Social Proof Affirmation
Introduction
Social proof affirmation can have a significant impact on the perceived value of our home, yet is an aspect that is often overlooked and underestimated. Here I discuss the crucial role that social proof affirmation plays on perceived value, both for and against us, and why we should make it work in our favour.
Buyers buy based on social proof affirmation
As much as buyers naturally buy by comparison, they also naturally buy based on social proof affirmation.
What do I mean by this?
Social proof affirmation is the tendency to follow the behaviour of others within the same group (in this case, other buyers), especially in uncertain and ambiguous situations.
This means that a buyer can become excited, disinterested or indifferent over a property based on the behaviour or sentiment of the buyers before them towards it, as much as the merits (or lack thereof) of the property itself.
‘How long has the property been on the market for?’ is perhaps one of the most common questions a buyer will ask of a seller. This question may very well be asked as a negotiation tactic, but a far bigger reason is for social proof affirmation. The buyer wants to gauge the buyer sentiment for the property. They want to know how much interest the property has received, and if it’s been on the market for quite some time, why has no-one else bought it, to identify any potential underlying issue or risk attached to the property that isn’t immediately apparent.
No seller should underestimate the impact that social proof affirmation can have on the perceived value of their property!
Why is social proof affirmation so important?
Social proof affirmation is an often overlooked aspect by many sellers, but it plays an important role in the success or failure of one’s ability to sell their home (and for the best price!).
The concept of social proof affirmation for a property is no different to reviews or feedback for any product or service. We, as end users, are now more conditioned than ever before to rely upon the reviews or feedback of other people who have used or experienced the product/service before us, in order to help us gauge the buyer or market sentiment before making any decision to commit or not. Someone coming across a product/service for the first time would generally follow the sentiment of others before them. So if a product/service is well-received, then they are likely themselves interested and willing to commit; but if it’s not well-received, then they are likely themselves disinterested or indifferent and not willing to commit. And so, social proof affirmation, particularly buyer sentiment, can mean the difference between the success or failure of a product/service!
How does social proof affirmation apply to buyers searching for their next home?
In order to answer that question, let’s consider the following scenario.
Let’s assume that our home had entered the market some time ago, priced above the market value from the outset, and has since been stagnating on the market and/or had the price reduced. Our home continues to remain on the market due to it being rejected by buyers (either from having viewed it in person or from the property listing and deciding not to go any further), feeling that the asking price does not reflect the perceived value that it brings (or for any other reason).
In this scenario, it is clear and apparent to everyone, especially to subsequent buyers coming across our home, that the property has effectively failed to sell and has become stale!
Social proof affirmation suggests that if a property remains on the market due to buyers rejecting it (for whatever reason), then subsequent buyers are most likely to be wary. A stale property (especially one that’s had its price reduced) can potentially raise red flags, arouse suspicion or spark doubts for subsequent buyers, as their cautious view or suspicion may be that if the buyers before them have rejected the property for whatever reason, then this may imply a potential underlying issue or element of risk that’s not immediately apparent from the property listing or from viewing the property in person at first glance.
Such caution or suspicion (whether well-founded or not) may be enough for some buyers to be turned off and deterred from pursuing further, opting instead to turn their attention elsewhere and move onto similar properties (i.e. the competition) that are more realistically priced and/or have less or no issues or red flags to be concerned with - thereby resulting in very few or even no interest, viewings or offers for our home!
Such a scenario can certainly diminish buyer confidence towards our home!
What if there is no actual issue or risk attached to the property?
Even a mere suspicion of an issue or risk (whether well-founded or not) can be enough to turn off and deter some buyers, some of whom are not prepared nor interested to discover the possibility, preferring it simpler to move on and look elsewhere.
If there is indeed no issue or risk attached, but the property is perceived to be overpriced and continues to be the case for as long as it remains on the market, then this can possibly leave buyers 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’ on the price, which can deter them from wanting to engage or negotiate with the seller, or even from wanting to pursue the property altogether!
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, deterred or discouraged in any way!
The trap of the stigma cycle
A stale property can become stigmatised, as diminishing buyer confidence can bring about further diminishing buyer confidence!
To put it another way, continued buyer rejections compounded by continued stagnation on the market can lead to further rejections and further stagnation! This creates the problem of what I personally call the stigma cycle (or the stigma trap).
THE STIGMA CYCLE
This cycle can only lead to the property becoming less attractive over time, to where some sellers may decide to reduce the price (and even reduce it more than once) to necessitate a sale. As the time value of our home on the market diminishes, the more necessary it becomes for the asking price to be reduced to correlate with the declining buyer activity and diminishing buyer confidence!
However, while a price reduction (or even successive price reductions) may be necessary and can possibly reignite interest for our home, it is not guaranteed to fix the problem. In fact, even a price reduction itself can play a role in the stigma cycle, as this can also contribute to diminishing buyer confidence!
And so; continued buyer rejections compounded by continued stagnation on the market, as well as compounded by a price reduction, can lead to further rejections, further stagnation, and further price reductions, i.e. successive price reductions!
THE STIGMA CYCLE INCLUDING PRICE REDUCTION
Clearly, this can make the stigma cycle difficult to escape from if our home does indeed fall into it, which is why it’s so important to price our home correctly from the outset rather than over ambitiously price it (or overprice it), in order to best avoid the stigma cycle altogether!
What if the buyer makes an offer?
A buyer that is prepared to make an offer for a property that has been stagnant and stale on the market, rejected by other buyers before them, or has not received a great deal of interest in general, is most likely to put forward an offer that is less favourable or competitive, or falls below the seller’s expectations - for the following reasons:
The buyer has taken into consideration the red flags, issues or risk that they perceive or assume.
