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Psychology Of Home Sellers


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HOLA441

Earlier in the year, sold a flat. Mortgage interest was below £200 p. m. Rental income over £500.

Not bankrupt, not crazy, not interested.

I want a family home to live in, how can I expect to do that if I go round behaving in precisely the way that stops me doing that?

We're talking about two different things, one is the morality of high house prices and rents, the second is someone stuck in negative equity who can see a way out by letting their property. I don't believe there'll be a crash of the kind everyone has talked about while ever rents are so high. The error is to see the market as us and them, in fact it's all us with similar motivations, and 'we' aren't going to lose a quick hundred grand if there's a way out.

If there's to be a big drop it'll be a protracted affair because no government is going to introduce a measure that'll bankrupt its core constituency and the market alone will take years to unwind. All IMHO.

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HOLA442

I'm not sure it's so cut and dry. If a person likes your house at £475k, they're going to like it at £500k. Conversely, dropping your asking price by 5% still probably leaves you with the same pool of buyers. Stamp duty thresholds also serve to push the market into distinct segments.

Of course all things being equal a cheaper price will get it sold faster, but I would probably wait till negotiation stage rather than being too quick to chop off a few thousand off the asking price.

And the difference between 500k and 400k ? You are talking about a 5% discount. There are not many things in the World where a 5% discount would change your view from 'vaguely interested' to 'I want to buy it now'. Why would houses be any different ? 5% is not enough to entice people in any great amount. If someone really wants to sell their house then they have to drop it by 10-20% and in most cases it will sell.

500k = Mmm nice to look at online but a bit more than we can afford - let's keep an eye on it. 400k = Lets make an offer today. It IS as simple as that. As long as the amount dropped is enough to get people's interest. And that is the thing nearly everyone that is trying to sell a hosue forgets. Although I don't think they really forget it. They just don't want to face reality.

Sellers need to get real.

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HOLA443

I know someone who is generally a pretty sharp cookie. However they are now trying to sell their house. Already living in another one. No idea of the finances but must be a little worrying for them anyway.

Trying to sell for ages. Almost no interest at all. Agent told them a few weeks back that they should try dropping the price and see what happens. The response ? Don't think there is any point in dropping the price when there is absolutely no interest at present. What would be the point...

:blink:

I didn't point out the obvious. I mean, is it not clear that dropping the price may generate interest ?! Does someone really have to point this out to an otherwise smart person...

I do think most deep down realise this. They are just in denial and in hope that it will all blow over and they will get their 2007 price like eveyone used to tell them. Slowly reality is getting through - I think. The denial is certainly not as vehement as it was a year ago. Fear is bubbling through.

Its necessary to look from the point of view of the guy taking the decision. The smart move is not as clear-cut as we might think.

For example, by dropping the price by 90% he seems certain to generate interest. He will 'lose' a lot of money, lots more than its costing to hold onto the property, because its highly likely he doesn't need to drop by as much as 90%. So it seems sensible to say that somewhere between a huge drop and no drop, there is an optimum price drop for the vendor. Anyone know what it is? Because its perfectly reasonable for the vendor to seek it. Just as we don't want to pay too much they have no obligation to sell for less than necessary.

The chap in your anecdote may well have a point. After all there are some properties selling without a price drop. Equally we frequently we see threads about a drop in price where the comments are all on the lines of I want another 50% drop before I'm interested. Therefore the optimum price drop appears highly variable because of random behaviour amongst prospective buyers. In which case doing nothing may be as smart move as any. Not saying its a great move but perhaps some of the time it is smarter than the alternatives. It all depends on the finances.

Buying and selling houses involves the largest sum of personal money about which most of us will ever make a decision. There has to be a strong force motivating people to do something that, quite rationally, appears to include some random risk of losing a lot more than necessary.

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HOLA444

I know someone who is generally a pretty sharp cookie. However they are now trying to sell their house. Already living in another one. No idea of the finances but must be a little worrying for them anyway.

Trying to sell for ages. Almost no interest at all. Agent told them a few weeks back that they should try dropping the price and see what happens. The response ? Don't think there is any point in dropping the price when there is absolutely no interest at present. What would be the point...

