Why I Always Wanted To Mention A Dollar Amount First

Hello all of your BiggerPockets fanatics out there! 

I was thinking about the times my wife goes shopping the other day and I realizing the common thread of what I can almost entirely guarantee. 1) She is going to be really excited to show me what she bought 2) She is going to convince me that saved a whole lot of money. What she will do is go through and show me everything she bought but how she does it is cleaver- "This bag was originally $100, but it was marked down to $40. This dress was $75, it was on sale for $35." Now, in my head I am thinking great she spent $75 dollars on a new bag and a dress, which is exactly what she wants me to hear because she could have bought the same two items for $175, so at the end of the day we saved ourselves $100. 

The tool is called price anchoring. We value the item, object, or property based on the first number and then anything else that comes after it. So let's shift into real estate and talk about when you are meeting with a buyer. You have probably sat at the kitchen table, on the couch in the living room, or in the chair in the home office of a seller and they start saying I would say my home is worth 100k, or I'd like to get 80k out of it when you know that offer you are going to be holding is maybe 40k- how on earth can you compete with that what they think their home is worth and make it seem like your offer is worth anything? 

We reset the price anchor. I am not saying to throw your offer out there in fact I tell my team that they should not even mention the offer until they set the pricing anchor, and it all ties into the scripting that they want to use when they are meeting with a seller after they have build up rapport. 

The trick to doing this is to set the idea early that first you just want to see the house, and you would rather wait to talk specific numbers until after you have seen the house, as your first focus should actually be on building rapport and information gathering. Then when you have all the facts and have all the information you need you can shift the conversation forward to talking dollar amount. What becomes important here is the firm understanding that you want to anchor your price to the market. So lets go back to that example from above:

"Mr. Seller, Mrs. Seller, before we go any further I wanted to share with you what the market has done in your area here so you can understand where I am basing my offer off of. I think you would be surprised to see that houses in your area here have sold within the last year for right around $60,000 with all the updating, houses that have not been modified however are trending much closer to the $40,000." 

Now, that has not done a thing to your offer, nor is that $40,000 even your offer. However, whatever comes next, or your actual offer is going to be directly compared to the anchor you have set which is going to be a lot more attractive as you can describe how and where you came up with your offer. This is why I want to make sure my team is throwing out the first dollar amount to anchor their offer, compared to allowing the seller have a preset anchor in mind.  

Next time you go to an appointment try this, and see how the conversation changes.