What do real estate ads really tell you about a property? According to Steven D. Levitt and Stephen J. Dubner, authors of the bestselling book, Freakonomics, the choice of wording might in fact indicate whether the agent is holding out for a high price or subtly encouraging would-be buyers to bid low.
Levitt and Dubner based their conclusions on a study of the real estate ads and sale prices for 100,000 houses in suburban Chicago, including 3000 houses owned by the real estate agents themselves. They found that certain words had a powerful correlation with the final sale price, both positively and negatively.
It turns out, if you want to get a higher price for your house, you should use terms that describe its physical characteristics. Out of the 10 commonly used terms in real estate ads, the five that correlated to higher prices were:
The five commonly used terms that translated to lower prices were:
- great neighbourhood.
The authors suggest that ambiguous adjectives (e.g. fantastic, charming) and the rather desperate-looking exclamation mark are used when the property doesn’t have specific attributes worth describing. ‘Spacious’ is code for decrepit or impractical. ‘Great neighbourhood’ suggests that while the area might be a good place to live, the house itself is not.
So why would agents use terms like ‘charming’ in their ads if they don’t encourage the highest offers? According to Levitt and Dubner, it may be because the agent doesn’t necessarily have their client’s best interests at heart.
Once you break down the commission fees, they argue, there’s not a lot of incentive for an agent to keep the property on their books for an extra week or two—even if it means adding another $10,000 to the final sale price.
If the selling agent’s actual commission (once it’s been split with the buyer’s agent and the agency has taken its cut) is around 1.5 per cent, or $4500 on a $300,000 house, selling the house for $310,000 only puts another $150 in the agent’s pocket. So the incentive for the agent is to get their $4500 and move the property off their books as quickly as possible.
Unless, of course, the house is their own. According to the study, real estate agents kept their own house on the market for an average of 10 days longer than those of their clients. They also sold them for at least 3 per cent more.
How did they do this? By using terms like granite, state-of-the-art, Corian, maple and gourmet in their property ads.
See also:Diana Parkhouse via photopin cc