In the day and age of the Internet, there is nothing more a millennial loves to hear than that a quick Google search can solve all their problems. You want instant gratification and easily accessible answers to your questions. It's fair to believe the technological resources of today can provide solutions when needed. But, what about in instances where human interaction seems necessary? Such as, say, buying your first home. Is it necessary to turn to a "real person" over a computer? It turns out, there is an interesting alternative out there: a computer algorithm that can help you to decide which home is perfect for you.
As a person in tech I tend to read a fair amount to keep current. One of the more interesting reads was from the book Algorithms to Live By and the particular algorithmic approach that was interesting is related to “optimal stopping." Ok, so enough of the geek speak: in our current real estate market in Toronto and the GTA the problem is that there is so little inventory that people almost (or do) feel pushed into making snap buying decisions. We are talking on average about a $750,000 decision, not exactly a pair of shoes on sale. As well, the latest numbers from the Toronto Real Estate Board claim that the average home in the Toronto/GTA area will climb by another $100,000 this year. What’s a buyer to do? The question is how many homes do I need to see to raise the likelihood that I purchase the best one? Thankfully there is an algorithm for that, even if you’re not a tech geek.
The answer is simple.... 37. Well, 37% to be more exact.
AStatistically once you've seen about 37% of a group of choices (about 8 homes in this case), simply seeing more does not necessarily increase your success in finding the best home option (even if you see 50). Seeing less than 8 however may result in a less optimal purchase decision. What you need to do therefore is see a certain number of homes that have the features that you’re looking for (perhaps obviously in the price range you can truly afford) but resist the desire to simply buy one (true, easier said than done). The approach is to view just enough homes to develop the "intelligence" of what constitutes the best fit for your needs. Determine in each one how close it is to what you ultimately want to buy, then do this about 7 more times. After you’ve seen those 8 homes, the next home you see that most closely matches your criteria (and compares against the previous ones you’ve now seen) is the one you should jump on aggressively. You’ll be less likely to feel like you rushed in the decision process.
I think nowadays we spend more time buying the right pair of shoes than buying a home, and that's largely due to pressure and an appearance of a lack of options. Algorithms used in computers (and life) can help streamline and reduce the stress of large decision-making. This algorithm can be applied to many decisions - even corporate hiring, wedding venue location, or which new Starbucks drink to make your regular (though you'd be highly caffeinated if you indulged in eight in a row...). Looking forward to talking about more algorithms soon. Use them for fun or small purchases, or try them out for big decisions!