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Consumers want experiences over products, do you know why?

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What does that even mean?

shopping bagsA recent study by Cornell University revealed that consumers prefer experiences over products. This sounds like fluffy marketing speak, but it has some simple applications in the real estate industry (and I’m not talking about baking cookies for open houses).

“The study… found that ‘experiences’ are more rewarding than ‘things’ because of the way people tend to evaluate their happiness by comparing themselves with others. For example, it is easier to feel crummy about some possession of yours if you learn that someone else has a superior version of it. “Experiences are inherently less comparative,” says one researcher, which means they tend to bring happiness regardless of other’s.”

Let’s say Marcus buys a new home at the same time as his coworker Jacqueline who has the same income and purchased a home at the same price. Marcus is invited to Jacqueline’s housewarming party and is disappointed that her home is much larger and nicer than his, so he experiences some disappointment at comparing products.

On the other hand, Marcus and Jacqueline have lunch together and haven’t seen each others’ homes and they swap tales about their home buying experience, they are exchanging personal connections with the process and their memories that are unique. Marcus talks about how he and his wife looked at houses for months and about the one open house they went to that reminded them of a scene from their favorite romantic movie while Jacqueline recounts the open house they went to that had a dead squirrel under the kitchen sink which had their kids squealing with laughter.

People own their experiences

“According to the study, experiences are so effective at making us happy because we truly ‘own’ them in that they become integrated into our characters and help shape our personalities. Material goods, on the other hand, can really only be ‘possessed’ and rarely become a part of us in any meaningful way. Also, things we buy are subject to material degradation and devaluation, not to mention a gradual lessening in our appreciation for them. In contrast, experiences are transformed into memories, and even bad ones can be appreciated later on down the line.”

In the Marcus and Jacqueline story above, Jacqueline’s family experienced a disgusting dead animal in an open house, but it was memorable and they ended up buying the home because it was perfect for them AND their buyer’s agent was embarrassed, used her cardigan to wrap up the dead squirrel, took it into the back yard, called the listing agent to let him know what happened, sacrificed her cardigan as the squirrel’s burial ground and offered to send Jacqueline and her family to lunch on her while she tried to find some candles and spray so they could start the tour again. The animal was no big deal to Jacqueline, but the agent going the extra mile not only impressed them, but kept them in the home for an extended period of time and gave them a unique story to retell.

Granted, unhappy people experience life through poo colored glasses, most normal people will reflect on memories fondly because they’re unique and their own.

So what’s the big secret?

Knowing that consumers want experiences over products means that an automated purchase process will continue to be inferior to a guided, personal process. The preference for experience means that consumers are paying attention to how you answer the phone, what you say when they’re in your car, where you stand when you give a tour, how friendly you are when you call to follow up, what your demeanor is when you attend their closing and how non-salesly you are when they invite you to their housewarming party. The preference means that clients care less about what your listing presentation looks like and more about how you present it, how much feedback you give them about tours of their home, how often you check in with them to update them of other listings that have come online, and how available you are and what special touch you provide.

The big secret is that there’s no big secret. Your website should emphasize experience over product so people can meander and learn all types of information and get to know you. You should answer the phone, respond to email and go above and beyond in all ways possible. By doing your very best or even half of your very best, the sad truth is that you’re providing a superior real estate experience over most of your competitors who take 36 hours to call people back and are never heard from after a contract is signed.

The big secret is that you have to make paths to an experience possible. If people like swimming and that’s what makes them happy, builders should make sure their subdivisions have community pools so the experience can be fulfilled. If people feel most satisfied by knowing the sales history of a home, make it available to them so their experience can be fulfilled. If the real estate industry created less obstacles and more paths, consumers could focus on the experience of buying (which is a more lasting value proposition for the industry) rather than the actual product. Instead of running out of the house and stamping it as unacceptable, Jacqueline’s agent cleared a path and ended up giving them a lifelong memory (albeit a gross and hilarious one).

