Over the past few decades, the focus of psychological research has expanded to encompass much more than the just study of “abnormal” individuals. In fact, some of the hottest areas of psychology today (social psychology, positive psychology, and the cross-over field of behavioral economics) focus on understanding how “normal” people function on a day-to-day basis—on how they (we) react, interact, make decisions, manage our emotions and behavior, and much more.
Since closing buyer-side transactions can sometimes feel a bit like trying to catch a fish with your bare hands, I thought a little bit of psychological insight, and a few tactics using those insights, might help.
(Next week and the week after, I’ll post about some psychological discoveries that will help with sellers and with managing ourselves.)
Discovery #1
Our ability to make decisions (and to concentrate our willpower in other ways) is kind of like using a muscle. Use it too much in a short period of time, without rest and recovery, and it fails almost completely.
Psychologists call this Decision Fatigue.
One fascinating thing that researchers discovered was that the simple act of making decisions-- even simple ones that we make quickly and without much effort-- tends to wear out our decision-making muscle.
What This Means when Working with Buyers
Try to limit the number of homes you show clients in any given stretch of time. I don’t think there’s a perfect maximum number here (though three seems about right). But five to seven is definitely too many.
Remember, clients are generally making a dozen or more “mini-decisions” for every property they view:
Would the layout of this kitchen really work for us?
Would the garage be big enough for our boat?
Which bedrooms would belong to which kids?
And on and on…
If the clients’ decision-making muscles are too worn out, they’ll typically go with the default decision of not making an offer.
By the way, I think this adds credence to the “show them the best house first” school of thought. They’ll be more likely to make good decisions (and offers) when their minds are fresh.
Discovery #2
Our ability to look into the future and predict how we’ll feel— about things, people, and situations and whether or not they’ll make us feel happy, sad, or indifferent—is pathetically bad.
Psychologists call this poor Affective Forecasting.
The most relevant point here is that we really suck at predicting what will make us happy.
What This Means when Working with Buyers
This is one of the reasons why the old saying “buyers are liars” is untrue.
Buyers tell you what they think they want. It just often turns out that buyers don’t really wind up wanting what they think they do (what they think will make them happy).
This is also why veteran buyers agents know how important it is to be patient with buyers. Many have also learned how important it is pay close attention to buyers’ emotional reactions to properties they view (facial expressions, body language, tone of voice, etc.). In fact, this can often turn out to be some of the most valuable feedback they give when it comes to helping them find the right property-- sometimes more important than what they actually say.
Discovery #3
Everybody likes to win, but we really, really hate to lose. And it doesn’t matter if we’re talking money, opportunities, relationships, or physical objects.
Psychologists call this Loss Aversion.
One of the reasons that we hate to lose so much is we tend to feel negative emotions (like loss) 2 to 3 times more keenly, or powerfully, than we feel positive emotions (like the feeling of gain). Now, this doesn’t exactly seem fair, but it’s very likely something that helped our ancestors to survive in our long-ago evolutionary past.
What This Means when Working with Buyers
The concept of loss aversion looms large in many different areas of buying and selling real estate, and when it comes time to deciding about making an offer on a property, it looms very large, indeed.
Your buyers are often concerned about offering too much (and losing money), about finally committing to buy (and losing freedom), and about whether or not this is really the right house for them (and losing out on a better home that might still be out there).
There’s a very powerful thing you can do here to nudge your buyers into making that offer (assuming that really is what’s best for them):
That is to gently remind them of all the things that they liked (and they’ll get) with this property, and how they’ll absolutely lose those things, especially those things that other properties didn’t have and future properties are unlikely to have, if they don’t seize the day and act now.
Resources:
Well, I hope you’ve found this dip into buyer psychology useful.
For the nerdy amongst you (like me!), here are some books you can check out that will go deeper into the subjects I’ve mentioned here, as well as into many related ones.
• For more on decision fatigue, see Willpower by Roy F. Baumeister, Ph.D.
• For more on affective forecasting, see Stumbling on Happiness by Daniel Gilbert, Ph.D.
• For more on loss aversion, see Thinking Fast and Slow by Daniel Kahneman, Ph.D.
[Cartoon Copyright Mark Anderson. Used under license.]
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What’s your take on this?
Have you had experiences working with buyer clients where you’ve seen some of these psychological effects come into play?
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