Do you see yourself as a rational person? Able to compare the facts objectively to make the best possible decision? What about your customers? We all want to believe that we are logical beings in full control of our choices. Spoiler : this is often far from being the case. Here’s why and how to turn this reality to your advantage… and that of your customers!
In this article reserved for premium members, you will discover
- What is cognitive bias and how to overcome it;
- Why understanding the main cognitive biases applicable to real estate can help you become more efficient and better help your clients;
- The 7 main cognitive biases applicable to real estate and how to use them to your advantage, but above all, that of your clients.
What is cognitive bias and how can you overcome it?
A cognitive bias is a thought mechanism that impairs our judgment and bypasses our rational decision making. In some situations it can be very helpful to us, but in others it causes us to make mistakes in reasoning that can be damaging.
If you have a brain, you are prone to cognitive biases. Since they are automatic, knowing these biases will never completely prevent you from falling into the trap. No, it is impossible to completely outsmart them. On the other hand, understanding the main cognitive biases applicable to real estate will allow you to:
- Better understand, anticipate and respond to your customers’ objections. For example, we will see the biases that influence the perception of the price of a property, but also one of the main psychological obstacles to the exclusive mandate. You will be able to anticipate objections upstream and adapt your presentation to mitigate these biases.
- Recognize the situations where you yourself risk falling victim to an error in reasoning and take actions to mitigate them. No professional, even the most seasoned, is immune. We will see in particular how certain irrelevant information can cloud your judgment without your being aware of it.
There are hundreds of cognitive biases. Today we will see the main ones that can influence you and your clients in your real estate activity. You will also find, for each of them, tips to mitigate them or to use them to your advantage… and that of your customers!
Our brain tends to rely too much on the first piece of information given to us about a subject and make it our point of reference (anchor). Any new information is then interpreted from that point of reference from which we have difficulty moving away.
The anchoring is particularly powerful at the level of the figures. The most telling example in real estate is obviously the price of a property:
- Too high a price will influence the buyer’s offer and may cause them to pay too much.
- Sellers are also very likely to stick to irrelevant metrics, such as the price they themselves paid, the municipal assessment, or the sale price of another property that they (wrongly) judge ) comparable.
- Do you think that your expertise protects you from this type of error? Think again ! Even the most experienced professionals subconsciously get swayed by irrelevant numbers when appraising a property.
How Anchoring Can Help You Mitigate Price Objections
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