So that’s it- make memories, because that’s what are shared over dinner about the home buying experience in nine years, not what type of granite the counters are… appreciation for memories grows over time while appreciation for physical possessions declines.

Lani is the Chief Operating Officer at The American Genius - she has co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

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16 Comments

16 Comments

  1. Joe Loomer

    April 13, 2010 at 12:16 pm

    great post Lani – I love the “big secret” analogy.

    Navy Chief, Navy Pride

  2. Ken Brand

    April 13, 2010 at 8:48 pm

    It clicks. The human element rules all. Amen.

    Cheers L.

  3. Erica Ramus

    April 13, 2010 at 10:00 pm

    Lani–You took a very vague subject and made it concrete with that whole squirrel anecdote.

    I see buyers and sellers CHOOSE an agent time and again not because the agent is the best or the smartest or has the best marketing tools, but because they CONNECT with them on some level. It’s very basic stuff. You don’t have to have the killer listing presentation. But the seller must trust you and believe you’ll work hard for them.

  4. Maggie Dunne

    April 15, 2010 at 10:28 am

    Great article! It certainly gives one something to think about. Yes, people want to know what you are going to do for them. The agent certainly did go above and beyond the call of duty in showing how much she cared about this family. Just be yourself!

  5. Nancy Sadler

    May 19, 2010 at 7:15 am

    People may say they have a possession/item that is meaningful to them so goods can be meaningful, however it is most likely that it is meaningful because of the experience associated with it e.g. a persons toy bear reminds them of when they were a child and the places the toy went with them. Good article.

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Coaching

Disputing a property’s value in a short sale: turn a no into a go

During a short sale, there may be various obstacles, with misaligned property values ranking near the top, but it doesn’t have to be a dealbreaker!

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It’s about getting your way

Were you on the debate team in high school? Were you really effective at convincing your parent or guardian to let you do things that you shouldn’t have been doing? How are your objection-handling skills? Can you flip a no into a go?

When working on short sales, there is one aspect of the process that may require those excellent negotiation or debate skills: disputing the property value. In a short sale, the short sale lender sends an appraiser or broker to the property and this individual conducts a Broker Price Opinion or an appraisal, using special forms provided by the short sale lender.

After this individual completes the Broker Price Opinion or the appraisal, he or she will return it to the short sale lender. Shortly thereafter, the short sale lender will be ready to talk about the purchase price. Will the lender accept the offer on the table or is the lender looking for more? If the lender is seeking an offer for a lot more than the one on the table, mentally prepare for the fact that you will need to conduct a value dispute.

Value Dispute Process

While each of the different short sale lenders (including Fannie Mae) has their own policies and procedures for value dispute, all these procedures have some things in common. Follow the steps below in order to conduct an effective value dispute.

  1. Inquire about forms. Ask your short sale lender if there are specific forms that you need to complete in order to conduct a value dispute. Obtain those forms if necessary.
  2. Gather information. Your goal is to convince the lender to accept the buyer’s offer, so you need to demonstrate that your offer is in line with the value of the property. Collect data that proves this point, such as reports from the MLS, Trulia, Zillow, or your local title company.
  3. Take photos. If there are parts of the property that are substandard and possibly were not revealed to the lender by the individual conducting the BPO, take photos of those items. Perhaps the kitchen has no flooring, or there is a 40-year old roof. Take photos to demonstrate these defects.
  4. Obtain bids. For any defects on the property, obtain a minimum of two bids from licensed contractors. For example, obtain two bids from roofers or structural engineers if necessary
  5. Write a report. Think back to high school English class if necessary. Write a short essay that references your information, photos, and bids, and explains how these items support your buyer’s value. This is not something that you whip up in five minutes. Spend time preparing a compelling appeal.

It is entirely possible that some lenders will not be particularly open-minded when it comes to valuation dispute. However, more times than not, an effective value dispute leads to short sale approval.

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Coaching

Short sale standoffs: how to avoid getting hit

The short sale process can feel a lot like a wild west standoff, but there are ways to come out victorious, so let’s talk about those methods:

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What is a short sale standoff?

