Critical Decision Making - Risk or Opportunity?

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Real Estate Agent with Jack White Real Estate 15598

Who has not experienced this scenario: A buyer seems committed to the buying process, the home inspection is done, repairs are negotiated, and yet - at the last moment, the buyer gets cold feet for no apparent reason and wants to pull out, willing to sacrifice the earnest money. What is going on here?

That is the moment, when we really earn what we're worth: How we frame the situation in the buyer's mind affects the outcome.

This is the valuable lesson I learned reading: Kahneman and Tversky, Choices, Values, and Frames.

Framing matters a great deal.

Frames are mental structures - beliefs and assumptions - that simplify our understandig of the world around us and help us make sense of it as we decide and act. Frames enable us to deal with compelxity without being overwhelmed by it. However, the frames can also be quite constricting because of well established routines when faced with a threat.

The way we frame a problem drives the types of solutions that are considered. Is a problem framed as a threat, or as an opportunity? Framing affects our propensity to take risks - and buying a house can be a risky business.

 If we frame a situation in terms of a potential gain, we act differently than if we frame it in terms of a potential loss. So, telling a buyer that he will lose a certain house if he does not make an offer right away might be true, but can actually have the opposite effect - the situation is framed as a potential LOSS (sometimes rationalized by not wanting to end in a bidding war).

In the case of the buyer getting cold feet, we need to help him define a problem in several different ways, because each definition tilts toward one kind of solution. Most of us are slightly risk averse, and getting cold feet when the risk factor dawns on this buyer, is not surprising. When faced with threat/risk, we tend to respond rigidly, but act more flexibly and adaptively if the same situation is framed as opportunities.

Here is the skinny of it all: Help the buyer assess the level of threat - the level of risk, but then reframe the situation as an opportunity to achieve what he or she wanted to do in the first place before getting temporarily derailed.

Language - Framing - matters a great deal as it shapes the way we look at a situation and has a powerful effect on our decision making.

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Marianne 907-529-6602

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Rainer
100,217
Marianne Grant, Realtor
Jack White Real Estate - Anchorage, AK
CRS 907-529-6602

Thank you, Adam. Anything we can do to help each other by sharing is a winner for everyone of us. Hope this year is a "10" for you. Marianne

Mar 14, 2010 06:21 AM #6
Rainer
60,622
Pam Turner, REALTOR®, e-PRO®, SFR
Century 21 Belk Realtors Dalton GA - Dalton, GA

I remember some first time buyers I had 6 or 7 years ago - the husband was especially anxious about the whole process - he called me while I was on vacation - after the conversation my son said it sounded like I was trying to talk someone off a ledge.....we closed and they loved the house in the end. They did have an inspection done and even though it was an older home there were only very minor issues. 

Mar 24, 2010 11:35 PM #8
Rainmaker
886,983
J. Philip Faranda
J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY - Briarcliff Manor, NY
Broker-Owner

Buyers remorse. And yes, some do need to be talked off the ledge. Breaking the concerns down to a managable issue that can be solved, rather than an overhwelming burden, requires some patience and energy. Been there. Thanks for the thoughtful post.

Mar 24, 2010 11:56 PM #9
Rainmaker
192,049
Gregory Bain
Mezzina Real Estate & Insurance - Little Egg Harbor, NJ
For Homes on the Jersey Shore

Framing Matters. Dad saying the neighborhood is not good enough for them. Uncle Bob saying the house is not build to (his) standards. Prices of homes continue to fall and it won't be worth that much in two years. Everyone is losing their jobs. They are all hard to beat if they don't have enough riding on the deal. Stop taking contracts with a few hundred bucks in escrow. Then when you tell them they might lose their deposit money it will really mean something to them.

Mar 25, 2010 12:06 AM #10
Rainmaker
1,388,937
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Marianne, putting the buyers in the right "frame of mind" will always result in a smoother transaction and a happy buyer. Thanks.

Mar 25, 2010 12:17 AM #11
Rainmaker
313,721
Glenn Roberts
Retired - Seattle, WA

Yes, helping the buyer work through several scenarios to discover what the real problem is helps. Sometimes they do need out. The agent may not have gotten the right story to start with.  

Mar 25, 2010 12:24 AM #12
Ambassador
768,033
Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Thanks for "framing" our thoughts.  Problem solving is inherent to what we do and a part of that is reminder the buyer why they made the choice in the first place.  Hence, bringing the benefits back to the surface.

