Selling Tips

Sell Your Home Faster Using These 3 Psychology Principles

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We all like to think we’re perfectly rational when it comes to our investments. But when it comes to buying a home, it’s a whole different ball game. We fall in love with houses in a way that we’d never fall in love with stocks and bonds. After all, a home is a place you’ll make memories and perhaps raise a family.

So, if you’re selling your home, there are a few ways you can take advantage of the way buyers’ brains operate.

Principle #1: The paradox of choice

When given a large number of choices, humans are quickly overwhelmed. In fact, studies have shown that we cannot efficiently compare more than five options. Contrary to what you’d expect, researchers have found that shoppers—both online and in a store—buy less than when faced with more choices.

Home buyers often face an extraordinary amount of choices. And cognitively, they respond by making quick judgements. Researchers at the Institute for Behavioral and Experimental Real Estate found that when viewing an online real estate listing, buyers typically decide if they want to see more solely based upon their impression of the first photo. They spend more time viewing the first photo (20 seconds on average) than any other aspect of the listing.

How to apply this to your home sale:
Make the first impression count. If your front porch desperately needs a fresh coat of paint, it may leave a sour impression that can’t be overcome by a sparkling interior. That’s likely why studies have reported homeowners often achieve the highest ROI from exterior projects.

 

Principle #2: Psychological pricing

You see this everyday, with nearly every product you buy, because it works. This theory, also known as ‘charm pricing’, works off the notion that certain prices have a psychological impact.

A home priced at $499,900 is perceived differently than a home priced at $500,000. Rationally, of course, the $100 difference should have no impact. Researchers call this the “the left-digit effect” because buyers tend to emphasize the far-left number first, perceiving this home as close to $400,000.

How to apply this to your home sale:
Studies have shown that ‘charm pricing’ can lead to a higher final sales price. Consider pricing just slightly under the ‘break point’ where your home is valued. And on a practical note, price your home so it comes up in as many searches as possible among qualified buyers. For example, a list price of $505,000 would not turn up if a buyer’s search filter is set to $500,000.

Principle #3: Loss aversion

One of the foundational ideas in behavioral economics is that psychologically, the pain of losing something is about twice as powerful as the pleasure of gaining. This principle often comes into play when people are unwilling to sell an asset at a price for less than they paid for it. On the other side of the coin, loss aversion instills a sense of urgency in buyers.

How to apply this to your home sale:
Applying this principle is more tricky because you cannot drum up showings or offers if you don’t have them. But your real estate agent should always keep interested parties updated if they can emphasize strong showing or offer activity. On another note, it’s never a bad thing to have a few showings scheduled around the same time. The fear of losing out is a strong motivational push.