We all like to think we’re a logic-based species, though often enough our decisions are formed with emotion first and then “justified” with logic later.  

But how does this play out when buying and selling houses?  

A purely logical approach might be a middle of the road, sensible estimate of the property’s worth – which is how a valuer would see it, assuming both buyer and seller are each acting rationally. Not terribly exciting for a homeowner, but these are the sort of numbers that investors, banks, and the courts rely upon.

How about a logical buyer combined with an emotional seller?

This could be a vendor under financial pressure to sell, or recently divorced, or under urgency to relocate for a new job, or because of health reasons… as a buyer, these are the best opportunities to secure a bargain. The property is ‘logically’ worth more, but the vendor is acting on emotion - whether its fear, impatience, health, or compulsion; and is prepared to accept a lower price.

How about the inverse? A logical vendor combined with an emotional buyer.

This is precisely what agents are targeting when they advertise your property for sale. Trying to ensure the vendor is reasonable in their expectation, while reaching for the top price from an emotional buyer who falls in love with the property and decides to purchase anyway despite rational analysis of comparable sales and listings. As a vendor this is of course what you want to happen. Sadly though, not all properties are presented and located to elicit that emotional delight from prospective purchasers.

And the last option… where both vendor and purchaser are acting on emotion?

This is quite common and incredibly difficult for agents to juggle. By nature, emotions are fleeting and subjective, and impossible to accurately measure. Securing agreement on price and terms between two such parties requires a delicate touch, speedy response times, and a level of empathy to see the process from another’s point of view. If queries take too long to answer, or offers take too long to be counter signed, the moment can pass as quickly as it arrived.

So if you’re selling and hoping to attract an emotionally driven buyer – how do you prepare?

Again, beauty is in the eye of the beholder, and you cannot possibly appeal to everyone. Time is your enemy here… buyers form emotional decisions quite quickly, and it's sensible to remove all barriers to that decision. Remember, after first deciding in their “gut” they’re now trying to rationalise it to themselves and others.

You must make this as easy as possible. The first days and weeks on the market are critical as you have a new listing and all eyes are upon it – even if briefly. This also creates urgency as buyers will sense others circling the opportunity too… presentation needs to be impeccable, price guidance clarified, settlement terms clear, chattels list confirmed, and ideally furnish satisfactory documents ahead of time like a LIM report, Builder’s report, Geotechnical report etc. Any items that purchasers will probably want to see, but by providing them up front you might reduce the need for a lengthy due diligence period.  

Emotions will pass soon enough – so strike while the iron is hot! Once the emotional period is spent, back to logic we return…

Take care,
Scott Morison