Transacting Property
Transacting Property
This chapter examines how the psychology of cognition, decision making, and deception affects buyers and sellers in real estate transactions. The chapter describes how some aspects of property law, such as standardized forms of property (e.g., fee simple ownership, leasing) may reduce information-processing costs and enhance understanding of transactions. Yet other laws, such as property defect disclosure, fail to respond to buyers who struggle to process, update, and price complex, late-coming information and sellers who are subject to motivated reasoning and tendencies toward deception. The chapter also considers emerging psychological evidence on conflicts of interest that calls into question the prevailing approach of allowing dual agency by brokers (i.e., representing both buyer and seller).
Keywords: Schemas, bounded rationality, sunk costs, optimism bias, anchoring, motivated reasoning, deception, dual agency, nudges, debiasing
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