Whether as an agent, appraiser, buyer or seller, anyone that has done many residential real estate transactions has dealt with the owner that says (or feels), "I can get a higher price for my house because my house is SPECIAL!"... or some variant of the remark.
And since most buyers and sellers are not accustomed to large financial transactions from a business perspective.. and because they often do not understand money... the decisions are often more emotional than logical.
So, what can you do about this???
And, more importantly, can you help them?
First off, there are probably as many great approaches to this problem as their are sellers and agents. But here are some ideas to consider:
- Don't argue. That makes people defensive and reinforces their position. If you just need to be right and prove how smart you are, then this is not the industry for you. It is not about being right, it is about finding ways to make the deals happen fairly for all involved.
- Ask for help understanding what they mean (who knows, maybe there is something about the house we didn't know that adds value).
Strategy 1:
- When asking for help understanding, ask if it is okay to make a list. (Getting permission helps them believe you are ready to listen to them... and sometimes that is all they want... for someone to listen first).
- Once you have permission, make three columns.
- Their reason (or item) such as "location", "bathroom", "pool", "Favorite designs", etc. If they say something is the "Best" in the neighborhood, get them to explain what best means to them. And at this stage, don't comment or judge, just listen. Don't agree or disagree on value.
- Leave this middle column blank for now, not even a title.
- Their belief of the value it has to them (in dollars).
- After making the list and completing the values, cover up the last column and go back to the middle column. Ask them to pretend they are looking to buy a house in another city. Talk about what, as newcomers in a new city, they might look for in a house. If they mention something not on the current list or in the current house, ADD IT to the bottom of the list. Now, as the buyer, go back down the list and get them to assign a value to each item on the list and ask why to be sure you understand the value.
- You can now compare the perceived initial value to the new value... and subtract off the values they would look for in a house that their house does not have!
- Remind them that the price in not just about how their house is special to them but also what the house is missing that buyers expect (sellers like to ignore this part).
RISKS: They will work hard to still justify the original value and not be emotionally able to assign a new value.
POSSIBLE VALUE: By creating a new perspective, they may see that the memories in their house are only important to them and are not something they can sell.
Strategy 2:
- Ask permission to talk about money. People are uncomfortable and by asking it often opens the door emotionally.
- Ask that they agree to be very candid and if you ask anything they do not want to answer, they tell you they would rather not answer instead of giving a polite but inaccurate answer. As their adviser, you need factual information so you can help them.
- Once you have permission and agreement, determine what they plan to do with the proceeds from the sale. Many people ask for a high price because they already have emotionally spent the money (or literally have spent it already). Or they are using the house price to be "the best" to someone or show how smart they are to a neighbor, their dad, their buddies, their spouse, etc.
- Whether they owe more than they are asking or they have only emotionally spent the money, this is the opportunity to talk about the cost of a long sales cycle that will only cost them more money.
RISKS: They won't be honest about the money or will still ignore the long sales cycle
POSSIBLE VALUE: You have discovered their emotional (or fiscal) justification. You can either help them adjust it or, if they refuse, politely decline to proceed (a future post).
There are many more approaches and strategies and you often have to match an approach to the personality of the sellers. And some sellers are just not going to be realistic. Just be sure to mutually qualify quickly in a professional efficient manner. This will help you and them find the business relationships that meet the respective needs.
Even if the buyer or seller has unrealistic emotional responses, your job is to be the professional in the process. Earn the role of trusted adviser, even if it means you don't get deeply involved in every opportunity.
Additional Related Posts:
I agree that people have a very hard time being objective when it comes to placing a value on their homes. My experience has shown that finding out the seller's motiviation for selling (retiring, short sale, etc) and then explaining the statistics about the comparables is the best way to help them gain a less biased perspective.
I also let my sellers know that if they are hoping/wanting to get more out of their real estate, that they may want to wait a bit for the market to even out a bit more. The amount of short sales and foreclosures are dropping the comparables too low for most homes to appraise at higher values.
If a home has been on the market a month, is not getting showings and the seller is unwilling to do a price reduction, another strategy I have found helpful is to ask your seller to put on a buyer's hat and go shop the competition with you.
If the seller's home is currently listed for say $400,000, I will take the seller to several of the best homes currently listed for $400,000 and asked them to evaluate each one. At the end, I will ask them which home they liked best and why. After they identify their favorite home, I will ask them, "If you were a buyer, would you purchase your home or the home that you liked the best today?" If their home truly is overpriced, it will be painfully obvious to them. This doesn't work all of the time, but it is a way to prove to your client that their listing price is unreasonable and that the home is not likely to sell without a price reduction.
Charles, excellent words of wisdom and particularly appropriate for the current market!!
Great post!
I validate my sellers by agreeing wholeheartedly, then I do two things:
Buyers first see the strengths of your home, and then they start listing all the weaknesses/objections. (sorry, it's true).
Have them LIST EVRYTHING they LOVE about their house, and then ask them to list any potential shortcomings and objections.
then I send them all the virtual tours in their price range so they see the other special houses that are creating not so special competition!
BethAnn in Spokane
Glenn, thanks for this post. This is a common issue these days; there was a survey recently that revealed the majority of folks don't think their houses have lost value, despite what the reality may be. This is always a tough one and I like your suggested approach.
Sherry Lee, this is a very good approach! Reality is easier to deny from one's own living room.
BethAnn, excellent process. Setting expectations properly is through efforts such as yours. No matter what we say, the demonstration is usually stronger!
Susan, there is an interesting book called "Predictably Irrational" that is a behavioral economics book. The basic message is that people do things that are not logical but these same illogical actions are not that random. One chapter discusses how people value their property more than identical and similar property (or possessions) they do not own... just because it is theirs! The author presents how they tested these behaviors to draw their conclusions. Not a business book but should be treated as such by anyone that deals with the public in sales.
This little tidbit of strategy has changed my career (and my personal life, actually). When I can actually REMEMBER not to argue, I get my way a whole lot more often.
Brilliant post...
I always take my sellers to see the competition. The only thing is a feel a little guilty for the seller who possibly believes we are a valid buyer.
Jennifer, interesting that you say that. Me too. But I find very few others to have both realized and embraced that you don't have to argue... ever. Disagree, sure. Argue? Naw, that is only for folks that have to win every battle. Have a great day!!
Ellie, not to over rationalize, but who's to say your sellers might accidentally find something they like OR tell friends of a house they saw who might become buyers. Plus, you realize some of the folks looking at your house may be doing the same competitive review, so there is some give and take going on across the universe.