How a house tour can completely alter your home-buying budget — and why trained professionals struggle with it too. Plus three nudges before your next home or car purchase.
Money Nudges — Part 2 of 3: Anchoring
How it begins
You start house-hunting with a number in your head. Something your budget supports — maybe around $300,000, which (believe it or not) is close to the national median for a “starter home” these days.
Your realtor lines up a Saturday of house tours, and the first one on the list is a $425,000 three-bedroom in a nice neighborhood with an updated kitchen. Even though it’s around the typical price for a home in the U.S. right now, this would be a real stretch for you. But you walk through it and imagine your life there. If I really cut back my spending, could I afford it?
By the third house, the $260,000 starter home you visit feels small. Cramped. A consolation prize.
Nothing about your budget changed. What changed is the first number your brain saw.
What’s actually happening
If you missed part 1, this is the second in a three-part series on anchoring bias: the brain’s nasty habit of treating the first number it sees as the reference point for every decision that follows. Even when that number has nothing to do with what something’s actually worth. In Part 1, I saw a cat tree priced at $999 (ridiculous!), which made the $350 version I bought feel like a bargain. Price tags make a difference.
The same influence works on six-figure houses, too.
Even experts can’t out-think it
In a well-known study, researchers asked two groups – newbie college students and practicing real estate agents – to walk through an actual house for sale in Tucson. Everyone got an identical packet of facts: same description, same comparable sales nearby. The only thing that secretly changed between groups was the listing price printed on the fact sheet. Some groups saw a listing price well above the home’s real assessed value, and others saw a price well below it.
Afterward, everyone was asked to estimate four things: the home’s value, a fair selling price, a reasonable price to offer as a buyer, and the lowest offer a seller should accept.
All four numbers shifted based on whatever listing price people happened to see. People who saw a lower listing price estimated lower numbers. Those who saw a high price gave higher numbers. And it held true for both inexperienced college students AND professional real estate agents.
Here’s the real kicker. When researchers asked the agents afterward whether the listing price had influenced their thinking, they were adamant: No, it did not. This is exactly the kind of thing years of professional experience allegedly teaches you.
But their actual numbers proved otherwise. Expertise didn’t make them immune to the anchor — it was even worse: They were more confident they weren’t affected by it.
In a well-known study, researchers asked two groups – newbie college students and practicing real estate agents – to walk through an actual house for sale in Tucson. Everyone got an identical packet of facts: same description, same comparable sales nearby. The only thing that secretly changed between groups was the listing price printed on the fact sheet. Some groups saw a listing price well above the home’s real assessed value, and others saw a price well below it.
Afterward, everyone was asked to estimate four things: the home’s value, a fair selling price, a reasonable price to offer as a buyer, and the lowest offer a seller should accept.
All four numbers shifted based on whatever listing price people happened to see. People who saw a lower listing price estimated lower numbers. Those who saw a high price gave higher numbers. And it held true for both inexperienced college students AND professional real estate agents.
Here’s the real kicker. When researchers asked the agents afterward whether the listing price had influenced their thinking, they were adamant: No, it did not. This is exactly the kind of thing years of professional experience allegedly teaches you.
But their actual numbers proved otherwise. Expertise didn’t make them immune to the anchor — it was even worse: They were more confident they weren’t affected by it.
It’s not just open houses
Anchoring shows up in big purchases in several ways. Not just a home’s listing price, but also:
A mortgage pre-approval letter. When a lender pre-approves you for a $475,000 house, suddenly $475,000 starts to feel like your budget. In reality, that number reflects the highest amount the lender believes you could technically repay – not what actually leaves room in your budget for savings, travel, or a sudden car repair. Mortgage professionals openly warn buyers about this: the approval amount is a ceiling, not a target. But it rarely feels that way once you’ve seen the number in writing.
The sticker price on a car. That number in the window is often set well above what the car will actually sell for. And it’s designed to be a number you negotiate down from. While paying “$2,000 less than sticker” feels like a win, it can still mean you paid more than the car was ever worth.
The first number you saw is doing exactly what it’s designed to do.
Three small nudges
- Pull your own comparisons before the first house tour. Look at actual sold prices in the neighborhood — not list prices — from a source that isn’t trying to sell you anything. That number now becomes your anchor, instead of the ridiculous listing price.
- Write your ceiling down somewhere. Text it to a friend, or put it in a notes app. A vague number in your head is different from a concrete number in writing. It’s a lot easier to talk yourself into “just a little over” when your number only existed in your head.
- Ask your agent to start with a below-budget option first. Seeing the $260,000 house before the $425,000 one resets what “reasonable” feels like for the rest of your search. Don’t let the priciest house you tour first sway your decision.
These nudges won’t make that updated kitchen in a nice neighborhood any less beautiful. But they’ll help you make smarter decisions based on your own goalposts.
Next up in the series: what happens when the “first number” is a lowball salary offer — and why “negotiate harder” isn’t actually the fix most of us have been told it is.