FOR SALE BY OWNER for Less than It Is Worth

Intermediaries May Help You Get More Dollars for Prized Possessions

What accounts for owners selling items for more or less than they are worth? Do sellers and buyers see the value of an item in the same way? Can a third-party agent impact the selling price of an item to net the seller a higher profit? The following article explores these questions with some surprising answers.

Consumers who decide to sell a used product often consider employing an intermediary instead of trying to sell the product on their own. For example, many consumers utilize real estate agents to sell their homes or dealer consignment services to sell their vehicles. Even smaller-ticket items like DVDs, textbooks, or baby strollers may be sold via consignment stores or “iSold It” drop-off locations.

Intermediaries often attempt to attract customers by touting their ability to set more realistic prices than product owners. Indeed, empirical research has found that in comparison to intermediaries, owners tend to be “overly optimistic” when determining list prices for their homes,[1] sports memorabilia,[2] or shares of corporate stock.[3] To illustrate, an article on noted that homeowners whose homes are For Sale By Owner “usually overprice their home,” which “is a sure way to deter potential buyers.”[4] The problem with overpricing (in terms of both the initial listing price as well as the minimum price sellers are ultimately willing to accept) is that it can create unnecessary delays and even result in failure to sell a product.

The Role of Product Attachment in Pricing Decisions

One reason that product owners may demand higher prices than intermediaries is because they feel greater emotional attachment to the product being sold. As documented by television programs such as Hoarders and Hoarding: Buried Alive, consumers may become so intensely attached to their possessions that they develop a pathological condition. Even among normally functioning consumers, however, product attachment is prevalent. In fact, a recent online poll conducted by the Globe and Mail newspaper indicated that nearly 60 percent of respondents were emotionally attached to their houses; for many, this attachment was due to memories associated with the house.[5]

On the surface, the link between product attachment and pricing decisions seems straightforward—sellers who feel strongly attached to their products may charge above-market prices to make themselves feel better about selling a treasured possession. Consistent with this notion, a study examining home prices in the Boston housing market suggested that owner-occupants might list their homes for higher prices than professional investors because “perhaps, the psychological pain of selling one’s home exceeds that of selling a mere investment.”[6] Alternatively, attached sellers may charge higher prices to “subconsciously sabotage the [sales] process.”[7] According to a blog published on the real estate website, “often, a seller who isn’t emotionally ready to sell will insist on listing at a price that is higher than what the market will bear.”[8]

Consumers themselves seem to share the intuition that product attachment will lead owners to charge more. In a recent study, we asked participants to indicate which of the following two sellers would likely seek a higher price when selling an identical baseball card: an attached seller who had inherited the card from his grandfather or an unattached seller who had received it from an acquaintance. An overwhelming majority of participants (92 percent) expected the strongly attached seller to demand a higher price.[9]

Despite an abundance of evidence that product owners often charge higher prices than intermediaries,[10] [11] [12] we argue that in some cases attached sellers do exactly the opposite—that is, they charge less rather than more. Specifically, in a series of recent experiments, several of which were reported in the Journal of Marketing,[13] we identified conditions under which attached sellers are willing to accept less than unattached sellers (e.g., intermediaries) for an identical product.

The Unexpected Power of Buyer Usage Intent

Why would sellers be willing to grant discounts rather than charge premiums when selling products to which they feel attached? Simply put, sellers want to be absolutely sure that they “find a good home” for their most cherished possessions and are often willing to sacrifice personal profit to ensure that this objective is met. Our research suggests that unlike intermediaries, attached sellers may be greatly influenced by the dialogue that often occurs with potential buyers during the transaction process. In particular, if an attached seller learns how a buyer plans to use her product following the transaction, this knowledge can meaningfully influence her sales price or willingness to discount. For example, collectors are often reluctant to split up their collection by selling individual items to different buyers and instead seek a single buyer who will keep the collection intact. Although the owner of a 300,000 record collection “balks at the idea of splitting up the records to different sellers only looking for one genre, he knows he might be forced to do so.”[14] Because attached sellers are more sensitive to the usage intentions of potential buyers, the price that they are willing to accept for a product can depend on whether they agree or disagree with how the buyer plans to use the product. If an attached seller deems a particular buyer’s usage intention to be appropriate, he might grant a discount. On the other hand, if an attached seller considers a buyer’s usage intention to be inappropriate, he may actually charge a higher price.

