The Five Rules Of Buyer Behaviour | Steve Day | Real Estate Cronulla & Burraneer

Summary

The story of Mr. and Mrs. Seller illustrates the consequences of not understanding buyer behavior when selling property. Initially, they rejected an offer of $480,000 for their home, hoping for a higher price. However, after re-listing at progressively lower prices, they ended up accepting $430,000—$50,000 less than their first offer. This experience highlights five key rules of buyer behavior, such as how buyers select areas, think in price ranges, and make quick offers. Understanding these behaviors and positioning a property effectively can help sellers achieve a better outcome by avoiding common mistakes.

Takeaways

• 😀 Buyers typically choose an area first and focus exclusively on properties within that location.
• 😀 It's important to price the property attractively to draw interest from buyers both within and outside the desired area.
• 😀 Buyers think in terms of price range rather than a fixed price, so adjusting pricing strategy can capture a wider audience.
• 😀 Many buyers are willing to spend 10-15% more than initially planned, so positioning your property correctly can attract these buyers.
• 😀 The best offers usually come in the first few weeks when the property is fresh on the market.
• 😀 Properties that sit on the market too long can become stale, leading to lower offers or fewer buyers showing interest.
• 😀 Sellers should act quickly on the first offer, especially if it's within a reasonable range of their asking price.
• 😀 The initial interest and inspections on a property play a crucial role in setting the best possible price early on.
• 😀 Price adjustments may be necessary if a property isn't getting sufficient interest, but sellers should be cautious about undervaluing their property.
• 😀 Using the 'biowave' approach—tracking inspections against the days the property has been on the market—can help determine the optimal selling strategy.

Q & A

Why did Mr. and Mrs. Seller initially reject the first offer of $480,000?

Mr. and Mrs. Seller rejected the offer because it was $20,000 below their expected sale price of $500,000. They believed they could attract a higher offer by keeping the property on the market for a longer period and showing it to more buyers.

What mistake did Mr. and Mrs. Seller make by rejecting the initial offer?

By rejecting the initial offer, Mr. and Mrs. Seller missed out on a potential sale for $480,000. Later, their property became stale on the market, leading to a significant price drop and a lower offer of $430,000.

How does understanding buyer behavior help in selling a property?

Understanding buyer behavior helps sellers position their property effectively to attract the right buyers at the right price. It also ensures they don't miss out on good offers and avoid pricing the property too high or too low, which could result in a lower sale price.

What is the first rule of buyer behavior?

The first rule of buyer behavior is that buyers typically choose an area first. They focus on a specific suburb or neighborhood and dismiss properties in other areas, which is why sellers need to effectively market their property to buyers in and outside their chosen area.

How do buyers typically think of price when looking for a property?

Buyers don't think in exact prices; they think in price ranges. They set a range for what they are willing to spend based on discussions with their broker and personal budget, which means sellers need to ensure their price positioning appeals to buyers within and around their price range.

Why might a buyer spend more than they initially planned when purchasing property?

Buyers often spend 10 to 15% more than they initially planned due to emotional factors. When they find a property they like, they may justify spending a little more if they perceive the property as worth it, similar to how consumers might upgrade a car purchase for additional features.

What is the most critical period for attracting offers on a property?

The most critical period for attracting offers is when the property first hits the market. Buyers who are actively searching for properties are most likely to make their best offer during this initial period, driven by urgency and fear of missing out on a good deal.

Why do properties that remain on the market for a long time tend to receive lower offers?

Properties that sit on the market for an extended period tend to lose buyer interest and become 'stale.' Buyers may perceive the property as overpriced or assume there is something wrong with it, leading to lower offers.

How does the concept of 'buyer wave' tie into the five rules of buyer behavior?

The 'buyer wave' concept ties into the five rules by showing the relationship between the number of inspections and the number of days the property is listed. Properties that generate more interest early on are more likely to sell at a higher price, and the strategy needs to leverage this initial surge in interest.

How can sellers ensure they don't make the same mistakes as Mr. and Mrs. Seller?

Sellers can avoid the same mistakes by understanding buyer behavior, pricing their property correctly from the start, and positioning it to attract the most buyers early on. They should also be prepared to adjust their strategy based on market feedback to avoid the property becoming stale.