3 Psychological Discoveries that Will Help You Close More Buyers

By
Real Estate Agent with United Real Estate Partners, LLC LA #0000042692

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.

Catching a Fish

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.

Making a Buying Decision

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.

[Photo Credit]

[Cartoon Copyright Mark Anderson. Used under license.]

****************************

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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Rainmaker
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Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Not that is means much, but I have a BS in sociology and find the dynamics of the buyer process a fascinating societal phenom.  I've been a buyers agent for close to 15 years, and an exclusive buyers agent for almost 12.  There has been some interest patterns and trends over the years.  And combined with Internet and HGTV, not for the better, IMHO.  Good post.

Aug 27, 2013 08:14 AM #37
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Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

I'm going to echo what Jill said, I rarely show them the best house first. They aren't usually ready to see that one first. It's the old, I can't write an offer on the first house. I show them the worst one first, then when they see the best one, they are ready to write.

Aug 27, 2013 08:37 AM #38
Rainmaker
77,881
Craig Ernst
United Real Estate Partners, LLC - New Orleans, LA

Carla - I suspect that your knowledge of sociology has helped you quite a bit over the years, in subtle ways. I'd love to hear some of your thoughts on how working with buyers has changed over the years. One of the ways (not for the better), I suspect, is that many of them are fooled by their reading on the internet and by their HGTV viewing into thinking that they have a lot more knowledge than they actually do.

Tammie - I totally respect your opinion on this. And I do think the best showing order heavily depends on the client, their state of mind, and their situation-- things that would have been too much to go into for this post. The only thing I would point you to is my reponse above to Jill about keeping in mind "primacy and recency." 

So, there is defintely some wisdom in showing them the worst property first, as well. It can provide some strong "mental contrasting" that may help move them toward the "good" house when you finally show them that.

Aug 27, 2013 09:13 AM #39
Rainer
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Rebecca Foresee
Alain Pinel Realtors - Morgan Hill, CA
Let's foresee the possibilities . and get results!

Craig,  Thank you for this point of view.  You've given me quite a bit to ponder over.  On a lighter note, that chocolate house sounds intriguing!

 

Aug 27, 2013 09:53 AM #40
Rainmaker
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Craig Ernst
United Real Estate Partners, LLC - New Orleans, LA

Rebecca - I'm glad that the post gave you some stuff to think about, and I'm glad to hear that you enjoyed the cartoon. ;-)

Aug 27, 2013 10:16 AM #41
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Ralph Gorgoglione
Maui Life Homes / Metro Life Homes - Kihei, HI
Hawaii and California Real Estate (310) 497-9407

Craig, I appreciate all the detailed research you did on this blog and the organized manner in which you presented the information. The psychological insights are fascinating and useful.

Aug 27, 2013 10:22 AM #42
Rainmaker
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Craig Ernst
United Real Estate Partners, LLC - New Orleans, LA

Ralph - Thanks very much for the kind words. Glad you found the post useful. :-)

Aug 27, 2013 10:42 AM #43
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Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Geeze, Craig!  You're a newbie rainer and hit it out of the park twice!  I was here for months before earning a coveted gold star!  Oh, and what a great post!  We do have to be part shrink to do this job.

Aug 27, 2013 10:44 AM #44
Rainmaker
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Craig Ernst
United Real Estate Partners, LLC - New Orleans, LA

Patricia - Thanks for the kind words! And you're right about the "shrink" part. I wonder if anyone out there has business card that says something, like "Real Estate Consultant/Therapist"? If nothing else, it would probably be a good conversation starter. ;-)

Aug 27, 2013 11:28 AM #46
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Brenda Mullen
RE/MAX Access - Schertz, TX
Your San Antonio TX Real Estate Agent!!

Very good post and thoughts about how buyers think or may perceive such things.  Great job

Aug 27, 2013 12:00 PM #47
Rainer
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Caroline Gerardo
Sun West Mortgage Corporation - Newport Beach, CA
C. G. Barbeau the Loan Lady nmls 324982

EXCELLENT!

Also works for lenders:

Borrowers can't digest as much as you want to teach in one meeting. Keep the parts short and listen, watch how they sit, remember what they say they want and listen again.

