how long they have been up for sale.
- Next we look at how the number of buyers compares to the supply of homes for sale.
- We take stock of the direction of the market. Are prices rising or falling? Are homes selling quickly for the asking price?
- Finally, we look at the incentives other sellers are offering, such as paying some closing costs, and what conveys with the property, like draperies or washer and dryer.
As you noticed, neither how much you paid for your home nor how much money you wish to profit from the sale affect the market value of your home.
Avoid “Testing The Market”
Many times, sellers are tempted to price their homes a little high in hopes of getting more money from the sale. But often the opposite happens, and they sell – after a long time on the market – at a price below what the home would have sold for if it had been priced correctly at first. This is because most buyers look only at homes they can afford.
- If a home is overpriced, many potential buyers don’t bother to consider it because the asking price is above what they can afford to pay.
- Buyers who do tour the overpriced home see that it doesn’t measure up to others in the same price range.
- By pricing the home close to market value, on the other hand, the sellers make the most of their best opportunity to sell to the home’s true market during the highest traffic period – the first weeks after the new listing comes out. That’s when real estate agents call in the buyers they have been working with to see what’s new on the market.
“The best game plan is to price your home over market to give yourself room for negotiation if offers come in low.”
REALITY: Most homes sell within 5% of what similar neighborhood homes have recently brought. Pricing your home too high will actually scare buyers away. They’ll assume you are unrealistic and likely to be difficult to deal with. In addition, buyers who believe your home is out of their price range won’t even look at it.
The best way to deal with a low offer is by making a counteroffer or rejecting the contract outright. Having an experienced real estate agent in your corner will help you price your home to sell quickly, while netting you the best possible return.
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