The Best Practice 2-2-7 Rule

Best Practice property consultants know that, in order to act in the vendor's best interests, they must be able to explain the strategy surrounding any variation of the asking price.

Most have a document similar to the sample on this page which forms part of the pre-listing kit and/or listing presentation proposal and / or the agency's website.

Sample

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THE BEST PRACTICE 2-2-7 RULE

Since it is our aim to achieve the highest possible price for your property, we will set the asking price for our initial marketing (in line with your instructions) a little higher than we expect the market to bear. When a property first enters the market, momentum is generated, because all the qualified buyers (those in the price range who have been looking around for some time and are ready to buy) will discover the property for the first time. Competition peaks in the first few weeks of marketing and buyers are most likely to make the highest offers for fear of losing out to someone else.

If the initial marketing does not attract the desired offers, it may be necessary to consider varying the asking price. If the price remains the same for too long, the momentum of the marketing programme is likely to fall away, affecting the property's profile and competitiveness.

It is important not to vary the asking price too early because it sends a signal to prospective buyers that the price is not genuine or that the vendor is perhaps too keen to negotiate.

Varying the asking price too late sends a signal that the seller is not aware of, or prepared to listen to, market forces - in other words, not genuine or realistic. Qualified buyers lose interest and the opportunities for receiving high offers diminish, along with the potential of achieving the best price at the end of the day.

Research with past satisfied sellers tells us that there is a simple two-point rule indicating the appropriate time to vary the asking price.

This rule is known as the Best Practice 2-2-7 Rule. There are two conditions which must be met before this rule can be applied.

1. The property must be well-presented (please refer to our enclosed document on how sellers can effectively present their property for sale) and

2. The property must be professionally marketed to attract the attention of all current prospective buyers in the price range (our recommended marketing proposal(s) are enclosed).

Provided these two conditions have been met, research indicates that residential real estate achieves its best price if the asking price is varied when there have been two advertisements and no response, or two open homes and no shows, or seven inspections and no offers.

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Suggestion

Why not consider re-writing the above sample in your own words and including it in your listing materials? In your local area, the 2-2-7 rule might be a 1-3-6 rule or a 3-2-9 rule; carry out your own local research and come up with the appropriate three-step price variation rule for your area.

Best practice property consultants report that provided

1. the 2-2-7 rule is included and explained in the pre-listing kit, and

2. the vendor is provided with optimum feedback (minimum five contacts per week over the first two weeks of the marketing programme), and

3. at the time of signing the agency agreement, a face to face meeting is scheduled with the vendor on the fifteenth day of the marketing programme to "review the marketing",

the first price variation occurs at the start of the third week of marketing.