How to prevent an irrational property purchase
October 31, 2020 - Blog
The thing about any property purchase is that it creates an emotional response in many people.
That’s because of the connotations of “home” being a place where we are safe, happy, and with our loved ones.
However, when it comes to property investment, emotions should play no part in our decision-making, which I know is easier read than done.
Many homebuyers and novice investors get caught up in how a property makes them “feel”, rather than how it is likely to perform as an investment vehicle over the medium- to long-term.
They usually end up overpaying for a property, probably at auction, or they fall in love with one so much that they lose sight of any research they may have done beforehand.
Heart over head
Thankfully for them, our guidance and expertise will always prevent them from making a property purchase just because it makes them feel good.
When we bid on behalf of clients at auctions, for example, we generally suggest they don’t attend, or they are not standing near where we are.
Now, this is not because we don’t want them to be part of the process, it’s because auctions are designed to achieve optimal prices, because of their competitive nature.
While we always stick to the budget and the reasoning that has been approved beforehand, the last thing anyone wants is for a client to get carried away by the atmosphere and lose their cool because we won’t go above the set price limit!
This situation can also occur when a homebuyer randomly attends an open home, for a property at the top end of their price guide, and promptly decides they simply must have it.
Sometimes the property isn’t even the type of dwelling that they originally said they wanted but that doesn’t matter to them anymore.
Such a turn of events can be quite common for second or third homebuyers who are generally upgrading to nicer digs.
What usually happens is their emotional reaction to a home, as well as wanting to treat themselves, will see them throw all reasoning out the window.
The next thing they know they are in a bidding war at auction or in multiple offer situation where any financial common sense has left the building.
Keep your cool on your next property purchase
One of the many ways that we assist clients is our ability to stay objective.
It’s a bit like having a wise uncle or aunt to keep you on the straight and narrow!
We work with homebuyer clients to create a brief that not only reflects their wants and needs, but also takes into consideration the best investment fundamentals as well.
So, even if they come to us and say: “We’ve changed our minds! We’ve found this amazing house that, sure, is smaller than we need and more expensive than we agreed, but we just have to have it!” we will listen and nod our heads – and then remind them about the reasons why our recommendations were nothing like this one.
They might metaphorically stamp their feet, but once they have calmed down, their perspective becomes more reasonable once more.
At the end of the day, our clients recognise that they aren’t experts in how to facilitate a great property purchase, which is why they engage our services.
On top of that, they also may recognise they have a propensity to make emotional property decisions and want to prevent doing that again.
Last and certainly not least, my design and construction experience means that I am able to recommend properties that they can add value to over the years, which will improve capital growth.
It’s all about seeing the potential in property – rather than paying top dollar for something that has all the bells and whistles to entice buyers – but won’t have much gas left in the growth tank anytime soon.
If you are currently looking to buy a property in the Northern Beaches property market and don’t want to make an irrational property purchase, get in touch with STRAND today.
We can save you time, stress and money through the whole buying process and help you find and secure your ideal property without the emotional stress.