Vendor discounting is a really useful data point that can tell you a lot about the supply and demand equation in your local market. It captures the average amount by which sellers are negotiating to get a sale when selling by private treaty or a normal sale. For example, if the listing price was $500,000 but the final selling price was $475,000, that’s a vendor discount of -5%.
The number is always negative because of the way it is calculated and any amount between -4% and 0 is a strong market. This indicates that sellers do not need to discount much to get a sale in those markets. And in some cases, may even be negotiating up.
When vendor discounting starts to grow, it’s a sign that sellers are out of touch with the market and expecting more than buyers are prepared to pay. The end result is that properties stay on the market for longer until sellers reduce their prices.
If the vendor discount rate in your suburb is in high, especially double digits, you need to take this into account as part of your sales plan. You will need to set a realistic price to obtain a sale, and should probably expect to be on the market longer (depending on how realistic your pricing is). You may also need to spend more on marketing to attract a buyer.
If the vendor discounting is low, it means you may be able to adopt a more aggressive pricing strategy. You’re probably going to get a strong offer very quickly and may choose to hold out to see what else is offered. It may also mean an auction is a good option for your property.