Stages of Buying a House
Discuss about the Understanding of Consumer Behaviour.
When purchasing an item, buyers consider a lot of factors and a lot of decision goes into the process before finally making a purchase. The following are the stages one goes through when wanting to make a purchase of a house.
In this stage, the buyer knows what they need and in this case, it is a house. However, they are not aware of the options or the choices available in the market. In most cases, the buyer already knows what they want and whatever decision they make will not be farfetched from their needs. Therefore they will make decisions based on their preferences (DiMaggio and Goldberg 2018). This does not deviate far from the homo economicus model which suggests that people make rational decisions based on self-preference. However, the decisions may not be rational.
In this stage, the buyer looks into the choices and options available in the market for houses. The buyer may decide to go online and look for real estate firms or agents to assist in the process. Once they have found a real estate agent, the buyer relays what they want and the agent informs them of the options that they have.
In this stage, the buyer is expected to make a rational decision and make decisions that maximize their personal preferred preferences. However, as humans, we are emotional people and it is very easy for emotions to get in the way of a decision. When going through the auctions, the buyer may find a house that has an emotional element that speaks to them. They will therefore not make a rational decision because it will be driven by their emotions hence deviating from the homo economicus model. This shows the behavioral economic concept that human beings are irrational.
In this stage, the buyer evaluates different houses on the market by attending different auctions. This stage is heavily dependent on a person’s attitude. If the buyer dislikes a certain house then they will not even look at it anymore. The involvement, in this case, is low and thus they are less likely going to purchase this house.
In this case, the buyer is already making a decision not to buy the house based on their emotions and this deviates from the homo economicus model and leans more towards the behavioral economic concept. The buyer is unable to make decisions rationally thus will end up making bad decisions.
Cognitive Processes Involved in Buying a House
In this stage, the buyer has already gone through all the stages and is supposed to make a purchase. If there is negative feedback from any other customers, this will affect the purchase decision. For example, if the buyer wants a particular house but another client informs them that the house is hunted. They will refrain from buying the house if they choose to accept the negative feedback. This shows that the buyer is not making decisions based on their self-preference but rather from other people’s opinions. This deviates from the homo economicus model.
Also, the price of the house goes into this stage. The buyer is posed with the question how will I maximize my utility? More often than not buyers make purchases that do not maximize their utility because the house they want satisfies all their emotions or social intentions. This complies more with the behavioral concept that the decision is influenced by cognitive bias, emotions and social influence hence the decision made is not in their self-interest which is what the economist man considers.
In this stage, the buyer has already purchased the house and now compares it to their expectations. Is the house what they wanted? Did they make the right purchase? Here they determine whether they are satisfied or not (Goto et al., 2017). If the house was purchased due to emotions or cognitive bias, then it will not meet the self-interest of the buyer. This might prompt them not to work with the company in future when the decision made was theirs.
In this case, again, the client feeds into the behavioral economic concept rather than a homo economic model. The buyer makes an irrational decision not to work with the agent again based on their negative emotions that the person did not deliver what they asked for.
Cognitive processes are the processes of acquiring knowledge and understanding. The following are the processes that buyers are likely to use:
In this processes, one identifies there need and provides attention to it. They can even go to the extent of identifying a particular product, in this case, a particular house and concentrate on it. This process is used so that one can provide their full attention to a particular product in order to know all the facts and make a decision based on them.
Perception
In this process, one captures information from the environment and processes it. It involves input from sense organs such as eyes, ears, nose figures and mouth and transforming it into perception entities such as words and ideas. This process is used so that a buyer can be able to translate information from the environment to what they want or need and also view it to see if it satisfies their needs (Grigsby 2017).
Government Policies and Implications on the Housing Market
In this process, one stores the knowledge the information that fits their need in order to access it later before making the purchasing decision. For example, as the buyer looks at different houses they will store in their memory their first three options (McCrone and Stephens 2017). This way later when they want to make a decision they will rely on these three stored in the memory. This process is used so that the buyer can eliminate any unnecessary information that will not help in making a purchasing decision (Fleming 2017).
In this process, one collects new information and experiences. On this case, the buyer learns from the real estate agent what is available in the market from the pricing to locations. This process is used to enlighten the buyer with information about different houses before making an informed decision (Fennell and Keys 2017).
In this processes, one looks at all the facts and information presented and conducts research which may include a discussion with others or oneself. This processed is used so that one can critically evaluate the information presented before making a decision (Tatum 2017).
