Why do some owners of luxurious homes and elegant condos list their properties for sale but refuse to state an asking price?
That flies in the face of extensive negotiation research showing that making an ambitious first offer—even if it’s unrealistic—serves as a psychological magnet. It can lift up the expectations of potential buyers and prompt them to inflate their counteroffers.
Two questions:
1. What’s the advantage in not disclosing the price: and
2. And, if that works for the super-rich, should the rest of us mere mortals try the same thing?
Hiding the price won’t work in markets where there are lots of comparables. You may have a lovely house, but there may be others in your neighborhood that are similar, more or less. Buyers and sellers alike can track those sales to see the range of recent prices. Likewise for used cars. One particular model may have more options. Another one may have lower mileage. Still, it’s possible to get a ballpark sense of what could be workable.
In situations like those, a seller may might list something at the high end, hoping to bump up buyer’s offers, but if he asks too much, buyers won’t bother to take a look.
This first-offer advantage, however, may shift if whatever is being sold has rare qualities. Say it’s a gorgeous home with spectacular views, for instance. Or a vintage car from the 1930’s, one of only a few still in existence. In cases like those, the seller may hide the price in hopes a buyer with a thick wallet will fall in love with whatever is being sold and dread the possibility that someone else will snatch it away.
In essence, the hidden price is a tool to get a buyer to bid against himself. On the one hand, that means forfeiting the so-called “anchoring effect.” On the other hand, it protects the seller from underestimating just how much a buyer might be willing to pay.
Now all this talk about vintage cars and luxury homes that sell for scores of millions of dollars may seem to be lightyears away from your experience, but bear with me. So-called “zero-pricing” may be advantageous for you at some point, provided you’re selling something rare that at least one other person values highly. What could that be? How about your skills, your expertise, your network?
Someone I know quite well was negotiating a job offer from a prestigious university. It would be a big step up for her but also a great addition to that school’s faculty. The Dean asked her, “How much are you currently being paid?” She didn’t reveal that number or make a demand. Instead, she said, with a confident smile, “Not nearly enough.” He responded with an offer that was much higher than she expected.
All you need is one person, one company that places high value on what you bring to the table. If there is one such buyer, don’t underestimate their willingness to pay. (And by all means, do not set up an auction where there are no other bidders.)
My literary agent Jim Levine knew this decades ago when he and two business partners developed some innovative educational software, but they were having trouble marketing it. Finally, they were able to get a meeting with a prominent tech company in Massachusetts. By this point, their aspirations were low. If they could get $15,000 for their product, it would be worth the trip.
When they arrived at the company, they were ushered into the president’s office (a good sign). As Jim tells it, they first made some small talk. Then the president asked if they were interested in selling. “Yes, we’re interested in hearing your offer,” said Jim. “Tell us what you have in mind.” (A classic “zero pricing” move.)
The president leaned across the table and said, “A million dollars.” Jim, seated between his two partners, could feel them about to leap out of their chairs. But Jim kept his composure and replied, “I think that’s a little low, don’t you?” The trio caucused briefly, returned to the president’s office, and settled for a million and a half.
All of this because he did not name a price
Housekeeping
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Be well! Mike