Imagine a buyer is in the market for a three-bedroom home and his agent found him fi ve houses to preview. Each meets his general criteria, with similar features, are comparable in price, and are located in his desired area. One would assume the buyer would hav e a diffi cult time deciding between the houses. But no matter how similar they may seem, no two houses are exactly alike. Th is is where something called the “80/20 Rule” comes into play. Th e 80/20 Rule, also known as the Pareto principle (suggested by Joseph M. Juran and named a ft er Italian economist Vilfredo Pareto), states that for many situations, about 80% of results, or e ff ects, will come from about 20% of e ff orts, or causes. Let’s say that one out of the fi ve houses has a pool. Th e buyer is unaware of this feature, however, because the agent didn’t bother to mention it. Th e buyer tours the four houses without a pool and isn’t particularly interested in any of them. Th en he sees the fift h house with the pool. Suddenly, he is ready to make an o ff er. He may even pay full asking price, even though this house is more expensive than the others. THE 80/20 RULE IN ACTION: BUYERS FOCUS ON UNIQUE FEATURES Th is buyer’s o ff er isn’t based on the 80% of features this house shared with the rest. Instead, his bid is based on one unique attribute: the pool. Th e 80/20 Rule predicted the sale of this house. Unfortunately, a lot of time was wasted in fin ding the perfect house. Had the agent known to look for the 20% diff erence, this may have been their fir st stop. As a seller, you can leverage the rule to work in your favor. Draw attention to de fin ing characteristics in 39
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