When I taught real estate I many times used my wife as a main character in the stories I told my students. My wife has always had a bad back but every once in awhile I would come home to find all of the heavy furniture moved to a completely new location. I’d say that this miraculous feat proved one of two things: either she was having an affair with a very strong moving man or she was highly motivated to get that furniture moved. I have found that motivation is a major factor not only in the moving of furniture but also in all sales or services. Things get done or get done much faster if someone involved is motivated.
One of the oddest things about being in the real estate business is watching over and over again how little people make sense in the sale or purchase of their property and how little they understand how their own motivation to buy or sell plays in the final transaction. One of the best things about real estate is that there is so much data that each transaction is easy to predict. As easy as it is to understand the data, it is just as baffling at how resistant clients might be in understanding that if they are unmotivated, by definition the transaction will take longer.
No matter what anyone tells you there is no such thing as “the right price." The right price is always the range of values that someone is willing to pay and the range of values someone is willing to accept for a specific piece of real estate (or any other goods or services.) The key here is “the range concept." Think about popcorn in a movie theater. We are always going to “overpay” here because the buyer is more motivated then the seller.
For example, lets say that your house has a value range of between $150,000 and $190,000. (I have taken this range from an actual house that was listed for sale.) This means that the data shows that there are actual sales of similar homes between these prices. I can’t emphasize enough that this range is created from actual data, not rumor, conjecture or simply out of thin air. It doesn't reflect what a seller “needs to make” or what a buyer “would like to pay”. It simply states the fact that sales took place and closed between these values.
If we look at the diagram above we can see the concept visually. Note that the highest price also has the longest market time and that the lowest price has the shortest market time. As a broker for over 30 years I can tell you that while this rule is broken occasionally, it is valid 95%-99% of the time. (Chance, luck or quantum mechanics is still at play some small percentage of the time.) This time concept is important and I will expand on it later. Also note that when I describe the players, on the high price side I describe the seller as unmotivated and the buyer as (highly) motivated and when I describe the lowest price sale I describe the seller as (highly) motivated and the buyer as unmotivated (a bargain hunter.)
To further the example, the high sale is probably made by an out-of-towner or very wealthy buyer who is in a need to purchase quickly. Time is as or more important than price. The buyer is highly motivated. When I expand on the attributes of the second sale seller is use the term highly motivated. This seller also believes that time is as or more important than price. In both cases the principal motivation (time) is more important than the price.
This time/motivation concept is the key to understanding any transaction. The product or service (in this case real estate) is irrelevant. A real estate brokers main conflict is when a seller tell us that they are highly motivated but ask for a high listing price or a buyer explains that despite being highly motivated, even the low end product is “not enough of a bargain”. By the way, the actual price range is irrelevant. It could be the low end (below $100,000), the middle range (between $100,000 and $500,000) or the high end (over $500,000). What's fascinating to me is the general anger that exists when you have to tell you client that their wishes and stated motivation don’t match. Yes, "I can sell your home for that price but not in that time frame" or "yes, I can sell your house in the next 30-60 days, but not for that price."
These concepts are universal. As I have said, the product or service does not matter. Think of Apple. They get their customers so motivated for each new product that they can (consistently) put out defective products (which eventually are corrected) and have happy customers because everything else about their product is innovative and hip. Their customers are always looking for the next big thing. Something to remember about you think of your business.
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