:blink:

I didn't point out the obvious. I mean, is it not clear that dropping the price may generate interest ?! Does someone really have to point this out to an otherwise smart person...

I do think most deep down realise this. They are just in denial and in hope that it will all blow over and they will get their 2007 price like eveyone used to tell them. Slowly reality is getting through - I think. The denial is certainly not as vehement as it was a year ago. Fear is bubbling through.

Its necessary to look from the point of view of the guy taking the decision. The smart move is not as clear-cut as we might think.

For example, by dropping the price by 90% he seems certain to generate interest. He will 'lose' a lot of money, lots more than its costing to hold onto the property, because its highly likely he doesn't need to drop by as much as 90%. So it seems sensible to say that somewhere between a huge drop and no drop, there is an optimum price drop for the vendor. Anyone know what it is? Because its perfectly reasonable for the vendor to seek it. Just as we don't want to pay too much they have no obligation to sell for less than necessary.

The chap in your anecdote may well have a point. After all there are some properties selling without a price drop. Equally we frequently we see threads about a drop in price where the comments are all on the lines of I want another 50% drop before I'm interested. Therefore the optimum price drop appears highly variable because of random behaviour amongst prospective buyers. In which case doing nothing may be as smart move as any. Not saying its a great move but perhaps some of the time it is smarter than the alternatives. It all depends on the finances.

Buying and selling houses involves the largest sum of personal money about which most of us will ever make a decision. There has to be a strong force motivating people to do something that, quite rationally, appears to include some random risk of losing a lot more than necessary.

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HOLA445

Its necessary to look from the point of view of the guy taking the decision. The smart move is not as clear-cut as we might think.

For example, by dropping the price by 90% he seems certain to generate interest. He will 'lose' a lot of money, lots more than its costing to hold onto the property, because its highly likely he doesn't need to drop by as much as 90%. So it seems sensible to say that somewhere between a huge drop and no drop, there is an optimum price drop for the vendor. Anyone know what it is? Because its perfectly reasonable for the vendor to seek it. Just as we don't want to pay too much they have no obligation to sell for less than necessary.

The chap in your anecdote may well have a point. After all there are some properties selling without a price drop. Equally we frequently we see threads about a drop in price where the comments are all on the lines of I want another 50% drop before I'm interested. Therefore the optimum price drop appears highly variable because of random behaviour amongst prospective buyers. In which case doing nothing may be as smart move as any. Not saying its a great move but perhaps some of the time it is smarter than the alternatives. It all depends on the finances.

Buying and selling houses involves the largest sum of personal money about which most of us will ever make a decision. There has to be a strong force motivating people to do something that, quite rationally, appears to include some random risk of losing a lot more than necessary.

I understand what you are saying, however there has to be a dose of reality somewhere. No prrice drops in 6 months and no viewings ? I think the market is clearly telling you the price is too high. Time to drop by a reasonable amount to gauge interest. Then see if viewings start to appear.

Yes I appreciate a lot of money is involved. However these same people will buy the said house in a matter of minutes after 'falling in love with it' and quite happily pay 50k extra if it means they get it ahead of the 4 other interested couples (Talking about back in the boom days).

These people are simply in denial. They need to stand back, be objective about it and seriously think about what they want. If they want it sold ? It is not difficult to do.

Had this exact situation with my parent.s Up for sale for almost a year with little viewings or offers. I finally persuades them to take a big chunk off to excite anyone who had been keeping an eye on it. Sold 6 days later.

Most houses will have people keeping an eye on them. All you have to do is tempt them out into thinking they may miss out on the reduction you are offering if someone else 'jumps in' quicker than you.

All very simple psychology. To keep it on topic !!

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HOLA446

You've got to ask yourself the question whether you would expect your average man/woman in the street to be happy selling something for a lot less money than they thought it was "worth".

For most people we're not talking trivial sums here. Dropping the house price by 20K is like sacrificing a years worth of take home pay for a lot of people. It's not something that people are going to do willingly.

Dropping the price to avoid chasing the market down may make sense from a business perspective, but many home sellers are not business people and do not understand this concept.

