Friday, December 28, 2007

Critical Thinking v. Herd Mentality

Who are you listening to?

Robert Ashby's recent post
Who's Advice Do You Take When Getting a Mortgage,

Let’s face it, it is easy to give a 30-year fixed rate mortgage to anyone these days because that is what the borrowers have been told is the best thing for them right now (just read the news).

But is it really? Believe it or not, the Option ARM, yes those dreaded, "evil" loan programs that place homeowners in foreclosure while making mortgage brokers rich, are actually the best solution in a "perfect world". But alas, we are not in a perfect world. As Americans, we tend to do things we shouldn’t, such as use our house as an ATM machine.

How are we to find the best mortgage program for ourselves? Friends, family, Realtors, mortgage brokers? Not likely. We are really on our own if we want to find the best solution. We must do our own research and find the "advisor" that will help us determine the best solution.

Now, be careful as you decide though.
Asch’s Conformity Experiment can prove deadly in your decision making process. You see, that experiment proves that while you clearly know the correct answer, being surrounded by those answering incorrectly may lead you to answer incorrectly as well.

Do you seek out the opinions of skilled professionals who have a solid understanding of your specific situation? Option ARM's you say? Well I'd never... remember he said "in a perfect world." Critical listening & thought - it matters when you seek mortgage advice just as much as when you listen to the 11 o'clock news!

This herd mentality carries into other areas too, for example, "now's a bad time to buy" or "I'd never buy a condo". Both of these examples may be true for the 'Madding Crowd", but not everyone. As Ashe discovered, it only takes one dissenting view for critical reasoning to prevail. Everyones situation is unique, their needs, wants, & goals unique. Sadly the current thought is "don't buy, values are still plummeting" while savvy investors are grabbing this down market opportunity - the classic buy low, sell high still holds true.

Applying a critical thought processes to the mortgage & real estate market, just might lead you to an unexpected conclusion. As Ashley notes, "The best solution may be the complete opposite of what you are currently thinking."

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