Home buyers, your Mind is playing Tricks on You!

When you have made a decision to buy a home, it can be helpful to understand the cognitive biases, or shortcuts your mind uses when sorting information to make decisions.  Sometimes, these will lead to poor decisions, let's take a look at some to see if we can avoid some common pitfalls.

*Short term memory- The capacity for short term memory is widely regarded as 5 to 9 chunks of information (Dr. Van K. Tharp).  Beyond this number, information will be bumped out by new items.  In other words, limit the number of houses to look at in one outing to no more than six or so.  Remember that for each house, one has to remember the yard, floorplan, kitchen, neighborhood, schools, distance from work, condition, price etc., come up with some overall grade and then compare that grade with other houses.  The idea of being industrious and looking at 15 houses in one outing is well intentioned but often counterproductive and confusing.

*Anchor Effect- The first home that you look at on your outing will form the anchor for subsequent houses.  What you think of a particular home will depend to a great extent on what you looked at before.  So if you look at a particularly run down house, the next one you look at will look good by default.  This tendency has been demonstrated through research with numbers by Rooijen & Daamen, The Department of Organizational Psychology, Leiden University.  A good suggestion is to look at a house a second time independently before writing an offer to reduce the chance of a poor decision due to this effect.

*Halo Effect- This is the tendency for your mind to look at someone that is attractive and assume that they are also likeable, intelligent, good etc.  In other words, the mind generally lumps a person, thing, or place as generally good or generally bad, not a combination of good and bad features.  So you might end up not downgrading a house with small closet space and a dingy, small kitchen if it has great curb appeal.  The term was coined by the social psychologist Richard Nisbett in the 70s. 

In order to minimize the effects of these biases, sit down with your agent and go over the things that you are looking for in a new home, don't look at too many houses in one go and take good organized notes as you go!