With ten years of property ramping and prices "always going up" it will take a long time for sentiment to change. In the meantime we will probably have stagnation and probably a further increase in spread between asking prices and selling prices. Because of low IR's many people are under no pressure to sell, so why would they if they cannot get what they think is a fair price ? People will moan about not being able to sell, but they won't actually do anything about it until it makes clear sense to them financially.

In my area it seems like the market has crunched to a complete halt. I dread to think what volumes will look like next month. The agents must be tearing their hair out.

I think there is a long wait ahead yet.

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HOLA447

You've got to ask yourself the question whether you would expect your average man/woman in the street to be happy selling something for a lot less money than they thought it was "worth".

For most people we're not talking trivial sums here. Dropping the house price by 20K is like sacrificing a years worth of take home pay for a lot of people.

The 20K was never there/already gone, they sacrificed nothing.

Unfortunately after 6 years or so some of the cleverest people I know - posters on TPC - remain clueless as how to make the general public understand this.

Hell a lot of clever politicians and successful business people struggle with the concept.

Edited by xux42
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HOLA448

The 20K was never there/already gone, they sacrificed nothing.

Unfortunately after 6 years or so some of the cleverest people I know - posters on TPC - remain clueless as how to make the general public understand this.

Hell a lot of clever politicians and successful business people struggle with the concept.

They will never understand it because they don't want to. Who wants to be told they have 20k less than they thought they had?

I suspect that if the job was to convince people that they had 20k more than they had it might be a bit easier.

It's just human nature. No good getting worked up about it and banging your head against the wall. It's the way the world is and no ones going to change it.

It's a great opportunity for the smart to make money. But like poker patience is the key.

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HOLA449

Ah, if only one could top-slice on an "investment" property in order to keep some of the gains and reduce the further risk... but that is the problem with a single egg investment. You don't even have a basket to keep it in.

Cakehead - can you please provide some numbers to back up your claim that rental "values" are high, that keeping property to rent out whilst one rents another place (e.g. reluctant LL) is a viable option?

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HOLA4410

You've got to ask yourself the question whether you would expect your average man/woman in the street to be happy selling something for a lot less money than they thought it was "worth".

....so why would they if they cannot get what they think is a fair price ?

In my area it seems like the market has crunched to a complete halt. I think there is a long wait ahead yet.

And where do they get this idea of what is a fair price?

From an EA's initial valuation in the vast majority of cases!

And the EA is valuing at that figure to get the sole right to sell it on commission, not because he/she genuinely thinks it will fetch that price.

The consequence is that a figure is lodged in the head of the vendor, and any offer substantially below this 'EA's hook the fish' figure is seen as a 'loss'.

A very elderly friend had a well- known and hugely disliked London EA chain in to value her Surrey house. They valued it 25K above local EA's, who knew the area a lot better. She went with the locals. At their lower figure it still hasn't sold. 8 weeks onward without a buyer - another £20K was knocked off.

As it happens, this house will be sold because nursing home fees are mounting. But whatever it sells at, the elderly owner will see as selling for less than it was 'worth', solely because of that initial insane valuation.

She bought the house for nothing 45 years back, and had the initial valuation been 60K-70K less than it was, it would now be sold, and she would be quite happy she had received a fair price.

Edited by juvenal
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HOLA4411

And where do they get this idea of what is a fair price?

From an EA's initial valuation in the vast majority of cases!

And the EA is valuing at that figure to get the sole right to sell it on commission, not because he/she genuinely thinks it will fetch that price.

The consequence is that a figure is lodged in the head of the vendor, and any offer substantially below this 'EA's hook the fish' figure is seen as a 'loss'.

A very elderly friend had a well- known and hugely disliked London EA chain in to value her Surrey house. They valued it 25K above local EA's, who knew the area a lot better. She went with the locals. At their lower figure it still hasn't sold. 8 weeks onward without a buyer - another £20K was knocked off.

As it happens, this house will be sold because nursing home fees are mounting. But whatever it sells at, the elderly owner will see as selling for less than it was 'worth', solely because of that initial insane valuation.

She bought the house for nothing 45 years back, and had the initial valuation been 60K-70K less than it was, it would now be sold, and she would be quite happy she had received a fair price.

