5 cognitive biases to better understand your customer

Do you think you're rational? Able to make a decision without any outside influence? Without realising it, your judgement, which you imagine to be impartial, may be altered by a series of thought mechanisms. Here are the 5 cognitive biases that can influence you and your clients in your activity as an estate agent.

What are cognitive biases? Forms of thinking that are quick and intuitive ways of making a judgement or a decision. They are opposed to analytical reasoning, which takes into account a range of relevant data and information.

In thereal estateThese cognitive biases can manifest themselves in a variety of ways, both on the part of customers and on the part of estate agents themselves. While it is impossible to completely ignore these biases, it is important to analyse how they work in order to better understand and anticipate your clients' behaviour. You can recognise the situations in which you may be faced with an error in reasoning. No real estate professional, however experienced, is immune to a lack of discernment due to one or more cognitive biases!

Here are the 5 cognitive biases that can influence you and your customers in your day-to-day estate agency work.

• False reference point bias :

When selling a property, it is common to base the selling price on a false reference point. This reference point may be the purchase price or the price of a similar property in the same town or street. However, there are many other criteria that need to be taken into account if the price of a property is to be set correctly. The role of the estate agent is precisely to assess the price of a house or flat as accurately as possible, without taking these external factors into account.

• Anchoring bias :

It refers to the difficulty of detaching oneself from the first impression or the first price communicated of a property transaction. With this bias, all new information is interpreted from this point of reference. For example, a price that is too high influences the potential buyer's offer and may therefore lead him to pay too much. A bit like the previous bias. Sellers can also fall victim to anchoring bias by using irrelevant indicators as a reference point.

• Familiarity bias :

This bias consists of putting more trust in what is familiar or close to us, and favouring it over other options. The property sector is characterised by a certain opacity. Unlike the financial markets, which allow their players to enjoy transparency of information. In the property sector, this bias is reflected in the fact that buyers concentrate their purchases in the neighbourhood, an area with which they are familiar and which they consider more secure.

• Loss aversion bias :

This behavioural bias means that humans attach more importance to a loss than to a gain of the same value. For example, the discomfort generated by a loss of money is twice as great as the pleasure derived from a gain of the same amount.

In the property sector, individuals risk selling their homes at a loss because the expected market value at the time of sale is lower than the purchase value of their property. They tend to put their property up for sale at higher prices than similar properties. Loss aversion bias is often associated with anchoring bias. Since we are referring to the purchase price, which leads to an overvaluation of the price good.

• Compliance bias :

Sellers and buyers are not the only players in the property market to be subject to cognitive biases. Conformity bias can affect estate agents themselves. In complex conditions and in a context of uncertainty. Some estate agents tend to follow the decisions of their colleagues, thinking that they have more information than they do. This is known as the information cascade principle.

You now know more about certain cognitive biases and how they affect your customers' brains (and your own). But there are dozens more. By learning more about these biases, you'll be able to better understand your customers' behaviour, anticipate their objections and implement actions to mitigate them.