Emotional property mistakes that could cost you money
There’s no denying that buying and selling property can be an emotional process. Not only is there a lot of money at stake, but if you’re buying or selling your own family home, there are a lot of conflicting feelings and memories clouding your brain as well.
It’s important to remember that a real estate transaction is most likely the largest financial decision you will have to deal with. As such, it must be handled as a business transaction, and you should never let your heart dictate your choices.
There are several emotional traps you may fall into when dealing with real estate transactions. Here are some to watch out for.
Listening to your heart
Some people claim that about 90% of a purchasing decision is based on emotion and only 10% on logic when it comes to buying and selling family homes. While this is understandable, it should be avoided. Listening to your heart rather than your head often results in overpaying for a property, rather than being patient and negotiating the best deal possible. This can get dangerous if you don’t have the financial approval for, or the means to cover, the agreed price.
Such emotional distraction can also be detrimental if you’re the vendor. While you may value certain features of your home above all else, potential buyers may not. So putting a premium on it because of your emotional investment won’t do you any favours. Many vendors make the mistake of thinking their property is the most special and fantastic on the market. But remember, property prices have nothing to do with what you believe and what your emotions dictate; they’re a direct reflection of what is happening in the market and the broader economy.
This is also relevant when you’re facing an auction situation. It’s common for emotional buyers to get caught up in the moment and overbid for the property. Be careful of this. Set a maximum price you can afford, and do not go over it. If you can’t trust yourself, have someone neutral come with you to the auction with no ties to the property, so if it looks like you’re about to go over your limit, they can stop you.
Failing to plan
As they say, “when you fail to plan, you plan to fail.” And a lot of the time, we don’t plan simply because we are emotionally invested in the situation or outcome. But buying and selling property requires enormous planning! You need to set targets and goals, do your research on the selling and buying market, and investigate what options are out there for you.
There’s even planning to do when you finally settle on the property you want. You’ll need to organise inspections before you even attempt to think about purchasing the property. You’ll need to talk to your existing lender, or perhaps need to look elsewhere to find a better deal. You need to discuss contracts with your lawyer to make sure everything is in order. Purchasing a property on a whim means you won’t have this essential information to back you. And that ignorance can be very costly.
Becoming too attached to a property
This goes for vendors and purchasers. When you’re too attached to your property as a vendor, you’ll likely have unrealistic expectations of the process and selling price. And this can lead to failure.
Being too attached to your property can lead to:
- Asking too high a price
- Ignoring market analysis of the surrounding area
- Thinking the property is perfect and ignoring the need to update things before inspections
- Being irrational when taking pre-auction offers.
As a buyer, if you become too attached to a property, you run the risk of bidding too high at auction and ignoring the need to plan. It also potentially means you’ll be devastated if you don’t get the property, and make the continued search for your next home much harder.
Not considering offers properly
This mostly concerns vendors - the main thing you must remember is to consider every single offer as a serious offer. Often, it’s easy to take everything in the selling process personally, including an offer when it comes in. You need to remember that nothing about real estate transactions should be personal or emotional. Potential purchasers will point out the flaws in your property, and will often start much lower than they’re willing to pay. And remember, receiving an offer (or multiple offers) means there are serious buyers out there.
Additionally, don’t ignore early offers. The most traction a property will receive is often in the first couple of weeks on market. If a potential purchaser is serious about the property it’s unlikely they will wait until auction, but rather put in an early offer to secure the property. Don’t let your emotions sway you to think these offers aren’t serious, because they are. Listen to the offer and negotiate. Waiting for a better offer can seriously jeopardise your ability to sell your property because buyers may just walk away if you’re not open to negotiate.
Property dealings can be an emotional rollercoaster. Whether you’re selling or buying, it’s a big deal to buy or sell a home. But it’s important to remember that these are business deals, and letting emotions get in the way may have dire financial consequences.