One of the smartest people I know often notes that people make purchases emotionally and justify logically. And, I am realizing that this applies to screwdrivers as much as it applies to real estate.

We buy what we want or need. But HOW we buy it says a lot about us. For instance, say you need a screwdriver. Do you just go to the store and buy the one that will work and get on with your day or do you compare prices at 5 different stores before making the right decision?

This is not a matter of frugality, as even frugality is a choice. I am a very frugal person, even when I don’t need to be, because it gives me deep satisfaction that I am not getting ripped off. Another frugal guy I know feels like he is using a trick to get one over on the man when he uses coupons (And, he doesn’t really need to use coupons). But, us frugal people justify our purchases as smart money-saving moves.

On the flip side, others might buy whatever they want without giving a second thought to price. They justify it by saying they are buying the top quality or living in the moment.

And, when it comes to real estate, it isn’t much different. We tell ourselves and others that we want a solid house in a certain price range that will increase in value. We make it sound like we are making a very rational decision after days and weeks of deliberation.

But, when it comes right down to it, most people buy the house that they respond to emotionally. I often hear from buyers, “This one just feels like home,” and not “Well, this house meets 93% of our criteria, so let’s make an offer.”

What prompted this blog entry is an article at SmartMoney.com making the rounds this week about the psychology of real estate purchases, which I found very fascinating. It is not something people talk about very much.

For instance, buyers often respond negatively at some level to homes that are marketed as having a lot of new features (new flooring, new roof, etc) as it leads them to worry about why the house needed new things and what else might be wrong. I also think that people want to put their own imprint on their new home and might feel guilty about getting rid of new stuff to replace it with their own.

On the flip side, houses that required simple affordable upgrades (like new paint) often turned off buyers, making them think that the house was too much work.

These two facts are somewhat contradictory, but there they are in this academic study. Which reminded me all the more that people buy emotionally and justify logically. Even when they are buying something that costs hundreds of thousands of dollars.

I highly recommend the article, which you can read by clicking RIGHT HERE.

What do you think? How much does psychology and emotion play into your big purchases?