Photo Credit: M. Lengemann
Duke University economics professor Dan Ariely is well known for his unconventional views on how people make decisions.
I am the daughter and granddaughter of lawyers and the great-granddaughter of a judge. For me, it seems only natural to seek a lawyer’s advice before signing an important legal document, especially a contract that dictates the terms for a project with bankrupting potential, such as building a new home or a major remodeling project. I would do this no matter how well I knew the professionals I wanted to engage.
Indeed, when I rebuilt the back porch of my own house, turning it into a year-round room five years ago, I asked a real estate lawyer to review the contracts for both the architect and the contractor before signing the paperwork even though I knew both professionals well and had previously done several smaller jobs with the contractor.
But this is not how most people see it, said Dan Ariely, a professor of behavioral economics at Duke University and author of Predictably Irrational (Harper Collins, 2008). It would be prudent to have a contract checked out when large amounts of money are involved, but his research and that of other behavioral economists has shown that people do not always act in their own best interests, financially or otherwise.
Although homeowners often will spend thousands of dollars on a new house or remodel, the major issue in hiring the person who will do the work for most people is not legalities and contracts but trust, a human character trait that “we are hard-wired for,” Ariely said.
Trust becomes an issue when we develop a social relationship, and that is how a home building or remodeling project begins for most people. They spend hours with a prospective home builder or remodeler, first interviewing him and then touring his finished projects. They spend a comparable amount of time with a production home builder’s on-site sales agent during the four or five times buyers typically revisit the builder’s furnished model before deciding “this house is the one.”
As with any budding social relationship, the more time we spend with a builder or a sales agent, the stronger the bond and the more likely we have shared hopes, dreams and personal details, like the number of children we hope to have someday. Intimacies are more likely to be shared in this instance because the subject is “home” — the emotional center of most people’s lives.
When homeowners finally decide they are ready to move forward with the project, and the subject of a contract comes up, most have a hard time saying that they want to have a lawyer look at it first. They may tell themselves it will take too much time or the lawyer will cost too much. But the real reason for the reluctance, Ariely said, is that “it violates our notions of trust. If you and your husband agree on something, you wouldn’t insist on a formal contract because it violates the spirit of an agreement.”
Once you create a social relationship, Ariely said, “it’s hard to enter into other types of relationships without feeling that you are violating the social one. When you say, ‘Let me talk to someone else and read the fine print, it feels bad.’”
In short, a sense of friendship between you and the building professional with whom you are engaging creates a mental barrier that prevents you from perceiving the relationship for what it is: a business transaction in which you are paying someone a huge sum of money to build or remodel a house. The builder is under no such illusion; he knows he must be personable to get the job.
Is there a way to put things into a proper perspective? Can you be friendly, but not so friendly that you won’t feel uncomfortable getting the contract reviewed? And that you won’t feel that you are violating the relationship?
Before you meet a builder or his sales agent and before anything gets started, Ariely suggests committing yourself to the idea of saying, “I am reading the contract, and I will say so up front.” This may sound hokey, but Ariely said that extensive research in social psychology has shown that if you go through the mental exercise of practicing what you are going to do or say beforehand, there’s a good chance that you will actually do or say it.
Another strategy, which Ariely said many people find easier, is what he calls “the appeal to an outside power, or, the third party excuse.”
“If you say, ‘It’s not me, but I need to show the contract to a lawyer because I promised my wife and my parents,’” it puts the onus on someone else, Ariely said. You can state this in even stronger terms, and he offered this example: “I love you like a sister but my dad on his deathbed made me promise before you sign any contract documents go to a lawyer!”
Do you really need such a strategy? Not necessarily, but, Ariely said, “If you don’t have a strategy and tell yourself let’s meet first and talk, you will trick yourself into behaving badly. Once you’ve gone past pleasantries, exchanged opinions and shared mutual complaints about significant others, you’ll skip over the place where you’re supposed to say, ‘I must take the contract for review,’” he said.
Interestingly, Ariely said if you paid the builder by the hour, as you would with a lawyer, the nature of the relationship would be clearly drawn — “It would feel transactional,” he said. You would still rely on his expertise and defer to him, but you wouldn’t expect to be friends, and you wouldn’t be discussing hopes and dreams while the meter was running.