Managers within the residential real estate market typically face a number of challenges that impact performance in the short-term. Market sensitivity concerns leave managers in the field in a unique position strategically, whereas many must rely on intuitive processes to gauge whether past performance indicators are relevant tools for determining the rules of the game for current buyer and seller needs. One of the top obstacles relates to assessing what leadership examples are necessary for acquiring quality listings and increasing residential property sales.
Representativeness Heuristics: Making Probability Decisions in Times of Uncertainty
A number of managers do not realize that how they respond to challenges is often the result of their thought processes, cognition, and decision-making heuristics. These factors largely inform their work habits overall within their organization. Unbeknownst to most, the representativeness heuristic is one frequently used by residential real estate managers. Proposed in the 1970s by psychologists Amos Tversky and Daniel Kahneman, this category of rules that govern judgment or decision-making is categorized as an easy computation used when judgments are being made about an event’s probability under uncertainty (Shah et.al. 207-222). As who will purchase a residential property listed for sale, for how much, and when is never a guarantee, probability judgments are essentially the only option for making decisions prior to putting it on the market.
According to the psychologists, representativeness is defined as the measure of an event being comparable to a parent population by shared characteristics and reflexive of the noticeable features of the processes that generated it (Tversky et.al. 1124-1131). They further note that making decisions according to representativeness can lead to misjudgment because being representative of something does not equate to it having an effect realistically on likelihood (Bar-Hillel et.al. 1119-1131). For example, if a person wants to determine how much of the California population likes attending sporting events, making the determination solely based on survey responses from 10 people who live in Los Angeles, California will not produce an accurate measure just because the sample population meets the requirement of living in the state.
When this type of heuristic is used in residential real estate managerial decisions, it can be difficult to predict what the actual impact of the decision will be. However, a number of managers in this field qualify their decision-making through an examination of their limited experiences. In some cases, the impact is positive, while in others; it is difficult to discern the effects. This is one reason the heuristic is often used in this capacity. Because the non-sale of a home, or having it remain on the market for an extended period of time can be attributed to various factors that disrupt the market, it is easy for managers to overlook steps of their decision-making process as linked directly to the outcome.
Residential Real Estate & The Effects of Staging a House
The residential real estate market deals with the buying and selling of single or multi-family residential dwellings as opposed to property used for industrial or commercial purposes. A common question asked of residential real estate managers today is what are the effects of staging homes that have been placed for sale on the market? According to a definition by the National Association of Exclusive Buyer Agents (NAEBA) staging is “the preparation of a home to sell by a professional who specializes in this form of decorating.” Staging can occur on two different levels: 1. Basic Staging and 2. Emotional Staging.” (NAEBA 20017)
Basic staging involves activities that include but are not limited to:
• The removal of home clutter
• The placement of attractive, often minimal furniture in every room
• Painting walls and trim in colors that are neutral
• Cleaning and ensuring that good lighting is showcased throughout the home
Emotional staging involves creating scenarios with props or furnishings and can involve but is not limited to:
• Including dining room place settings
• Displaying pillows and wine glasses in front of a fire place
• Placing books on night stands and reading chairs
• The presentation of fresh flowers, the smell of baked cookies, and other items that help forge an emotional connection between the home and buyer
With regards to both types of staging, agents, buyers, and sellers alike also question: Does home staging help increase the probability a home will be sold? Is it necessary in every case to stage a home? What are the repercussions of not staging a home? What are the risks of investment for home staging? These questions help illustrate the myriad of concerns realtors present to managers they look to for guidance on these matters.
A Los Angeles based real estate office manager addressed these and other questions in an interview included in a case study related to managerial challenges that impacted his organization. In his response, the representativeness heuristic is evident as illustrated in his perception of first-time buyers and seasoned ones.
Case Study: Real Estate Office Manager Interview
(Name) is a manager at a Keller Williams real estate office in Los Angeles. His organizational strategies include encouraging home staging to increase the likelihood of residential property sales. Some less seasoned agents under his leadership have proposed challenges with having to arrange for home staging, particularly in cases where sellers have expressed objections. The agents have cited differences in beliefs of home sellers and reality as a primary issue as many view the condition of their homes as good enough to warrant a top sale. For clients who appear most defiant, the relatively new agents prefer to respect their wishes and not try to force the issue out of fear of hurting their feelings and losing the listings.
