The Psychology of a Homebuyer

Buying a home is likely the most important and largest emotional purchase you will make. According to a survey conducted in 2018, about 40 percent of Americans go as far as to call home buying “the most stressful event in modern life.” Buyers shouldn’t beat themselves up for getting emotional.

While data is helpful when buying or selling properties, buyers and sellers cannot ignore the x-factor of human emotion…the variable that could have the most significant impact on the outcome. This is where a competent realtor can bring real value to the real estate process via a human connection, guidance, and counsel. Effectively combining data-driven metrics and emotion will help lead to happier homeowners.

Don’t resist getting emotional. But rather, I would encourage you to harness your emotions and weigh them carefully in concert with the data and facts. Preparation and planning are key for entering into the real estate marketplace. If you have an excited yet thoughtful approach with realistic expectations you can be on the lookout for the emotional triggers that can derail an otherwise positive homebuying experience.

First and foremost, buyers should be self-aware of their own potential emotional triggers. And, look to the mistakes many of their peers have already made. What are the stressors and triggers that may create an emotional response while buying a home? Here are some psychological traits of the typical home buyer.

Tightwad-ism: I probably made up that word. I’ve seen it plenty, where buyers will become paralyzed by the idea that they must get a good deal. Or, at least, “feel” like they are getting a deal. Some even make sport of it. Pricing intelligently takes data and experience. However, the feeling of being miserly can lead you to “low-ball” or make offers that are unrealistic, not supported by data, and frankly…are insulting to a seller. Be smart, do your homework, listen to your agent, know the value of the area and the home you are buying. Don’t second guess yourself if the seller quickly accepts your offer and you feel like you could’ve gotten a better deal. Trust the process and be at peace with the outcome. Don’t be “that guy.”

Nostalgia: Go to any home search website and you’d be hard-pressed to find a search option that allows for emotion. You can’t enter “nostalgia” or “childhood memories” or “romantic kitchen tiles from Italy that remind me of my spouse.” There’s no algorithm for humanity.

There have been multiple times when my clients have gone into a home and ended up buying, or not buying, not because it was a good price or a great neighborhood, but because they simply “had a feeling” or the house “had the right vibe.” It turns out that 80 percent of buyers know the moment they step in the door. Price, square footage, location…all that can be trumped by the visceral reaction of seeing a home. Colors, lighting, views, temperature, smells, and sounds you can hear inside or from the outside — you might not be aware of them, but they can have an influence. A study showed that 44% of home buyers spent more on a home because they “really liked it.”

Perfection: Sorry, it’s a myth. There is no perfect house. On the remote chance that you think you found perfection, the emotional attachment will sometimes become so high that you will overpay or overextend yourselves financially. Consider your exit strategy for when you buy to avoid losing money when you sell. The average time a homeowner stays in a home is 5-7 years. There is definite value over time for the enjoyment and use of the home, but that number is slight when compared to the total investment. Don’t be the guy who says, “the data says this, the data says that…blah blah blah.” It matters. As bad as these decisions can be in the long run, when it’s time to sell, this is where that earlier emotion will really wreak havoc.

Another consideration of perceived perfection is the trade-off for perfection. One of the biggest trade-offs is commuting. Yeah, the house is great but the commute sucks. It’s so easy to get caught up in comparing the physical features of the places you’re looking at but you should really stop to consider how the places you’re considering will shape your overall quality of life. It’s not just about the home. When buyers are considering a purchase, they’re purchasing a lifestyle, too!

Competition: A consequence of finding that perfect house is that others also see this house as the perfect house. The entire spectrum of emotions of the home search process will come alive when getting caught up in a multiple offer situation. Your inner warrior will rear its ugly head. You’ll say, “This is my house. I deserve this house and you’re going get it – at all costs!” Emotions jump through the roof when you feel the pressure of competition. Remind yourself that you need to stick to your plan. If you end up unsuccessful in getting your offer accepted on this perfect house, plan on going through the five stages of grief. You experience denial, anger, bargaining, depression, and acceptance as part of the framework that makes up our learning to live with the fact that you lost this house. The bad news is that you might have to relive this same cycle again. Sorry. The best advice here… you need to get back on the horse that bucked you and start looking for the next perfect house. And, do not feel guilty for making us agents chase around for days on end or think you have to please us by buying. That’s foolish.

Infatuation: Remember when you met someone and you “fell-in-love” at first sight? How did that work out for you? Maybe you dumped them after the second date. Or, quite possibly, you ended up marrying them and have been happily married ever since. Sometimes the perfect property will be the first one you look at! I’ve seen it happen. Don’t artificially rule it out. However, buyers can make the mistake of falling in love with a property after a first visit. It is likely to happen with homes that are professionally staged to elicit that kind of response. This isn’t inherently wrong. But, be sure before you proceed that you do your necessary due diligence.

Expectations: Like any emotional transaction, real estate can be extremely unpredictable. I often hear clients tell me that they simply want a three-bedroom with a big kitchen in a certain neighborhood because of x,y,z. But, reading between the lines, I know that what they really want is a certain aesthetic that exists in various shapes and forms well outside of their “desired location.” What they think they want isn’t really what they want.

