New York Tech News welcomes faculty-generated content to spotlight our university’s rich array of expertise. This “Faculty Forum” submission is from Colleen Kirk, D.P.S., associate professor of marketing in the School of Management.
With soaring prices, plunging inventory, and fierce competition, navigating today’s homebuying market can feel like a roller coaster ride.
When demand outpaces housing stock, buyers will make every effort to avoid being “scooped.” But, when forced to act swiftly, they may find themselves in the middle of a territorial bidding war or worse—with buyer’s remorse. What’s a prospective homebuyer to do?
As a consumer behavior researcher, I study a phenomenon known as psychological ownership, when shoppers feel ownership of “that perfect something” before buying it. This phenomenon is very applicable to today’s real estate purchases. Think: a buyer attends an open house, touches the countertops, opens the closets, and begins to imagine living there.
However, if consumers feel ownership of a home that they do not yet legally own, they can experience a great sense of loss when they are outbid or unable to acquire it for other reasons. When we own something—even psychologically—it becomes part of our “extended self,” and having it taken away feels threatening.
The good news is that homebuyers can actively limit this self-threat and manage expectations. Here’s how:
Restrict your “likes.” Even adding a home to your digital wish list can cause psychological ownership. Prospective homebuyers should restrict their digital favoriting, such as saved homes on Zillow, to only those that they would realistically purchase.
Limit your bidding. Research on consumer bidding behaviors, such as those on eBay, finds a vicious spiral comes into play. The more frequently consumers bid on a product—in this case, a house—the more invested they can become and feel that the product is already “theirs.” To combat this, set a limit on the number of bids you’ll place and stick to it.
Find something else that boosts your sense of self. Engaging in compensatory consumption by purchasing a different, unrelated product can restore self-confidence. For some, this might mean stepping away to shop for a special new piece of clothing; for others, it could mean cooking a fancy dinner or vanquishing an opponent in a video game.
Amplify the flaws. Make the unsuitable or unattainable home psychologically less attractive by focusing on one feature that you don’t love. Focus especially on why that undesirable feature does not help you communicate your own self-identity to others or give you the sense of security and “having a place” that is essential in owning a home.
Focus on your must-haves. Limit your focus only to homes that have all the features you cannot live without. This may prevent psychological ownership in the first place, as well as cognitive overload. Research shows that when consumers have too many choices, they are ultimately less satisfied with their purchases because they continue to think about all the choices they gave up. Making a checklist of your must-haves can limit the “what if” when buying a home.
Close the lid on the transaction. Once you’ve purchased your home, limit potential buyer’s remorse by telling others about it or posting it on social media. Doing this can help consumers feel that the transaction is closed. Simply printing out a contract or photo of the home, signing it, and filing it away can provide more closure.
By limiting the negative feelings and infringement that can come with psychological ownership, consumers have the power to make the home buying experience feel more like a major milestone and less like a wild roller coaster ride.
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