For many clients, emotions around home and property aren't gone with the wind. Many of us grew up believing that owning a place of our own would be a sign of success in life. In some families and cultures, owning real estate is the only true mark of a family's wealth. For a fortunate few in this highly mobile nation, family holdings have deep emotional roots. In all these situations, a house is not just a home; it's a magnet for people's hopes, dreams, and disappointments.
With real estate prices having set new records in many areas of the country, clients' attitudes toward real property may lead to emotionally loaded financial questions or disputes that end up in your lap. Here are some ways you might approach helping clients sort out their options.
Q: A married client of mine wants to spend a recently awarded $40,000 bonus on a master bath upgrade, top-of-the-line appliances, and other renovations that he feels will pay for themselves when they sell their home. His wife would rather have the money go into their retirement savings fund. She says the house is fine as it is. How can I help resolve this impasse?
A: The need for these clients to add to their investment portfolio may be perfectly valid. I assume you're clear on their current financial situation and their probable retirement needs. But before you weigh in on whether improving the house or adding to the retirement fund would create more financial security, it's important to find out what's really motivating these folks.
Try to discover more emotional detail about each person's rock-bottom needs and wants. What do they think and feel about the home they live in? What are their hopes and dreams about home, hearth, and financial security in the future?
People have traditionally viewed their home as a center of family life, and often as an extension of themselves. From that perspective, it has typically been women's role to favor making improvements because they spend more time at home, are more attached to it, and feel more ashamed if it doesn't measure up to their standards. Men, who tend to be less aware of a need for renovation, often prefer to invest their money more conventionally.
Ask your clients if their home is truly in need of a fix-up. In this somewhat unusual role reversal, the husband may be expressing a desire for more up-to-date fixtures and furnishings that he can show off to friends. Alternately, his support for an upgrade may simply confirm that he views his home as a reliably appreciating investment.
Here's my suggestion: Model compassionate listening skills with each client by repeating their desires, validating what makes sense about each one from their perspective, and empathizing with what else they may be feeling. By using this method of slowing down and cooling off the process, you may learn more about why they have such dug-in positions.
Once you assess each client's deep desires and needs in the context of their future financial security, you'll feel better positioned to help resolve their dilemma by advising them on which course of action is best–or suggesting a compromise.
Q: In the fairly hot real-estate market where my business is located, a young couple I work with have done well at buying and "flipping" properties. I've warned them that they may lose everything if the market implodes, but they say they're not ready to get out, that "there's still money to be made." Is there a better argument I can use to reach these risk-taking clients?
A: The combination of these clients' youth and the allure of fast profits may make it difficult for them to imagine a catastrophic loss if the market goes bust.
Ask if they remember the day-trading boom, when it seemed as though everyone was making money on quick trades. But after their trading costs were factored in, they lost money. Of course, the "irrationally exuberant" market eventually went down, too.
