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Are You Competent Enough?

My editor (who I’m married to) had a bicycle accident on August 30th which resulted in broken and fractured bones. Her recovery will take some months and because health comes beyond all else I’ll not bother her with editing. This means two things.

1. I can make the statement below (she’d never allow it).

Zillow, Bravo and HGTV real estate shows (and like shows) are the equivalent of real estate pornography. It’s reality T.V. in the guise of information. Entertainment is fine but don’t confuse entertainment with information (fiction vs. truth). To do so put’s your money is at risk.

2. I get to reprise (and update) a Newsletter from the Homebuyer Associates vault. Enjoy.

I write about money and real estate because many people don’t see the connection. The potential for money to be lost is increased when a real estate purchase is made without information – and I’m not talking about the “isn’t this a lovely kitchen” kind of information.

Warren Buffet, the famed investor, often discusses the concept of a “circle of competence.” In his field the circle consists of all businesses with which the investor is familiar and understands. His words came to mind recently when I read that a famous author lost her life savings – she invested with two “investment specialists” who did currency arbitrage.

Another example, closer to my world, is an acquaintance (who didn’t use Homebuyer Associates) who had an offer to purchase fall apart the day before closing. The buyer commented, “It was a foreclosure and I don’t know much about foreclosures.” Buffet also advises to “Invest in what you know.” If the buyer didn’t know much about foreclosures, why was he trying to buy one?

“You suppose something will happen when someone gets paid” is a poetic way of saying: ‘It is implied that good will happen if professionals are paid’. The author and my real estate acquaintance found otherwise. Take the time to interview and understand the mission statement of the agent you are considering working with – most importantly who they really work for. We’re always glad to share who we are and our mission statement over a cup of coffee.

I’ve learned to accept the fact that everyone knows real estate.Illusory superiority is a cognitive bias that causes people to overestimate their positive qualities and abilities and to underestimate their negative qualities, relative to others. No doubt because so many people consider the afore-stated shows informative, today’s many buyers suffer from illusory superiority. That illusion will cost you money.

I don’t know how or why everyone knows real estate but they think they do. Recognizing the possibility that illusory superiority may play a role, I believe our objective, unemotional approach – as Exclusive Buyer Agents – has helped our clients avoid mistakes when buying a home.

It helps that I know what I don’t know. When I venture into “I don’t know land” I consult or hire or use people who do. This approach started on the playgrounds. At age 14-15 I’d find playgrounds around the city to play basketball where I was the 9th or 10th best player. I thought I’d learn more by playing against players who were better than me. This approach allowed me to attain a goal I’d had since 7th grade – playing college basketball.

I refer to this approach as the “bump theory” as in when you bump into someone who knows more than you about a subject – ask questions and don’t pretend to have all the answers.

I remain mystified why more people don’t use “bump theory” but they don’t. They continue buying real estate the Zillow, Bravo and HGTV way – and all the while putting their money at risk.

Thanks for reading,
Michael D. Holloway

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Homebuyer Associates
1835 N. Riverwalk Way
Milwaukee, WI 53212
Phone: 414-254-4129