6.2: Part II- Decision-Making

Decision-making in real estate is a process that carries significant implications for professionals. From determining optimal prospecting strategies to negotiating complex transactions during escrow, real estate professionals are repeatedly faced with choices that shape the trajectory of their careers and outcomes for their clients.

Given the substantial financial stakes involved in real estate transactions, success hinges on prudent judgment backed by knowledge, experience, and industry expertise. Each decision requires careful consideration of market dynamics, legal regulations, client preferences, and ethics to ensure the best possible outcomes. How do you assure that you are making the best decision possible? Let’s learn.

The Rational Decision-Making Model

Whether your mindset tends to be fixed or growth oriented, decisions need some structure and basis for reaching them. A well-known model that provides a framework for making well-informed and logical choices is the Rational Decision-Making Model. Many renowned scholars and researchers in behavioral economics and decision theory have studied this model extensively, including Herbert Simon, Daniel Kahneman, and Amos Tversky.

The Rational Decision-Making Model leading to a sound choice involves the following steps:

1. Identify the problem. Begin by acknowledging that a decision that needs to be made. This could mean identifying a problem, opportunity or goal that requires action.
2. Collect Information. Gathering information is crucial. This information may consist of facts, data, opinions and other details to help grasp the situation and assess choices.
3. Explore Options. Using the information, explore potential courses of action or alternatives. These options should be practical and feasible for addressing the decision at hand.
4. Assess Alternatives. Evaluate each option or alternative by weighing the pros, cons, risks, outcomes, and other factors associated with each choice. Consider, for example, cost in terms of time, dollars, stress, emotion, durability, and so forth.
5. Decide on a Course of Action. After evaluating the alternatives, select an option to pursue that aligns best with goals, preferences and limitations.
6. Put the Decision into Action. Once a decision is made, it must be implemented. This includes creating a plan assigning resources and then carrying out the chosen course of action.
7. Assess the Results. Once the decision is implemented, assess the outcomes to determine if the intended goals have been achieved. This feedback loop helps in learning from experiences and enhancing decision making processes.

These steps may not always follow a sequence, and they may require adjustments based on new information or changing circumstances. While the Rational Decision Making Model offers a logical approach to making decisions, remember that decision making is often influenced by mindset, cognitive biases (see Module 12 regarding fair housing), emotions, and other factors.

Decision-Making for College Students

College students can greatly benefit from using the rational decision-making model when it comes to managing their classes, studying, tests, and homework assignments. This model involves a systematic process of defining the problem, identifying the criteria, weighing the criteria, generating alternatives, evaluating the alternatives, and making a decision. For instance, when choosing classes, students can start by identifying their academic goals and requirements, then list potential courses that align with these goals. They can weigh factors such as course difficulty, professor reputation, and schedule compatibility before making a final decision.

When it comes to studying, the rational decision-making model can help students create an effective study plan. They can begin by assessing their current understanding of the material and identifying areas that need improvement. By setting clear criteria for what constitutes effective study methods—such as time efficiency, retention rates, and personal learning preferences—students can evaluate different study techniques and choose the ones that best meet their needs. This approach ensures that their study time is used efficiently and effectively.

For tests and homework assignments, students can use the model to prioritize their tasks and manage their time. They can start by listing all upcoming assignments and exams, then rank them based on factors like due dates, difficulty, and impact on their overall grade. By evaluating the importance and urgency of each task, students can allocate their time and resources accordingly, ensuring that they stay on top of their workload and reduce stress. This structured approach not only helps in achieving academic success but also in developing valuable decision-making skills that will be useful beyond college.

Challenges

College students often encounter several common pitfalls in decision-making that can impact their academic and personal lives. One major pitfall is procrastination. Many students delay making decisions or taking action until the last minute, which can lead to rushed and poorly thought-out choices. This can affect everything from selecting courses to completing assignments, ultimately impacting their grades and stress levels.

Another common issue is over-reliance on peers. While seeking advice from friends can be helpful, students sometimes make decisions based on what their peers are doing rather than what is best for their own academic and personal goals. This can lead to taking courses that are not aligned with their interests or strengths, or adopting study habits that are not effective for them.

Additionally, lack of information can be a significant pitfall. Students may make decisions without fully understanding all the options or consequences. For example, they might choose a major without researching the career opportunities it offers, or they might select a course without knowing the workload involved. Ensuring they gather sufficient information before making decisions can help avoid these pitfalls and lead to more successful outcomes.

Other Factors

Other factors to include when making a decision include reality and values checks, external accountability and validation.

1. Reality Check

By performing a reality check, you can start the decision-making process more efficiently. A reality check enables you to take a step back and look at the full picture. Are your expectations realistic? How will the options affect your life and the lives of others? Do you have the resources (monetary, emotional, or physical)?

