Buying or selling a home isn’t just about numbers on a page. It’s about judgment, which is often clouded by noise. Drawing from Daniel Kahneman’s insights, we will explore how mood, timing, group dynamics, and even headlines can influence real estate decisions. Learn how to spot hidden biases, separate priorities from personalities, and make clearer choices that lead to better long-term results.
Eric Andersen, B.A., M.Div.
Owner/Designated Managing Broker, Andersen Realty Group
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Transcript:
When buyers and sellers think about pricing a home, the good ol’ comparative market analysis, or CMA, is usually the first thing, and sometimes the only thing, that comes to mind. I’m Eric with Andersen Realty Group, and while CMAs are useful, it’s not the whole story. Buying or selling a home isn’t just about numbers. It’s about judgment. And, as Daniel Kahneman demonstrates in his book Noise, there’s a lot more that goes into our decisions than rational facts. Our decisions are almost always affected by noise. Noise is the variability in our judgment that has nothing to do with facts. If this weren’t bad enough, most people don’t even recognize that it’s happening. Two appraisers can value the same home and end up with very different numbers. Two buyers can walk into the same house on different days and have completely different reactions. None of this is due to the house itself. It’s due to noise, and making better decisions about selling or buying homes begins with recognizing this.
Kahneman distinguishes between different kinds of noise. One of the most important for real estate is occasion noise. This is the way our judgment changes based on things like timing, mood, or context. Imagine a buyer who just had a stressful day at the office, and now they’re stuck on I-55 in rush hour traffic. They show up 15 minutes late to see a home, and now it feels cramped, the yard looks small, and the traffic noise out front seems unbearable. Now imagine that same buyer coming back to see the home on a different day after a relaxing morning. Now, they notice the sunlight coming through the windows, the cozy layout, and the convenient location. Occasion noise affects perception, and when it comes to real estate, that perception can be worth hundreds of thousands of dollars. It might not be the best idea to go home shopping the day you got a promotion or the S&P 500 hit a new record high. That’s like going grocery shopping on an empty stomach. You’ll inevitably end up spending more than you wanted to.
There’s also pattern noise, which Kahneman defines as the consistent biases different people bring to the table. One buyer always writes lowball offers because they grew up in a family that pinched pennies. Another buyer always overpays due to fear of missing out. Sellers can fall prey to this, too. They might anchor their expectations in what a neighbor got, or in the amount of money they need rather than what’s supported by the market.
It’s also important to be aware of group dynamics. In theory, having more voices in the room should cancel out noise. But in practice, groups often amplify it. Family members fixate on different things. One wants the open kitchen. Another is focused on the school district or the commute. The loudest voice doesn’t always have the best judgment, but it can affect the decision. Couples often compromise not by finding the best house but by going with the one the dominant person likes best or that offends the quieter person the least. Agents, relatives, inspectors, attorneys, and even lenders can all add their own noise to the process.
It’s important for buyers and sellers to be aware of these hidden factors, because they can have a big impact on decisions. The house itself doesn’t change, but our perception of it can. The key is to step back, recognize when noise is distorting judgment, and keep long-term priorities in view rather than let personalities or external factors determine the outcome. A good agent can certainly help keep priorities front and center, but the first step is awareness.
The market has noise, too. One month inventory is up, and another, it’s down. One weekend brings multiple offers, the next brings none. Just because the market feels one way at a given time doesn’t mean everything has shifted. As Kahneman reminds us, we’re hard-wired to see patterns even in randomness, which is why short-term trends can trick people into changing course prematurely. When it comes to real estate decisions, patience is often a virtue. That doesn’t mean you should sit around on the sidelines and wait when a great home becomes available and gets competitive. Someone who has been doing their homework and has patiently waited for the right home to come up will be ready to act quickly, decisively, and present an intelligent, strong offer.
Eliminating noise isn’t possible, but we can get better at recognizing it. It’s important to know when your judgment is being clouded by circumstances, emotions, or group pressures, and to have reliable systems and support to keep you grounded when the numbers look fuzzy and the voices get loud. A CMA may be able to help with pricing a home, but it can’t tell you how your mood will be on a given day, about the influence of family members, or how economic and political headlines might affect your decision-making. That’s where awareness makes the difference. The more you can separate priorities from personalities and signal from noise, the closer you’ll be to making a decision that truly serves your long-term goals. If you’d like my help reducing noise with your next home sale or purchase in the western suburbs of Chicago, reach out using my contact information, below. I’m Eric with Andersen Realty Group, a family-owned brokerage where we treat our clients like family.