Nudge: the planner and the doer
Every once in a while, I discuss something that strikes me from my current reading. Sometime this summer, I read Nudge by Richard H. Thaler and Cass R. Sunstein. This book discusses how to improve decision making. I liked Stumbling on Happiness better, because it explains why we get in our own way rather than how to create structures that get people to decide in a specific way.
But today, I am writing about Nudge. This is not part of the ongoing trope of the book, but I find it useful for buyers and sellers of real estate:
Here’s the concept: The planner is the part of everyone’s psychological make-up that puts off gratification and does the necessary things. The doer just does what comes to mind. Going to work every day is an act of a planner. We work to get paid; we get paid to enable our future self to have food, shelter, and spending money next week.
Nudge says the planner gets up in the morning to get to work. The doer hits the snooze button, starts work later. (The author suggests a clocky for the doer.) As someone who doesn’t start work early, I have to pay attention to honoring the planner within. I encourage you to do the same, especially in buying and selling house.
Here are the things to do to honor the planner within to please your future self:
Buyers:
1. Get pre-approved for a loan.
2. Calculate monthly payment before making offers. (Use highest interest rate quoted that week.)
3. Pre-decide on towns and neighborhoods before you shop for houses.
All these things keep you from spinning your wheels and wasting your time. More importantly, it keeps you from falling in love with a place you can’t afford or is in the wrong location.
Sellers:
1. Look at the cost of moving. All your repairs to sell, the cost of getting your next mortgage, and legal, recording and broker’s fees all come off your profit. Estimate the assets you’ve liquidated, less those costs. Is there enough money there, from your profits and savings, to facilitate your next move?
2. De-clutter your house ahead of time. Clean and de-cluttered houses sell better. You may sell faster, for more money, or both.
3. Fix small visible problems. Houses sell better if there are not niggling little repairs in sight. Things like finishing a little area of trim, or painting the scratched-up hallway will encourage buyers.
When you completed the work on your home for sale, you will enjoy living there more. Maybe you’ll even stay and save yourselves money and a lot of fuss and bother.
If having a clean, uncluttered house with no niggling repairs hasn’t convinced you to stay, you will be happier while you are selling. Having the house really ready for sale will help you avoid selling the house for less than you want, just because you are sick of it.
4. After you have done 1- 3 above and you still want to move, prepare for your next move ahead of time, as I advise all buyers.
Planning has its rewards.
Comment
Permalink
E-Mail
Planners will do the math and realize real estate is a lousy investment. Don't bother buying. If you want to sell, get used to the idea of getting less than you paid.
I am not sure exactly when it was, but at some point people began buying "real estate" rather than buying "a home." There is an enormous difference. There is no question that as a purchaser you want to buy something that over time will at a minimum hold its value and over a reasonable period of time hopefully gain value. However, to expect large returns and an ability to "flip" for profit is just a phenomenon newly introduced and should leave as fast as it arrived.
Buying makes sense in every logical way.....but more importantly, it is part of what "we" strive to achieve and desire to obtain....There is something about owning a home.
As far as selling.....of course now is not the best time to do so, but on the converse, if you sell and use the proceeds to buy, you can buy something that has also decreased in value.....also speak to a good accountant to ensure that any losses are reflected on your tax returns.
Planning is the best key....but planners and do-ers....should not be mutually exclusive categories.
If you have more questions feel free to ask me. info@lisslawboston.com
It can get very stressful when a couple is buying and one person is more of a planner and the other is more of a doer. hypothetically, of course!
I never suggest that buying RE is a *great* investment. I love owning my home because I just do.
However, there are thousands.. MILLIONS.. of potential bad investment methods out there. I do not spend my time going to message boards of each of them to say that each one is a bad investment.
I am blown away at how many people who admit that they will never ever buy a home also find time to write lengthy posts about how bad an investment a home is. Since they have nothing to gain from it (since they admit they will never ever buy a home), why bother? What is in it for them?
