House is listed at X and offers A, B and C come in. They know they are competing but C, who was willing to pay X+$20k figures that the seller thinks the house is worth less than he did so puts in an offer at X+$10k. It happens to be the best offer and terms. Seller is thrilled; got $10k over asking. Listed higher, the seller would have netted around $9,400 depending on the commission rate if C had come through as he had planned. Though C paid more than asking, he can brag to his friends that he paid $10k less than he would have at the same time the seller is bragging that they got $10k more.
It’s psychological and theoretical because we can’t get inside the head of C to really know the thought process. Setting the price at X sets the expectation. At X, C’s expectations about the property dropped so the offer reflected it. We can’t confirm if the house had been listed at X+$20 that C would have walked in and paid full price but our research shows that might have been the case.
A seller is not obligated to sell a home at any price, regardless of the offers (though there may be some contractual issues with the earning of a commission by choosing not to sell). We’ve previously discussed that an overpriced home will sell for less than it would have had it been priced accurately on day one. We’ve discussed that an accurately priced home will sell in any market. This is a consideration that even in an open market, an under priced home MIGHT sell for less than it would have had it been priced higher. We’re not talking auction here- in that case, the price would have to be low enough that at the asking/reserve price, the bidders would be knocking each other over to put their bids in. The scenario above applies to the fine tuning of the listing price in a conventional sale.
Nor can we ignore that every seller has a different motivation. If get out quick is the desire, under pricing and taking a little less may be the stated goal. We can’t know that either. Sellers probably shouldn’t beat themselves up if their home sold quickly and they possibly left some money on the table. It is completely possible that buyer C really only wanted to pay X but in the heat of battle paid X+$10k and never would have paid a penny more.
Pricing and offers are both about thresholds. The buyer’s smartest offer is usually the one that the seller can live with and doesn’t counter for risk of losing the buyer altogether. The seller’s best listing price is the one that gets the buyer hooked instead of passing up the property in lieu of another one.