There’s a peculiar phenomenon that happens in both real estate and the stock market, and it goes something like this: the moment something becomes a genuinely good deal, a large portion of the buying public suddenly develops cold feet, an urgent need to “wait and see,” or a full-blown panic attack. It’s as if the word “discount” triggers a fight-or-flight response in otherwise rational human beings. We’re going to talk about that. We’re also going to talk about a house that got away, because it’s a perfect illustration of how people outsmart themselves right out of a great opportunity.
The Deal That Was Already a Steal
A client came to me not long ago with a very clear mission. He wanted “a deal.” When I asked him to define that – because real estate agents love nothing more than pinning down a moving target – he told me he wanted to buy a property under list price. Simple enough. Admirable, even. A man who knows what he wants.
We found a house. He liked it. It checked his boxes. The price looked reasonable on paper. And then he said the seven words that have haunted real estate agents since the beginning of time: “Let’s wait for the price to drop.”
Now, here’s where things get interesting, and also a little painful to recount. I ran the comps. For the uninitiated, “comps” are comparable sales – what similar houses in the same neighborhood actually sold for recently. When I finished running those numbers, I sat back and stared at my screen for a moment of quiet reflection.
The houses in that neighborhood were selling for roughly $65,000 MORE than what this house was listed for.
Let me be very precise about what that means. The house wasn’t just priced well. It wasn’t just a fair deal. It was already, at that exact moment, a smoking deal. The seller, for reasons known only to them and possibly their accountant, had left $65,000 on the table. The list price itself was the discount. My client was standing in front of a store with a “70% off” sign in the window, and he wanted to wait to see if it would go on double clearance.
You can probably guess what happened next. Another buyer – someone who either had a sharper agent, did their own homework, or simply didn’t overthink it – walked up, recognized the value, and wrote an offer. The house went under contract. My client, who wanted a deal, did not get the deal that was sitting right in front of him, because he was waiting for a deal.
This is not a unique story. This happens constantly. The market doesn’t care that you wanted to wait. In real estate, list price means almost nothing. It’s a starting off point. Sales price can go up or down.
The Stock Market Does the Exact Same Thing to People
Now, let’s talk about stocks, because the psychological parallel here is almost too perfect to be coincidental.
Warren Buffett – a man who has spent the better part of seven decades being right about money – once made an observation that is equal parts funny and devastating: the stock market is the only place where when things go on sale, people run for the exits. Think about that. At Costco, if a 50-pack of paper towels drops from $35 to $20, there’s a mob. People buy six. They’ll be 94 years old with paper towels they haven’t used yet, but they still buy those paper towels. But when a broad index fund drops 15%, suddenly everyone’s a philosopher. “I’m concerned about market conditions.” “I’m going to wait for things to stabilize.” “I don’t think now is a good time.”
You know what “waiting for things to stabilize” means in practice? It means buying back in after prices have already recovered, at a higher price, while congratulating yourself for being cautious. The volatility is the sale. The red numbers are the clearance rack. The panic is the 70% off sign.
When the market drops significantly, the instinct for most people isn’t “great, I can buy more shares for the same amount of money.” It’s closer to “everything is terrible and I should do something.” The something people typically do is sell. They lock in their losses, they move to cash, they wait for “certainty” – which is a thing that does not exist in financial markets, incidentally – and then they miss the recovery. Then they get back in when things feel comfortable again, which is almost always near another peak, and the cycle repeats.
It’s as if everyone knows intellectually that you’re supposed to buy low and sell high, but in practice, the low part feels dangerous and the high part feels safe. We have managed to collectively invert the most basic principle of investing, and we’ve done it reliably, for generations, across every market cycle.
Why Does This Keep Happening?
The short answer is that human beings are wired to treat falling prices as a warning signal. In most areas of life, this makes complete sense. If you’re in a grocery store and the chicken is marked down 80%, your first thought is probably “what’s wrong with the chicken?” Price drops, in everyday experience, often signal something bad: the product is old, damaged, unpopular, or defective. Our brains apply this same logic to assets, and it gets us into serious trouble.
A stock that’s down 20% isn’t necessarily a sick chicken. It might be a company that got caught up in a broad market selloff. It might be temporarily out of favor for reasons that have nothing to do with its underlying business. It might, in fact, be the house in the neighborhood that’s listed $65,000 below what everything else is selling for.
The difference between a good deal and a falling knife is a question worth asking. But “is this thing actually broken, or does it just look scary right now?” is a very different question from “I should panic and sell everything.” The first question is investing. The second one is something else.
What a “Deal” Actually Means
Here’s the part my client and a lot of investors get wrong about what constitutes a deal. A deal isn’t defined by what the price does relative to itself over time. A deal is defined by what you pay relative to what something is worth. Those are not the same thing.
A house listed at $400,000 that drops to $380,000 in a bad market might not be a deal, if it’s only worth $350,000. Meanwhile, a house listed at $400,000 in a neighborhood where everything else sells for $465,000 is a deal the moment it hits the market – not after it’s been sitting there for three months and someone else has already bought it.
Stocks work the same way. A stock that’s down 30% from its high might be a spectacular bargain, or it might still be overpriced, depending entirely on what the business is actually worth. Price movement tells you what the market has done. It doesn’t tell you what something is worth. Those are two different conversations, and conflating them is expensive.
My client defined “a deal” as buying under list price. By that definition, the only way to get a deal was for the seller to reduce the price. He wasn’t looking at value. He was looking at a number going down. The number was already low. He just didn’t know it, because he was watching the wrong thing.
The Uncomfortable Punchline
The honest truth is that great deals, in real estate and in the stock market, tend to come with a side of discomfort. They don’t usually look like obvious wins. They look like a house that’s priced weird in an otherwise expensive neighborhood, and you have to do the math to understand why that’s significant. They look like a market that’s down 18% YTD while the financial news channels cycle through their full repertoire of apocalyptic graphics.
The times that feel the most like “definitely don’t buy anything right now” are often precisely the times when buying something is the smartest move. And the times that feel the most comfortable and obvious – when prices are up, confidence is high, and everyone agrees that now is a great time to invest – are frequently when you’re overpaying.
This doesn’t mean you should buy anything that’s falling indiscriminately, or make offers on every house that’s been sitting on the market. It means you should do your homework. Run the comps. Look at what things are actually worth. And then, when the math tells you something is a legitimate deal, don’t wait around for the price to drop further while someone else buys it.
The market’s on sale. The question is whether you’re going to shop, or head for the exits.
Leave a Reply