BUYING your dream home is a process that’s bound to stir up strong emotions.
Endless Saturdays spent at auctions – and the frustration of watching someone else seal the deal on what looks like your ideal abode – can take their toll.
But the worst trap a homebuyer can fall into is letting their feelings take over the transaction, an experience that’s all too common, especially in Sydney’s hyped-up property market.
Whether it’s high ceilings and polished floorboards, a luxurious second bathroom, a wine cellar or a French provincial kitchen that captures your heart, keep in mind that the fundamentals of a property’s value may have nothing to do with these trimmings. Nor do the designer furnishings installed by interior decorators, whose bread and butter is extracting more money from you.
A Commonwealth Bank survey of Australian buyers in 2013 found many admitted to being influenced by emotional characteristics of the property up for sale – and 44 per cent paid more for a property simply because they ‘really liked it’.
With properties selling as much as 10 per cent over the price guide the norm, it’s hard to know when to walk away, especially once buyers get caught up in the theatre of an auction.
The ever-present FOMO (fear of missing out) can push a house hunter over the edge and into dangerous overspend territory.
Property expert Peter Boehm, author of The Great Australian Dream, said first home buyers were particularly vulnerable to being led by their hearts.
And the number one tip he has for them is to ‘check your emotions at the door’.
‘Buying a property is an emotional experience, because it’s probably the biggest investment you’ll make in your whole life,’ Mr Boehm told news.com.au
‘It’s going to be with you for some time, so it’s got to feel right. But the problem with that is that something that might feel right, might be out of your capacity to buy.’
He said many first home buyers ‘start looking at properties they shouldn’t, and then they get discouraged.’
They might show up at a few auctions and be quickly outbid, or have an offer on their dream property rejected, then become disheartened by the whole process.
‘Unfortunately, the reality in today’s world is that you’ve got to be pragmatic,’ Mr Boehm said.
The best approach, he said, was to understand your buying power, set your budget, and only look at suburbs where the median selling price is within it.
And once you are at the auction, ‘never bid with your heart’.
‘You could end up being a slave to your mortgage and your first home could be a trap, it could be like a prison,’ Mr Boehm warned.
Keep in mind that a sophisticated auctioneer will be working to draw you in, get your confidence, and generate competition among bidders.
‘It’s their job to engage with you and talk about all the good points of the property.’
Psychologist Sarah Godfrey said emotions were an inevitable part of making big purchases, but you could minimise their impact by being aware of how they affect you.
‘All our decisions are emotional, no matter what,’ Ms Godfrey said.
‘Studies should that we can’t actually make a decision unless we can get a sense of how we feel about the options.’
It’s just how we’re wired, she said.
And skewed decision-making often reared its head in distinct ways at auctions, where Ms Godfrey said there was four personality types to watch out for – in yourself and others.
1. The competitor: ‘This is the person who is in it to win. It doesn’t matter if they want the house or not, they just don’t want you to have it. They get caught up in ego and pride, because you are bidding against them.’
2. The dreamer: ‘The buyer who walks into a house and is off in fantasy land – women are particularly bad at this. They fall in love with a person’s lifestyle or status and are mesmerised by a clean and beautifully-decorated house.’
3. The adolescent: ‘Wants it now and doesn’t want to think about the long-term implications, driven by impulse and immediate gratification. Not realistic about price or essential characteristics of the property.’
4. The narcissist: ‘This is the person who has the real estate agent tearing their hair out. They believe they should get the house at a better price than anyone else and will not back down, they are grandiose and will fight to the last $1000.
Ms Godfrey said that while we’ve all got a bit of these archetypes in us, watch out for them or you might make a decision you will regret.
If you’re standing next to someone who appears to be ‘bidding without thinking’ in a bid to get one up on you, ‘step back and think. Why is this person bidding this way? Is this becoming a battle?’
Sydney buyer’s agent Marcus Gould knows how easy it is to make the wrong decision in the property market.
‘We take the approach that if you’re buying a property as your primary residence, you should see it as an investment,’ he said.
‘That’s what having an arms length buyers agent on your side is good for; it gives you that advantage.’
While it’s his job to remove stress from the process by taking over the search, Mr Gould has some tips for those who want to go it alone – starting with ‘do your research’.
‘You’ve got to understand the suburb you’re buying in,’ he said.
‘Which streets are selling for a higher price, and why? Some streets are better than others; do your due diligence.’
This means looking past the shiny floorboards and tasteful furnishings which the agent has carefully ensured will capture the eye.
‘The beautiful furniture and styling, it’s all there to make you want to buy. You’ve got to see past that and look at the quality of the structure,’ he said.
‘It’s important to look at the floor plan, and check to see if they’re common in the area. If not, you might have trouble selling it because it’s not as suitable,’ Mr Gould said.
And it might sound obvious, but take a fine-tooth comb to all the relevant inspection reports.
‘I know people who get the building and pest reports and they don’t even read them,’ he said.
A good buyer’s agent will take down all the attributes of a potential purchase and put them in a spreadsheet for you, comparing them in detail with similar properties that have sold in the area.
‘We look at the comparable sells – not the ones the seller’s agent puts in front of you, because sometimes they are no directly comparable,’ Mr Gould said.
When it comes to bidding at auction, he said, ‘we’re always there first.’
‘See how many people register, so you know the level of competition. Not all registered bidders will actually bid, but it’s good to keep an eye on what’s going on.’
Then, he said, look for signs of weakness in your competitors. Mum-and-dad buyers could be spotted a mile away, and were notoriously emotional bidders.
‘When they start to bid in smaller increments, it’s a sign that they’re coming to the end of their budget. So if they start bidding in increments of $5000 or $10,000, we continue bidding at $20,000.’
Finally, patience is key: it takes most buyers up to six months to secure a property that is right for them.