The Psychology of Real Estate: Fred Flintstone and the Low-ball Offer

Fred Flintstone and his family lived at 301 Cobblestone Lane, Bedrock in a 2 bed, 1 bath bungalow with an attached garage and a wood-burning fireplace. The home was a cozy place for two, but when Wilma was pregnant with Pebbles, Fred decided to put the house up for sale and look for something a little bigger.

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He listed his home for 100 clams. A number he thought was fair and reasonable based on past comparable sales.

Meanwhile, his best friend Barney Rubble and wife Betty were thinking about buying a new home. The market in Bedrock was slow, and as a result, there have not been that many sales in the year. When Betty saw the For Sale sign, she demanded Barney make an offer.

That night Betty and Barney argued over how many clams they should offer the Flintstones for their bungalow. Betty, who has a reputation for overspending, was insisting they pay the full asking price for fear of losing out on the home. Barney felt the opposite. He was frugal, and he just wanted to get a good deal.

The next morning, Barney made Fred an offer of 50 clams.

Fred Flintstone is generally quick to lose his temper, even over the most trivial matters, but this matter was far from trivial. Barney’s offer was not well received. Fred Flintstone was insulted, and that night the entire town of Bedrock could hear Fred’s outburst.

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Barney returned home to Betty and told her that Fred had lost his temper again. Betty begged him to go back with a higher offer.

Half an hour later, Barney goes over to see Fred again with a much higher offer than before, hoping Fred will negotiate with him.  This time Fred refuses to speak with him and won’t even look at the offer. He is so angered by Barney and decides that under no circumstance will he sell this house to Barney, whether or not he is the sole and only Buyer.

In an emotionally charged decision, Fred takes the house off the market and decides to build an addition for the new baby addition instead. 

What lesson can we take from this fictional story set in the Stone Age? 

The situation is similar and the reverse to an economics experiment called “the Ultimatum Game”.

In the Ultimatum Game, a Proposer decides how to split a sum of money with a Responder. Let’s say the Proposer is given $100 and can choose to split the money with the Responder in any percentage the proposer would like. However, if the Responder rejects the proposal, both players get nothing.

Psychologists can gather insight into the human psyche from the outcome of this game.

What they found is that Proposers found success when they offered between 40%-50% to the Responder. When Proposers offered less, the Responders generally rejected the offers and both players ended up with nothing. 

Why would a person reject 30% and leave with nothing, when it’s economically irrational? Isn’t something is better than nothing? 

Informed, knowledgeable Responders may react to small ultimatum offers by perceiving them as unfair, feeling anger, and acting spitefully. They prefer to have nothing and punish the Proposer’s greed. Perhaps the line of thought is that they would only lose 30%, whereas their opponent will lose 70%.

Many psychological complexities can be drawn from the Ultimatum Game, especially if it’s a one-shot deal. The Proposer will have to work out the minimum offer that’s likely to be accepted. Most Proposers will act fairly, or appear to act fairly, as it’s a highly rational custom in a society where people have to work together.

In Fred Flintstone’s case, he is the Responder while Barney Rubble is the Proposer. He and Barney were the only two players, and it was somewhat of a one-shot deal. Barney offered Fred a sum that was far too low and unfair. Rather than take some time to cool down, Fred was quick to act and decided to punish Barney and took his house off the market. Neither Fred nor Barney ended up with anything and the deal was unsuccessful.

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Does this happen in real estate in real life? Generally, Sellers don’t react well to low-ball offers if they perceive the amount to be unfair. Buyers are allowed to make as many offers to a Seller as they like, but once they’ve established a poor relationship, negotiating becomes more difficult.

The short lesson today is for Buyers. If you find a house you love, don’t risk spoiling the relationship between you and the Seller with a low-ball offer. You will have greater success if you offer a fair amount.

 

  

THE PRECEDING COMMENTARY IS THE OPINION OF HANNA MACDONALD AND DOES NOT REPRESENT THE INTERESTS OR OPINIONS OF RIGHT AT HOME REALTY INC., BROKERAGE OR THE TORONTO REAL ESTATE BOARD. THEREFORE, RIGHT AT HOME REALTY AND THE TORONTO REAL ESTATE BOARD WILL NOT BE HELD RESPONSIBLE AND/OR LIABLE FOR ANY OF THE OPINIONS HEREIN.

THE AUTHOR IS NOT LICENSED TO PRACTICE PSYCHOLOGY. THE RESEARCH FINDINGS REFERENCED IN THE COMMENTARY ARE USED TO MERELY UNDERSCORE THE AUTHOR’S OPINION AND OBSERVATIONS.

 

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