Buyers and sellers alike need to understand “fear of loss” psychology in home purchases
Whether you are thinking of buying or selling a home, understanding the current market is crucial. You need to know if you’re in a buyers’ market or a sellers’ market because that’s going to affect how your property is marketed and how much money you’re going to get for your home. If you understand the market, that will tell you what your home is worth and what you can expect if you’re a seller. If you’re a buyer, it is going to tell you what the appropriately priced offer on the property would be.
Using the market on the Sunshine Coast right now as an example, we are in a seller’s market. In a seller’s market, you’re much better off listing your property at a price that is going to attract as many potential buyers as possible and try to create an environment where they have a “fear of loss” motivation; you should aim to capitalize on that and end up in a situation where you have multiple offers.
Fear of Loss Motivation
Here’s an example of “fear of loss” motivation – also colloquially known as FOMO, Fear of Missing Out.
Let’s say you’re looking at a newspaper ad because you’re shopping for a black Dodge Dakota. You look at 15 of them – they all have similar mileage, and they’re all around the same price.
If you are the person trying to sell a Dodge Dakota in that environment, the best thing to do is to position your Dodge Dakota to look the best and price it 5% cheaper than all the other ones. Then all the buyers will want to come have a look. Everyone will look at your price and then make offers because they don’t want to miss this opportunity to get this amazing deal.
It’s the same with houses. Even though you may think that your house is unique, and beautifully decorated, with all sorts of redeeming features, the reality is that when people are initially looking at the information available on the Internet, they typically don’t know any of that. They will call up their buyer’s agent and ask to see the home based on the first impression they’ve had from the photos.
Your listing agent has to make sure when they list your property that they have a good understanding of the market value of the house, and then position it in a way where it’s going to get the most exposure and the most interest as possible. Then what needs to happen, in this market, is the listing agent needs to maximize exposure.
This is what I do. I say we’re not going to accept any offers until “this date,” and I give two to three weeks for everyone who is potentially interested in it to come and see it.
Price it Right
A lot of people make the mistake of pricing their home too high, thinking it gives them room to negotiate. For example, if a house is worth $500,000 and they price it at $550,000 because they think they can negotiate and end up with $500,000. That’s the worst thing you can do because that’s going to put people off.
The average buyer is not a professional real estate agent, and they’re the ones deciding which properties they want to see based on their online research.
If you don’t make your home appear to be a really good deal, you’re going to lose a lot of potential buyers. When they come see your home, then they can find out that it’s got lovely decoration, it’s a great neighbourhood, it’s close to a school, and all the other great features. But until they come and physically see the home, it won’t really be on their list, so you can miss a lot of people. If their search parameters are set at prices under $500,000, your house won’t even show up at all.
Understanding and Expertise
You’re much better off understanding the market, understanding how people buy, and understanding the psychology of buyers and sellers. It’s very important. As a seller, it can make you tens of thousands of dollars, if not hundreds of thousands of dollars, in a market like Vancouver.
As a buyer, understanding this can save you the same kind of money. Right now, there are a lot of buyers in our local market using Vancouver agents, paying tens of thousands of dollars too much because the agent they’re working with doesn’t understand the local market. They’re coming from a market in Vancouver where sellers are selling for $2 million, and then buying a place on the Sunshine Coast for $600,000. They think they’re getting a great deal. If they were using a local agent who knew the market, they would probably get the same home for $550,000. But they don’t and $50,000, compounded annually at 3% is a huge amount of money. A local agent who knows the market and is working as a full-time agent in the thick of things can save you, or gain you, thousands of dollars.