- Once attention is brought to a particular house one will overlook other house and stay focus on the one even if there are better offers
- Once a person’s perception of a particular house is not good they will not bother learning more facts about it and look for one that feeds into their emotions
- Once a person decides to memorize a particular house they will only store good information about it overlooking its negative attributes (Oblak et al., 2017). They might end up buying a house because they loved the interior décor and it stuck in their mind when the house maybe has negative attributes
- One might be biased to only learn information about a house that suits their personal reference. Therefore will tend to select information to learn (selective bias)
- Other people’s opinions may affect ones reasoning about a house.
Various policies set by the government have had implications in the housing market. The housing market is increasing day by day because of the increase in population. Therefore it is important that the government sets up policies to ensure everyone is able to get adequate housing (Schultz, Stauffer and Lak 2017).
Affordable Homeownership: This policy aims at ensuring everyone can get an affordable price for the purchase of a home. However with economic instability housing prices at times inflate and the working class is unable to afford houses and those that they can afford are not in suitable living conditions (Yechiam, Ashby and Pachur 2017).
Healthy living environment: This policy aims at ensuring every person resides in an area that will not implicate their health in any way. However with pollution is a problem in many areas be it from industries or the people living in the area. Thus finding a healthy living environment is becoming more difficult (Fennell and Keys 2017).
Adequate shelter: This policy aims at ensuring everyone has a shelter that is enough for them and their family and the government ensures this by building enough housing infrastructure. However, this is a problem due to the increase in population making most people homeless since the housing is not enough (Arora, Singha and Sahney 2017).
Good growth. This policy aims at increasing affordability of houses through effective demand. With the growth in economy and a stable economy housing prices become stable and also affordable. This leads to increase in demand for housing which in turn ensures the economy stays stable. However, the economic growth is unstable due to poverty and low income (Das, Joshi and Finin 2017).
Secure Housing: This policy aims at providing housing that ensures the protection of the individuals or persons living in that establishment. Is the area secure from floods, tsunamis or even robbers? People will more likely live in an area where they feel safe.
References
Arora, S., Singha, K. and Sahney, S., 2017. Understanding consumer’s showrooming behaviour: Extending the theory of planned behaviour. Asia Pacific Journal of Marketing and Logistics, 29(2), pp.409-431.
Das, P.K., Joshi, A. and Finin, T., 2017, May. App behavioral analysis using system calls. In 2017 IEEE Conference on Computer Communications Workshops (INFOCOM WKSHPS): MobiSec.
DiMaggio, P. and Goldberg, A., 2018. Searching for Homo Economicus: Variation in Americans’ Construals of and Attitudes toward Markets. European Journal of Sociology/Archives Européennes de Sociologie, pp.1-39.
Fennell, L.A. and Keys, B.J., 2017. Introduction to Evidence and Innovation in Housing Law and Policy.
Fleming, P., 2017. The Death of Homo Economicus. University of Chicago Press.
Goto, N., Mushtaq, F., Shee, D., Lim, X.L., Mortazavi, M., Watabe, M. and Schaefer, A., 2017. Neural signals of selective attention are modulated by subjective preferences and buying decisions in a virtual shopping task. Biological psychology, 128, pp.11-20.
Grigsby, W.G., 2017. Urban housing policy. Routledge.
McCrone, G. and Stephens, M., 2017. Housing policy in Britain and Europe. Routledge.
Oblak, L., Pirc Bar?i?, A., Klari?, K., Kitek Kuzman, M. and Grošelj, P., 2017. Evaluation of Factors in Buying Decision Process of Furniture Consumers by Applying AHP Method. Drvna industrija: Znanstveni ?asopis za pitanja drvne tehnologije, 68(1), pp.37-43.
Schultz, W., Stauffer, W.R. and Lak, A., 2017. The phasic dopamine signal maturing: from reward via behavioural activation to formal economic utility. Current opinion in neurobiology, 43, pp.139-148.
Tatum, R.C., 2017. Homo Economicus as Fallen Man: The Need for Theological Economics. Journal of Markets and Morality, 20(1), p.127.
Yechiam, E., Ashby, N.J. and Pachur, T., 2017. Who’s biased? A meta-analysis of buyer–seller differences in the pricing of lotteries. Psychological bulletin, 143(5), p.543.
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