5 costly emotional property mistakes
Let’s face it. Buying a property is an emotionally-charged experience.
Even seasoned investors admit to feeling nerves each time they enter into a transaction.
Buying a property can be confusing and it truly tests many buyers. It’s for this reason that many people suffer from buyer’s remorse after they’ve gone through the process.
The mistakes made during this emotional rollercoaster can be costly. Therefore it’s important to be aware of the traps to avoid a nasty aftermath.
1. Justifying overpaying just to get into the market
Talking yourself into paying more just to get into the market is an easy trap to fall into during the boom cycle. This is especially true for buyers in Sydney and Melbourne where punters are in a frenzy to get into the market amid soaring prices.
Paying too much on a property is rarely a smart move. If you buy at the peak of the market cycle, not only are you paying a premium, you’re also buying a property that may have already experienced a lot of growth. You could end up holding an expensive asset that may be slower to appreciate in the years to come.
2. Being too optimistic about growth potential
Believing that property will always grow in value year after year is a trap that could lead you to make riskier deals.
While generally, property values have grown significantly over the long term, you can’t be certain that your property will keep growing in value each year. There will be years when it may be stagnant before it rises again. If you’re counting on your property to keep on appreciating in value and you base your strategy around this expectation, you’re exposing yourself significantly if a downturn hits your investments.
3. Being lured by very cheap properties
Cheap properties may seem desirable to buyers on a tight budget, but risks can come with such properties. It’s simple – if it’s that good a deal, why hasn’t anyone bought it before? There is usually a good reason why a property is available for an enticingly-low price.
When presented with a cheap property, find out why. Are there any problems or risks associated with it or with the local area? For example, the property may have structural problems, signs of pest infestations, it’s in a planned flight path or located in an area where a big employer is about to close down its operation. In these instances, vendors may be desperate to offload their properties.
The question you need to ask yourself is this – would I want to carry all these risks in return for the cheap price I’m paying for this property? The answer in many cases is no.
4. Getting too attached to a property
There’s a reason why vendors go out of their way to stage their homes during open houses – it’s to evoke emotional attachment from potential buyers.
The selling agent wants you to fall in love with the home. Once you’ve become so attached, they would have an easier job selling you the home at a premium.
Becoming infatuated with a property could also make you forgo your usual due diligence and rush through the buying process for fear that you might lose this deal. Being love-struck could also drive you to waive crucial conditions in the contract in a rush to make an offer. More often than not, those overlooked details end up costing you a great deal in the end.
Don’t let your ‘love’ for a prospective home rule you and make you lose your common sense. There are more properties out there for you to choose from than you realise. But it’s a lot harder to recover from a bad deal made in the heat of the moment.
5. Waiting for the perfect property
Hesitating to make a move once you’ve done your due diligence in the hope that a better property will come could cost you more than just time.
Dragging your heels can make you lose opportunities such as buying before the market takes off. The longer you wait, the higher prices could go and competition is likely to grow. By the time you’re ready to make a decision, the property has been snapped up by another buyer.
If you’re continuously waiting for the perfect property to come along, you risk never getting started and never reaching your goals.