Here’s a simple math question: Together, a bat and ball cost a dollar and ten cents. The bat costs a dollar more than the ball. How much does the ball cost?
The vast majority of people respond quickly and confidently, saying that the ball costs ten cents. This answer is both obvious and wrong. The correct answer is five cents for the ball and a dollar and five cents for the bat.
When people face an uncertain situation, they don’t carefully evaluate the information or look up relevant statistics. Instead, their decisions depend on a long list of mental shortcuts, which often lead them to make foolish decisions. These shortcuts aren’t a faster way of doing the math; they’re a way of skipping the math altogether. Asked about the bat and the ball, we forget our arithmetic lessons and instead default to the answer that requires the least mental effort.
How is this related to real estate? In many ways. Buying and selling real estate is very difficult and many people simply “skip the math”. Here’s a story.
I’ve been emailing back and forth with a fellow (I’ll call hime Colin) over the last four weeks. He initially emailed me looking for more information on our listing at 46 Mary Street. Normally we invite prospective clients into the office for a consolation to see how we can help them. But often before that, there is a “courting period” (a series of emails, phone calls and sometime cards and letters) which real estate agents go through to demonstrate our competence and establish trust and prospective home buyers and home sellers go through to gain enough information to realize that they could use the services of a professional realtor.
Anyway, after four weeks of emails, we didn’t get very far into the relationship when Colin emails and says “you’re just trying to get me under contract”. He terminates our budding relationship before I could even begin to help him. He made a foolish decision based on a false assumption. Alasdair and I don’t put people under contract. Colin made a mistake. He’s skipped the math. It doesn’t cost anything to use the services of a professional realtor when buying a house. Consumers should interview three or more and choose one to work with. That way they will have access to the knowledge and expertise of solid professionals who know the market and do real estate work for a living. Unfortunately when facing uncertain situations many people choose to go it alone which seems like the easy thing to do but really is a short cut to a bad time.