Why Fear and Greed Rule The Housing Market (And How To Use Them To Your Advantage When Selling)

When it comes time to choose the price you ask for your home, I strongly encourage you to give this some serious thought.

Our studies show that a home priced correctly at the onset of the initial marketing plan will, on average, yield 6% to 8% more for the seller than one in which the seller prices high and then reduces until it sells.

There are many reasons (we believe) that the seller will eventually get less, but it usually comes down to a combination of a few key factors, fear and greed.

Why Fear and Greed Rule The Housing Market

We advise our home selling customers that fear and greed rule the housing market (just as they do in every other market). Both the seller and the buyer(s) must deal with both of these emotional forces that can wreak havoc on a home sale.

For the seller, there is no fear when they first enter the market. They want to get above top dollar and they certainly are not willing to give the house away. They often do not understand that greed will cause them to over-price their home, asking an amount that will lure the WRONG buyers to their home. As time goes on and their home does not sell, greed is replaced by fear which can cause them to capitulate to an offer that is lower than what their home is worth. If you think this cannot happen to you, you are like all the seller's who sold below market when fatigue set in after months or years of being on the market without a buyer.

For the buyer, greed will cause them to low-ball a well-priced home. Most new-to-the-current-market buyers want to try to buy a home at far below market value, a form of greed that often causes them to lose in a negotiation war to another buyer (or to receive a counter offer from the seller that is far higher than the seller is willing to take). As time progresses and they tire of the difficulty of home shopping and the consistent losses in negotiation, it is fear that causes the buyer to bid too high on a home they could have bought for less. If you think this cannot happen to you, you are like the scores of buyers who work with the wrong agent and who look at the wrong homes, and then fail to make compelling offers.

So the new seller and the new buyer, unless well-educated by their real estate agent, typically allow fear and greed to bring them harm.

Why Smart Sellers Make More Money

Price Your Home Right, The Buyer Is Asking Which Home Does Not BelongSmart home sellers recognize how the market runs. They use their initial asking price to activate the fear emotion of the ready-buyers for their homes. If you understand this concept, then you understand why we advise home sellers to get top dollar for their home, they need to plan to sell a home in just 4 to 14 days.

Take a look at the image on the right. Can you tell which circle does not belong in the picture? Pretty tough, huh?

Four of the five circles are a shade of blue, one is yellow. Four of the five are the same relative size, one is quite smaller. So if you chose the small yellow circle, you are correct.

Now look at the image on the left below.

Can you tell which one doesn't belong?

How Your Home Compares On The InternetYou know what? So can every buyer who will look at these homes online when it comes time to select properties to visit.

94% of the prospective buyers for your home are using the internet to select which homes to visit, and they aren't stupid. Buyers are not going to choose to come see your home if it does not compare favorably with those priced similarly.

When you over-price your home, even by "just a little," you make buyers compare your home to those that are nicer. In my 24 years of experience, buyers prefer the nicer homes.

Next time you get the urge to "price it high and see if somebody brings an offer," please try to remember these pictures. It is how the internet works for buyers, and buyers are using the internet.

So how does this relate to fear and greed?

How To Stimulate The Fear Emotion Among Homebuyers

For most areas and price ranges, there is one or more buyers waiting in the wings, looking at every deal that hits the market in their chosen neighborhood. They understand values better than most Realtors (for their selected neighborhood), and they are ready to jump when the next one hits the market. (If you want to know more about who's stalking your neighborhood, just follow the link).

Which One Doesn't BelongSo why are they ready to pounce? Because they are seasoned buyers, and they already lost one or more in your neighborhood when "greed" was in control. But they are tired of losing out, and they want a good home.

If you price your home to sell, it will look like the middle home in the picture on the right. Your home will be the obvious best-buy, and buyers will jump on it and make a full-price offer or higher. Why? They are fearful of losing your home to another buyer.

But if you hit the market over-priced, they know you won't sell right away, so they are in no hurry to bring an offer (or even look at your home that compares poorly to the good ones priced at the same level).

Fear and greed are great emotional motivators, make sure you put yourself in a position to use them to your advantage. Want to know other ways to get top dollar for your home when you sell? Simply drop me a note and we'll set a time to discuss the best ways of selling your home.

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