Today’s real estate market already suffers from having fewer sales to use when evaluating other properties. We’ve seen how some buyers, particularly those using Big Cash are paying prices that are hard to justify using traditional methods. As a result, the comps are more suspicious than ever as an accurate reflection of real value.
Now this article mentions the anchoring concept, and how the list price influences an evaluation. Hat tip to reader JB who sent this in:
http://www.marketwatch.com/story/how-car-dealers-get-you-to-spend-more-2014-04-02?siteid=yhoof2
An excerpt:
Real-estate agents sometimes have outsized confidence in their ability to “price” homes that are put on the market, or to assess whether a price is too high or too low. In his great book “The Two-Headed Quarter: How to see through deceptive numbers,” Loyola professor Joseph Ganem described a study which proved that.
Real-estate agents were asked to appraise a home based on a 10-page packet of information where the only variance was the list price. When it was $119,000, the average appraisal was $114,000. When the list price was $149,000, the average appraisal was $128,700. In other words, simply by changing the first price suggestion made agents raise their perceived value of a home by $35,000.
Worse yet, the agents were blissfully unaware of the influence the list price had on their appraisal.
“Only 10 percent of the agents mentioned listing price as one of their top three considerations,” Ganem writes. “It is interesting that anchoring effects influence experts without their being aware of, or at the very least, willing to admit the influence.”
Get good help!
this question is kind of relating to your open house videos.
If someone comes in to you open house without their own realtor and wants to make an offer how do you prefer to handle that? Seems like a busy environment to be filling out paperwork. Do you fill out the offer right there or maybe wait and see them when you can meet one on one maybe monday?
In the old days, I would write the offer right there in front of visitors to incite more activity.
These days, writing offers is done electronically, so it looks like we are just busy doing something on the computer. Buyers sign offers with their phone.
“It is interesting that anchoring effects influence experts…”
With all due respect, with the exception of JTR I’ve yet to meet a realtor who is “expert” at pricing homes. I’m not sure the average realtor would even consider that skill to be a high priority. Sales tactics, personal public appearance, and personality seem to be a far higher priority than actual pricing and negotiating expertise.