We all know the mind works in funny ways but when it comes to buying property it can seem outright whacky. Here’s a list of some of the strangest habits when it comes to property and the psychology behind them.
Sensory sensitivity colours emotions
Our perception is derived from the sum of our sensory input (that is, what we see, smell, touch, hear and taste), together with our experience. It’s unsurprising that factors as seemingly insignificant as a distasteful wall colour or unpleasant odour can and do make or break a property sale. Studies show that even the weather, particularly the amount of natural light, can impact our moods and perceptions.
Accounting for the sensory elements of a potential buyer’s perceptions can have a positive impact on the sale. Ensure that the property is well-lit, highlighting exposure to natural light where possible, that the home has a pleasant but unobtrusive scent, and that it’s kept clean and de-cluttered to maximise the property’s marketability.
In the words of Darryl Kerrigan “a man’s home is his castle”, and research shows it’s not just an Aussie cinema quip. Studies reveal that homeowners consistently overestimate the value of their property in the range of five to ten percent. That’s because, in our eyes, we attribute greater value to those things that we own. This phenomenon is particularly relevant when property values decline, at which time sellers often refuse to recalibrate their expectations with market value. This refusal often stems from an aversion to loss; the pain from which research shows is up to three times greater than an equivalent gain. This makes sense – property owners don’t want to sell for less than what they’ve paid. It’s interesting to note that the behaviour is twice as prevalent among homeowners as investors, who typically have less of an emotional attachment to the property or transaction.
Buyers inspecting more than just your property
It may come as no surprise to some, but research has shown the attractiveness of a real estate agent is linked with sale price. That is, an agent’s attractiveness can impact a buyer’s, particularly a man’s, willingness to pay more for a property.
But, before you rush out and appoint the best looking agent in your area, consider other factors such as the agent’s knowledge of the location, their number of years’ experience and sales record, and their access to a network of potential buyers.
Overthinking your purchase
While it’s important to do your homework when making expensive purchase decisions, research shows that when it comes to complex decision-making, such as buying a property, the more time we spend thinking about it the progressively worse choices we make. However, the same research also showed that thorough consideration of simple decisions yields better choices.
Real estate is a far more complex proposition than it was two decades ago. The market is now flooded with new products, such as student accommodation and off-the-plan properties, as well as taxation initiatives and developer incentives, which add to the confusion. Unfortunately, many of these factors play into the decision-making process of buyers, adding unnecessary complexity to the equation, which effectively renders our decisions less effective.
Property investment needn’t be complex. The best measure of a property’s future potential performance is its previous track record. Taxation advantages such as stamp duty savings and other incentives are non-transferable benefits and should not factor into your assessment of a property’s ability to achieve strong capital growth.