A property remaining stagnant and stale on the market and/or having its price reduced sends a signal (rightfully or wrongfully) to the buyer that the seller is very likely motivated to sell and could possibly accept a lower figure than the initially listed price or even the reduced price! This will only serve to hand the buyer a ‘licence’ to negotiate the seller down to a lower figure than the reduced price with a decent chance of succeeding!
Weak or no buyer engagement, leading to weak or no interest, competition or demand for the property, means that the buyer lacks the pressure, motivation, incentive or sense of urgency to want to make a better offer.
Any scenario that results in weak or no buyer engagement, leading to weak or no interest, competition or demand, especially a scenario in which the property has become stale on the market, only serves to indirectly empower the bargaining position of the buyer who is prepared to make an offer, while diminishing the seller’s own bargaining position, hampering their own ability to achieve the best price or the market price!
Thanks to the wealth of property resources and data that are readily and freely available, buyers are informed and savvy to the market and are able monitor a property’s activity on the market, including how long it's been on the market for and its pricing history (including any price reductions). Buyers can easily spot a stale and/or overpriced property, a factor that would certainly be taken into account in deciding whether to pursue the property further and how much to offer for it, or to ignore it and move onto other properties!
Making social proof affirmation work in our favour
Social proof affirmation does not have to be negative. In fact, it can be positive and be used to work in our favour!
For example, if our home came onto the market and was priced correctly from the outset in such a way that was attractive, i.e. saleable, and sufficiently compelling to encourage strong buyer engagement, exciting buyers and stimulating their interest to want to come through our door for a viewing, then this would attract a strong level of interest for our home rather quickly!
A property that is new and fresh on the market, priced correctly and attracting an abundance of interest from initial buyers, is one that will catch the attention, interest and excitement from more buyers! Thanks to social proof affirmation, interest will beget interest, compelling more buyers to want to join the crowd and excitement. After all, it’s natural to perceive something as being more valuable the more people that want it!
It’s this type of scenario that can bring about the strong level of interest, competition and demand we’d need to achieve the best price!
Identical properties but different perceived values
To further explain the impact of social proof affirmation on perceived value, let’s assume that we have two properties in the same area that are both identical in every way: Property A and Property B.
Although both properties are identical, each property is received differently by the buyers.
Property A attracts an abundance of interest from buyers.
Property B attracts very few or no interest from buyers, and has been rejected by those who have come across it.
Despite both properties being identical, in the eyes of subsequent buyers, Property A is mostly likely to be perceived of higher value, simply because it's attracting more interest than Property B. Property A can seem more attractive for reasons I’ve covered earlier and conversely, Property B can seem less attractive, again, for reasons I’ve covered earlier.
Strength of interest is one measure of perceived value. So despite the merits of both properties being identical, subsequent buyers may feel more confident about Property A, based on the strong interest from buyers before them; whereas Property B is more likely to be met with suspicion, doubt, caution or apprehension, based on the lack of or weak interest.
Subsequent buyers seeing Properties A and B will in general follow the behaviour and/or sentiment of the buyers before them with respect to each property.
In this scenario, Property A is more likely to achieve the best price, and Property B is more likely to sell for a considerably lower price, if it sells at all.
The point is that, despite both properties being identical, each property can have a different perceived value to one another due to the impact of social proof affirmation.
What do other property professionals say about social proof affirmation?
In an article published on Property Industry Eye, Colby Short, co-founder and CEO of GetAgent.co.uk, commented:
‘It has always been clear from data that pricing a property inappropriately makes a successful sale far, far less likely. For a buyer, seeing a price come down makes the property seem less appealing and often leads to a lower selling price than if the property had been priced appropriately from the start’
Click here to read the full article.
And in an article published on This is Money, Charlie Lamdin, founder of BestAgent, commented:
'Only when competing buyers are bidding on a property will you find its true maximum market value, as they are fighting over each other to win their dream home’
'You never get a bidding frenzy when testing the market. Potential buyers are put off by the perception of it being too expensive’
In the same article, Carl Howard, group chief executive of Andrews estate agents, also commented:
'My advice to sellers is always to list at an attractive asking price. When your property offers value for money, every buyer looking in that area in that price range will want to view it’
'This creates multiple viewings, leading to multiple offers. Fear of missing out can then lead to offers quickly coming in over the asking price’
'It is rare that the modern buyer will only view one house, and with access to a huge amount of house price data they will soon decide if a property has been listed above the current market rate’
'Properties listed for an over-ambitious asking price can sometimes end up selling for less than they would if they were listed correctly in the first place, due to becoming stale in the market after weeks of marketing'
'The danger of setting too high an asking price for your home is that it will stagnate on the market, appearing increasingly stale as buyers wait for the inevitable price reduction’
'As our research shows, pitching too high is a false economy that can leave sellers in limbo and may even lead them to miss out on their next property’
Click here to read the full article.
Social proof affirmation should be our ally, not our enemy
While it may be tempting to test the market with an overly ambitious price, we should now realise and understand that we will almost certainly run the risk of social proof affirmation working against us. Not only can this prove costly to our bottom line, but also cause a great deal of stress and frustration!
We should avoid creating a scenario that allows casting a shadow over our property and doubt from the buyers. Instead, we should be creating a scenario that makes social proof affirmation work in our favour!
Ultimately, we should make social proof affirmation our ally, not our enemy!
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.
In the next section, I discuss seller sentiment and bias, another important aspect that 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!
So if you’re interested in knowing about my thoughts on seller sentiment and bias, come and join me in the next section.