Successful sales function of facts, not emotions

Here’s a new thought for you. Our residential market is trying to correct itself, but we keep getting in the way. “We” includes buyers, sellers, agents, lenders and any other stakeholder that has the propensity to allow emotions to enter their decision-making process. As I said in a previous column, I believe the market is efficient. And like water will seek its own level, supply and demand will equalize with some predictability, if the human factor can be minimized.

Keeping decisions factual and rational sounds good, at least in theory, but let’s face it, we are emotional creatures. Emotions have been called the spice of life. However, in a real estate transaction, decisions rooted in emotion can have the same effect as eating a Habanera Chili Pepper. That is, they both can go down in flames.

One of the best ways to keep your emotions in check is to keep your expectations in check. Tom Magliozzi, a radio talk show host, said, “Happiness equals reality minus expectations.” Who knows if this applies to all aspects of life, but it certainly does apply to real estate.

Too many people involved in the real estate process have a depressive disorder called “Expectation-itis,” which is nothing more than wishing things were one way, when in fact, they are not. How do you know if you have it? Well if you find yourself using one of the following phrases, you may need expectation therapy.

One of the phrases is “Today’s buyers are bottom feeders.” Buyers wanting to buy as low as they can have been around as long as the law of gravity. Sellers want to sell as high as they can. So what? Expecting anything different will certainly disappoint you.

One point that should not be ignored is that when the seller finally becomes a buyer they do not consider themselves a bottom feeder. They call themselves an informed and prudent buyer.

Another classic phrase is “I don’t want to give my home away.” This is another forbidden phrase if you are trying to recover from expectationitis. When you sell your home, you will not be giving it away. You will be selling it at today’s market value. The “giving” part is purely a seller’s mental exercise as they subtract what the market is willing to pay from their “expected” selling price.

The most chronic sufferers will continue to remind everyone how much they have already reduced their asking price. So does that mean if their original listing price was $1.5 million, and now they are down to $500,000, that the market has fallen that much? Or could it be that their expectations were a little unrealistic?

Does it really motivate a buyer to learn that your current asking price is one-third of what it used to be? Nope. Buyers only get excited about “real” savings, which is how much below market value they can buy a property.

Sellers aren’t the only ones who test positive for this disorder. Buyers’ expectations can exceed what reality can deliver as well. How about the buyer who uses the seller’s purchase price as rationale for their offering price? This approach may sound reasonable, but not if the property was purchased five years ago. Or what if it was gifted to the seller? Would your offer be nothing? The seller’s basis in the property is good information, but it does not indicate what the property is worth.

How about the “rule of thumb” method of coming up with an offer price? That’s the one that says you always offer some percentage, usually 10 or 20 percent, below the asking price. These buyers will always be disappointed because they will miss all the good deals. We had a home that was listed at $649,000, but when the advertisement came out there was a misprint. The asking price read $349,000. Guess what? We had an offer come in 20 percent under the printed price. An old adage in real estate says that when you find a great deal, you buy it. In other words, you don’t steal in slow motion.

One of the biggest surprises is about to happen to the fence-sitting buyers. They felt there was no urgency in buying now because prices were falling. Well, they may have already waited too long, because while prices were getting more attractive, lending policies were not. For the buyers who have much less than above average credit and do not have a hefty down payment, they may not be able to buy now, even if they wanted to. That fence you’re sitting on isn’t quite so comfortable now, is it?

There is a difference between expecting the best and having unrealistic expectations. Make sure your recipe for decision-making has more substance than spice. And if you want to add a chili pepper, be sure you have the tolerance for the after effect.