You will be able to recognise anchoring and deadline pressure in property, car and other large purchases.
Hui Min and her fiance, Wei Jie, went to view a resale flat in Bukit Batok on a Saturday morning. The agent opened with the asking price, S$688,000, and mentioned that two other couples were viewing that afternoon and the seller wanted an answer by Monday. By Sunday night they were discussing whether S$670,000 would be a fair offer. At no point had they asked themselves what they'd decided the flat was worth to them before the agent said a number. They hadn't decided. The agent's number had filled the space.
Critical thinking and better decisions, lesson 5.2, Anchors and confirmation, explains anchoring: the first number you hear pulls your later estimates towards it, even when you know it's arbitrary. Lesson 4.3 showed how retailers use anchors with crossed-out prices. Big purchases use the same mechanism with far more money at stake.
In property, the asking price is the anchor. Every counter-offer gets measured against it, so S$670,000 feels like a hard bargain next to S$688,000, even if the flat is worth less to you than either. At a new launch, the first quote at the show flat does the same work, especially when it's presented next to the higher prices of "the units already sold" or a future price list. For a car, the list price or the first package quoted sets the scale, and every discount, free servicing package and accessory bundle is judged against it.
The anchor doesn't have to be an outright trick. Asking prices are a normal part of negotiation. But the anchor is set by the person who benefits from a higher price, and it has its effect whether you notice it or not.
Sellers of big-ticket items also tend to add time pressure. "Another couple is viewing this afternoon." "The price goes up after launch weekend." "Only three units left in this stack." "This package ends at month end." Some of these will be true. All of them cut the time you spend comparing, and lesson 2.2's loss aversion makes the deal you might miss feel more valuable than it did ten minutes ago.
Launch days add crowds. When a new condo opens for sale and the showroom is packed, the crowd itself becomes evidence that the price is fair. That's herding, from lesson 6.3, moved from the stock market to the property market, and the same logic applies: by the time a crowd has formed, it tells you about demand, not about whether the price suits your budget.
There's an odd pattern in how people spend their decision time. They'll compare phone plans for an evening to save S$5 a month. Then they'll commit to a S$600,000 flat or a S$150,000 car after two viewings and a weekend of pressure. The stakes and the time spent run in opposite directions.
Part of the reason is that big purchases are rare, so people have little practice. Part of it is that the sales process for big purchases is often designed to be fast. And part of it is that the numbers are so large that small differences stop feeling real: S$10,000 on a flat price sounds like rounding, but it's more than many people save in a year.
The time you spend should grow with the size of the decision. That means more viewings, more comparisons and, above all, a number of your own before you hear anyone else's.
The defence against anchoring is to set your own anchor before you meet the seller's. Decide the most you'll pay, write it down with the reasons, and treat it as the limit.
Your maximum should come from your own numbers: what your budget can support, the loan you can actually get and service, and what similar flats or cars have recently sold for. Property & Mortgages, lesson 4.5, Work out your own maximum loan, shows how to calculate the loan side, and lesson 6.2, Valuation and cash over valuation, explains why paying far above valuation matters for a resale flat. Recent transaction prices for HDB resale flats are published by HDB, so you can see what nearby flats of the same type actually sold for.
Hui Min and Wei Jie went back and did it properly. From their budget and loan limits, and from recent sales of similar flats in the same area, they set a maximum of S$625,000, wrote down why, and agreed that neither of them would go above it without a night's sleep and a fresh look at the budget. They didn't get the Bukit Batok flat. Three weeks later they made an offer on a different flat for S$612,000, and it was accepted.
Think about your next big purchase, whether a flat, a car, a renovation or something else, and decide the maximum you'd pay for it before you look at a single price.
Write the maximum you would pay for your next big purchase before you look at any price.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).