Don’t get so emotional! 10/09/12

Now that’ easier said than done.  We spend a lot of time now days talking about research and statistics. As buyers we are taught to look at comparative sales data, area vacancy rates, rental returns for similar properties, infrastructure investment by local councils, unemployment and earning demographics, amongst millions of other pieces of information.

These are relevant when making a purchase, and form part of a smart homebuyer or investor’s ground work. I certainly pay close attention to all of the above when I shortlist a property for a client. I want to make sure that I cover all avenues and have all the key information at hand.

Then there is more general information, like the reports on market status by industry “experts”. This is the stuff that is written by research companies and newspapers telling us how the unemployment rate rising will adversely affect the value of the property you just purchased and how the market is either in free fall or has turned a corner. This all depends on which expert you read and who they work for. As well as the agenda behind the publication.

With all this data available I still find that the largest single driving factor when it comes to property purchase is emotion. No matter how in depth the research, the emotional content involved in a decision reigns supreme. Ever seen a person spend too much on a purchase or walk away from a great deal simply based on a “feeling”. They either really wanted this place or alternatively they just didn’t feel that bargain was for them.

How is it possible with all this quality information available that final decisions are based on nothing more than a feel or a want? Let’s face it, when you exceed your available budget at Auction you put yourself in a pretty tough situation, yet you take the risk based on what? An emotion? Or you chose to walk away from something that is going to make you very wealthy very quickly based simply on a feeling? How is that sensible?

In reality it isn’t sensible, so don’t make the mistake of trying to rationalise it. Understand how emotion works in real estate and use it to your advantage. Selling agents have been doing it for ages. Ever been to an open for inspection? The agent, if they are any good, will ask you for your opinion on the place as well as your thoughts on the layout of the rooms. He may ask you, during the course of casual conversation, what type of furniture you may have and whether you think it would be best to put the couch in this corner or that? He may ask you if you entertain, and could you see yourself walking through the open plan kitchen dining, out through those magnificent double doors on to the deck near the pool? It’s a nice thought in summer isn’t it? You would have to drag your deck chair over to this side though to get the afternoon sun.

You haven’t even talked about the cost of the place and you are re-arranging the furniture and entertaining friends by the pool! It’s called ownership, and the more ownership or emotional investment you have in the place, the greater the chance your emotion will drive you to make choices about exceeding your budget when the time comes. This isn’t necessarily a bad thing, it’s just something you need to recognise. The emotional attachment you have to a property may affect the good sense you normally display when negotiating or buying.

Emotion is why people get angry when they miss out at auction or become frustrated when dealing and negotiating. It is the reason, in a lot of cases, that buying a place can be so difficult because buyers tend to make irrational decisions based on what they feel and think rather than on what they know. It is the real reason a buyer’s agent or buyer’s advocate exists. We are here for the most part to control the purchaser’s emotion but let me tell you, it’s like trying to tie down King Kong with dental floss. Mildly successful but you know in the end he is going to bust loose. So is all hope lost knowing how big a part emotion plays in purchase?

Well here is the thing, don’t try to deny emotion plays a large part in what you do. Accept it and recognise it, but meter it with the application of good information. Try to balance it out. Understand too that when you come up against someone else that is driving the price up based on their emotion, that you recognise this and don’t need to pay ridiculous money to prove you are more emotionally attached than they are.

Knowing how big a part emotion plays, use it to your advantage. If you read an article in the paper that says the property world is ending, then celebrate. It means if you are negotiating this week that others will be emotionally saddened by a writer’s opinion and it should make your job easier. When talking to an Agent, and they want to know where you are going to put the couch, why not ask them what they intend to do with the commission? Will they be buying a new car? Or a boat perhaps? Remind them that you are a qualified buyer and are ready to go. Subject to how they treat you and how hard they work, their commission is in the bag and what will they be spending it on? Get them to own that new Audi or trip to Thailand in their minds. Emotionally they may just be motivated to push their vendor a little harder to accept your price as a result. Alternatively, emotionally the Vendor may be over the whole sale process and just want this sale done and by offering them a simple solution to their emotional issue you may both get what you want.  You see, emotion works both ways if you know how to play it. As always, negotiate hard, but fair. Have fun and buy well.

Garry McPherson

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