TPC Gold | Why Auctions Are So Emotional (And What To Do About It)

0:00If someone's churning up at an auction or they're about to negotiate on a property, where are the common applications for your field to help someone who's about to go this weekend to negotiate on a property? Yeah, so first thing, obviously I say to people is realize that buying a property is an emotional decision. How many times have you walked into a house and you've got a list of things that you're willing to want? You've got a frozen cons list and these are the muster haves and these are my trade-offs and you're walking to a house and go, this is it, I don't care, this is the one, you know, and then that's your aid talking right and all of a sudden the priority is because at the window you pay whatever you want for that property because it's sometimes it makes sense, particularly when you're going to live in that property. So it's your primary residence, not just investing, this is going to be your primary residence. The thing that people are going to realize is that a property is an identifier. It says something about you and who you are in your successful life and where your station is

1:01and you've almost got to mitigate for those feelings to go, you care about that more than other people, you know, the suburb that you're in means more to you than anyone else. So, you know, starting to pick apart some of those emotions that sit there at the very outside so that you don't even go into an auction, so mostly invested that you've got a limit of, you know, 1.2 mls and you know, it's a two-way and because you're in the competition, you're in the room, it's mad at you, you have a bit of time pressure, but you know, you try into the navigate things and you get yourself in the trouble. I think time pressure in an auction is what works for the auction you, it works for the selling and you know, if you're much as possible even in an auction, you're trying to decrease that time pressure something up and expand it out. And the other thing is because you don't worry about loss, you know, if people can, the loss of a house can really hurt, you can almost grieve the loss of a house and you're not

2:02even owning it yet, but you're emotionally invested over two months as you walk to the house and you've got connected with the house and you're seeing your kids in the house and you've even visaged parties and what your life's going to be like in this future state and then to not get the auction, you get the strange sense of loss. Now, the interesting thing about loss and where a verse to watch, you know, this is loss of aversion. When you've experienced a loss, the very next thing you're about to do often means that you definitely will get a lot more risky in order to make up for the pain of that loss. So the next option you like to go to, you like that actually makes a forced decision. Beware the rebound property, right? Exactly. So this is a close loss of aversion. So I think just being aware of those things is good. I think you can often set up sort of how do you, you know, the emotional regulation or when it's there, but how do you slide our environment a little bit better? You know, one thing a lot of people do that know that they get caught up in the motion or an auction, have a friend or a trusted other, you know, that where they can bid on their behalf, where prior to the auction,

3:06they set up rules, simple rules, don't go over this amount, you know, if it's too, if the bidding is too fast, slow it down, you know, all of those sorts of rules in, you can think of beforehand because you're using your rational brain, your emotional reactive brain and get someone else to do that. We realize that you're not an expert, you're not doing this all the time, you know, yes, there are experts that do this week ending week out, but the expertise is very rarely on the buying, the selling side, right? On the buying, the selling side, you are not an expert, so you will be emotional and you will be open to bias because you don't have that expertise. Yeah, can I add to that, Phil, because I think if we along that line of thought, there's a couple of things where I can add Mike's lived experience, Ben and I've got something called the buyer's decision quadrant, which helps people understand that they will need to compromise. Most people in this country need to compromise in one of the four areas of price, location, size of the land, quality of the dwellers. So knowing that in advance actually helps you game and prepare your

4:09environment for success. Also, this one is a little philosophical, but it's the red light, green lights philosophy where I've done so many transactions over a career and buying it in my own portfolio that I know that life will throw us a red light or a green light and if you continually keep coming up against red lights, it probably wasn't meant to be. So the example for that is being so invested in an outcome on a piece of real estate for someone and they miss out, they're devastated, but it's only like two or three months later that we realize why they missed out and it's because the one that they actually bought was so much better, so much more appropriate, but at the time of missing out, we would not have even spout them that that was possible. So for me, it's like, don't push the river. If you've tried whatever you can to make it work and you got a red light, it was for a reason and the reason will reveal itself at some other stage. And then the third one for me is when you, because I agree with you, I've had people on the show that go, there's no way I'm

5:09going to buy a property that looks like a, b and or c and I take them to a property because the producers want me to take them there and it's got a, b or c and I'm thinking, oh, how am I going to get them to even consider walking through the property, let alone buying it? They go through, oh, this is amazing. This is the one I'm like, really? Wow, okay. So therefore my suggestion for gaming that is to realize the first time you go through a property, there's an emotional response, but then what I find is when I take them back the second time, all of a sudden they go, oh, actually, it's not a lot of storage in this property. And I'm not sure if the kids are actually going to be able to talk about the back here. And so therefore, they're actually gaming on the second look. So there's a couple of lived experiences through the property game that's sort of reinforced some of the things you're saying around setting yourself up to game your emotions. Yeah, simple rules, right? Our brains love simple rules. And if you can learn some simple rules that help guard our good decision-making and stick with them, then you're ahead. You're ahead.