We’re stepping away from numbers and statistics for a bit to talk about emotion and how it can impact real estate decisions.  Emotions can be positive or negative, so some of the examples we use below are happy and some are sad.

As humans we’re emotional creatures and any attempt to remove emotion from something as fundamental as shelter is doomed to fail.  While logic is an important component to buying or selling real estate, so is emotion.

Without further ado, let’s look at three concepts about the intersection of logic and emotion so you combine the two approaches in the right way.

Focus on how you feel, not how you hope it will make you feel

There is a term we use within our team – aspirational buying.  While that is sometimes associated with retail therapy, it’s got nothing to do with trying to have a more expensive home to impress others.

It’s when a buyer client is focused on properties that they feel will make a positive change in their life.  It can be as small as the idea that a good gym in their new condo building will allow them to get in better shape, or as large as the idea that being close to an active, vibrant retail strip will get them to socialize more and meet the love of their life.

At its heart, aspirational buying has the notion of the purchase being instrumental rather than intrinsic.  Instrumental in the sense that the new place is an instrument or tool that will take the buyer to the person they want to be – whatever that looks like – in contrast to an intrinsic purchase, where the home achieves its purpose from the moment you move into it.

Hopes, dreams and goals are positive things to have and we’d never suggest you don’t strive towards what you want – but we always caution our clients to make sure the home they buy fits who they are now as well as who they hope to become.

The big risk with any sort of instrumental purchase is that if it fails to get you to where you want – or your goal of what you want changed – there isn’t the intrinsic value in the home that makes it a good fit.

If you’ve always loved gardening, buying a home with a nice backyard where you can spend time enjoying your passion is a great decision – it’s intrinsically valuable to you from day one.  In contrast, if you hate gardening but see the backyard as a way to spend more time with a family member or friend who loves gardening, you’re at risk of that not working out and you having a back yard full of weeds.

When we work with clients who have aspirational aspects to their purchase decision, we try hard to make sure that the intrinsic aspect of the property is there as well.  There’s nothing wrong with making a move to improve your life but it should work for who you are now as well as who you hope you’ll become in your new home.

Positive Emotion + Logical Sense = Record Sale Price

There is an interesting dichotomy between emotion and logic when it comes to real estate.

Put simply, logic is necessary but not sufficient for a property to sell for an unusually high price.

  • A home that strikes the right emotional chords can sell for a reasonable price but it will never sell for an unusually high price if there isn’t some logical support in addition to the emotional connection. Logic was necessary for the sale to take place at that price.
  • A home that doesn’t hit buyers on some sort of emotional level can’t rely solely on logic to achieve a really good sale price. It might sell, but at a lower price, as without the emotional aspect, the logic of this being a good purchase isn’t sufficient to command such a high price.

The most obvious example of this is with investment properties.  Such properties don’t sell for inflated prices as they are purchases based on logic.  An investor looks at the condition of the home, the rental rates that can be commanded and the sale price that makes debt servicing possible – and offers accordingly.

Bidding wars on homes where we see sale prices in excess of what a logical price for the home would be take place on private homes where emotion is the key factor.  A home buyer who wants to live in the home falls in love with it and pays whatever they must to achieve their dream.  There is no such thing as a bidding war that pushes an investment property past its market value.  As the price rises, the property becomes less and less viable and past a certain point, it is not a worthy investment.

On the other side of the coin, we see a similar story.  Emotion is necessary but not sufficient for a property to sell for an unusually high price.

  • A property has to strike the right emotional chords to sell for an unusually high price. If a buyer is going to offer beyond what logic dictates, an emotional connection to the property is necessary to make that happen.
  • At the same time, emotion on its own is not sufficient to garner an unusually high price. The higher the sale price goes, the more the emotional aspect is placed under pressure.  When we see homes that sell for unusually high prices, they have a solid logical base to support a high value and that is combined with an emotional appeal to buyers.

When a property can combine emotional appeal (good design, lighting, finishes and layout) with solid logical fundamentals (large lot dimensions, home attributes and high end comparables nearby) the result is buyers willing to pay unusually high prices.

When we work with sellers who are seeking to maximize their sale price, it’s important to review the logical fundamentals of their property as well as the emotional touchpoints we can create.  The most appealing property with limited logical support faces an upper limit to their sale price.

On the buying side, we understand that properties that hit both aspects are likely to fetch a premium, depending on the market conditions for the location, property type and price range.  There are real opportunities on the buying side where the logical fundamentals are present but the seller has not done the work to make the property emotionally appealing.  Such purchases often do very well for the buyer who is able to make changes to increase the emotional charm of the home before resale.

Go with your gut

Finally, let’s talk about a simple way to make sure you’re not relying too heavily on logic and ignoring what your emotional reaction is telling you.

We’ve shown thousands and thousands of homes to buyer clients over the years.  One of the things that is a consistent harbinger of eventual dissatisfaction with the home is when the buyers had to convince themselves it was a good idea to buy it.

If you’re considering a home and your initial reaction is that it doesn’t much appeal, don’t spend tons of time reviewing the property logically.  If you spend 30 minutes talking about the ways in which it maybe, might work, if we make changes to it this way and possible add in something there – you don’t want this home.

If you walk in and say “Wow.” and continue to say the same thing as you see the rest of the property, let your agent do the heavy lifting on the logical side to make sure it is a good property with solid fundamentals that will allow it to appreciate nicely over time as you enjoy the home.

When you combine logic and emotion, you make smart decisions about real estate.  If you want to work with an agent who understands how the two aspects best work together, get in touch.  Only if you feel like it though.