There are many factors that go into selling your home. But one of the more critical pieces is pricing your home just right. The asking price of your home can dictate many aspects of the home-selling process throughout the life of your listing.
One of the things that home sellers tend to overlook is the psychological factors that your list price has on buyers.
Let’s explore some of the psychological factors that can motivate a home buyer to buy or a home buyer to even reject your home.
Hopefully, after reading the article you will understand why pricing your home properly from the beginning is important.
Buying a Home Is an Emotional Decision
For most home buyers, buying a home is an emotional decision. A home is their little slice of the world that they control and seek peace from the world.
Often a home is where some of the best memories are made over a lifetime.
It is important that a home buyer likes your home and even love some aspects of it. Home buying for very few homebuyers is strictly a practical decision.
So how does a buyer’s emotion translate into pricing a home?! Your home is constantly being compared to others in the real estate marketplace.
A certain price point has certain expectations.
Is the price of your home allowing home buyers to fall in love with some of its features. Or, is it priced too high and does not compete with similarly priced homes… and only disappoints.
A Home In a Certain Price Range Will Have Certain Expectations
For example, years ago, I had a family member price a home about $100,000 too high in the Andover MA real estate market. I am not in the habit of taking overpriced listings but it was a family member. Two vital mistakes were made in my family member selecting their list price.
First and foremost. It was the only home anywhere near that price range that did not have a master bedroom suite. We aren’t just talking about a master bedroom with a bath….. we are talking about a large master suite with a large bathroom with his and her sinks, a soaking tub and a separate shower with at least one walk-in closet.
Second and to a lesser degree the kitchen while in good shape did not have the sizzle that other kitchens had in its price range. It was lacking recent, modern upgrades or even a complete renovation.
It is hard for a buyer to look past those two items. If every other home you looked at had a master suite, it is a hard thing for buyers to give up.
The marketplace has set the buyer’s expectations. If a buyer is expecting a master suite because the marketplace has set the expectation than yours should have a master suite too.
And of course, it is easy to fall in love with a brand-new kitchen, with all the latest design trends.
So if your home is not meeting a buyer’s expectations because it is priced improperly compared to its competition it is easy for buyers not to see the value in your home
A funny thing happens when a home is overpriced and goes thru a couple of price changes until it gets into the right range. The feedback changes from darn right rude and nothing appealing to buyers about your home… to feedback containing some positive comments and you can see they are mulling over the possibilities of your home.
The total tone of the feedback changes as you go from overpriced to priced about right.
Herd Mentality for Home Buyers
The herd mentality plays into many aspects of life, not just home buying. The herd mentality is how people are influenced by their peers in their thoughts and actions, which also include how and what they purchase.
For example, look at how popular brand names are in the marketplace. Michael Kors, Coach, Polo, etc… You can certainly buy quality handbags for much less without the label or an oxford shirt without the logo. But those brands have been validated by peers.
Or, even look how trends start in real estate…. stainless steel, granite or whatever the trend de jour may be in real estate that day, buyers want it. Look at faux painting, shag carpeting or tile countertops.
The herd or mob mentality is human nature that goes back since humans have been interacting with each other. Wanting or having what others have validates the person’s desire for the same.
The Herd Mentality and Psychology of Home Buyers
What’s the difference between an open house packed with home buyers versus one where one or two couples show up? Or a home flooded with showings, one after another?
The activity and interest from other buyers validate that the home is desirable and a good deal.
The herd mentality kicks in. The buyer likes the home but it now holds a higher interest now that their choice appears to be desirable by other buyers.
But what does this have to do with how you price your home?
How you price your home will definitely impact the amount of activity a home has for showings and open house activity. The closer you get to pricing your home at fair market value, the more activity you should have on your home.
Buyers are not stupid, and have been to multiple homes in person and have viewed many more on the computer. Buyers notice a home that is reasonably priced. A well-priced home brings more qualified buyers and increased interest.
Hope and Excitement When Your Home is New to the Market
Lets quickly look at the typical home buying cycle. A buyer looks on the internet for a period of time, sometimes up to a year.
Then they pull the trigger to look at homes…. at first maybe open houses, then many will start working with an agent.
The first homes they look at will mostly be old inventory mixed with a few newer properties. They may write an offer or two and may even lose some good homes from not pulling the trigger soon enough, over home inspection issues or underbidding.
