Don’t Let Emotions Cloud Your Decisions

    Sometimes we let our emotions blind us to hard facts about the market. Recently, we showed our clients a newly-listed home on its first day on the market.  Our clients fell in love with the house immediately, made an offer over the asking price and were willing to put 40% down.  It was a solid “blue-ribbon” offer. The sellers, however, wouldn’t accept the offer because more showings were scheduled and felt that they would get better.  The sellers’ agent was unable to convince the sellers to accept the offer even though they could have used it as leverage against subsequent offers.  Our clients became so frustrated when their offer wasn’t accepted quickly that they withdrew it.  To rationalize their decision, they started fixating on the negative aspects of the home.


    What should our buyers have done?  They should have kept a cool head, continued looking at other properties, and waited to see what transpired on the property over the next few days.  That is sometimes easier said than done when you’ve lost other properties to competitive bids.


    Research shows that anger, triggered by a prior, unrelated experience, can influence our current judgments and decisions and can make us unreceptive to what others have to say. Research by Larissa Tiedens of Stanford University found that anger triggered by something unrelated to the decision at hand also affects how we evaluate others’ ideas, including advice from your real estate agent.


    Some sellers overprice their homes because they know that current inventories are at historic lows. They may get some lookers, but then wonder why they’re getting no offers.  Some blame their agent’s marketing when the problem lies with their unrealistic pricing.


    A few years ago we did a market analysis for a client and advised her that her home should be priced at $1,125,000.  Because she was adamant about listing it at $1,200,000, we reluctantly listed it at $1,249,000 – and, predictably, nothing happened.


    Recently, we contacted her to tell her that with this active market, we thought we could now get her the full price she had wanted.  She agreed at first, but when we met to sign the listing, she wanted to raise the price another $100,000.  We believe that the originally agreed-upon price would likely generate multiple offers and have advised against an increase. By insisting on an unrealistic price the client is again allowing her emotions to cloud her judgment and decrease the likelihood of an expedient sale.


    In short, emotions inevitably factor into negotiations. The best you can do is to be aware of the tendency toward irrationality, working around it by focusing on facts. Buying or selling a home is a big step and it’s helpful to have someone in your corner to make sure you’re making smart decisions not driven by emotions.



    “In 2002, the Nobel prize for economics was awarded to Daniel Kahneman, a Princeton psychologist whose studies proved that human beings make decisions first for emotional reasons. Second for rational reasons. This is not biased toward gender or ethnicity. It is the human condition.”

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