Agreeing on an asking price with vendors is a decidedly delicate balance. You’ve got to convince them that you love their home and can sell it for a good price, whilst simultaneously keeping their expectations realistic.
Fortunately, property price prefixes give you some options. You could simply set a price with no prefix, so everyone knows where they stand, or invite offers slightly below the asking price with a ‘guide price’ or ‘offers in the region of’ prefix.
But which strategy is best? We chew over the science of attracting a good nibble below.
Reading between the lines
Setting an asking price is a complex psychological game. The challenge, of course, is to generate interest that translates into the highest possible offer. You can either go low and initiate a bidding war, or set a higher price in the hope of attracting just one or two acceptable offers.
Prefixes play a key role in executing your agreed strategy. The danger, however, is that they can seem ambiguous and leave hungry house hunters confused and reluctant to make an offer.
Let’s discuss the most commonly used prefixes…
Arguably the most popular prefix, the ‘guide price’ reveals the price that the seller hopes to achieve. Some buyers will see it as an invitation to make an offer and then negotiate, whereas others might think the ‘guide’ is a telltale sign that agent and seller aren’t sure what a property is worth.
Recommending a guide price prefix gives you some wriggle room with both buyer and seller. It encourages purchases to come forward and start a discussion. Then you can see what offers actually materialise. Using a guide is also a good strategy if you can’t agree on a price with your seller. It’s inherently cautious and doesn’t firmly promise that the price threshold will be met.
The difficulty, however, is that different agents use guide prices in different ways. Some agents use guide prices to sell particularly attractive homes in the expectation that the guide may be smashed if several parties are interested. Others, on the other hand, only use a guide price prefix to sell fixer-upper properties when it’s hard to ascertain the home’s real value. This uncertainty makes it difficult for buyers to interpret the strategy and approach negotiations.
Offers in the region of / offers around
The ‘offers in the region of’ (or OIRO) prefix is similar to the ubiquitous ‘guide price’ but suggests that there’s even more flexibility. It basically tells buyers that the vendor would love something higher but might consider something lower. In other words, it strongly suggests that a seller is open to negotiation.
This prefix is therefore best employed when your vendor is motivated to sell. It gives potential buyers encouragement and may even provoke cheekier offers than normal. After all, the OIRO strategy implies that bids below the asking price won’t insult the seller.
Where things get more complicated, however, is when a price range is set. Why? Because there’s no incentive for buyers to make an offer at the higher end of the scale. What’s more, adding a floor might discourage buyers from offering something slightly lower than that – not good if your seller wants a quick sale.
Offers in excess of
The ‘offers in excess of’ (OIEO) prefix does exactly what it says on the tin: buyers should only make offers above the figure stated. However, unlike a reserve price at auction, the practicalities are somewhat different. For example, would the vendor really refuse an offer that’s a smidge below his or her floor?
What’s more, buyers are often wary of agents using OIEO to under-value a property. The perceived aim is to get several would-be buyers through the door and create a bidding war that eventually results in an offer way above the bottom price stated.
The worry is that buyers might be turned off by this strategy. Or they simply might not understand it. The vendor could also come across as inflexible when a bottom price is set. Alternatively, buyers might see OIEO as a marketing trick to fool them into offering more than the property is actually worth. Hmmm.
Using an OIEO prefix can therefore be risky. Buyers often dislike attempts to put a bottom on the market. What’s more, they might not make a lower offer for fear of offending the seller. Either way, befuddling or irritating buyers is rarely a good idea.
The no-prefix strategy
Maybe the best prefix is no prefix at all? No games, no ambiguity, no misunderstandings. Many property experts believe that guide prices, OIROs and OIEOs simply confuse your average buyer. After all, why suggest a low starting point and begin an elaborate dance when you can simply tell buyers upfront what price your vendor wants.
There’s a lot to be said for getting straight to the point. Although some vendors might enjoy a game of bluff, as it might ultimately lead to a higher offer, it’s possible to achieve more than the asking price anyway if several parties are interested. What’s more, you’re less likely to irritate or alienate certain buyers if you’re transparent from the start.
There’s just one potential drawback to precluding prefixes, however. You’d better get your valuation spot on. If the asking price is too high then the property will painfully linger on the portals in perpetuity.
Don’t pay the price
Ultimately, only you can decide what’s best for your seller. Whilst prefixes can be ambiguous, your strategy is bound to depend on several factors - not least the vendor’s position and whether it’s a seller’s or buyer’s market.
It’s also important to remember that many buyers will simply ignore your prefix anyway. Not everyone trusts them. Consequently, unless there are good reasons to use a prefix in particular circumstances, it might be best to keep things simple. After all, greater transparency leads to greater trust. And that’s vital as sales move towards completion.