How to attract buyers setting the right price
Clients often don’t understand that pricing a home correctly is the most important part of selling a home. An optimal market price will greatly improve the chances of a successful sale that’s completed in the seller’s timeframe, whereas setting too high of a price will drive the home’s best chance of sale in the first two weeks.Leverage your professional relationships. Talk to buyers’ agents to understand some of their client’s criticisms and feedback about the home, and fix and address those issues if possible.
Sellers always want top dollar for their homes, as they should, but there are serious risks to setting the initial price too high. Communicating to clients how to appropriately determine the home’s value with statistics and data, not gut feeling — particularly those selling luxury homes — can be the most frustrating aspects of our jobs as advisers and homeselling experts.
Providing a comparative market analysis (CMA) of a property is the best tool for setting a seller’s expectations and price. A CMA offers the sellers and buyers an objective analysis of a property’s fair market price. Without the CMA, agents don’t have as strong of an argument in guiding clients away from gut-pricing decisions.
However, agents should highlight their expertise by anticipating how buyers might react to the price and whether setting too high a price will backfire.
‘Herding theory’ explains why buyers follow the market
Savvy restauranteurs, professional sports, entertainment industries and real estate agents understand how people inherently trust crowds. The herding behavior is a concept by John Maynard Keynes, a British economist and one of the most influential and controversial 20th century thinkers, who theorized that people often follow the actions of the crowd in uncertain circumstances because they assume others are better informed.
We won’t discuss why this theory was revolutionary for addressing mass unemployment in Britain during the 1930s economic depression, but it turns out Keynes was right, and people have a natural tendency to follow crowds.
The herding theory’s application applies to buyer activity of a listed home. Buyers are comfortable when they notice high amounts of buyer activity for a particular listing. There’s comfort in the crowd, especially in today’s highly competitive seller’s market.
Conversely, speculative buyers can be intimidated by a seemingly exaggerated or uncertain list price, consequentially spooking other potential buyers who feel more comfortable chasing more competitive properties.
Our job is to drive the dynamics like urgency and competition to build momentum towards the ultimate sale. Understanding and anticipating buyer activity is essential when determining the optimal listing price, which will either create urgency or irrelevance. To exaggerate the listing price risks chilling buyer activity, and you have the first one or two weekends on the market to drive that “crowded” demand.
The top-paying buyer is typically found in the first two weekends of a listing. There will be an initial wave of buyers eager for this type of property to come onto the market, and they will be ready to act quickly.
But if the pricing, house photos and marketing tactics aren’t handled correctly, the initial wave of buyers — and your best chance of selling the home — will have moved on, with little chance of kickstarting the initial listing buzz.
So, instead of playing offense, the agent switches to a defensive strategy after about 10 days. As the home sits, it develops something of a stigma. New buyers will wonder why other buyers didn’t act on this property and assume there’s a reason to stay away.
No one wants to be stuck with the stale plain donuts before the shop closes.
The best defense is the best offense, if you’re creative
Playing defense for a home sale is challenging, but it can certainly be done. Options include a price change to better compare with similar homes, taking new marketing photos, investing more into staging and alternating the online listing’s main photo to a new exterior shot.
Posting images taken at night is another way to reframe a house’s appeal, especially if it has a backyard that’s already set up and lit for evening entertaining. Here are additional ways to perk up a stale home and boost interest from the herd:
Revisit comps and trends. If the overall market is slowing down, then order another CMA to better understand fair current pricing and adjust accordingly.
If the home sits for months, check the curb appeal. Ensure the landscaping is maintained. Consider a quick power wash to brighten the home’s exterior. Keep it looking as fresh as possible while keeping expenses reasonable.
Pricing a home correctly is a classic blend of art and science. Agents need CMAs and other market data to inform their decisions, but we also need to understand buyer trends and interests.
Before clients jump to their gut decision for their home’s price, they need to understand how the buyer herd will react to a price and determine the price that maximizes herd appeal.