Buyers also want to win. I often set a rate target that we hope to hit and cost target. I follow the rate market like a hawk but don't emphasize that this expertise will mean cost savings to them. About 99% of the time I give some extra piece of cake at closing. It is funny that although they know exactly what I quoted many don't call me and say, "Hey wait this is a little cheaper than you said." After they sign I will tell them about the extra gift for the baby in the costs but only until after it closes do they recognize that the constant follow up and then a win for them is an emotion that they always remember :)

Aug 27, 2013 12:53 PM #48
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MichelleCherie Carr Crowe Just Call...408-252-8900
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

Excellent post, I appreciate you sharing about the psychology of people and decision-making fatigue, poor affective forecasting and hatred of losing.

Aug 27, 2013 01:12 PM #49
Rainmaker
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Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

This is a very interesting post. I find that buyers who are competing with other buyers when inventory is low are validated because other buyers want the same property.   Competition seems to be a great motivator.

Aug 27, 2013 01:12 PM #50
Rainmaker
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Gary Frimann, CRS, GRI
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
REALTOR and Broker

Interesting post.  I've always been interested in the psychology of selling, success and decision making.  This was pretty revealing.

Aug 27, 2013 03:07 PM #51
Rainmaker
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Craig Ernst
United Real Estate Partners, LLC - New Orleans, LA

Brenda - Thanks for the kind words. I'm glad you enjoyed it. :-)

Caroline - Absolutely! It definitely seems you have a handle on things. And as I mentioned to someone ealier, these principles are absolutely applicable to lenders and other professionals. You just have to translate the examples to your particular situation. 

Michelle - Thanks! Glad you liked it.

Joan - Thank you! And you're absolutely correct in what you're saying. There are a whole slew of psychological factors that can come into play in those situations, but those are posts for another day. ;-)

Gary - I'm glad to hear that the post coincided with some of your interests. Thank for commenting!

Aug 27, 2013 05:10 PM #52
Rainmaker
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Jane Chaulklin-Schott
TEAMCONNECT REALTY - (407) 394-9766 - Orlando, FL
TeamConnect Luxury Homes - Orlando, Florida, 32836
Excellent psychological points, Craig. Having a more in depth understanding of another will normally produce more rewarding results. Your post succeeded in pointing out the psychological workings of the MIND. Yes, we have seen the negative results in our daily work. Our niche is prestigious, gated, golf, lakefront homes, excellent schools and/but in DISNEY'S backyard. Many (!!!) people flying here - Domestic/International - have a very short period of time to find a relocation home or that second or vacation home - trying to combine Business and Family Vacation in a very short period of time. You probably can see the hiccup areas in which we stumble.
Aug 27, 2013 07:27 PM #53
Rainmaker
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Craig Ernst
United Real Estate Partners, LLC - New Orleans, LA

Jane - Thanks for your input. I can't imagine the pressure-cooker situation you guys are used to dealing with when it comes to buyers. Contending not only with a relo situation, but also having to compete with Mickey! I don't envy you, but I'm quite sure you guys have adpated and mastered the situation. :-)

Aug 27, 2013 07:50 PM #54
Rainmaker
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Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

I have felt some of these emotions myself and never had a name for them.  Thanks, I think.

Aug 28, 2013 05:27 AM #55
Rainer
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Debra Hight
Coldwell Banker United, Realtors - Houston, TX
Debra Hight

Thanks for the post Craig. Because Houston is so spread out and traffic is almost always awful somewhere, I usually try to show homes in logical geographical progression. However, I'm going to try showing the best house first. At first glance, I agree with Tammie about showing the worst house first and best house last, so will probably try that as well. Great info. I've just started reading WILLPOWER, and find it interesting.

Sep 02, 2013 03:33 AM #56
Rainmaker
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Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Craig, I have done it every which a way. Best house first, best house last, best house in the middle, and then there are those buyers who want to do a blitzkrieg the first day, then we go back to the ones they liked the second day. More than once buyers have bought the first house, but they had to see others just to be sure they weren't faling for the first house when there was something out there that was better. Excellent post and congrats on the gold star! For your normal (and first time) buyer, this is great advice, but many times my buyers have the ability to take in multiple houses with their grids and systems of eliminating houses. Now that in itself is a psycochological study :) 

Sep 02, 2013 12:57 PM #57
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