Managing Cognitive Bias
2 min read
I won’t let them give it away!
I’ve heard this a dozen or so times over the past few weeks.
I know that this comes from a good place. Saying this clearly shows that you want the best outcome for your client and will not prioritize your commission over that.
The ethics of doing the right thing for your client is the fastest way to sustainable success.
And, from my decades of experience in real estate sales, I know that agent bias around pricing in a declining market can hurt the client irrevocably.
Let’s take a deeper look.
Prices across Canada are down, on average, about 25%. Some markets are down more, some less. Additionally, the Bank of Canada will continue to raise rates, unemployment is expected to increase in the coming months, and variable rates mortgages are reaching the trigger point. Most economists are predicting a recession and further declines in real estate values. Sure, we will have massive immigration over the coming years, and we have a severe housing shortage. It’s a complex puzzle.
So, where is the market going? It’s anyone’s guess, but the only ethical answer is, “I don’t know.” If you tell your clients anything else, you are setting them up for failure.
Cognitive Bias can have a powerful influence on agents’ opinions about the value of a property. We want the prices to stay high. It’s better for our clients, better for us, it’s better for the economy. This Bias can cause us to interpret information in a way that serves that belief. When researching pricing, we are likely to weigh certain information more heavily and ignore or minimalize the importance of information that doesn’t point to our desired outcome. Most of this happens subconsciously.
Cognitive Bias also influences most sellers. The more distressed they are, the stronger and more damaging this Bias will be. When their agent reinforces this Bias with their own Bias, anchors are set, and properties don’t sell, or if they do, it’s a painful process. There are many examples in the market right now where people are making price reductions that are too small and too late, chasing the market down.
If they need to sell, this is an unnecessary tragedy.
Agents with the professionalism to overcome their Bias, and the courage to communicate clearly with their sellers, are getting listings sold.
Do you carry this Bias?
Join our fireside chat tonight, where we can share ideas on how to best help our clients make good decisions in this market. RSVP here