Why Use a Holdback Strategy to Sell your Property?

Dated: August 7 2020

Views: 108

There’s more than one way to sell a home. In fact, there are three main strategies that agents use to move real estate in the current market. In this video, Christan Bosley, President of Bosley Real Estate outlines the options.

In this blog series, we will be explaining these strategies in more detail. When selling your home - and even when buying - It’s important to have an understanding of the various approaches. When you’re working with a Bosley agent, we will make specific recommendations based on your particular situation and needs. As Christan explains, the strategy you choose to go with will depend heavily on your current local market area.


In today’s blog, we’re discussing the holdback strategy. In the holdback, your Bosley agent will encourage you to list your home at 5-10% below market value - doing so could encourage maximum exposure and procure a multiple bidding war, getting you a final sale price that is greater than your initial number.

Main takeaways

PROS

  • Holdback is currently the most common listing strategy 
  • The end goal is to achieve more than your list price
  • Higher offers will speak to more motivated buyers

CONS

  • You’re “playing the game”

Why use the holdback strategy?

A holdback is often used when selling a property that is likely to draw a high volume of potential bidders who can compete with one another to boost the price of the home. For instance, there is always a high demand for standard single-family residences like two-bedroom condos - starting at a lower price will bring a lot of eyeballs to a listing.

“The objective is to list the property at a price that is instantly identifiable as good value. The lower the price, the more people will come through with the idea that they will be able to secure the property,” explains Bosley Agent Steve Fudge of the popular Toronto Real Estate blog Urbaneer

Steve explains that those who are experienced in buying and selling - and those that have a good agent - won’t feel duped by a holdback: “Many buyers will also be savvy enough to stick around once they see a lower price start to climb. For those familiar with the market, a low-list price instantly signals to the well-informed Buyer that this property will sell for a higher sum. In a market where this strategy has been common for well over a decade, Buyers understand that a low list price is not where the final sale price will land.”

What impacts a holdback price?

Steve advises his clients to set their prices relative to other properties in the area (which of course he provides to them). This price compared to others nearby allows the seller to argue, upon reviewing offers, that the final sale price should be higher. This is often the case in newly renovated homes, which intrinsically have more value than a home that has not yet been updated.   

“I can demonstrate that here's a house that was not renovated, and here's my listing that is,” Steve says. “As a result, I have the opportunity to educate prospective purchasers on the real costs associated with the renovations, and how I anticipate the demand for these sorts of upgrades will translate into the final sale priceMy objective is to choose a list price from which I can establish a point of reference, so Buyers understand where we are all coming from.”

Who is bidding on a holdback (and why does knowing this help you)?

Motivation value and fatigue value have a lot of influence on the bidding process. The former usually refers to the timeline - someone who wants to relocate quickly will act with more urgency (and pay more) than someone who doesn’t need to move within 30 days. “You’ll likely be able to tell when you get an offer from someone who sold their condo, is now living in their mother-in-law’s basement, and just wants to get out of there,” Steve says.

By the same token, someone who has already made several losing bids may recognize that they need to up their bid in order to secure a home. “The buyer who is offering for the first time in a multiple offer situation is probably going to offer less than the buyer who's already lost 10 houses. In an escalating market, each sale sets the precedent for the next. The Buyer who has lost after multiple attempts can see that there's value in paying their top sum sooner than later before they have to settle for an inferior property for the same price.” Steve concludes.

Because of this, you can often tell the difference between offers of those who are simply dipping their toes in and those who are motivated to buy. This not only helps you prioritize the best offers, but you can be more confident that a deal will go through - saving you time, energy, and stress, and getting you more value for your property.

While there are some common trends, every home (and every home sale) is ultimately a unique experience for both the buyer and the seller. At Bosley, we can make that complicated process feel a little less intimidating. Our expert realtors can recommend a sales strategy that will get the best price for your home, or help you find a home at a price you can afford.

 With a Bosley agent in your corner, our expertise and experience is your greatest asset.

Blog author image

Christan Bosley

Christan is a dedicated real estate professional that has been working at Bosley Real Estate since the age of 12. From front desk operations to a successful sales career to general manager, Christan ....

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