Perhaps people like "StillRenting", "WillAlwaysRent", "BostonRenter", and so on will please answer this question. It is puzzling to say the least.
kz, I think you missed the point of most renters' point of view. As a sideline-house-hunter, I want to buy a home, but right now it doesn't make much sense in this region of the country unless the family/job/financial situation dictates it. I'm in this region after living in the south and the mountain west. Right now the risks associated with home purchase are high and the perceived rewards are low. No wonder so many people are not feeling motivated to buy! We don't see a home purchase as tipping the balance for an overall positive, as defined by a lengthy personalized list of priorities. I'd rather save the money than be enslaved to a mortgage. Of course, I don't expect to rent forever. My family will grow, I will become less patient with landlords, and I aspire to be self-sufficient.
At the right price, and with many other factors in alignment, I'll move off the side-lines and hopefully find just what I'm looking for. But for now, I'm with "StillRenting" when I say I'm not going to shell out for a place I'm not going to be happy with.
To answer your specific question: Everyone who participates in this blog does want to buy and sell, to some degree or another. Folks who bash on home-ownership are really wishing that 1) they could afford to live wherever they wanted, 2) there were more entry-level homes that are neat and tidy rather than droopy and dumpy, and 3) there was more stability (rather than uncertainty) in the valuations of homes in this area. I'll buy a home when it's "worth" (to me, of course) what I'm paying for it.
kz-
Looking through the comments from the posters you mentioned:
"StillRenting" is specifically critical of the mortgage mess, and believes that prices will fall when Alt-A and teaser-rate-ARM's explode in 2010. She says she's glad she rents, but that seems mostly because she thinks house prices are in for a big decline, and she doesn't see the point in paying more per month just so you can own a declining asset.
"WillAlwaysRent" is just a cynical name you made up.
"BostonRenter" has, many times, stated that he wants to buy, but he's not willing to buy while sellers are asking for a significant premium over the equivalent rental price. (Personally, I'm not sure this is the right threshold to use, but it's a reasonable starting point.) He also has some of the same thoughts on mortgage resets that StillRenting has. And he points out that median incomes can't sustain median prices in this market.
Some commenter on this blog at some point has probably said, "I don't ever want to buy," but that doesn't describe most of us. Hung Wang and Accidental Landlord certainly own property already.
As for me (I'm not the only "james" here, i've been commenting maybe 6 months), I'd like to buy, but I'm comfortable enough renting that it doesn't matter much to me whether I buy tomorrow or 18 months from now. Judging by market fundamentals like income affordability of outstanding mortgages and delinquent mortgage rates, it seems likely that prices are still falling, so I'm in no rush to buy until I find a place I really love. And quantity has fallen so low that it's hard to find a place to fall in love with. There's just not much on the market right now, but I'm hoping that as mortgages reset and banks deal with their foreclosure backlog, more sellers will emerge.
I can't speak as to why other people comment on this blog, but I started posting because I found most of the commenters here to be interested, analytical, and honest. I can think of three possible reasons most of the people on this blog are bearish: a) we're analytical, and the analysis points downward, b) most of the coverage out there is bullish, and only the frustrated bearish types care to post, or c) potential buyers tend to be bearish, and most of the interest in the housing market comes from buyers (who look at lots of houses) rather than sellers (who only look at one).
As for there being lots of potentially bad investments out there, that's true, but most investors counter that by diversifying. Something like 50% of your portfolio in mutual funds, 30% in bonds, 20% in commodities, or something. Even if one investment goes south, you're ok. But when it comes to real estate, your options are basically zero or 500% of your money. If it does go south, even a little bit, you can be wiped out entirely.
Spot-on, James.
KZ, if you've read my comments carefully, you'll also know that I'm in an INCREDIBLY comfortable rental at a steal-of-a-price in a phenomenal family neighborhood in the suburbs. Were we to buy right now, our price range would dictate a smaller home in much poorer condition in a town with less-than desirable schools. Suffice it to say, I'm not feeling pushed to move. Not by a long-shot.
Never once have I said I "will not ever buy a home." One reason I read this blog is simply because home ownership is something I look forward to and something I aspire to......EVENTUALLY. When the time is right. When it makes financial and practical sense for my family.
Renters can do their homework, too. One can be knowledgeable about the market without being neck-deep in it.
This blogger might want to review your comment before posting it.
Recent Posts
browse this blog
by categoryINside Boston.com