One test of this hypothesis was a study in which participants learned of a rare handmade doll in pristine condition that had previously been on loan at an art museum. Participants were informed that a prospective buyer had offered to pay 75 percent of the doll’s asking price but was unwilling to negotiate further. Participants were then divided into three groups. One group was told that the buyer wanted to buy the doll for his young daughter to play with (which participants later reported was considered to be an inappropriate use for such a rare doll). A second group was told that the buyer wanted to buy the doll to display in an art gallery (which was considered appropriate). A third group, as a control, was not told anything about the buyer’s usage intentions. All participants were then asked whether they would be willing to accept the buyer’s offer. As predicted, participants in the first group (who deemed the usage intent inappropriate) were less likely to sell the doll at a discount than participants who were not informed of the buyer’s usage intent. In contrast, participants in the second group (who deemed the usage intent appropriate) were more likely to sell the doll at a discount than participants in the control group.

Relative to attached sellers, intermediaries are much less sensitive to the usage intentions communicated by buyers and therefore less likely to provide unnecessary discounts. To demonstrate this, we conducted a field experiment on a popular e-commerce website in which sellers who had listed a used car for sale were emailed and asked whether they would consider providing a discount of 15 percent on their car. Sellers were either individuals who were trying to sell their own cars or professional used car dealers (i.e., intermediaries). In the request for the discount, the communicated usage intention was randomly assigned to be either appropriate (i.e., “I’m interested in restoring used cars to their original condition”) or inappropriate (i.e., “I’m interested in disassembling used cars for parts”). The findings showed that individual car owners were greatly affected by the usage intentions that were communicated. On average, they were 46 percent more likely to consider giving the discount when an appropriate (vs. inappropriate) usage intention was communicated. Intermediaries, on the other hand, were no more compelled to provide a discount after learning that the usage intention was appropriate versus inappropriate.[15]

Do buyers always reveal their product usage intentions to sellers in this way during the process of negotiating prices and exchanging information about a product? Perhaps not, but data suggests that communication of buyer usage intent occurs more often than one might expect. Nearly one in four consumers surveyed who had sold a product online (e.g., on eBay, Craigslist, etc.) recalled potential buyers who had communicated usage intentions to them. For example, one seller remembered a potential buyer of exercise equipment who had communicated how much he planned to use the equipment “to lose weight and tone [his] body.” Another seller recalled that the buyer of her sofa had revealed her plans to “lay on it and watch movies all day.” And even when buyers did not explicitly communicate their usage intentions, 61 percent of sellers indicated that they inferred usage intentions anyway.[16]

Even though buyer usage intentions are frequently communicated during transactions, sellers of used goods may not realize that this seemingly innocuous “chatter” may be inadvertently causing them to discount their prized products. To test this, we asked 130 prospective sellers to list as many reasons as they could for selling a cherished product below its market value. Although the sellers provided a total of 624 reasons for selling their products for less than they were worth, not a single response mentioned buyer usage intentions. Instead, the reasons given for discounting a favorite product centered on relationships (e.g., the buyer is a friend/relative), fairness norms (e.g., it was the first offer received), and transaction-related benefits (e.g., the buyer will pay cash). Sellers do not seem to realize the powerful impact buyer usage intent can have on their pricing decisions. The following section discusses how buyers, sellers, and intermediaries might leverage the power of buyer usage intent to succeed in the marketplace.

Leveraging Buyer Usage Intent in the Marketplace

Implications for Buyers. The main implication of this research for buyers is that price may not be the only factor that matters in negotiations. When competing with other potential buyers for a scarce good, clearly and fully articulating a usage intention that the seller would endorse can be a source of advantage and may limit the focus on price competition. Even if the intended use is so obvious that it seems not worth stating, the results of our research (e.g., the doll study mentioned earlier) suggest that merely communicating this appropriate intention can be beneficial. On the other hand, buyers who wish to purchase items from attached sellers should avoid expressing a usage intention that might be considered inappropriate by the seller. Investing a little time and effort to learn about a seller’s preferred usage intention can have a large payoff for buyers.