I actually think a lot of EA's are finally coming around. Many are probably just as pissed off with the 'sticky' market as the rest of us.

A few prominent ones in Edinburgh have even been in the usually VI press instructing people to be a bit more realistic.

Definite change from even a year ago.

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HOLA4412

Cakehead - can you please provide some numbers to back up your claim that rental "values" are high, that keeping property to rent out whilst one rents another place (e.g. reluctant LL) is a viable option?

No. If you don't believe they are no amount of cut and pastes from me will convince you otherwise. On the second point if a vendor can't sell a house for the price he wants but a tenant is willing to cover his mortgage payments, renting a second place for him/herself seems the lesser evil. As I noted previously, competitive rents are generally the preserve of urban singletons and dinkys with. Families looking for family sized houses, especially in rural areas, don't have anything like the same choice and rents are, at least from my searches, high, relative to any mortgage except a mid-noughties one.

Edited by cakehead
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HOLA4413

Time and time again, i see new properties added, similar or exactly the same as existing ones, but 25-35% more expensive. Inevitably, over the course of a few months the price drops several times until theyre the same price as the ones that actually sell.

Why not just list it at a lower price to begin with?

Why when there are houses not selling at the lower price would exact copies sell at 25%+ more?

Greed, desperation and denial.

Mostly denial.

The desperation is only in pockets of the market at the moment. It's not widespread yet. It will take mass unemployment and raised interest rates before it becomes so.

Edited by tallguy
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HOLA4414

And it never seems to occur to people who've spent a bomb on e.g. a kitchen they think is so perfect, that however much it cost, it's almost certainly not what someone else would have chosen.

I agree. I would much prefer to buy a house with a functional but dated kitchen, bathroom(s), decoration etc. which I can update myself, to my own taste, in my own good time. Why pay through the nose for someone else's (second-hand) taste? Part of the fun in owning your own place is doing it up to your own taste in your own time.

One of the many problems with the house price inflation issue is we have been practically force-fed property development programmes for the last 15 or so years where one of the consistent take home messages is: "pay to have a new kitchen put in, paint your walls white and knock down a wall to create a 'kitchen-diner' . You'll 'add value' to your 'investment' - anyone can do it, great innit?". So when it comes to selling, some people will believe that "my house must be worth more than I paid for it cos I did all the things Krusty and Fil recommend."

There's a clear distinction between renovating a house (a noble profession compared to many jobs if one is doing it properly) and the more minor amendments as described above, but this distinction is deliberately lost in the property programs I've seen where the focus is on 'profit'.

I was watching BBC1 yesterday morning and the upcoming line-up was :10am homes under the hammer, 11am cowboy trap and 11:45 am To Buy or Not to Buy. People are still being force-fed this nonsense it seems.

Edited by Unsafe As Houses
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HOLA4415

Well probably because ONLY dropping the price by 5% is not really reflective of what the market is doing. This isn't some temporary menial fall in the housing market, this is the beginning of the big collapse.

I predict in 12 months time housing will have fallen by about 40% all over the UK (and yes that even includes some nice parts of London). If I was an EA I would seriously be trying to hone up on another skill.

PS. I just changed my status from Neither to Bear. And away we go....

I hope your right. If they've dropped by =>15% at the end of 2011 with interest rates still at 0.5% I'll see that as a result (but hoping for more of the same in 2012).

One thing I am seeing in my area in the last 6 weeks or so (Essex) is that price reductions are becoming increasingly common ... momentum is building. ;)

Edited by Unsafe As Houses
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HOLA4416

One of the greatest disservices house shows did for domestic dwellings was to promote a bland visual hegemony, a universal tasselled functionalism that could offend no-one, except anyone with the slightest aesthetic sensibility. Homes should be a palimpsest of life, not a whiteboard to be rubbed out every three years for a similarly inoffensive vision. Personalised houses need time spent of course, which is contrary to the ladder of aspiration such television programmes sell.

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HOLA4417

One of the greatest disservices house shows did for domestic dwellings was to promote a bland visual hegemony, a universal tasselled functionalism that could offend no-one, except anyone with the slightest aesthetic sensibility. Homes should be a palimpsest of life, not a whiteboard to be rubbed out every three years for a similarly inoffensive vision. Personalised houses need time spent of course, which is contrary to the ladder of aspiration such television programmes sell.

