These days, too many brokers are winding down the clock to bankruptcy, with lots of help from their sellers. Too much misplaced blame has been on buyers of late. Other than foreclosures, we have not looked hard enough at sellers’ contribution to the inventory problem. And sellers are a problem. Too many brokers have trapped themselves with “list to live” strategies that have achieved anything but. No genius is necessary to see how holding a commodity for ten, twelve or twenty-four months, then selling after multiple price reductions, isn’t a business plan. It’s a going-out-of-business plan. No matter how large the commission, it’s barely enough to get out of debtor’s jail free. With record amounts of listing inventory still clogging the marketplace, REALTORS have no choice but to start doing the rest of the listing presentation with their sellers.
If we want to correct the housing problem, we have to drive down inventory and more accurately price properties. (Increasing prices isn’t the goal; proper pricing should always and only be the goal.) It’s really that simple. Supply and demand, high school economics. Up until now, however, the industry has been supporting efforts to stimulate demand through artificially low lending rates and free Federal money. But buyers aren’t dumb: They simply will not be enticed to purchase antyhing overpriced. Not, certainly, during a recession.
Agents prefer focusing on buyers, though, because most of them aren’t our “clients.” So we don’t have to have the hard conversations with them, while we’re representing the sellers. Unfortunately, buyers really aren’t the solution to the problem any more. It’s up to sellers to become the force of change in the market. Hopeless, however, since few sellers “get it.” More accurately, too few agents have helped them get it. Honest conversations with sellers is as rare as accurate property pricing; it’s so much easier to blame buyerst.
REALTORS and sellers still have their heads in the clouds. Foreclosures aren’t price correctors: they don’t matter in the long run because their “sellers” were renters who won’t help reset market prices until they become buyers again – in the distant future. Besides, foreclosures are finally pricing right, anyway, regardless of agents’ protestations.
Real sellers (those with any equity remaining) are still trying to set the price of their home according to market nostalgia. And that’s part of the problem. Current market data alone isn’t enough of a factor in proper price setting. Even the smartest accountant overprices his home these days. That’s because sellers aren’t motivated by data, just as they were not motivated by pricing data when they were buyers. When they bought their home, they made decisions based upon their emotions.
Why should we expect them to do any different when it comes time to sell?
When today’s sellers were once buyers, they “fell in love” with their home. Then they went to any lengths to acquire it, even financial brinkmanship. According to the research, the top reaons buyers purchase a home have nothing to do with data or market forces. Price ranks at the bottom of the list. Most buyers purchase a home because they have an emotional need, and the home “fills it.”
REALTORS use emotional reactions every day with buyers; yet they too often fail to incorporate it when advising sellers. If a buyer gets a promotion or loses a job, he’s buying a home based upon feelings and finances. He may select a market segment with his head, but his heart will which to ultimately buy. Agents use emotional triggers all the time with buyers – words, photos, videos – to encourage offers. Even the silly “fresh baked bread smell” at open houses appeals to the gut. Buyers buy what feels right; and they spend whatever is necessary to fulfill that desire.
It may not be right, but it’s how it works.
When it comes time to sell, however, REALTORS suddenly treat them differently. There is an implicit assumption that buyers become financial experts after a few years of home ownership. Nobody knows why, but we treat them like they have become “data driven” when they decide to sell again. Its’ a major mistake, because we spend half of the listing presentation displaying facts, figures, data and reports. Our discussion centers around impersonal market forces. It’s all about the Comparative Market Analysis. Charts, graphs, ratios, rates. Trends. Time. Technical data.
And the emotional issues are simply forgotten. And left unleveraged.
The emotional side is still there. Most agents ignore it. So the seller’s emotions are left with nothing to do but mess things up. Sellers emotions lead them to think their home is special: The case of the “golden nails.” Emotional nostalgia overrides every report and chart. Rational readers of reports don’t overprice commodities, like stocks. If the commodity is their home, however, all bets are suddenly off.
Agents could only turn this around by dealing with the seller’s emotions during the listing presentation. Actually, dealing with it before the presentation might even be better.
CMAs in color can’t reach the seller’s inner pricing sanctum. To penetrate emotion-based barriers, we have to appeal to their emotions, not avoid them. The easiest way to do this is to get the sellers out of their house and into the car. Imagine the possibilities. What if we dumped the traditional dog-and-pony listing presentation. Forget about the pre-listing kit, too: Enough with the eye-rolling studies in agent egos. We get it. You’re the biggest, you’re the greatest. Move over, sliced bread. Your company is great, too. Today’s sellers have been through all of this before – almost four times on average. They know you’ll stick a sign in the yard, input the property in MLS, take a photo of the toilet and use unintelligible advertising abbreviations in the newspaper. Then you’ll proceed to ignore buyers who inquire by email because you don’t have a smartphone yet.
So why spend the time going over all of this again? Let’s try something different with the short amount of time we get to set the stage for a successfully priced sale.
Let’s help sellers make better decisions by leveraging their emotional intelligence. Not market intelligence, but emotional. For the first half of the listing presentation, let’s take sellers for a ride. Drive them around the neighborhood to see the other homes they are competing against. Get them inside, to see with their own eyes, smell with their own nose and feel with their own emotions what they are up against. Let them experience the newer, older, better, worse – firsthand. Almost like a buyer again.
Then bring them back to their own home. And reality.
We can have more constructive pricing conversations with sellers who have actually experienced the market. Not on a computer screen or a printout, but really “been there.” By focus on the houses they just saw – felt – sellers will have an emotional context in which pricing data makes sense. Sellers will “get it” when they can see it intellectually and feel it emotionally.
Of course, some sellers may still try to overprice their home, but their recent experience should help agents politely challenge any rationalizations. Or run for the door. Still, there is every reason to expect sellers to make better decisions with both halves of the equation: The issue of pricing has been made more real to them. Their firsthand experience will challenge assumptions about whose home is better or worse.
In the end, some charts and graphs will appear. Market data can be fruitful only in emotionally fertilized ground. Today’s real estate professionals need to leverage the same emotional triggers that worked when their clients were buyers. Think of it as the “emotional half” of the listing presentation.
And none too soon. Gen X – the next generation of sellers – is widely believed to be “just the facts” oriented. So agents are over-focused on data, data, data. Yet this is a big mistake. As the “Me-Generation” completes their final round of mid-life-emotional-pricing disasters, Gen X is right behind them with equally irrational behavior. Yet unlike Boomers, Gen X cannot be snapped out o fseriously bad decisions with “trust me, I know what I’m doing” methods. Nor can we count on information overload to do it, either. Gen X uses computers, but they aren’t computers. They have already purchased homes. In fact, Gen X has already spent itself – emotionally – into record debt levels at Starbucks and BMW. According to the data, Denny’s coffee and a Honda Civic are better investments. But Gen X is just as emotional as their parents – perhaps more so because their ultracompetitive ways equate “win” with “more expensive.” That means they will insist on setting a higher sales price – at any cost – than their brother-in-law who just sold his house.
Part of the listing presentation needs to include market data. But only part of it. We’ve been practicing better data techniques for twenty years. But color CMA’s can’t overcome overpricing. Not until we address the “other part” of the listing presentation. The emotional part. Agents who can address their client’s emotional intelligence and their intellectual undersatnding will finally put together the other half of the marketing pricing solution.