Appealing to Buyers' Emotions (vs. Pocketbooks)

Playing Down the Price

Patriotism is the last refuge of a scoundrel.

--Samuel Johnson

The real estate equivalent of Johnson's line is, "when you've got nothing else (left?) to sell, sell price."

That's not to say value is irrelevant.

In today's Buyer's market, it's more important than ever.

However, financial considerations -- price -- come after a prospective Buyer already likes (or loves) the home.

Then, the price becomes more of an after thought, assuming that it's within their budget.

Price speaks to the Buyer's rational side.

But they decide to buy based on emotion.

Toting Up the Equity Hit

The $7 Trillion Hole in the Economy

Would you be tightening your belt if your house had dropped $50k-$60k in value in the last four years?

Probably.

And if you'd taken out a home equity loan against your home when it was worth $50k-$60k more . . . almost definitely.

Now, take that $50k-$$60k drop in home equity, and multiply that by . . . . every homeowner in the country.

Yup, that's how much the average homeowner is down since 2006 ($54k per home, to be precise).

That equates to a national average 30% drop in home prices from the peak, or over $7 trillion in shrunken home values.

Hmmm . . . could be that that something to do with the not-so-robust economy (at least away from Wall Street).

Price as a Function of Time

"For Sale" Homes, Wine, & First-Run Movies

Some things become richer and more valuable with time. Fine wine. Love. Collectibles like antique cars or rare paintings.

A home for sale isn't one of those things.

Rather, a home on the market is like a newly released movie.

The most fanfare accompanies the "premiere," when the stars, director, and other VIP's gather at an invitation-only event. For a home, the equivalent event is the Broker open -- or Tuesday tour -- when Realtors check out the new inventory.

Next comes the first few weeks on the market, when the most motivated fans pay top dollar to see the movie at first-run theatres. For a home, the first few weeks on the market are also typically the period when it commands the highest price.

Eventually, the first wave of demand is exhausted, and the movie is released on DVD, where it reaches a second, less price-sensitive audience. Ditto for homes after 40-60 days on the market, when the first price reduction is in order (if not before).

Finally, movies show up on TV, where the general public can watch it for "free" (networks make money on the ads).

Thankfully, for-sale homes never reach that stage. However, after six months or so of market time, their initial asking price is usually just a dream . .

Playing Realtor Roulette

Will the 4th Time Be the Charm?

Where: 29xx Quentin, St. Louis Park
What: 4BR/3BA; 3,900 FSF; 1931 two-story home
How much: $264,900
Originally listed: $374,900 (11/2/2007)
Number of Realtors (so far): six
Number of Brokers (so far): four

Scanning today's newly listed -- and re-listed -- homes, I couldn't help but notice 29xx Quentin.

I recalled it being an especially active listing and, sure enough, when I did a little digging, I pulled up a very long listing history. (If this house were a felon, it would have a rap sheet a mile long).

Since coming on the market 16(!) months ago, the owner has dropped the price four times, changed the size of the house once (from 4,505 FSF to 3,902), and switched Realtors four times (they've actually had six Realtors working for them because two of the listings were handled by two-person teams).

Even George Steinbrenner -- famous for hiring and firing managers -- didn't make this many changes this fast.

The Ex-Files

So what's going on?

You don't really know for sure unless you personally know the principals and the home involved -- and I don't.

However, it wouldn't be the first time that the combination of a declining housing market and an unrealistic seller proved combustible.

One pattern I've increasingly seen is that the homeowner insists on an unrealistic price, then finds a Realtor who'll take the listing at that price (one always will). The owner is then positively shocked -- shocked -- when the house fails to sell.

Goodbye, Realtor #1, Hello Realtor #2.

It recalls the Seinfeld episode where Elaine thinks she sees her doctor write that she's "difficult" on her chart, and then tries to get Kramer to track down the chart and delete the note so she won't be ostracized by other doctors.

Real estate's equivalent of a medical chart is the listing archive.

When Realtors see a troubled archival history, they naturally think twice about taking the listing (or should).

Unless they can determine why the listing failed to sell -- and have a plan for correcting it that the Seller will go along with -- the likelihood is that they, too, will be eventually be added to the "ex-files."

P.S.: For Realtors, it's decidedly not better to "have listed and lost then never to have listed at all" (sorry, I couldn't resist)

Next: When to Fire Your Realtor