Where does this leave them?
Waiting for the next new home to come on the market, as they have exhausted all other possibilities.
With each new notification, they hope this may be the one and they are excited at the opportunity that this could be their new home!
And, on top of it, these are your best home buyers. The first home buyers are usually educated about your local real estate market and what to expect from a properly priced home.
With hope and excitement comes urgency. A buyer is afraid to miss a good opportunity.
Days on Market Has A Psychological Impact On Home
There is a direct correlation between your home’s list price and how long your home lingers on the market.
Set your list price too high and you start to see market times of a couple of months to even four to six months. Homes you see that sell in the first 20-30 days are usually priced right at or near fair market value.
Days on market do have a psychological effect on buyers.
The longer a home sits, the more suspect a buyer becomes of the property.
I will eventually get the calls about what is wrong with it and why hasn’t it sold.
In the very strong greater Boston real estate market, home buyers are starting to ask that even if a home has been on the market for 30 days. Which in the whole scheme of things a little above average market times. But with so many homes getting multiple offers within days of hitting the market, it leaves home buyers wondering why this home hasn’t sold.
The Herd Mentality Kicks In Again
This is when the herd mentality kicks in again. But, this time the herd mentality instead of working for you works against you.
Other buyers have rejected the home and that is why it has sat on the market for so long. Now the home buyer is second guessing if this is a good home to see or not. There must be something wrong with it in their minds. It’s overpriced, it’s ugly, there are serious issues, etc…
The herd is not helping to validate your home to a potential buyer. It is now validating that this home is not a good choice.
Nobody else wants it, why should I?
The Sense Of Urgency Is Gone
Also as a home sits on the market unsold, a home buyer’s sense of urgency goes away. They figure they can do two things:
- Wait and see if a better home comes along that is a better deal. In their mind it has sat around this long they have plenty of time to make a decision.
- Negotiate harder and longer. They have no fear of losing the home to a competing home buyer. Not one buyer has stepped up yet. Now they feel that they have all the time in the world to beat you down and negotiate the best price and terms.
And guess what they probably can.
80-90-120 days on the market and the buying public has told you as a whole we are not interested in your home at that price. You have exhausted the bulk of the home buyers in your price range.
Phscologically A Buyer Does Not Want To Engage In A Process That Won’t Have A Positive Outcome
Unfortunately, home sellers knowingly or even unwittingly overprice their homes.
While a home buyer can still find merits in an overpriced home they will sense it is overpriced. The problem is while they are willing to pay a fair price they feel the negotiations will not have a positive outcome if the fair price is too far from the asking price.
Because home buying is mostly an emotional process they do not want to invest their valuable time and energy negotiating an offer that they feel will not have a positive outcome.
Most buyers are expecting to pay fair market value for a home.
If your home’s true market value is 5-10% less than your list price a buyer feels they may have to start negotiating at10-20% or even 30% percent below market value to try and meet you in the middle.
Their mindset is why bother it will never come together. They will wait and see if you lower your price or move on to a home that they perceive is a better value.
Summary of The Psychological Factors of Home Buyer’s and Your List Price
Your home’s list price certainly impacts how home buyers think. And home buyers may not even be completely aware of their thought processes.
There are certain psychological factors at play in how home buyers will perceive and react to your home’s asking price.
There is a fine balance between giving your home the proper exposure to the right buyers and your home sitting on the market too long.
It gets to a point the home has what I call market rot. The buyer’s perception is that of a banana. First day back from the store it is fresh green and new! As the banana sits each day it matures until it eventually rots. This is how a buyer perceives your home as it sits on the market.
Careful consideration needs to go into pricing your home correctly to play into the mindset of buyers. Get them excited give them hope and let them see your home is desirable and you will get the best price for your home.
Other Home Selling Resources:
- Wall Street Journal The Psychology of Buying a Home
- Bill Gassett What Factors Should I Consider When Pricing My Home
- Anita Clark Overpricing Your Home is Just A Bad Idea
- Paul Sian How Do Days On Market Effect My Home Sale
- Kyle Hiscock Seller Mistakes to Avoid When Pricing Your Home
The Psychological Factors of Home Buyer’s and How They Perceive Your List Price is provided by Kevin Vitali a Massachusetts REALTOR located in Tewksbury MA. If you would like to sell your home or buy a new home give me a call at 978-360-0422 and let’s get the process started.
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