Mar 25, 2010 01:03 AM #13
Ambassador
1,673,097
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

You should have been a Professor, excellent post. It is important to note that rigid thinking does create restrictions in solutions. If you through out of a narrow frame options, paradoxes, and the like, creative thinking is dead and no solutions that serve everyone is possible..

Mar 25, 2010 01:05 AM #14
Rainmaker
233,401
Susan Thompson-Solomons
Berkshire Hathaway Home Services McNelis Group Properties - Solomons, MD
Southern MD Real Estate-Solomons Specialist

You have done a great job of putting into words the mentality of how to hold deals together. Every deal seems to involve taking a step back and assessing how to keep it from derailing and the perspective you present here is an excellent way to break the deal down into workable parts to make it happen.

Mar 25, 2010 01:28 AM #15
Rainmaker
335,667
Jenna Dixon
DRA Homes | Cobb County Real Estate - Marietta, GA
Empowers You With a Better Real Estate Experience

I agree with both sides (what kind of commenter am I?).  My first approach is always one of positive reinforcement of their decision to purchase this house.  Telling them what a great house it is, the perfect location, wonderful future for you and your family, etc. etc.

When that doesn't work I remind them of the 1 or 2% that I required that they put on the contract as earnest money.  Most people can swallow walking about from $500 or even $1000, but when it's $3000-7000, it takes on a whole new meaning.

Mar 25, 2010 01:31 AM #16
Rainmaker
662,099
Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

Oh yes,  "it's not what you say but how you say it!" 

Patricia/Seacoast NH

Mar 25, 2010 01:54 AM #17
Rainmaker
662,099
Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

Oh yes,  "it's not what you say but how you say it!" 

Patricia/Seacoast NH

Mar 25, 2010 01:54 AM #18
Rainer
82,252
David J. Lampe
Your Castle Real Estate - Arvada, CO
Realtor - Web Savvy Denver

Hi Marianne, Thanks for the great post! How we say things makes a big difference.

Mar 25, 2010 02:21 AM #19
Rainer
82,252
David J. Lampe
Your Castle Real Estate - Arvada, CO
Realtor - Web Savvy Denver

Hi Marianne, Thanks for the great post! How we say things makes a big difference.

Mar 25, 2010 02:26 AM #22
Rainmaker
1,560,756
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

I am very sympathetic to buyer's remorse.  But after the offer has been negotiated,  home inspection done and negotiated repairs, appraisal is in (to value), loan docs out ... and then if the buyer walks there's a clause in my buyer rep agreement for liquidated damages.

Mar 25, 2010 03:46 AM #23
Ambassador
534,399
Kate Elim
Dockside Realty - Spotsylvania, VA
Realtor 540-226-1964, Selling Homes & Land a

Hi Marianne...Reminding them of the features that appealed to them initially is helpful also. 

Be sure to educate buyers prior to writing a contract is important also.  Be sure they know when they have reached the "point of no return" before they ever get there can possibly avoid these situations. 

Kate

P.S.  Yes, I realize that sometimes nothing works.

Mar 25, 2010 06:45 AM #25
Rainmaker
317,567
Susan Brown
Keller Williams NE, Kingwood Texas (Humble & Atascocita too) - Kingwood, TX

Marianne, Framing is terminology that is accurate - helping the clients see all parts of the picture so they can address whatever is causing them concern.

Mar 25, 2010 09:27 AM #26
Ambassador
2,010,522
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Framing is great terminology.  To be able to do this, it's important to understand the clients' goals and desires from the beginning.

Mar 25, 2010 03:18 PM #27
Ambassador
2,301,090
1~Judi Barrett
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

Sometimes how We ask something or state something can make such a huge difference!

Mar 25, 2010 03:53 PM #28
Rainmaker
88,223
Kathleen West
Trademark Realty Group of Palm Coast - Palm Coast, FL
Flagler County & Palm Coast Realtor

Great post Marianne.  I am actually dealing with a similar situation right now as the listing agent and it's a bit frustrating not having the buyer's agent work to make the deal happen.  It all boils down to a misunderstanding about dates and effects nothing really.  But assumptions have set in about 'games being played' when there are none without fully explaining short sales to the buyer and how banks are slow to repsond.  'Cold feet' I can always understand and couldn't agree more that one should be empathetic and explain the benefits. 

Mar 26, 2010 02:32 AM #29
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