I love this negotiating tip for home sellers from Bernice Ross in Inman News (subscription required).

2. Put pressure on buyers who are negotiating by doing a simultaneous price reduction. Whenever you issue a counteroffer with a lower price, ask the seller to reduce the list price. When the buyers realize that the seller is lowering the price, it places additional pressure on the buyers to take action.

This tip exposes something strange, but super common, about home seller psychology.

How Home Sellers Think

In a counter offer, a seller may offer to accept a price lower than his list price. Let’s assume the negotiations then fail and agreement couldn’t be reached with that buyer.

You would think that since the seller told one person he would accept a lower price that he would want to tell the whole world about his new lower price to generate more offers.

Sellers, however, often have this feeling; since their home was priced at $500,000 when the offer came in for $450,000, if they tell the whole world they would accept $475,000, the next offer will be for $425,000…

This is so true! Sellers really feel this way.

And it’s so wrong!

It is common to see that after a 4% to 5% price cut that a home getting no offers, except low-ball offers, will start getting realistic offers from serious buyers.

How Home Buyers Think

A seller should put himself in a buyer’s shoes.

The buyer has seen tons of good homes and is even having trouble deciding which home is best. He has a huge selection to choose from.

Let’s say the buyer ends up with 2 favorites. One is priced at market and the other is overpriced by 4% to 5%.

Mr. Seller, which home do you think Mr. Buyer will put an offer on?

  1. The buyer can deal with a seller who has to be negotiated down in price $25,000 just to get the price into the right ballpark. Sure, the seller could have simply padded the price by $25,000 but odds are the seller is one of the many delusional sellers out there who is not ready to lower his price to market price. If that is the case, then all of the negotiations with the delusional seller will be a waste of time for the buyer – and in the meantime the buyer’s other favorite home could get bought by someone else, or;
  2. The buyer can deal with a seller who has already priced his home near market price.

How Home Sellers Should Think

If a seller proposes a new price in a counter offer he should tell the world what his new price is.

Even better, the seller should lower the price in the MLS at the same time he proposes it in a counter offer.

If the seller is near market price – and the buyer is smart enough to know it – the lowered MLS price should give the buyer a little bit of fear about losing the home and a little bit of urgency about reaching an agreement.

In today’s market, the number one thing buyers lack is urgency.