Be prepared to go beyond your own preconceived notions. It’s not so surprising to see how many people buy exactly what they don’t want in the end.

Media: Facebook, Instagram, Pinterest, Snapchat, HGTV — all very popular forums. What these mediums have in common is they are places to host shared connections, deliver social proofing, and foster endless imagination. Trending ideas on any of these platforms is powerful. They can be an integral part of turning the emotional x-factor into an actionable home buying motivation.

Don’t forget about the influence of blogs, articles, government reports, and news stories swirling around issues on the economy, interest rates, and housing.

One of the biggest irrational fears just may be related to the upcoming presidential election. How might that affect housing? We will be treated with nonstop hysteria, rumors, and hype. What we’ve seen historically in the late summer months of an election year is a pause in the market. That doesn’t mean that buyers are not going to purchase. It just means that they are pausing with the perception of uncertainty. Perception is reality. The market wants to see what will happen on election day. Ironically, what happens is that 2-3-weeks following election day these same buyers and sellers will return to the market, saying, “nothing major changed, let’s keep on going.” Data tells us that elections usually have little lasting effects on the housing market. It’s a mental thing that both buyers and sellers go through. It requires a type of emotional processing that the market has to deal with.

Family: When buying a home, ask for advice from friends and family. There could things that your family sees that you can’t or won’t. Having a second opinion or a second set of eyes can be very helpful. Moreover, if you have friends or family members who have recently bought a home, they may have some pointers on how they did it. This advice comes with a caveat.

A major point of contention can be how involved the parents are going to be during the buying process and throughout ownership. It is important to develop a plan before you start shopping — and leave the family drama out of it. It’s all about the control factor and who gets to call the shots. Soliciting advice is good practice. Ultimately, you will be the homeowner. You need to take the lead and make the final decisions that are best for your own interests. It’s best to talk it out prior to sinking time into home shopping. Trust me, a home inspection is not an appropriate place for a family feud.

Money: General money management and having enough money for a competitive down payment can be stressful. This is especially true for newlyweds who are just starting to figure this out as a couple. A strong argument can be made that renters would be better off as buyers. In most cases, making a mortgage payment is cheaper than paying the monthly rent. But renters are having trouble getting over one specific roadblock to homeownership. That hump is the down payment.

In 2014, some 70 percent of overall consumers say they didn’t know that low down payment programs are available for middle-income homebuyers in their community and 73 percent of Millennials say they were unaware of lower down-payment options. Five years later, a survey found 31 percent of Millennial buyers said they used first-time homebuyer assistance to augment their first home—more than any other source of assistance, including a second job, living with parents or withdrawal from a retirement fund.

In early January, Freddie Mac launched a new, free, online homeownership education course called CreditSmart® Homebuyer U. It offers six educational modules, each focused on a critical learning principle relating to money management, credit, getting a mortgage, the home buying process and preserving homeownership. The goal of this exceptional program is to empower those who are pursuing the dream of homeownership with the knowledge to make informed, responsible decisions.

Added tension can come in the form of closing costs. What are they? These are additional fees on top of the down payment and sales price of a home. It is important to consider closing costs in the financial equation since they may be added or negotiated with your upfront cash requirement. The two biggest costs you experience when buying a home are the costs to acquire the loan and the title fees. A good rule of thumb is to anticipate 1% of the sale price will be needed for closing costs.

Other closing costs are the appraisal fee, which will come out of pocket and won’t be wrapped into the loan. Also, the inspection fees are out of pocket and not rolled into the loan.

Timing: Buying and selling at the same time is an increasingly real proposition that home sellers face, especially in a market that favors sellers. You say, “sure, I can sell my home, but what do I do after that? I don’t want to be homeless!” The fear is palpable. Whenever you face the proposition that your current home will sell quickly, make sure you have an exit plan with contingencies already built-in and accounted for. You may need to move twice. You may even need to temporarily stay with family. In the grand picture, it’s not the end of the world. In fact, it just might empower and position you to be a more effective and confident buyer.

Readiness: Am I ready? The process can be anxiety-ridden. Ultimately, you may not be ready and homeownership. There are legitimate questions and reservations you might hold – real or perceived.

  • Do I have enough for my down payment?
  • Will interest rates be better if I wait?
  • Can I even afford the monthly payments?
  • What if I lose my job?
  • Should I wait for a buyer’s market?
  • Am I willing to do the required maintenance?

The biggest worry home buyers have is that they’ll discover something is wrong with the home after they buy it. In reality, there are simple answers to these questions. But some first-time homebuyers get so consumed by them that they feel anxious and overwhelmed at the mere thought of trying to make sense of them all.

Home buying can be exciting! If you are in a good place in terms of your emotional wellness, roll up your sleeves and get after it! If you are living on pins and needles and continue to suffer through sleepless nights you may not be ready. Your emotional meter must be strong. Your data should be sound, but don’t be a slave to only the numbers. Your best approach when buying or selling is two-fold: a healthy dose of data-driven metrics and emotional wellness.

Happy shopping!