Buying is an emotional decision.
That’s a bold statement. Don’t we think about houses or cars or shirts or dresses before we buy them?
In his book, “How Customers Think: Essential Insights into the Mind of the Market,” Harvard professor Gerald Zaltman explains that emotion drives purchasing behaviors and decision making in general. Neuroscientists confirmed this through studies that show how people with brain damage in the area that generates emotions can’t make decisions.
What does that mean for real estate?
People often approach property value as a fixed concept, like the atomic weight of gold or the speed of light. But it’s all subjective to how you feel about it. Unlike the retail price of an iPhone, real estate is worth however much someone will pay for it on a given day, no more and no less. And guess what? There’s only 1 of every property, with no two structures or land parcels having the exact same qualities and locations.
There are no perfect comps.
Why does this matter? If you understand how your feelings guide the process, you can take a step back, see more clearly what’s happening, and make better buying and selling decisions.
Example:
The market hates uncertainty, and it hates negative trends. When the rates were rising in 2022, before they got into the 7’s but still over 5%, buyers pulled back. More days on market, more price drops, fewer offers. The difference between listing in March 2022 & September 2022 was often $100,000 or more in sale price.
But here’s the thing: we’re brokering in Massachusetts, and in the bay state, people don’t hold off buying because of finances. Every year we transact deals where buyers purchase properties with more than $1 million in cash. What do these people care about rising interest rates?
Now rates are coming back down and the buyers are back in force, even with rates still sitting in the 6’s. Last weekend, our buyer submitted an offer on a house south of Boston in a town called Randolph and they had 21 offers. The house went well above 15% over list, probably closer to 20%+ over ask.
Same rates, different trends, different reaction. This isn’t a game of pure logic, this is a game of understanding your emotions.
