A little while ago we talked about Real Estate Fear and the major role fear plays in real estate decisions. Low interest rates and supply and demand play their roles, but if you really want to understand what motivates buyers and sellers, don’t ignore fear.

I didn’t plan on writing a sequel to Real Estate Fear, but today I was reading an article by James Altucher called “Do You Make Fear Decisions or Growth Decisions?” (I like the way he thinks so I follow his blog) and felt a sequel was needed so here we are. Altucher writes that all of our decisions are based on either fear or growth and the ones made out of fear don’t work out while the ones made out of growth do work out. Try it for yourself. Make a list of a few big decisions you’ve made in your life, determine if you made them out of fear or growth and then examine how you think they turned out. In his case, the decisions he made out of fear didn’t work out.

When I look at my career, I come to the same conclusion. I didn’t want to accept an associate lawyer position when it was offered to me when I finished articling, but I was scared it would be a mistake not to at least give it a shot so I made the decision to accept the job. I hated it. I hated it so much I decided to quit. When I made the decision to quit I wasn’t scared about not having another job to go to and not even having any prospects because I was confident it was the right thing to do and things would work out. And they did.

One of the things I did after quitting that job was listen to Anthony Robbins’ Personal Power cassette tapes (to give you an idea of the year). Love him or hate him, his program contains lots of helpful material. That’s why yesterday I decided to revisit Personal Power. I’ve spent the last year or so renovating my body and giving it a tuneup, what with my knee surgery and frozen shoulder, so I figured I should do the same for my mind. When I downloaded the program I saw the chapter called Pain and Pleasure and remembered that one of his theories is we make decisions to either avoid pain or gain pleasure.

That got me thinking about pain vs. pleasure and fear vs. growth. Not so much from a psychological point of view because that’s not my field, but from a real estate point of view. Why? Because buying and selling real estate is a very emotional process. People make major decisions and we see these factors at work all the time. As Realtors, Corinne, Anthony and I need to understand how they work so we can help our clients make the decisions that are best for them. They often joke with us that we’re their shrinks, social workers, marriage counselors and Realtors all rolled up into one.

Based on my experience, I wouldn’t say you’re best off relying on pleasure and growth to make your real estate decisions and you should avoid making decisions based on pain and fear at all costs. Like everything else in real estate, there are no hard and fast rules. You have to do what’s best for you under the circumstances.

The first step to making the right decision is knowing yourself and having an appreciation of your risk tolerance level. Let’s look at a few examples:

• You find the perfect home and are in a multiple offer situation. The price you decide to offer may be different if you’re the type who believes “I’ll never find a home like this again” as opposed to telling yourself “If I don’t get this one, it’s just not meant to be and another one will come along down the road.” Notice that the reasoning behind your decision will in part determine how you feel about your decision after the fact. If you’re worried about experiencing the pain of losing the home and decide out of fear to pay a high price to get it, you might regret this later whereas if you decide not to pay a high price because you believe another home will come along in the future and lose out on the home, you may be able to live with this outcome quite comfortably.
• On the other hand, assume the same facts, but you say to yourself “This home is absolutely perfect for our family for the next twenty years. I can see us being SO happy there.” If you decide to make a growth decision to pay a high price to get it because of the pleasure you’ll gain from living there, will you be more likely to be happier with your decision than if you had made the decision to pay the high price because of your fear of losing the home?
• What about sellers who have to decide whether or not to accept an offer? Those sellers could be thinking “If we don’t accept this offer we may never sell our home” or they could be thinking “If it’s not this buyer, it’ll be another one.”

What’s most interesting to me is there’s never any right or wrong answer. In identical fact situations, the best decision for Steve may be the wrong decision for Sue. Or the same decision could be the right decision for both of them, but because one of them makes it out of fear or pain and the other makes it out of pleasure or growth, one of them is happy with the decision while the other is not. This is the kind of thing that keeps real estate so interesting. We never know what someone will do until they actually do it.

Before this goes too far, let me remind myself I’m a Realtor and not a psychologist. What matters from a real estate point of view is this:

• Know yourself.
• Understand your risk tolerance level.
• Figure out why you’re making the decision you’re making.
• Ask yourself if you’re making it for the right reasons.
• Determine if you’ll be happy with it.

Come to think of it, you might find this process helpful whenever you have a decision to make, whether it’s about buying or selling a home or something else.

Real estate seems simple, but it’s really not. If you know anyone who’s interested in learning how the market works and who’d like to receive the kind of help that involves honest answers, straightforward advice, no pressure and being treated like family, please let me know the best way for me to connect with them because I’d like to offer them this kind of help. And as always, don’t be shy if you have any questions or comments about this post!

Thanks for reading this year. All the best for the holidays and a happy and healthy 2016! See you in January.