Why Buyers Act Like Lemmings & What You Can Do About It
Working with buyers in multiple competitive offers has been, at times, an exercise in not pulling out all my hair. It’s not the multiple offers, that’s just a fact of the market, it’s when my clients insist that they must have that house. You know the one I mean. The darling of the week. The one with the prettiest twilight pictures and most attractive landscaping. The one with trendy light fixtures, modern paint colors, and maybe even a stylish wallpapered accent wall. The one every other buyer in that price range also must have.
I know what you’re thinking as you pour another glass of wine while reading the listing agent’s response about having 20 confirmed offers a week before they’re due:
Why do they always all go for the same house?!
Call it what you want: mob mentality, crowd psychology, mimetic desire, or buyers being lemmings, it’s all the same psychology. Humans are social creatures. Desire for acceptance, likability, and being a part of a group has its roots in evolutionary days when survival was dependent on not being alone in the wild. The traits we picked up millennia ago were so important that they persist today, though in perverted forms. We no longer need to be part of a group to survive. We are not in danger of being the prey of giant birds (seriously), crocodiles, leopards, sabertooth cats, Komodo dragons and other beasts when we leave our home (at least not typically), but our drive to be accepted and liked, to not be alone, runs strong.
But why must our clients shoot themselves in the foot, adding fodder to the roaring fire of the competition on what must be, apparently, the only available house to buy?
Mimetic Desire: Mimetic Desire is more than jealousy and wanting something because someone else has it. Rather, it's about valuing something because someone else values it. The more people who want that house, the more desirable it becomes. Whatever your client saw in it initially, it is now the best, most fabulous, architecturally significant, designer-designed linen closet they’ve ever seen.
Loss Aversion: Normally loss aversion pertains to things we already own, or ideologies we hold dear. We tend to place greater value on the loss of something and will take greater risks to avoid losing something than to gain something. In a more measured housing market a buyer submitting a bid lands on the side of gains because with no competing offers, there’s little to lose if their offer isn’t accepted outright. But in a competitive market there is a great sense of loss. Buyers have spent hours pouring over the photos, videos, virtual tours, and disclosures to the point that they identify the home as theirs -- now it’s something they could lose. Bring in competing bids and the loss aversion grows. It’s not good enough to raise their chance of success on a less competitive property, which offers more to gain and less to lose, now they also must not lose to other buyers.
Take these principles and add in that we’re talking about buying a home, the thing that most represents security, warmth, safety, and, historically, the American dream, and suddenly wanting what everyone else wants makes more sense -- after all if everyone wants it, it must be good.
So what are you to do? As an agent it’s your job to both represent your clients’ interests and to help them be successful in their goals. If they keep bidding on homes that go beyond their price range they will get frustrated and burned out, and in the worst case, they may blame you because you should have been a better advisor as they bow out of the market or jump to another agent.
If needed, I’ll sometimes let my buyers take a larger role in their first offer; I’ll advise them, but I won’t push too hard. But once they’re on their third offer (or more), not only am I being blunt with them about what it will take to get the darling house of the week that every other buyer also wants, but I’m adjusting their vision and expectations and talking about how refocusing on a less-hot property will give them a leg up in being successful buyers. The points of this conversation are the same with every client, but the examples and nuance are tailored to each need and desire.
Understanding this is a common conversation, it's a good idea to begin paving the path for it upfront in your very first meeting. You may find yourself wanting to be liked and saying what you think they want to hear so they sign up to work with you, but that’s only going to make your job harder down the road. Using the right language and setting the stage for them to be strong competitive buyers from the outset will not only make them see you as the best agent ever, it will also make your job easier and more enjoyable because your clients will listen to you sooner, become homeowners sooner, and help you get paid faster and more frequently.