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Greg Traub's Blog

By Greg Traub | Broker in Orlando, FL

Cognitive Dissonance and Why it Affects the List Price of your Home.

Cognitive Dissonance

This is the feeling of uncomfortable tension which comes from holding two conflicting thoughts in the mind at the same time.

Dissonance increases with:

The importance of the subject to us. (like the largest purchase most make in their lifetimes)

How strongly the dissonant thoughts conflict. (Price vs. Value)

Our inability to rationalize and explain away the conflict. (lack of information and/or fear)

How this applies to selling your home...

    A buyer sees a home they like on the internet or from their broker. They like the pictures they see and think this house could be what they are looking for. The price seems a bit steep, but they beleive it is still worth a look. This is where the dissonance starts, They feel they may like the home but they don't like that price compared to other homes they've seen and especially in this market they are afraid they will lose money.

    So they come see your home thinking "ok for the price they are asking the home has to be PERFECT" and they start asking questions and looking very hard to make sure the home is PERFECT (which very few if ANY homes are).

    The buyer walks through the house, likes it.... BUT "The neighborhood has a little more traffic noise than I'd like, the yard is a little too small, the kitchen/bathrooms could use some updates, it's a little to far from the school." The home is NOT perfect, so the price is now way to high, no sale, and no offer.

    This happens several times, so the price dropping begins to try and compensate. If that buyer hasn't bought yet they should still be interested, right? Wrong!

    The dissonance is amplified by the brain to help justify eliminating a good home from the list. Now when they get that notification of new price the buyer remembers your home and is now thinking, "I remember that one! It had the really noisy neighborhood, the TINY yard, the kitchen/bathrooms that really needed work, and was way to far from the school. That's a nice price, but I didn't like the house in the first place." Even if it were the deal of the century, that buyer would not be purchasing that home because they have talked themselves into thinking there are things seriously wrong with the house. And they confirm their theory on the fact that no one else has purchased the house by now!

    Now let's imagine we priced the home appropriately in the first place. The same buyer walks in, likes the home "The neighborhood has a little more traffic noise than I'd like, the yard is a little too small, the kitchen/bathrooms could use some updates, it's a little to far from the school..... BUT it's a nice house and priced fairly. I'm sick at looking at homes already, I can get used to the noise (I don't spend that much time outside anyway) the small yard means less yard work, the kitchen/bathrooms aren't that bad, the extra mile to school won't kill the kids and they could use the exercise." Let's put an offer in! Hooray!

    In this instance the dissonance between value and price was much less if any, and the buyer's mind justified toward where they were already leaning on price vs. value.

    In short, When pricing your home in today's market, don't ever think I can list high now and see what happens then just lower the price later if it doesn't sell. ALWAYS PRICE IT RIGHT AND PRICE IT RIGHT THE FIRST TIME!

Comments

By David & Samuel Rifkin,  Wed Apr 10 2013, 09:22
Thank you for this great information.

Samuel Rifkin
The Rifkin Team


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