Combining emotions with the purchase of your first home can often lead to overspending, particularly in a seller’s market. As a first-home buyer, this is often a significant purchase and perhaps the largest you’ll make, so there’s little wonder that emotions are high. It’s important, however to recognise how to avoid overspending on your property as a result.
Let’s have a look at some of the science before we tackle how to manage your own emotions when it comes to searching for your property.
It is the prefrontal cortex of our brain that is the logic and reasoning centre. It’s designed to control impulses, think through situations rationally and allow us to plan with a ‘level-head’. Unfortunately, when we’re in an emotionally charged situation such as at a property auction, or we’re feeling high levels of stress, the amygdala, which is the emotional centre of the brain, kicks into overdrive and this overrides the prefrontal cortex. Therefore, all logical and reason go out the window and emotions take over.
Now that we have an approximate idea of what happens to us in emotionally charged situations, how do we ensure that this doesn’t lead to us making poor financial decisions. This week we outline our top 5 tips to manage your own emotions and ensure that you’re making smart decisions when it comes to buying your property.
- Create Your Property Checklist
If you’re buying this property with a friend or your partner, sit down and create a list of all of the key qualities that it must have to ensure that you’re happy with it. This could include the number of bedrooms, a balcony, swimming pool, island benchtop in the kitchen or anything else that’s important to you. You should also rank each of these criteria so that if you find a property that almost has all of the important criteria you’ve outlined, you can determined whether or not you’re happy to settle.
By completing this checklist together before you start attending auctions or otherwise, you can ensure that both parties have equal input and will be happy with the final outcome.
- Don’t Wait Too Long For The ‘Perfect Property’
Many people are guilty of waiting too long with the aim of finding the ‘perfect property’, which doesn’t actually exist. A common driver for this is to delay the decision to purchase and the commitment of such an action. This can often mean that while you are continually waiting for your ‘perfect property’ that prices continue to rise and you may very well find yourself priced out of the market.
This is where the first tip of having a clear and ranked checklist for your ideal property comes in handy. You can quantitatively decide whether the property meets enough of your criteria and be sure that you’re making a rational decision.
- Avoid The Fear Of Missing Out (FOMO)
The Fear Of Missing Out (FOMO) can often lead homebuyers to overpay for their properties. This has been a common occurrence in both Sydney and Melbourne property markets over recent years, where buyers have been determined to get into the market no matter what the price. This is otherwise known as a ‘seller’s market’ or ‘heated market’, whereby properties, particularly those sold at auction, sell at above market prices due to people deciding to buy based on emotion rather than logic.
Do your homework before placing any offers on the property, and ensure that you’re paying the right price rather than getting caught up in the hype.
- Consider Partnering With a Buyer’s Agent
If you’re concerned about how your own emotions might impact your property purchase, consider partnering with a reputable buyer’s agent. You can outline the key criteria of your property as well as the upper limit of your budget, and they can do the work to ensure that this limit isn’t exceeded. This can remove the chance of seeing a property that is outside of your budget and still deciding to commit to it.
A good buyer’s agent can also be a valuable partner for you if you’re looking to buy your property at auction. This is often where many buyers’ emotions get the better of them as it’s often a heated and stressful environment, where budgets are often forgotten. An experienced agent can represent you at auction and ensure that you don’t blow the budget.
- Partner With The Right Mortgage Broker
An financially-savvy mortgage broker can help you to run the numbers and ensure that the property purchase is within your budget under a range of scenarios. This could include factoring in if only one partner was to be working, if you’re having a family, interest rates were to rise, or any one of a number of other options. The broker can also assist you to obtain a pre-approval before you start searching for properties to provide some peace of mind with regard to your spending power.
Removing this potential element of stress from your first home buying journey can be a valuable step.
Remember, understand how your own emotions might impact your property purchase, and ensure that you put the right steps in place at the beginning.
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