Every time I meet with my peers, we always talk about the market, and what’s happening with everyone’s buyers and sellers. The past few years, the conversation has gone like this:
“Buyers need to experience losing a house before they’re ready to buy. I have buyers who lost their first 10 offers before they got the house.”
I hear this same conversation all the time from all sorts of different agents. While there is a little bit of truth to it, I believe there is a better explanation for what’s happening to our Buyers.
I watched a video by Charles Duhigg about “How Habits Work” that opened my eyes. If that name sounds familiar, that’s because he wrote the book, “The Power of Habit”.
He talks about how every day around 2 pm, he gets up from his desk to get a cookie. He dissected the habit to figure out what he really craved. Was it the actual cookie? The act of walking around? Or the socializing he did on the way back to his desk?
After doing a little experiment, he found out it was actually the socializing aspect that he needed. So now, instead of getting up to get a cookie, he gets up to talk to his peers for a few minutes, and then gets back to work--no cookie.
What this means for Buyers:
In this analogy, my agent friends will tell you to simply "stop eating the cookie"… or to keep writing offers and experiencing loss before you’re ready to buy.
However, the actual important piece is what’s happening WHILE a Buyer is writing these offers and experiencing loss. Here it is:
They are learning the market the way an agent does. They are watching homes hit the MLS, going to the open houses, writing offers, seeing how long they take to sell, how many other offers there are, and what they finally sell for. Full circle.
Yes, they are “experiencing loss” which may help with motivation, but losing a home to another buyer isn’t going to educate you on how to write stronger offers.
Once they finally have a good grasp on how much a house is truly worth, they write the winning offer, no problem. It’s that simple.
Zillow and Redfin have made it easy to search for homes, but most people aren’t watching the whole process of a specific home from A to Z. They only see it hit the market, usually don’t notice it going into escrow, and definitely not the final sales price.
There just isn’t a good way to get that kind of anecdotal information from Zillow for Buyers.
The ONLY time Buyers get this full experience is when they are writing an offer themselves. Buyers usually start by writing “garbage offers” on homes they really have no intention on buying. That’s because they don’t really know the process, and they don’t know the value of a house.
When you see homes fall out of escrow, there’s a good chance the Buyer got the home and didn’t expect to. These transactions are a ticking time bomb.
This is also the main reason people don’t trust their agents in the beginning. Their agent tells them to write a higher offer, and the Buyer thinks they’re just saying that to make a sale.
Any of this hitting home for you?
Instead of waiting until you’re ready to write an offer to get familiarized with the market, start doing the RIGHT research now so don’t lose the house you want while you’re getting mentally prepared. This means going through the numbers sooner than later.
This is one advantage Sellers have over Buyers.
Sellers need agents to get on the market. But Buyers usually don’t reach out to an agent until they’re ready to write an offer. Then their first question is always, “What are the comps?” Couldn’t be a worse time to ask that question, by the way.
Two ways to go about understanding the market:
- Trial by Fire: Spend six months writing 10+ offers before you’re ready.
- Anecdotal Research: Find houses you are interested in, go to the open house, and then stalk the listing until it closes. The big takeaway here is seeing a finished product from Listing to Close.
I recommend Option 2. Keep in mind, this process still takes some time, but there are a bunch of things I do with my clients to shorten that period and build their confidence faster.
Care to find out what those are?