Implications for Sellers. Product owners often set out wanting to maximize profits from a transaction, but when the thought of parting with a used item to which they feel attached becomes very salient, they start to be influenced by buyer usage intent. To avoid such influences and maximize profits, product owners might consider hiring an intermediary to sell their product. Due to a relatively detached and objective relationship to the item, intermediaries are much less likely to be influenced by buyer usage intent and therefore more likely to get the best price for the product. Intermediaries are further incentivized to maximize the final selling price because it increases their commission, which is typically a percentage of the selling price. Of course, product owners who forgo intermediaries need not pay a commission at all, so sellers must carefully weigh the costs and benefits of selling on their own versus hiring an intermediary. If product owners opt not to use an intermediary, they may be well served to at least seek pricing advice from trusted yet detached advisers—friends and family who are not emotionally attached may be able to help attached owners maintain their focus on selling at a high price.

In addition to providing guidance to individual product owners, this research has important implications for companies in terms of how to market products. Specifically, for companies that seek to accelerate product replacement, our findings suggest that offering consumers an acceptable way to dispose of their used products may be critical. If consumers who feel attached to a product know that it will be put to good use, they may be more likely to trade it in or replace it.

Implications for Intermediaries. As indicated above, product owners who feel attached to their possessions may be reluctant to use an intermediary because they want to be personally involved in finding their products “a good home.” Intermediaries can help overcome such resistance by taking measures to ensure that sellers’ usage preferences are met, such as building a usage clause into the contractual purchase agreement. For example, the seller of a collection of products (e.g., antiques, coins) may wish to stipulate that the buyer keep the collection together as a whole and not re-sell the items individually. While sellers should be warned that insisting on such restrictions could potentially reduce their profits, this may help attached sellers feel more comfortable using an intermediary and more satisfied with the final outcome of the transaction. The final implication for intermediaries is that they can attract customers by warning product owners of the dangers of selling items on their own—not only do personal sellers run the risk of setting prices that are too high, they also are at risk of accepting offers that are too low. By highlighting this additional risk, intermediaries can increase the perceived value of the benefits they offer to product owners. In many cases, an increase in the final selling price when an intermediary is used may more than offset the intermediary’s commission, such that the seller generates more profit even after paying the intermediary’s fees than he might have generated by merely selling the product on his own.

In addition to its implications for business-to-consumer (B2C) and consumer-to-consumer (C2C) transactions, our research also has potential applications in business-to-business (B2B) contexts. For example, the relationship between attachment and buyer usage intent may hold for the sale of companies as well as consumer products. This is consistent with prior research which argues that the subjective valuation of a company may be impacted not only by its financial worth, but also by the emotional attachment of company leaders.[17] In 2008, Jerry Yang, the co-founder of Yahoo!, convinced his board to reject a takeover bid by Microsoft, claiming that the bid undervalued the company that he had built. Yang’s decision was widely criticized; the Harvard Business Review noted that Yang “never really did want to part with the company with which he has been inextricably entwined”[18] and the New York Times chided Yang: “Your feelings aren’t supposed to get in the way of your fiduciary duty.”[19] Indeed, entrepreneurs can grow attached to their businesses—particularly private family-owned businesses—and often have specific preferences regarding their future.[20] Investor Warren Buffett, speaking of the future fate of his company Berkshire Hathaway, has said “The important thing is not this year or next year, but where Berkshire is 20 years after I die. Not taking care of Berkshire would be like not having a will—cubed.”[21] Buffett’s preference is to keep the company intact, and reportedly “it would be his worst nightmare to have Berkshire Hathaway split apart after he is gone.”[22] Due to similar feelings of attachment, the CEO of a utility-and-energy company sold it to Buffett at a discount because the alternative—a private equity deal—“would have been great for me, but we would have destroyed the company.”[23] These examples show that individuals who grow attached to businesses display characteristics similar to those whose attachment to a product makes them sensitive to buyer usage intent.

In sum, our research suggests that buyer usage intent is a powerful non-price factor that can influence price negotiations. Although additional non-price factors may certainly affect negotiations, attached sellers do not anticipate being influenced by information about a buyer’s usage intent. In contrast, a seller might expect to grant discounts to a buyer with whom there is an ongoing relationship in hopes of gaining an advantage in future transactions. Similarly, as mentioned earlier, a seller may reject a higher offer in favor of a lower one due to relationship factors, fairness norms, or transactional factors. While sellers expect such factors to influence their selling decisions, they underestimate the extent to which their decisions may be influenced by knowing how the buyer plans to use a product. Indeed, this research shows that although attached sellers do not anticipate being influenced by a buyer’s usage intent, they often agree to sell their used product at a discount to buyers who express an appropriate usage intent, and may end up demanding more from buyers who express an inappropriate usage intent. Understanding how buyer usage intent influences pricing decisions can benefit buyers, sellers, and intermediaries alike. Each can wield the power of buyer usage intent to create a source of strategic advantage in the marketplace.

