The 95/5 Principle

I know you have heard of the 80/20 principle, “The Pareto Principle”, and I agree with that principle for the general work environment. 20% of the effort for 80% of the results.  And Pareto may have even found a scientific way to prove it.  

As a real estate agent, I watch lots of folks make decisions, and I get to watch others decision making processes. I have the pleasure of opportunity for observation.

And what I see often enough leads me to come to this principle –  that people often make decisions based on something that is actually a small part of their lives.

In general application, the 95/5 principle is in effect when people buy a house where a major focus of what they want is something they will seldom use.  For example, they have to have a dining room for 2 family gatherings per year.  They require a dining room for 60 hours out of the 8,760 hours they will live there in a year.  I know, that is less than 5%, but let’s go with it.  Maybe they will have a few dinner parties.  The result of this is that they rule out houses that may actually work well for them, or even better in other situations they use more often, but they hold out for the house with the large dining room.  I call that  95/5 decision.  It is neither wrong, nor right.  It is a consideration that I want my buyers to recognize.  Once they recognize it, they are then deciding it on purpose, rather than letting an emotional need drive the decision making process.

We frequently see this also as a factor for seldom-played grand pianos, extra bedrooms for unborn grandkids, and a large yard for kids who don’t play outside.  Again, if a buyer can afford it, they can, of course, buy for things they love and wish for.  If they cannot afford the larger home, it is my desire that they’d be realistic in their usage of their house.

Certainly, the choice is the buyer’s and they can and will buy for the 5%, and that is fine.  House buying is mostly emotional anyway.  But for those of you on a budget, do you want to buy for the 5%?

Happy Shopping! You can read about the personal side of this principle here.