Don’t underestimate the impact of psychology on a property’s sale price. After all, for many, buying a home is much more of a psychological decision than a logical one.
With the real estate market undergoing an unexpected boom, more property owners are considering selling up. Whether it’s to claim capital gains accumulated over the years, in a bid to pay off a mortgage, or to upscale and move onto the next phase of life.
If you’re thinking of selling, you’ll no doubt need to consider any associated financial responsibilities. For example, early mortgage exit fees or capital gains tax. For others it’s worth looking at bridging loans and potential refinancing for a new purchase. You may even consider shopping around to see whether you’ll get a better rate from a non-bank lender like WLTH.
This also means you’ll want to drive as much profit as you can from your initial investment.
Could psychology be the answer?
Buying a home can be much more of a psychological decision than a purely logical one. It’s one of the biggest investments of most people’s lives, if not the biggest.
Therefore, while price, resale value and location stand as significant motivations when it comes to purchasing a house, it’s important to remember they’re not the only factors at play. The psychology of property sales introduces many factors to take into consideration.
For first home buyers in particular, the purchase may be less about owning property and more about establishing a home. A refuge from the world and a place to raise a family.
For others, real estate is an investment they hope will drive significant returns down the road.
The psychology of property
Here are five psychological factors to consider when selling your home that go beyond a lick of new paint on the walls or fancy aesthetics.
1. First impressions are everything
Whether the property’s fence is beyond repair, or the tiles from the roof have seen better days, it’s important to remember that first impressions are crucial.
People often fall in love with a property very early on and will continue to think about it after their first visit. This goes the same way if the property isn’t up to scratch or doesn’t fit their criteria upfront.
First impressions can also be affected by herd mentality. What’s the difference between an open house packed with potential home buyers, versus one or two couples showing up?
The activity and interest from other buyers validates that the home is desirable and it’s a good deal. Those affected by herd mentality will be more desperate to purchase the home, as it seems to be desirable by others.
So how do sellers create a great first impression?
Simply, put in the effort. If the property is falling apart, opt for a potential renovation. Or if making changes isn’t worth the investment, consider marketing the property to a developer who isn’t motivated by the state of the dwelling.
If simple maintenance is needed for a leaky tap or air vent, call up the relevant tradesman to get it fixed. The longer the property is on the market, the more people will wonder why others haven’t already snapped it up.
2. Emotional attachment
As Marie Kondo once said: “does this spark joy?”
Homes come with far more emotional weight than any other investment made, especially if it’s a “forever home“.
It’s common for houses to fetch well over their asking prices (or on the other hand, pass in) due to an emotional attachment. Once someone has made their mind up on a property, and romanticised their potential lifestyle, it is very hard to let it go.
For sellers, especially those selling a family home, try to create a boundary between the emotional connection to the property and the financial reality of it. If you’re struggling to part ways, remember that this process presents an opportunity to create new memories in a new home.
What does emotional attachment mean for sellers?
Be realistic about the asking price and weigh up the cost of knocking back offers that come close to your asking price. How much will it cost to keep it on the market? Will delaying a sale prevent you from making other big life decisions?
3. Perceived additional value
Everyone loves a bargain. Think about how you can give potential buyers the feeling they’ve walked away with a good deal.
Perceived value-adds can often be the winning aspect for a buyer to say yes to a property. Mostly because they believe they‘re getting bang for their buck.
How can sellers increase perceived value?
Though they may seem like miniscule details, small additions that vendors can easily arrange can make all the difference when negotiating a sale.
These could be as simple as adding in a BBQ to the sale, updating lighting fixtures, or offering a free carpet steam clean.
4. A sense of security
Does the buyer feel safe in the house? What about the neighbourhood?
If a property doesn’t give the buyer peace of mind that they can sleep soundly, it’s likely it will become a no-go zone, regardless of price point.
If there’s been a handful of robberies or dodgy characters lurking around, or a questionable establishment nearby, your property could be losing value.
How sellers can increase perceived security
For vendors who suspect this could be a risk factor, consider adding safety features to the property. You might include an alarm system, security cameras, higher fences, hedges or safety screens. These are relatively low-cost, high value systems that allow potential buyers to feel at ease in their new neighbourhood.
5. Financial wellbeing and long-term returns
Finally, it’s important to remember buying a home can add significant financial pressure for people, especially in the current economy.
The reality is that a home deposit is a substantial sum of cash. Many times it amounts to all of a buyer’s savings. For those taking out a mortgage, they’ll be evaluating whether the property will drive long-term returns on their investment. Will they make a profit in 10-20 years time? Will the cost of a mortgage be worth the investment?
Ways to alleviate financial stress
In order to alleviate any financial stress associated with buying a property, you may be able to offer potential buyers insight into the financial commitments and benefits associated with the property.
For example, is there an owner’s corporation? How did you approach your mortgage and which provider did you find success with? What kind of rent can they expect if they decide to lease out the property?
It’s currently a seller’s market, so to get the best result from your sale, it pays to consider the psychology of property selling. It can help to communicate peace of mind, demonstrate long-term value, and convince potential buyers to take a punt on what could be an attractive, fruitful investment.
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