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5 Emotional Mistakes Sellers Make
Posted under: Home Selling | April
9, 2013 6:59 PM | 14,726 views | 12 comments
Have
you ever said something in the heat of the moment, then wished for weeks later
you could reel those words back in? Truth is, all of us commit emotion-driven
mistakes in some areas of our lives. But when it comes to selling your home -
read: cashing out your most valuable asset - the stakes are simply too, too high
to allow yourself and your transaction to fall prey to predictable emotional
pitfalls. Fortunately, when it comes to emotion, what’s predictable is avoidable if you’re willing to acknowledge and correct for your own feelings and how they can foul up your decision-making. This list will help you predict - and better yet, avoid - some common decision traps driven by emotions.
1. Price reduction paralysis. Wikipedia defines panic as “a sudden sensation of fear which is so strong as to dominate or prevent reason and logical thinking, replacing it with overwhelming feelings of anxiety and frantic agitation consistent with an animalistic fight-or-flight reaction.” But there’s a real estate-specific reaction to panic that the infinitely wise Wiki editors left out: freezing up entirely.
In cases of overpricing, the seller has most often started out as overconfident in their home’s prospects on the current market. But as the days on the market turn into weeks, or even months, that overconfidence morphs into panic: panic that the place will only get a lowball offer, panic that the place won’t ever sell, panic that the seller will be stuck in the property, panic that the seller’s future life or career plans will be ruined. This is a panic that snowballs into increasingly disastrous hypothetical scenarios, and fast.
Unfortunately, this panic is often accompanied by a fear that actually reducing the home’s list price will actually kick off the snowball effect. This couldn’t be further from the truth: when a home is dramatically overpriced, cutting the price is the only way to fix the scenario (besides pulling it off the market entirely) and render the home more compelling to buyers. Some sellers have actually found that reducing their price gets them to a sweet spot wherein their home receives multiple offers and sells somewhere between the reduced price and the original list price.
But sellers who cannot manage their fear and panic can end up paralyzed, unable to cut the list price. And this begins the snowball effect of more and more days on the market, which aggressive buyers watch until they believe the seller’s desperation will make them amenable to a lowball offer.
The best way to deactivate this panic is to put a plan in place before it ever arises. Work with your agent to understand how to use the data around how long most homes in your area take to sell as a guidepost for making price reductions, if and when the need arises.
2. Excessive attachment. Yes, this is the place your kid took her first steps, the place you carried your bride over the threshold, maybe even the place your parents built with their bare hands. But at the time you make a decision to sell it, it also becomes a property, an asset, that like any other good you would sell in the course of business, must be marketed and priced and transacted for.
Sellers who are excessively attached to a home are likely to:
- overprice it
- ignore market data, like the recent sales prices of comparable homes nearby
- disregard their agent’s staging advice
- improperly prepare their home for the market, failing to update or neutralize the decor
- be irrational in negotiations around price or repairs
- refuse to respond appropriately to market feedback, like no showings or offers even after it’s been on the market for weeks or months.
Buyers don’t know the emotional value your home holds for you. Nor do they care - and they certainly have no interest or intention to pay for it. If you want to stay attached to your home, keep it - no harm, no foul. But if you truly want to sell it, you must release yourself from your emotional attachment to it.
3. Ignoring the needs of your target audience. Again, by virtue of putting your home on the market for sale, you have become a de facto marketer. And every marketer knows that it’s essential to understand your target buyer’s wants, needs and lifestyle in order to get top dollar for your product (that’s your home). It’s up to you - working with your agent, of course - to figure out who the target market for your home is and to market it accordingly.
If your home is a 2 bedroom condo with a coffee shop on the ground floor and a subway station at the end of the block, your target buyer is likely to prioritize things like efficient storage spaces and room for entertaining. If your home is a rambling 3 story rancher on a half-acre, chances are good that pets and kids are likely to be high priorities on your home’s target buyers’ list.
Understanding your target market is one thing - marketing appropriately for them is another. Your condo’s buyer might be drawn in by mentions of built-in closet organizers, an espresso machine included in the sale and incentives like HOA dues paid a few months in advance. Also, make sure you mention just how close and convenient the place is to the subway station entrance (and mention the station by name) in the home’s marketing materials.
On the other hand, if young or growing families comprise the audience for your home, mentioning custom play structures, the organic vegetable garden, the proximity to quality schools and the built-in desks that are in each “kid’s” room, might be the way to help your home’s listing stand out from the rest.
4. Celebrating too soon. An old friend of mine who happened to be a former pro athlete would often shake his head when a team went wild over a mid-game rally. His mantra: “Don’t celebrate too soon.” In sports, some say that celebrating too soon can cause you to relax and play less aggressively or less defensively for the rest of the game, giving your opponent a chance to make a last minute comeback.
And the same is true in real estate. Multiple offers and above-asking sales prices happen frequently on today’s market, but it’s critical not to assume your home will be in that number until a deal is actually closed. Sellers who “celebrate too soon,” so to speak, can put themselves at a disadvantage in a number of ways, like:
- Cheaping out on staging, failing to do all the items on their property prep list
- Overpricing their homes, assuming the demand-supply imbalance will automatically swing in their favor
- Getting sloppy in how they maintain their homes on a daily basis, while they are still on the market, and
- Making large purchases or spending their house proceeds “in advance,” while the buyer’s loan and inspections are still pending.
Even on today’s market, deals sometimes fall out of escrow because a buyer has a change in their life, their job or their family, or because they simply turn out not to qualify for the loan they were pre-approved to receive. Smart sellers stay vigilant and keep their houses meticulous and their finances in good shape throughout the entire time frame from property preparation through close of escrow. Work with your agent and your mortgage broker around timing your purchase of your next home in a way that makes sense vis-a-vis your current home’s listing and sale.
5. Price confusion. Some sellers have a confused understanding of the mechanics of determining the fair market value of a home and setting a list price. This leaves them vulnerable to the trap of letting their financial self-interest and fantasies for the future get in the way of setting a smart list price.
See, a home’s fair market value is defined by what a qualified buyer will pay for it at a given moment in time. The best way to estimate or approximate that for a home before it is actually sold is to look at what qualified buyers have actually paid for very similar nearby homes, as recently as possible. This is what agents call looking at the comparables or “comps” - most listing agents will do a formal version of this process called a Comparative Market Analysis, and present that to a seller to consider in setting the list price for their own home.
If a home is more or less upgraded, spacious or well-located than the comps, or if the market has moved up or down since the time the comps were sold, it might warrant listing the property at a price higher or lower than the comps indicate. And if a seller is aggressively trying to get buyers into a property to create a bidding war, they might even go so far as to discount the list price a bit from what the comps, making the home seem like a great value in order to drive buyer traffic and interest (whether this strategy is appropriate for any given property is a subject for conversation between a seller and their agent).
All that said, some sellers are so emotional about their plans for the next stage of their life that they convince themselves to base the list price for their current home not on its fair market value or marketing considerations, but based on how much money they need to fund their next home purchase or their move to Malaysia. (I’ve been watching too much House Hunters International - don’t mind me.)
This is the quickest, most lethal route to pricing your home so high no one comes to see it and it lags on the market, a road which usually ends in no offers at all, or very low ones. Smart sellers can combat this tendency by staying fixated on the comparable sales data, and committing to being responsive to market feedback like low buyer traffic or having your home sit on the market for many days beyond the average in your area.
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