Careful: Some Words Are Equity Killers
The following is a passage from the book Freakonomics, by economist Steven D. Levitt and bestselling co-author Stephen J. Dubner. Here is their insightful and delightfully irreverent blog .
“An analysis of the language used in real-estate ads shows that certain words are powerfully correlated with the final sale price of a house. This doesn’t necessarily mean that labeling a house “well maintained” causes it to sell for less than an equivalent house. It does, however, indicate that when a real-estate agent labels a house “well maintained,” she is subtly encouraging a buyer to bid low.
Listed below are ten terms commonly used in real-estate ads. Five of them have a strong positive correlation to the ultimate sales price, and five have a strong negative correlation. Guess which are which.
Ten Common Real-Estate Ad Terms
- Fantastic
- Granite
- Spacious
- State-of-the-Art
- !
- Corian
- Charming
- Maple
- Great Neighborhood
- Gourmet
A “fantastic” house is surely fantastic enough to warrant a high price, isn’t it? What about a “charming” and “spacious” house in a “great neighborhood!”? No, no, no, and no. Here’s the breakdown:
Five Terms Correlated to a Higher Sales Price
- Granite
- State-of-the-Art
- Corian
- Maple
- Gourmet
Five Terms Correlated to a Lower Sales Price
- Fantastic
- Spacious
- !
- Charming
- Great Neighborhood
Three of the five terms correlated with a higher sales price are physical descriptions of the house itself: granite, Corian, and maple. As information goes, such terms are specific and straightforward—and therefore pretty useful. If you like granite, you might like the house; but even if you don’t, “granite” certainly doesn’t connote a fixer-upper. Nor does “gourmet” or “state-of-the-art,” both of which seem to tell a buyer that a house is, on some level, truly fantastic.
“Fantastic,” meanwhile, is a dangerously ambiguous adjective, as is “charming.” Both these words seem to be real-estate agent code for a house that doesn’t have many specific attributes worth describing. “Spacious” homes, meanwhile, are often decrepit or impractical. “Great neighborhood” signals a buyer that, well, this house isn’t very nice but others nearby may be. And an exclamation point in a real estate ad is bad news for sure, a bid to paper over real shortcomings with false enthusiasm.
If you study the words in the ad for a real-estate agent’s own home, meanwhile, you see that she indeed emphasizes descriptive terms (especially “new,” “granite,” “maple,” and “move-in condition”) and avoids empty adjectives (including “wonderful,” “immaculate,” and the telltale “!”). Then she patiently waits for the best buyer to come along. She might tell this buyer about a house nearby that just sold for $25,000 above the asking price, or another house that is currently the subject of a bidding war. She is careful to exercise every advantage of the information asymmetry she enjoys.” end quote
- pg. 73-74 Freakonomics
Funny and sad at the same time. . .