Get top dollar for your home with these 8 strategies!

The 3 Buyer Types and Why Sellers Need to ‘Price it Right’ from the Start

When I list a property, I always explain to my sellers that every potential buyer fits into one of these three categories:

1. Bargain Hunters will wait until your property has been on the market for a while; then they’ll start lobbing lowballs. Bargain Hunters are the last type of buyer any seller would ever want to attract. So that leaves only two buyer types we care about!

2. New Buyers enter the market continuously. Depending on your area and price range, typically, there might be one or two new buyers entering the market every week.

However, even if a new buyer happens to enter the market at the same time as you list, and even if they love your home, they likely won’t feel “ready” to write yet. They need to see more listings to gain the necessary confidence.

Here’s the third and most important group:

3. Current Buyers have already seen most or all of your competitors but haven’t found what they want yet. So, what are they waiting for?

New listings!

This is why there’s ALWAYS a flurry of showings immediately after you list. However, this rush subsides quickly, and now you wait. And wait. For what?

New Buyers! (see #2 above)

Of the three groups, Current Buyers are by far the largest and most motivated group. They’re educated on the market, ready, willing, and able to write an offer the moment they find the right property. 

In order to appeal to Current Buyers, it is vital to ‘Price it Right’ from the start.

All buyers need to like the property, of course; it has to appeal to their wants and needs. But one more critical aspect is required to trigger them to say, “Let’s write an offer!”

They must perceive good value in the property.

Think about it. Aren’t you the same? When shopping for anything (including a house), don’t you want to feel like the price is “fair”? If you don’t, isn’t your natural inclination to continue shopping?

Here’s what happens when a buyer does not perceive good value:

They focus on the negatives.

Every home has pros and cons. For example, let’s say that your kitchen cabinets are cheaper and more dated than your competitors. Everything else in the house is good, but this is one of the “cons”.

In this case, if a Current Buyer does not perceive good value, what do they think?

“I don’t like the kitchen. Let’s keep looking.”

On the other hand, if this same buyer does perceive good value, what do they think?

“This home is excellent! The cabinets are a bit dated, but that’s not a big deal. Let’s write an offer!”

To be clear, it’s not about the buyer consciously thinking about whether they “perceive good value.” Instead, it’s the subconscious which is far more powerful than the conscious mind.

This is Buyer Psychology 101.

The bottom line is that everything needs to add up to trigger the “Let’s write an offer!” response, including the property features, the presentation, and the price. But…

It’s the price that is the most critical component.

This is why it’s wrong to think, “We can always drop the price later.”

In the example above, if the buyer doesn’t perceive good value, they remember whatever negative they didn’t like about the house. So, even if you drop the price later, they’ll still think about it as “the one with the dated cabinets.” 

Once the buyer makes up their mind, it’s difficult or impossible to change, even with a new lower price.

Once the biggest and most motivated group – the Current Buyers – has come and gone, achieving the price you want becomes more and more challenging.

Now, you’re waiting (and hoping) that a New Buyer will see the home and perceive good value (even though none of the Current Buyers did). 

Hopefully, they will! But this might take a month or two or much longer. 

Here’s the problem:

The longer it takes to find a buyer, the less likely you’ll achieve a sale price that is at least close to the list price.

When I’m showing buyers, one of the first questions they ask is, “How long has it been on the market?”

The longer it’s been, the less urgency they feel, and vice-versa. If it’s a brand new listing, there’s a strong sense of urgency to write an offer “before someone else gets it.”

This is why finding the right price from the start is vital. It takes an experienced and skilled agent to find the “sweet spot” on the list price — not too low and not too high — the list price that is most likely to result in the highest possible sale price.