The Psychology of Real Estate

Earlier this year 27 students at Old Dominion University pressed their foreheads into a padded frame and peered ahead, much like patients at an eye doctor. They scrolled through pictures of 10 on-the-market homes on a computer screen as an ocular tracking program recorded their eye movements. In some of the homes, for some of the students, the living rooms were painted pink.

 

The question: Would a pink room-a problem you could fix for the price of a few cans of paint-make the students less likely to purchase the homes? The answer, based on preliminary results, is yes.

 

The study is part of a growing body of research that is putting real estate under the microscope. Scientists are finding that psychology-everything from how a buyer perceives his agent to how a seller prices her home-plays an unexpectedly large role. "When the market was going up, these questions were mildly interesting," says Michael Seiler, a professor of real estate at Old Dominion University and the coauthor of numerous studies in the field (including the one about the pink room). Today, with the market wobbly, "they're much more relevant," and the results of such research, he and other academics say, can offer useful insights to buyers and sellers alike.

 

Choose Your Words Carefully

For a seller, advertising that you've recently painted your house seems like a no-brainer. But in a study that looked at nearly 60,000 residential real estate transactions in Texas, listings that mentioned new paint, new carpet and/or roof work sold, on average, for slightly less than those that did not.

Thomas A. Thomson, the study's coauthor and the director of the Real Estate Finance and Development Program at the University of Texas at San Antonio, says that buyers aren't going to be fooled by a problem house simply because it has a fresh coat of paint. "It's kind of like putting lipstick on a pig," he says. But even if there's nothing wrong with the house, an advertisement that touts new features could set off alarm bells. If a seller says everything is new, a buyer might wonder why everything needed to be replaced-and whether there are other defects lurking.

Thomson recommends sellers take the simpler route: Let potential buyers be surprised by the quality of the home instead of disappointed by how average it is compared with its description. 

 

Read more: http://realestate.yahoo.com/promo/the-psychology-of-real-estate.html 

 

By David Rout, SmartMoney.com
Jul 20, 2010