Recently my wife and I sold our flat. We had a few estate agents value the apartment and then we put it on the market. Couples and families came to visit the flat every day whilst we went out for a walk. Some started having second viewings. And eventually, somebody put an offer in. Only the offer was far lower than the asking price. Lower than we’d hoped for. Logically, we were disappointed. We wanted more. We were just about to say no. They weren’t offering enough. Or were they?
As my disappointment and frustration started to emerge, I decided to trace back the steps to me thinking the way I was thinking and realised that I’d based my whole understanding of the entire process on one single piece of subjective information. The first piece of information I was given. To use the term from Behavioural Science, I’d fallen into the Anchoring Bias. This is the effect whereby what we first see causes us to judge everything we see thereafter in comparison to that first piece of information. For example, you might notice some companies show you a very expensive product, followed by ‘cheap’ one. It’s just that you only think the second one is cheap in comparison to the first one. Had you never seen the first one, you’d think the second one was expensive too. And this is what happened to me…
The estate agents valued our flat, and so in my head, that is what the house was worth. It was worth a lot. And then when the offer came in, it felt very low in comparison. But does that really matter? And so having understood that my disappointment was based on having been anchored high by estate agents whose incentive is to overvalue my home so that I list it with them in order to shut out the competition I calmed down. And we started to reconsider and ourselves the question: “What does really matter here?”
After thought, only a couple of things actually mattered to us: 1/ moving to a home that is right for our family and where we see ourselves growing; 2/ living a life we can afford without extra pressure. When we put the offer through the filter of these two questions, the answer was simple: Yes.
It is tempting to think we are ‘Homo-Economicus”. That we buy rationally and particularly that we buy bigger things even more rationally. But the truth is we are predictably irrational. All of us. Perhaps more so for more emotional purchases, and what is the most emotional purchase you could ever make? A home for you and your family is probably near the top of that list. Learning to nurture humility when it comes to how we make personal decisions is I think a wonderful lesson. Not only do we make better decisions but we grow as people. It can shift the lenses through which we see the world and free us from some of our slightly buggy mental software.
And in our case, well, had we not paused to deconstruct our mental bugs, we might have turned down the opportunity to move into a beautiful new home. So I’m grateful for being rational enough to know that I’m irrational.
Although… we’re also great at post-rationalising our actions so that we feel good about them. So maybe I’m still irrational about my irrationality afterall… Snap.