When making academic decisions, college students can benefit from conducting reality checks. This involves assessing the current situation and understanding the practical implications of their choices. For example, a student might consider their current workload, available resources, and time constraints before deciding to take on an additional course. By grounding their decisions in reality, students can avoid over-committing and ensure they are making feasible choices.

Balancing academic and personal goals during reality checks requires a thoughtful and strategic approach. Students can start by clearly defining both their academic and personal objectives. For instance, they might aim to maintain a high GPA while also wanting to participate in extracurricular activities or maintain a part-time job. By understanding their priorities, students can make more informed decisions that align with both sets of goals.

Reality Checks for College Students

Here are a few examples of how reality checks have influenced academic decisions for students:

1. Course Load Management: A student might initially plan to take five courses in a semester to graduate earlier. However, after conducting a reality check, they realize that their part-time job and extracurricular commitments already consume a significant amount of their time. Understanding the risk of burnout and potential impact on their grades, they decide to take four courses instead, ensuring they can manage their workload effectively.

2. Choosing a Major: Another student might be interested in majoring in a highly competitive field like engineering. After a reality check, they assess their current grades in prerequisite courses and the level of difficulty they experienced. Realizing that they struggled significantly and that their GPA might not meet the program’s requirements, they decide to explore other majors that align with their strengths and interests, leading to a more realistic and satisfying academic path.

3. Study Abroad Programs: A student eager to study abroad might initially choose a program in a country with a high cost of living. After a reality check involving a detailed budget analysis, they realize that their financial aid and savings won’t cover all expenses. Consequently, they opt for a study abroad program in a more affordable country, ensuring they can have the international experience without financial strain.

The above examples illustrate how reality checks help students make informed and practical decisions, ultimately leading to better academic and personal outcomes.  Now, let’s take a look at career questions that a real estate professional may ask themselves.

Reality Check - Career Example

Imagine you're considering becoming a real estate photographer. Ask yourself if your expectations are realistic.

• Do I have the needed resources (time, money, skills, equipment) to get there?
• What obstacles might get in the way?
• What risk is involved?
• Are there already so many photographers in the area that the competition will be very steep?
• How long will it take to build a client base and earn a sustainable income?
• What other income will I need while I’m building the business?

An honest evaluation helps ensure your enthusiasm is coupled with a practical understanding of what's involved before you invest significant time and effort.

2. Values Check

Values checks are equally important in the decision-making process. This involves reflecting on personal values and long-term goals to ensure that decisions align with what is truly important to them. For instance, a student might prioritize courses that align with their career aspirations or personal interests, even if they are more challenging. By staying true to their values, students can make decisions that are more fulfilling and meaningful in the long run.

Make sure that your decisions and goals align with your values; that is, the set of beliefs shaped by your spiritual, cultural, and/ or environmental background.Following a plan of action that does not align with your values could be difficult and demotivating. Ensuring that your values match your desired goals will help tremendously on your journey towards success.

Values Check - Career Example

Michael Cho plans to enter the field of real estate. He has identified two options: (1) house flipping; and (2) community revitalization.

In examining his options, Michael learns that flipping could be fast and very lucrative, but it might involve pressuring sellers for low prices and potentially displacing long-term residents. On the other hand, buying undervalued properties, renovating them with high-quality sustainable materials, and selling them to families looking to participate in community life would take longer and might not make as much property.

Michael realizes that the second option aligns with his value of contributing to positive change in a community. Also, using sustainable materials aligns with his concerns about the environment. This alignment with his values would fuel his motivation and perseverance as he tackles the challenges.

3. Accountability

Accountability plays a crucial role in effective decision-making. Students can hold themselves accountable by setting clear goals and regularly reviewing their progress. Additionally, sharing their goals with a mentor, advisor, or peer can provide external accountability and support. This helps ensure that they stay on track and are more likely to follow through with their commitments.

Accountability is a powerful way to keep you in alignment with your goals. You can find accountability through internal and external resources. An internal accountability system would include creating a task list and checking off items as they are completed. External accountability may include partnering with a person, group, or community who will hold you accountable. Finding a mentor–an experienced advisor who will guide you in making decisions that are aligned with your goals–is an excellent way to build accountability. In real estate, joining a team is an excellent way to receive mentorship and gain accountability.

Practice Zone

Conduct a personal values assessment using the free test at https://personalvalu.es/personal-values-test . After you identify your most important values, use one of the AI tools provided on the site to explore those values in a relevant and meaningful way. You will enjoy engaging with the test and the results. After examining your values, explain how two of your academic or career goals align with your top values. Give examples.

 

4. Validation

Finally, validation involves seeking feedback and confirmation from trusted sources to ensure that their decisions are sound. This can include consulting with professors, academic advisors, or peers who have experience in the relevant area. By seeking validation, students can gain different perspectives and make more informed decisions. This process helps to build confidence in their choices and reduces the likelihood of overlooking important factors.

 

Other factors include education and mentorship.