Seller Sentiment And Bias
Introduction
Pricing our home based on or influenced by our own sentiment and bias can be difficult to resist. In a lot of cases, sellers do not realise that they are doing this. Plenty of properties that remain stagnant on the market can be attributed to a large degree to the sellers’ own sentiment and bias. Here I shed some light on seller sentiment and bias and why we should avoid it in favour of evidence based pricing.
Can seller sentiment and bias hinder a sale?
Selling one’s home is understandably and undeniably an emotional undertaking, but seller sentiment can indeed hinder a sale, particularly if it’s to the point of bias and is allowed to influence the asking price (especially without having clear and attainable evidence to support such price).
How does seller sentiment and bias hinder a sale?
It is fairly common that some homeowners/sellers may believe that their home is the ‘best’ or ‘above average’ in their area. Any seller who prices their home based on their own sentiment and bias is likely to arrive at a price that does not reflect the true market value. If every homeowner/seller in the same area believes that their home is the ‘best’ or ‘above average’ and prices their home accordingly, then some of those homeowners/sellers are bound to be wrong - after all, not every home can truly be the ‘best’ or ‘above average’ in the area!
According to Rightmove, a survey was conducted asking sellers to compare their own property to others on the same street. 41% said theirs was above average, 54% about average and only 5% below average.
Clearly, these are sentiments and biases held by the sellers towards their own properties and not likely to be accurate reflections of their true market value. Especially for the 41% of sellers believing their property to be above average, most of them are likely to find that the market will disagree with their belief.
In a previous section, I discussed that the foundation of price (or value) is buyer sentiment, not seller sentiment. Buyer sentiment is the market value of a property, which can be supported by clear and attainable evidence, i.e. the comparables.
Seller sentiment on the other hand, is usually more personal and subjective to the seller, often offering no clear or attainable evidence that can be quantified into a value that can reasonably influence the asking price. In other words, seller sentiment generally tends to have no bearing on what the buyers can get out of the property itself, nor translate into any discernible benefit or appeal of the property to them.
An asking price that is influenced by seller sentiment and bias usually means that the price is overly ambitious, i.e. above the market value, in which the seller will likely struggle to sell their property for that price.
Sentiment and bias can not only greatly hinder one’s chances of being able to sell for the best price, but also one’s chances of being able to sell at all!
An asking price that’s influenced by seller sentiment and bias will only serve to deter buyers
It’s quite possible that an overly ambitious asking price that’s influenced by seller sentiment and bias can send the wrong message to buyers.
If buyers perceiving a property to be overpriced, believe (or that it’s apparent) that the asking price is influenced by the seller’s own sentiment and bias, then this can possibly leave them to interpret that the seller is less inclined to agree to a more realistic price. Such possible interpretation (whether well-founded or not) can deter buyers from pursuing further or from making any enquiries at all.
Especially in the case of a stale property, if it remains overpriced despite being stale, then this can possibly leave buyers to interpret (again, whether well-founded or not) that the seller may be ‘stubborn’, which can deter them from wanting to pursue the property, or to engage or negotiate with the seller.
A stagnant and stale property, especially one that is overpriced, can send the wrong message to buyers regarding not just the property, but also the seller themself! And one cannot simply assume that buyers are prepared to pursue, engage or negotiate, especially not if they are put off in any way!
Factors that drive seller sentiment and bias
Seller sentiment and bias can be driven by one or more of the following factors: (This is not an exhaustive list)
Family significance: the seller may have grown up or raised a family in the home, thereby holding a sentimental connection to the property.
Historical or personal significance: the seller may have experienced or achieved historical or personal milestones attached to or in the home (for example, it may have been the first home they purchased), thereby holding a sentimental connection to the property.
Return on investment: if the seller has made any improvements to the property, then it’s most likely that they would want to get a return on those improvements.
Better presentation: the seller may believe that the presentation (including the aspects or features) of their home is better than that of similar properties in the area.
They own the property: the seller may feel that their property is worth more simply because they own it and want to sell it for as much as they can.
Factors such as these can influence the seller to blur the lines between sentimentality and true market value. There are of course other factors that are personal and subjective to the seller that can similarly influence them to blur those lines; some of which I have covered elsewhere in this guide - click here to jump to that section.
Any approach to pricing that is anchored to seller sentiment and bias rather than clear and attainable evidence, i.e. the comparables, is bound to result in the property being overpriced, creating a discrepancy between the asking price and the actual value that the property brings to the table.
To any seller who believes that their sentiment and bias can be reasonably reflected in the asking price, I must bring to attention the following:
Price is ultimately determined by buyers (not sellers) who represent the market, i.e. buyer sentiment. Family, historical or personal significance generally have no bearing on what the buyers can get out of the property itself, nor translate into any benefit or appeal of the property to the buyers. They have no bearing nor impact on the property’s value, and therefore, hold no importance to the buyers in determining the price of the property.
For any improvements to have a positive impact on the value of a property, those improvements must be structural or major. Any improvements that are non-structural or non-major will generally have little or no impact on the value, with possible exceptions to certain types of improvements.
Similar to improvements, unless the presentation makes one property structurally or majorly superior over another property, it will have little or no impact on the value, with possible exceptions to certain types of presentation.
As mentioned earlier, the foundation of price is buyer sentiment, not seller sentiment. It would not be realistic for any seller to determine an overly ambitious asking price and expect their property to sell for that price. Any reasonable asking price must be supported by clear and attainable evidence, i.e. the comparables.
The traps and pitfalls of seller sentiment and bias based pricing
One can make the point that seller sentiment and bias based pricing is simply another form of overly ambitious pricing or overpricing.
Any seller who sees no reason to move away from this approach to pricing should be concerned with the following: the time value of their home on the market, the cost of waiting for the market itself, and social proof affirmation working against them - I have covered extensively the traps and pitfalls that a seller may find their home falling into as a consequence of overly ambitious pricing/overpricing in those sections - click the links to jump to those sections.
Anchoring our asking price to evidence, not seller sentiment and bias
If we are to successfully encourage strong buyer engagement, attract buyer interest and offers, and ultimately secure a sale for the best price, then it’s imperative that we anchor our asking price to clear and attainable evidence, i.e. the comparables, and not allow seller sentiment and bias to influence the asking price.
However, that is not to suggest that sellers don’t have a say in the asking price of their own property. Sellers do in fact have a degree of say, but their scope for determining or influencing the asking price is largely dependent on buyer sentiment (i.e. market sentiment) and the sellers’ own bargaining position.
Getting in touch with me
If you would like to discuss any of the above points with me further, or if you need help or have any questions in general, click here to get in touch with me.
Throughout this section (and throughout the guide up until now), I have mostly discussed avoiding overly ambitious pricing or overpricing.
But what if we price our home at fair or market value? Wouldn’t that be a better approach?
Although pricing our home at fair or market value is certainly a better approach, it may not necessarily help us to achieve the best price. In order to stack the odds in our favour to achieve the very best price, we should present a more accessible price to buyers.
And so, I invite you to join me in the next section, where I go over accessible pricing in more detail.
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Credit goes to Rightmove for the image used in this section