Teaser Pricing: What you need to know now

What is it?

Intentionally listing a property at an asking price below market value.

Why?

To generate multiple offers and drive up the price through competition.

But WHY?

Back when we were clawing our way out of the Great Recession around 2011-2012 as a way to get buyers into homes, agents began listing homes at lower prices. This is also a way of staying ahead of the market -- price it lower sooner to avoid the slow death of being overpriced. The pricing strategy worked -- maybe too well.

But why STILL?

Over the years buyers have grown accustomed to tacking on ~20% to asking prices to arrive at a rough sales price and they've adjusted their search parameters accordingly. When a seller prices transparently (at a price they're willing to accept, generally market price or close to it), buyers, tacking on that requisite ~20%, perceive the transparently priced home as overpriced. Or, it doesn't pass their teaser-pricing-adjusted-search-parameters, so it gets missed.

How to set search parameters

Talk with your REALTOR® who can help you tailor your search specifically for what you're looking for and where you're looking. Specifics matter. Different neighborhoods exercise different variations on this strategy, let alone different cities.

Save yourself a lot of frustration by not looking at homes with list prices around your max budget. A decent rule of thumb for competitive areas is to set your price parameters 10-20% under your max budget, and then ask your agent house by house if it will sell within your budget.

Caveat: Sometimes you can find one of those overlooked, transparently priced homes languishing on the market. From time to time, ask your agent to do a search for homes closer to your max budget that have been on the market for three weeks or longer.

So how much should you offer?

This is where your agent is key. There are many factors that come together to determine your offer strategy: the condition of the property, the level of interest, the listing agent's typical pricing strategy (how much they tend to underprice), and your budget. Typically you'll work with your agent leading up to the offer date and have a target offer range which you will fine tune right before your agent submits your offer. Last minute communications between your agent and the listing agent can affect your strategy, so it's important to be available for any finish line adjustments.