Note: The authors thank Nancy Dodd, Ben Postlethwaite, Smriti Saxena, and the reviewers for their helpful comments on this article.

[1] Genesove, D. and C. Mayer. “Loss Aversion and Seller Behavior: Evidence from the Housing Market.” Quarterly Journal of Economics 116, (2001): 1233-1260, doi:10.1162/003355301753265561.

[2] List, J. A. “Does Market Experience Eliminate Market Anomalies?” Quarterly Journal of Economics, 118, (2003): 41-71, doi:10.1162/00335530360535144.

[3] Shapira, Z. and I. Venezia. “Patterns of behavior of professionally managed and independent investors.” Journal of Banking & Finance, 25, (2001): 1573-1587, doi:10.1016/s0378-4266(00)00139-4.

[4] Geffner, M. “FSBO Woes: Why It’s So Hard to Sell Your Own Home.” (2000).

[5] Timson, J. “Houses are Never Just Investments.” (2012).

[6] Genesove, Quarterly Journal of Economics.

[7] Desimone, B. “Three Tips for Emotionally Detaching from Your Home.” (2012).

[8] Ibid.

[9] Brough, A. R. and M. S. Isaac. “Finding a Home for Products We Love: How Buyer Usage Intent Affects Sellers’ Pricing Decisions.” Journal of Marketing, 76, No.4, (2012): 78-91, doi:10:1509/jm.11.0181.

[10] Genesove, Quarterly Journal of Economics.

[11] List, Quarterly Journal of Economics.

[12] Shapira, Journal of Banking & Finance

[13] Brough, Journal of Marketing.

[14] Kennedy, G. D. “Murray Gershenz’s 300,000-Plus Record Collection is No Bestseller”. (2012).

[15] Brough, Journal of Marketing.

[16] Ibid.

[17] Astrachan, J. H. and P. Jaskiewicz. “Emotional Returns and Emotional Costs in Privately Held Family Businesses: Advancing Traditional Business Valuation.” Family Business Review, 21, (2008): 139-149.

[18] Kellerman, B. “Is Jerry Yang’s Bond to Yahoo Too Tight?” (2008).

[19] Nocera, J. “Oh Jerry, It’s No Longer Your Baby.” (2008).

[20] Vitelli, E. “How to Manage a Successful Family-Owned Business.” (2012).

[21] McLean, B. “Mr. Warren’s Confession.” (2011).

[22] Ibid.

[23] Ibid.

Authors of the article
Mathew S. Isaac, PhD, MBA
Mathew S. Isaac, PhD, MBA, , is an Assistant Professor of Marketing in the Albers School of Business and Economics at Seattle University in Seattle, Washington. His research focuses primarily on the psychology of consumer judgment and decision making, specifically examining how contextual frames, goal pursuit, and knowledge of persuasion tactics influence product evaluations and purchase intentions. Dr. Isaac’s research has been published in the Journal of Marketing and featured by TIME and the Harvard Business Review. He obtained his Ph.D. in Marketing from the Kellogg School of Management at Northwestern University and his MBA, with concentrations in Finance and Strategic Management, from the University of Chicago Booth School of Business. Prior to entering academia, Dr. Isaac worked as a Consultant and Manager for Bain & Company and ZS Associates, where he advised media, healthcare, and private equity clients on issues related to sales, marketing, and corporate strategy.
Aaron R. Brough, PhD
Aaron R. Brough, PhD, , is an Assistant Professor of Marketing in the Business Administration Division of Seaver College at Pepperdine University in Malibu, California. Dr. Brough received his Ph.D. in Marketing from the Kellogg School of Management at Northwestern University. His research, which examines how the framing and construal of information influences consumer judgments, decisions, and behavior, has been published in the Journal of Marketing and the Journal of Consumer Research and featured by TIME, TODAY, and the Harvard Business Review. Dr. Brough has served as an expert witness in trademark disputes and gained industry experience managing large-scale quantitative market research projects at a Boston-based consulting firm for clients such as American Express, Coca-Cola, Disney, IBM, and Microsoft.
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