I completely agree with you.

But, on the plus side, at least to some extent it has curbed the inclination of people with no taste to try to 'make a statement'' with their house . :D

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HOLA4418

I completely agree with you.

But, on the plus side, at least to some extent it has curbed the inclination of people with no taste to try to 'make a statement'' with their house . :D

I'd rather have artex like icing sugar, purple walls with a badly rendered Che Guevara, than the scented candle lit bedlam Kirsty High-Heels gets moist over. At least someone cared enough to make their mark and didn't dress the room like a stage set.

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HOLA4419

I'd rather have artex like icing sugar, purple walls with a badly rendered Che Guevara, than the scented candle lit bedlam Kirsty High-Heels gets moist over. At least someone cared enough to make their mark and didn't dress the room like a stage set.

While I agree with you on the one hand. On the other hand, I don't really like some of the things people do to tradtional houses such as paint the outside some gaudy colour or change the shape of the windows to a more modern style. The next owner of the house is stuck with such alterations...lol I would have hated living in the 70s.

Edited by Unsafe As Houses
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HOLA4420

I don't think every buyer or seller understands the market scenario nor trend, before they do transaction ...

but buyers tend to do more research..

Sellers normally have an idea and they do a price consultation with an agent which I feel is not always right. So they end up asking higher.

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HOLA4421

I don't think every buyer or seller understands the market scenario nor trend, before they do transaction ...

but buyers tend to do more research..

Sellers normally have an idea and they do a price consultation with an agent which I feel is not always right. So they end up asking higher.

Completely agree. Most sellers got in cheap and the modern day buyer is truely putting his shirt on the line. With a little bad luck buying a modest home in London could ruin your life. Paying back 300k is no easy thing and the clever purchaser realises this.

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HOLA4422

No. If you don't believe they are no amount of cut and pastes from me will convince you otherwise. On the second point if a vendor can't sell a house for the price he wants but a tenant is willing to cover his mortgage payments, renting a second place for him/herself seems the lesser evil. As I noted previously, competitive rents are generally the preserve of urban singletons and dinkys with. Families looking for family sized houses, especially in rural areas, don't have anything like the same choice and rents are, at least from my searches, high, relative to any mortgage except a mid-noughties one.

Ah I see where you're coming from. Lunacy. Never mind, you carry on in your little world.

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HOLA4423

Well if you insist on my anecdote is more meaningful than your anecdote, here's one. From early '91 to early '97 I rented a house that had recently been valued at £250k. By the end of the tenancy we were paying £350pcm, at the beginning a little over 300, I can't remember the exact figure. Although the house was never sold and the original owners still have it, similar properties are now selling for something around 400k. The rent when I last checked was £1400pcm.

I'd say that was expensive when wages haven't risen in line with rents.

Good luck with your cheap rent BTW.

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HOLA4424

Well if you insist on my anecdote is more meaningful than your anecdote, here's one. From early '91 to early '97 I rented a house that had recently been valued at £250k. By the end of the tenancy we were paying £350pcm, at the beginning a little over 300, I can't remember the exact figure. Although the house was never sold and the original owners still have it, similar properties are now selling for something around 400k. The rent when I last checked was £1400pcm.

I'd say that was expensive when wages haven't risen in line with rents.

Good luck with your cheap rent BTW.

The rent quadrupled in the 13 years between 1997 and 2010 ? Must be a rather spcific location you are discussing.

I doubt for 99.999999999999% of the UK the rent has even doubled during the same period.

Edited by ccc
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HOLA4425

Well if you insist on my anecdote is more meaningful than your anecdote, here's one. From early '91 to early '97 I rented a house that had recently been valued at £250k. By the end of the tenancy we were paying £350pcm, at the beginning a little over 300, I can't remember the exact figure. Although the house was never sold and the original owners still have it, similar properties are now selling for something around 400k. The rent when I last checked was £1400pcm.

I'd say that was expensive when wages haven't risen in line with rents.

Good luck with your cheap rent BTW.

selective b*ll*cks stat

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