When I list a property, I always explain to my sellers that every potential buyer fits into one of these three categories:
1. Bargain Hunters – These types will wait until your property has been on the market for some time; then they’ll start lobbing low-ball offers. There’s no need to discuss Bargain Hunters any further since they’re the last type of buyer anyone would ever want to attract. So that leaves only two buyer types we actually care about.
2. New Buyers – They enter the market continuously. Within your area and price range, I estimate there will be one New Buyer starting their search weekly (state whatever number you believe to be true).
However, the problem with New Buyers is that they probably have not yet gained the confidence to write an offer. So even if they come back in a week or two, you’ve lost the advantage of urgency and excitement that goes hand in hand with a new listing.
3. Current Buyers – They’ve already seen most (or all) of your competitors, so what are they waiting for?
This is why there’s always a flurry of showings immediately after you list. However, this rush subsides quickly. Then, you’re waiting for New Buyers to enter the market (see above).
Of the three groups, Current Buyers are by far the most important. They’re not only the largest group but also the most motivated; ready, willing, and able to write an offer the moment they find the right property.
In order to appeal to Current Buyers, it is vital to ‘Price it Right’ from the start.
These buyers need to like the property, of course; it has to appeal to their wants and needs. But one more critical aspect is required to trigger them to say, “Let’s write an offer!”
They must perceive that good value is being offered.
Simply put, here’s what happens when a buyer does not perceive good value:
They focus on the negatives.
For example (use something real that the sellers already know), we know that your kitchen cabinets are cheaper and more dated than your competitors. Everything else in the house is good, but this is one of the weaker features.
Therefore, if a Current Buyer does not perceive good value, what might they say?
“I don’t like the kitchen. Let’s keep looking.”
On the other hand, if this same buyer does perceive good value, what might they say?
“This house is excellent! The cabinets are a bit dated, but that’s not a big deal. Let’s write an offer!”
This is Buyer Psychology 101. It’s not actually the buyer consciously thinking about whether they “perceive good value.” Instead, it’s a subconscious decision, which is far more powerful!
The bottom line is that everything needs to add up to trigger the “Let’s write an offer!” response, including the property features, the presentation, and the price. But…
It’s the price that is the most critical component.
This is why it’s wrong to think, “We can always drop the price later.”
In the example above, if the buyer doesn’t perceive good value, they remember whatever negative they didn’t like about the house. Therefore, even if you drop the price later, they’ll still think about it as “the one with the dated cabinets.”
Once the mind is made up, it’s difficult or impossible to change it, even with a new and much lower price.
If this happens, and you miss out entirely on the biggest and most motivated group – the Current Buyers – it becomes more and more challenging to achieve the price you want.
You are probably thinking, “I already know all this stuff.” Of course, you do!
But ask yourself these two questions:
1. Do you have the skills to determine the correct list price (the one that will result in the highest possible sale price), every time?
2. Do you have the skills needed to convince your client to ‘Price it Right,’ every time?
If you master these two skills, you’ll make way more money, you’ll get way more referrals, you’ll have far less stress, and you’ll love your job even more than you do now.
For more information about how to present pricing options, check out this article, ‘Running the Odds on Real Estate Pricing.’