£232,000….This represents a lot of money and is approximately 7 times the average full time wage in the UK today.
If you have not already guessed what the number represents, it’s the current average house price in the UK and, for many people, it is the most expensive purchase they will ever make in their lifetime. So, given the magnitude of the decision, to what extent are buyers influenced by facts, data and logic versus social stereotype, stigma and their own emotions? Asked another way, what role does psychology play in buying and selling a property?
The psychology involved in making a significant decision like buying a home can be pretty complex. However, there are some general “rules of thumb” that sellers should be aware of when engaging with buyers. Understanding these rules will give you the best chance of converting a viewing into an offer and ultimately into a successful sale.
Making the Purchase Decision
The reality is that each buyer has different traits and behaviours leading to different ways of making decisions. An emotional decision maker “will know it when they see it” and that it’s “the house they want at any price” versus the logical decision maker who “needs time to think this through, they have their budget and their list of necessary criteria and they will stick to this at any cost.” The fact is that for every decision we make, there is a battle in our minds - a battle between intuition and logic, and the research shows that the intuitive part of the mind, often thought of as gut instinct, is a lot more powerful than we might think.
For the majority of time, the fast, intuitive mind is in control, efficiently taking charge of all of the thousands of decisions we make each day. And, with so much control, it can be challenging to reduce its influence over a key decision such as buying a house. This is when the fast, intuitive side of the brain should really pass over the decision to the slow, logical side. But this seldom happens.
The first “rule of thumb” is to understand that, for the majority of people, the key facet in making a purchase decision is “emotion”, which is frequently based on gut feel and made by the intuitive part of the brain. Many people see a property as “their home” and a place where they will bring up their families and build memories. Home is a refuge and a place of personal space where people define themselves and their territory. Literally, it’s their piece of the world. Research undertaken by Norwich Union shows that Britons generally rely on instinct when making the biggest purchase of their life, with as many as 9 in 10 people citing "gut feeling” as very important. Further research has shown that almost half of us buy a house because we ‘just like it’! As a seller, that's pretty important data to know.
So, contrary to popular opinion, it’s not always just about price, location and resale value, as the evidence clearly shows that for the majority of us, first impressions really do count.
Once a buyer has made a decision, they will then look for evidence in relation to how well the house is maintained and presented to support their decision - this is called "confirmation bias". It’s important to know that at this point of the process, people are looking for the positive attributes in your home, because they are trying to justify to themselves that they have done the right thing.
This leads us to our second “rule of thumb” of understanding the psychology of house buying, which is that during any viewing, a buyer should be presented with as much information as possible to allow them to confirm that they have made a good decision. This is where very simple steps can be taken to maximise your chance of selling. A nicely mowed lawn, lots of light, airy and uncluttered rooms, a recently painted hallway etc are all smart tactics to create a good impression and give a buyer the confirmation bias they are looking for.
Our third rule of thumb in the psychology of home buying involves a concept called “anchoring”, which is the process via which people’s thoughts are heavily influenced by the information they are presented with. When it comes to setting the price of the property and dealing with negotiations, understanding the concept of anchoring is obviously pretty important. But anchoring can also play a role in dealing with any defects and issues with the property. The sooner that these are brought to a buyer’s attention and they are presented with a solution, the more the buyer becomes “anchored” to the fact that the problem is manageable or solvable. The worst case scenario from a sellers perspective is when a buyer becomes anchored on negative data or information, typically highlighted in a survey. Working with your agent to get ahead of any such issues and to proactively manage the situation can mean the difference between a transaction falling apart or successfully completing.
Given that 40% of transactions fail to complete after an offer is accepted, it’s apparent that buyers can have a change of heart or mind. After the adrenaline wears off and the logical side of the brain wrestles back a little more control, buyers tend to start to question their decision. This is called “buyer’s remorse” and again, as a rule of thumb, a majority of buyers will go through this process.
This is where your agent really needs to earn their commission. A good agent understands that a buyer might have second thoughts and will proactively work to provide the information and assurance needed to settle the nerves. The positive news is that the research shows that “buyer’s remorse” while common, is a temporary state of mind for buyers which seldom lasts for more that about one week.
While we don’t advocate that you rush out and buy a book on human psychology before putting your house on the market, it is certainly beneficial to understand both the logical and emotional process that you buyer will be going through.