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Behavior of Investors - Home Buyers

By
Education & Training with French Real Estate

These are known knowns:

A monetary loss or gain is not just a financial or psychological outcome but a biological change that has profound physical effects on the brain and body.  What you've seen:  Sellers who are faced with a loss will become angry and difficult to work with.  Buyers who got beat out of a home will become disenchanted with the whole process

The neural activity of someone whose investments are making money is indistinguishable from that of someone who is high on cocaine or morphine.  What you've seen:  Home flippers will take bigger and bigger risks

After two repetitions of a stimulus - like, say a buyer sees two nice homes - the human brain automatically, unconsciously, and uncontrollably expects a third repetition.  What you've seen:  Buyers will continue to look until they see the sequence broken.

Once people conclude that an investment's returns are "predictable" their brains respond with alarm if that apparent pattern is broken.  What you've seen:  Home owners have always been told that home ownership is the safest investment...once that will continue to appreciate.  Now, they are experiencing great panic

Financial losses are processed in the same region of the brain that respond to mortal danger.  Want we've seen:  People jump from tall buildings when they have financial loss.

Anticipating a gain, and actually receiving it are expressed in entirely different ways in the brain, helping explain why "money does not buy happiness".  What you've seen:  Buyer's remorse

Expecting both good and bad events is often more intense than experiencing them.  What you've seen: Sellers think that they will not be able to live with foreclosure, but one year later they are just fine.

 

I'll interpret these more later.  You might be able to add to the list though

Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Welcome to Active Rain!  Your insights regarding emotional responses to perceived gains or losses is interesting.  Looking forward to reading more...

Jan 03, 2009 01:48 PM
Brian French
French Real Estate - Beaver Dam, WI
Evolutionary Real Estate

Thanks Lola,

I'm really hoping that this community of seasoned real estate agents can help put forward some ideas for overcoming some of these impedements. 

 

 

Jan 03, 2009 11:35 PM