If you are a short sale listing agent, a short sale processor, or a short sale negotiator then you probably already know about the short sale standoff. That’s when you are processing a short sale with more than one lien holder and neither will agree to the terms offered by the other. Or… better yet, each one will not move any further in the short sale process until they see the short sale approval letter from the other lien holder.

Scenario #1 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they will proceed with the short sale, and they will offer Bank 2 a certain amount to release their lien. You call Bank 2 and tell them the good news. Unfortunately, the folks at Bank 2 want more money. If Bank 1 and Bank 2 do not agree, then you are in a standoff.

Scenario #2 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they cannot generate your approval letter until you present them with the approval letter from Bank 2. Bank 2 employees tell you the exact same thing. Clearly, in this situation, you are in a standoff.

How to Avoid the Standoff

If you are in the middle of a standoff, then you are likely very frustrated. You’ve gotten pretty far in the short sale process and you are likely receiving lots of pressure from all of the parties to the transaction. And, the lenders are not helping much by creating the standoff.

Here are some ideas for how to get out of the situation:

  • Go back to the first lien holder and ask them if they are willing to give the second lien holder more money.
  • Go to the second lien holder and tell them that the first lien holder has insisted on a maximum amount and see if they will budge.
  • If no one will budge, find out why. Is this a Fannie Mae or Freddie Mac loan? If so, they have a maximum that they allow the second. And, if you alert the second of that information, they may become more compliant.
  • Worst case: someone will have to pay the difference. Depending on the laws in your state, it could be the buyer, the seller, or the agents (yuck). No matter what, make sure that this contribution is disclosed to all parties and appears on the short sale settlement statement at closing.
  • In Scenario #2, someone’s got to give in. Try explaining to both sides where you are and see if one will agree to generate their approval letter. If not, follow the tips provided in this Agent Genius article and take your complaint to the streets.

One thing about short sales is that the problems that arise can be difficult to resolve merely because of the number of parties involved—and all from remote locations. Imagine how much easier this would be if all parties sat at the same table and broke bread? If we all sat at the same table, then we wouldn’t need armor in order to avoid the flying bullets from the short sale standoff.

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Coaching

Short sale approval letters don’t arrive in the blink of an eye

Short sale approval letters may look like they’ve been obtained simply by experts, but it takes time and doesn’t just happen with luck.

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Short sale approval: getting prepared, making it happen

People always ask me how it is that I obtain short sale approval letters with such ease. The truth is, that while I have more short sale processing and negotiating experience than most agents and brokers, I don’t just blink my eyes like Jeannie and make those short sale approval letters appear. I often sweat it, just like everyone else.

Despite the fact that I do not have magical powers, I do have something else on my side—education. One of the most important things than can lead to short sale success for any and all agents is education.

Experience dictates that agents that learn about the short sale process
have increased short sale closings.

Short sale education opportunities abound

There are many ways to become educated about the short sale process and make getting short sale approval letters look easy to obtain. These include:

  • Classes at your local board of Realtors®
  • Free short sale webinars and workshops
  • The short sale or foreclosure specialist designations

As the distressed property arena grows and changes, it is important to always stay abreast of policy changes that may impact how you do your job and how you process any short sale that lands on your plate.

The most important thing to do is to read, read, read. Follow short sale specialists and those who blog about short sales on AGBeat, Google+, facebook, and twitter. Set up a Google Alert for the term ‘short sale’ and you will receive Google’s top short sale picks daily in your email inbox. Visit mortgagor websites to read up on their specific policies and procedures.

Don’t take on too much

And, when you get a call from a prospective short sale seller, make sure that you don’t bit off more than you can chew. Agents in most of America right now are clamoring for listings since we are in the midst of a listing shortage. But, if you are going to take on a short sale, be sure that it is a deal that you can close. And, if you have your doubts, why not partner up with a local agent that can mentor your and assist you in getting the job done? After all, half a commission check is better than none!

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