Creating a bidding war before your home even hits the market isn’t about luck. It’s a strategic process of pricing, positioning, and pre-market exposure designed to drive competition from day one. I had a great conversation with a reporter from Realtor.com and was happy to share my perspective on this topic. Our Q and A is below. 

Q: Can you explain what the value is, to a home seller, in a pre-listed bidding war? Why is generating interest even before the home hits the market good for a seller -- why not just go public and see what happens?

A: Generating a pre-listing bidding war is usually of great benefit to a seller. A recent study conducted by Darren Hayunga at the University of Georgia (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6359754&ref=notoriousrob.com) showed that homes sold off-market yield an average 1.7% more to the seller than those that are publicly marketed. He cites two reasons why this strategy often leads to higher profits, the first of which is the lack of price reductions on the seller's part. Not having price reductions results in a stronger negotiating position for the seller. The second reason is that there is much less back-and-forth negotiation between the buyer and seller than in a traditional transaction, so the sales price is not chipped away at during the deal. Even if you have no pre-market offers, promoting as a Coming Soon listing can lead to pent up demand from buyers who are eager to enter the home once showings begin. The more activity you have at the beginning of the listing period, the better, because having less days on market leads to a stronger negotiating position for the seller. 

Q: What does the original strategy session between an agent and a seller look like in terms of deciding what tactics to go with? Does the agent/brokerage drive this?

A: When I meet with sellers, I like to map out all of their market strategy options, and walk them through the pros and cons of each scenario. Every decision is the seller's to make, not the agent's or brokerage's, so it's a data-driven approach where the seller owns the decision-making based on the detailed and reliable information the agent provides. The agent is in tune with the market, so we can speak to the pricing, the pacing, what we are seeing out in the field, and that can help the seller have a good view of the market's landscape.

Q: I like hearing about how well-connected and relationship-focused agents bring value to this part of the process. Can you explain how to find an agent that has this network to leverage?

A: I think in real estate there really is no substitute for experience. A seasoned agent who has sold hundreds of homes has by default worked with hundreds of agents. We know everyone, and we know who works what areas. You can then add the breadth of a national brokerage's reach to that agent's own network, and the web is spread even wider. Buyers and sellers definitely find agents through referrals from friends and family, but they are also finding us online because our transactional volume is discoverable. If you check Homes.com you can see how many homes an agent has sold in the last 5 years. You can search by neighborhood to see if they have been selling in your area. Then you can look that agent up and read their reviews to hear what other clients have to say about them. By the time you call a listing agent, you can have a very strong idea of their past performance, the size of their network, and how they work with their buyers and sellers.

Q: Finally -- is completing a deal "off-market" better for a seller, or does it depend?

A: Deciding if an off-market deal is better for a seller depends on what that seller prioritizes. Some sellers do not want the hassle of open houses or multiple buyer showings. Some sellers are extremely private and they simply do not want their home publicly marketed. Those sellers would likely be thrilled with an off-market deal. Other sellers don't want to review offers until their home has been publicly marketed for at least two weeks because they fear they would be leaving money on the table. I would not recommend an off-market deal for someone with that mindset because it's almost guaranteed no matter how much they get for their home off-market, they will think they could have gotten more. That's why I think it's important for the seller to decide the strategy that is the best fit for them. Some sellers love the idea of an off-market sale and others don't like it at all.

Q: How can sellers generate interest before their home goes to market? 

A: There are a plethora of things sellers and their agents can do to get a jumpstart on their sale. The first thing, of course, is to always have the home looking its very best. We typically do a pre-listing walk through and provide the seller with a punch list of items to have completed before the professional photography and videography take place. All media and marketing collateral are ideally completed at least a week or two prior to going active in the MLS so that we can start to privately market the home in accordance with the local MLS rules.

In terms of pricing, I usually advise clients that they can choose to negotiate from a position of strength or from weakness. The strong negotiating position happens when you have multiple offers, and that only usually happens when you get your pricing spot-on or launch a little below market. And the weak negotiating position happens after you've been on the market for three months with no offers, most likely because you are over-priced and/or did not complete the recommended items on the afore-mentioned punch list.

It's amazing the number of deals that happen in San Diego off-market. There are a lot of excellent agents here, and we are all networking constantly to put deals together. We can use tools like reverse-prospecting within the Compass platform to find agents whose buyers are looking for listings like ours. Or sometimes I just start calling agents I've worked with before who I know specialize in certain areas to see if they have a buyer for me. Often the answer is yes.

To see the article on the Realtor.com website, click here.