While psychology is a popular college major, that doesn’t necessarily mean all of those who graduate with a bachelor’s in it continue on to become psychologists. In fact, the American Psychological Association found that only 26.7% of students who earn a psychology degree have jobs closely related to their field of study.
Among the fields some psychology graduates migrate to are sales, marketing, advertising and real estate.
How can psychology play a role in real estate? From managing the emotions of sellers and buyers to considering the sensory perceptions of a new home, psychology is at work in a number of ways throughout the real estate process.
Emotions Run High for Sellers, Buyers
Buying a home is the largest investment many people ever make. Regardless, for most people, it’s also far more than an economic transaction. That goes for those selling their home as well.
“Never underestimate the power of emotional attachment,” Sarah Marchese said in an article on Mental Floss. “It raises its head in so many ways.”
For example, potential buyers can fall in love with a house’s size and design, overlooking the fact that its location will add an hour or more to the work commute.
Home sellers may have a strong emotional attachment to the houses – and to the price they paid for them originally. Some buyers insist on selling for no less than they paid for the house, which can cause them to ignore the realities of the market and miss favorable selling opportunities. According to an article on MarketWatch, homeowners tend to overestimate the value of their homes by 5%-10%. When buyers insist on sticking with their idea of what the home is worth instead of what the market will pay, homes stay on the market.
This is particularly true of owners who bought at the peak of a seller’s market and then saw the value of their home fall as the market cycled downward. It’s a situation loss aversion, which causes one to experience losses far more intensely than an equivalent gain.
Ideally, the price should be attractive enough to attract a number of potential buyers. This is important because home shoppers may begin to doubt themselves if there’s no competition with other potential buyers.
Real estate agents need to be aware of the psychological traits to which home buyers and sellers are prone. Agents also do well by using psychology in how the house is presented for sale.
Personal, But Not Too Personal
Buyers want to be able to envision a house as a home. This can be difficult when house-hunting. Agents sometimes must show a dwelling while it’s still occupied, so potential buyers are seeing someone else’s idea of home while trying to picture their own. Or the house may be vacant, a blank canvas that may or may not inspire would-be buyers to imagine themselves living there.
Presenting the house for sale before potential buyers see it is essential. The first impression can be crucial, and it will have little to do with the floor plan or any other specifics.
Potential home buyers “are after the right ‘feel,’ which can only be created through aesthetics, ambience and presentation” Beth Mitchell from RE/MAX said on the website of Australian real estate marketing company Domain.
Agents are aware of these issues and the impact they can have on house hunters. They also know a few ways to compensate for the appearance, and to influence potential buyers to see a house as their new home.
The challenge is creating a homey look that’s not identifiable as someone else’s home. Too many personal items, like photographs and mementos, can prevent the buyer from seeing the abode as their own.
Color Psychology
While some may be skeptical of color psychology, hues can be a factor in human behavior in the real estate world. Light and neutral colors are best, according to online real estate database Zillow, which offers the following to back up that advice:
- Homes with bathrooms painted light pale blue or soft periwinkle blue sold for $5,440 more than expected.
- Light beige, pale taupe or oatmeal-colored living room walls bring in $1,926 more than expected.
- Go with slate blue to pale gray blue dining rooms, which brought in $1,926 more on average than homes with white dining room wall colors.
- Houses with an exterior painted in a mix of light gray and beige (known as “Greige”) sold for $3,496 more than homes painted in a medium brown or with tan stucco.
- Homes with doors painted dark navy blue to slate gray brought in an extra $1,514.
Conversely, some colors may deter buyers. Darker, style-specific walls such as terracotta dining rooms sold for $2,031 less than expected. A lack of color, though, may be worse: Homes with white bathrooms sold for an average of $4,035 below similar homes. Zillow’s full report can be found here.
Other Senses in Play as Well
How the house looks is greatly important, but the impressions made on the buyer’s other senses also can sway a decision.
While a scented candle or incense can enhance the appeal for some buyers, they could cause others to wonder if they’re being used to cover something malodorous. Fresh air and flowers create a subtler fragrance that won’t arouse suspicion.
Some sellers may be tempted to use music to set a mood for buyers. Music, though, regardless of style, is not subtle enough for this situation. It can tend to be overbearing to the buyer and seem like a desperate attempt to call attention to the house.
Communication and Research Skills
The majority of home sellers rely on real estate agents to guide them through the process of presenting their homes to the public. Agents are selling more than a house, though. They’re selling themselves to potential home buyers and sellers. Much of an agent’s business comes from referrals and returning customers. The ability to communicate well is essential throughout this process, as well as being able to read people. Buying or selling a home can be a stressful, emotional time, and real estate agents must help people in this transitional period of their lives. Being empathetic and understanding people’s desires, even if they don’t know what they want themselves, can make a real estate agent more successful.
Some real estate agents also have to conduct research, as they focus on particular neighborhoods or sections of a town, to get a better idea of the demographics and psychographics of the homeowners in the area. Agents can “farm” areas, targeting their marketing work on a specific area instead of looking, meaning they choose a specific geographical area and target their marketing efforts there. Having cultural and social awareness plays a key role here, both of which are developed in a typical psychology student’s curriculum.