When you are the seller, you should set the price a little higher than you are actually expecting to make from the sale. This increases the buyer’s expectation of what he will have to pay.
Research the true market value before the negotiation begins. You do not want your offer completely out of the ballpark, just a little outside the sidelines. If you do make your first offer too high, the buyer may walk-away without even bothering to negotiate.
Be the first to throw out a price and set the anchor for the negotiation. If you allow the buyer to be the first to offer, he may offer too low and thus set the anchor for the negotiation in his favor.
Example
A real estate agent first shows her clients a new home that is way out of their price range. The only homes that they can afford in the area are pre-owned, but now their expectations are set higher. They can’t get over how pristine the new homes look and feel. They end up purchasing a new home way out of their price range and the agent gets a bigger commission.