When asked whether he believed staging was an important selling point for homes in an interview, (Name) replied, “Yes, staging always has a positive influence. It affects all different kinds of buyers.” Yet he also inferred, “For seasoned buyers staging will not do a thing meaning if they are buying an income property it doesn’t matter if it is staged or not. However, for a rookie buyer, staging has the best effect.”
He likened a first-time buyer in a staged home to a kid in a candy store asserting, “When a first-time buyer walks into a home and sees an array of decorations, from nice sofas to artwork on the walls he or she is more likely to develop a quick emotional attachment to it. The smell of air freshener may even be a noticeable and attractive feature. The house is likely to sell over asking price because of the bells of whistles that an inexperienced buyer perceives as add on features of the home.”
According to (Name) “on the other hand if one is a seasoned buyer, walking into a staged home is a different experience, and qualities of the home relevant to the needs of the buyer are more of a focus than the fluff. (Name) says a good sales pitch to present to a seller when wanting to ensure the highest price is obtain for a home is to “let them know that you don’t want to deal with investors in the sale of a residential home. In order to sell your house quick and above asking price its best to have the house staged to attract the first-time buyer.”
As manager (Name) insists that agents attempt to work through the challenges and get authorization to stage all residential properties to be sold. He developed a strategy to help encourage hesitant sellers by pointing out the benefits of staging early in the process of working with clients. It includes demonstrating to sellers that:
• Staging for marketing is in no way an attempt to downgrade their decorating style of personal effects.
• Statistics show that 82 percent of homebuyers are shown to be distracted by residential property flaws when it has been professional staged (NAEBA 2007).
• Home staging helps attract buyers when viewing pictures on smart phones and other mobile devices.
The results have so far been positive in terms of decreasing the number of complaints from sellers who would prefer to not have their properties staged. However, it would be beneficial for the manager to research the impact of home staging in terms of multiple buyer profiles so that the scope of the impact of staging is more evident.
Suggestions for Managers Facing Home Staging Challenges
As someone who works in real estate, my experience has shown that home staging is a key selling element for residential properties. “Staging has taken the residential real estate industry by storm. It has been the major focus of television programs on HGTV and has been a dominant topic in real estate trade publications” (NAEBA 2007). However, I have also witnessed the reluctance of some sellers who have formed an emotional attachment to their own staging efforts that may lack a professional touch. This can present concerns for real estate office managers who work to cultivate a culture that encourages professional agents to be accommodating to the requests of buyers and sellers yet are firm in their position that staging is essential.
For residential property managers facing challenges with persuading sellers to agree to home staging, having researched evidence to support the benefits can go a long way. Managerial challenges may arise when seeking to provide direction to agents, particularly those with limited selling experience. Staging comes with certain expenses financially, may require dramatic appearance changes to a seller’s residential property, and does not in any case guarantee a sale. Therefore, backing up claims with supporting literature can help instill confidence in agents when discussing benefits with sellers and yield better results. As demonstrated by the case study when both agents and sellers are knowledgeable about staging, it can effectively remove barriers to making a sale.
Bar-Hillel, Maya; Neter, Efrat. "How Alike Is It Versus How Likely Is It: A Disjunction Fallacy in Probability Judgments.” Journal of Personality and Social Psychology. 65.6 (1993): 1119–1131.
NAEBA. “A National Association of Exclusive Buyer Agents Home Buyer Report.” (2007) Accessed 16 June 2017.
Shah, Anuj K.; Oppenheimer, Daniel M. “Heuristics Made Easy: An effort-Reduction Framework.” Psychological Bulletin 134.2 (2008): 207-222.
Tversky, Amos; Kahneman, Daniel. “Judgment Under Uncertainty: Heuristics and Biases.” Cambridge University Press. Science 185.4157 (1974): 1124-1131.