Emotions at the heart of buying and selling

Buying a house for most people is freighted with feeling. What starts as a practical and commercial enterprise very quickly assumes a psychological dimension.

The buying decision is not just about the cost, the location and the state of the property market.

An essential part of the choosing and buying process is about imagining yourself living in that house - opening up issues of your sense of self, your identity, your dreams and anxieties about how your life is unfolding.

When people approach an important decision like buying or selling a house they will usually do the preliminary "due diligence" work of gathering facts and seeking advice.

But with our better understanding of emotional intelligence and neuroscience, we now know that most decision making - apart from very routine decisions - is determined to a very significant extent by feelings.

The more important and complex the decision, the more uncertain the outcome (buying and selling a house meeting all those criteria), the more we rely on our emotions. It is those feelings - positive or negative - that will initiate the decision-action sequence.

Positive feelings will trigger what is called "approach behaviour". In the case of buying a house, that means getting more information about the property and the interest in it, arranging a second viewing, making a bid.

Negative feelings will trigger "avoidance behaviour", i.e. ignoring information on offer, walking away. Positive or negative feelings can be provoked very early in any interaction, such that we can develop a strong, sometimes unconscious, like or dislike the first few seconds of an encounter.

The decision to "approach" or "withdraw" from a particular house is akin to the process of falling in and out of love.

When the initial attraction to the house is followed by an early negative experience - an indifferent estate agent, a difficult vendor, the discovery of a hidden fault - feelings sour.

What will follow is the classical de-infatuation process - denigration of the attraction ("I never really liked it anyway") and pumping-up of the negative (an active search for even more hidden faults and deceptions, and a flight to confidantes and friends for emotional reinforcement ("I never thought it was right for you").

When the initial attraction to the house is strong, you cannot bear to be away from the newly beloved.

Like a love-struck teenager you will want to see the love-object again, to experience it from every angle. You will manage to re-route your journeys to work to view it yet again.

And each new bit of information will assume great significance and can trigger emotional see-saws from euphoria ("I just love it") to despair ("We'll never get it").

And the physical exploration is nothing to the emotional exploration that is going on in your fantasy life.

Sometimes the love is requited and you and the beloved are finally united in the auction room.

Other times, alas, your rivals in love get there first and you are rejected.

Nothing for it then but the painful process of psychological de-investment and the sadder-but-wiser search for a new love object.

As if the whole process of making a decision to buy a house were not emotionally draining enough, there is then the often even more emotionally freighted process of selling your own house.

The more attached you are to your house, the more of yourself you have put into it, the more you identify yourself with the house.

The clear danger here is that you approach the process as if you were putting yourself on the market, not your house and take the whole thing too personally.

The value of the house, the reactions of prospective buyers - all can be taken as judgements of you and on you. At least a proportion of unsuccessful house buying/selling transactions are due to this emotional over-involvement.

Given that for most people, buying a house is such a personal process, it is hard for us to make the link between our personal decision and macro economic forces.

Yet, the link could not be stronger.

Complex economic cycles seem incomprehensible and uncontrollable to most of us. But at the centre of the most complex mathematical models of economic forecasting is individual behaviour and psychological confidence.

John Maynard Keynes believed that great waves of optimism and pessimism are what drive major economic fluctuations. He went so far as to say that the rational knowledge basis for major economic investment decisions "amounts to little and sometimes nothing".

Given the extreme precariousness of such a knowledge base, he argued that decisions "can only be taken as a result of animal spirits - of a spontaneous urge to action rather than inaction".

So, today, as prospective house buyers scan this property supplement, how they feel will matter not just to them but matters to all of us. If they are still feeling pessimistic and worried, they will attend only to further indications of economic threat. They will decide to lie low. In that case, as Alan Greenspan, the former chairman of the Federal Reserve in the US recently remarked, we can only wait for the fever to break.

Or will they feel optimistic, full of Keynes' "animal spirits", sniffing recovery in the air? If so, they will notice and attend to the positive information. They will note the uncertainty, but feel that they can personally manage the uncertainty well. They will start the action cycle. And, as if by magic, each individual decision is linked one to another and a cycle of confidence is born.

Originally published in The Irish Times. 



Posted: 24 January 2008