Theory Behind Home Staging

In the down economy and slow housing market, most homeowners are staging their house for the sale. To a homeowner the value from staging comes from

  1. Higher price than they would have received otherwise
  2. Shorter time on the market and hence savings on carrying costs

Does staging work? Does it improve sale prices and days on market? What could be the consumer behavior theories behind it?

I hypothesize that there are reasons to  believe that staging works. Sometime back I wrote a piece titled “You touch it! You own it!“.  That article was based on new consumer behavior research that found that touching products increased customer willingness to pay for them. This was because touching increased ownership and as endowment effect theory show, we value things we own more than twhat the market is willing to pay for it.

The hypothesis for why Home Staging works is the reverse of this ownership effect. If we think someone else owns it then we tend to value it lower than if we owned it. A staged home reduces the footprint of the  owner and helps the potential buyer better imagine this as their own and hence helps to increase their willingness to pay for the home.

There is one statistic I saw from StagedHomes website that states, higher sale price and fewer days on the market for staged homes. This is not based on a controlled experiment but based on a survey they did. I cannot rely on these numbers to validate my hypothesis.

To test my hypothesis I should conduct a controlled experiment (controlled for time, location, listing price, size etc), randomly assign houses to be staged or not staged and measure the average sale price and mean time spent in the market for the two groups. Only if the  difference between the means of the two groups are statistically significant  can I claim that staging played a role.

I do not have the wherewithal to do this experiment so if you are considering whether or not to stage your house for sale consider writing a conditional contract with your stager. If they truly believe staging increases your home price and reduced days on market then they should agree to a structured incentive scheme that goes down in value every time you decrease your listing price and more days the house spends in the market.