Pain not gain in over­pay­ing

The Advertiser - Real Estate - - Real Estate - AN­THONY KEANE

THERE has been a lot of talk lately about house prices be­gin­ning to march higher, buoyed by our su­per-low in­ter­est rates.

Even the Re­serve Bank of Aus­tralia has warned about the threat of a new prop­erty price boom, while auc­tion re­sults in the past cou­ple of weeks have showed that the buy­ers are back and bid­ding.

When con­di­tions are buoy­ant, there is al­ways the risk of over­pay­ing for a prop­erty, so how do you avoid it?

As with all money mat­ters, the key is re­search.

To­day it’s eas­ier than ever to get an idea about what a fair price is for a prop­erty. Many web­sites list re­cent sales, real es­tate agents are of­ten will­ing to help, and the su­per-dili­gent can even buy re­ports for more de­tailed sales fig­ures.

Armed with enough re­search, the next step is to be tough on your­self. Emo­tion and prop­erty do not mix well to­gether, es­pe­cially when you are try­ing to avoid pay­ing too much.

Set a max­i­mum price that you are pre­pared to pay, and leave emo­tions at the door. If you can’t, have a trusted friend, fam­ily mem­ber or pro­fes­sional agent do your bid­ding.

It’s much eas­ier to strip emo­tion from de­ci­sions about an in­vest­ment prop­erty than your own home, so try to think like a hard-nosed in­vestor when mak­ing any pur­chase.

Re­mem­ber that the true price of any prop­erty is only what some­body is pre­pared to pay for it. Not what some­body wants to sell it for.

Over­pay­ing is one of the three big­gest home-buy­ing blun­ders listed by the Real Es­tate Buy­ers Agents As­so­ci­a­tion of Aus­tralia. Its other two are ‘‘lack of re­search’’ and ‘‘get­ting emo­tion­ally at­tached’’, both of which lead to over­pay­ing.

‘‘Buy­ers need to re­search the mar­ket, find out how much they can com­fort­ably spend and stick to their bud­get,’’ says REBAA spokesman By­ron Rose.

‘‘Learn as much as you can about the seller. The rea­son be­hind the sale can of­ten be a com­pet­i­tive ad­van­tage, so don’t be afraid to ask the agent as many ques­tions about the seller as you can. ‘‘On the flip­side, keep your own per­sonal fi­nances and de­tails to a min­i­mum.’’

Price is a fickle thing. If we are mov­ing from a buy­ers’ mar­ket to a sell­ers’ mar­ket, ev­ery­body is go­ing to have to be on their toes.

Of course, over the very long term – 10 years or more – any pur­chase price should de­liver good growth un­less you re­ally get stung. The price you pay should al­ways be fair and based on good re­search and plan­ning. If not, the price you pay can be fi­nan­cial pain. An­thony Keane is the edi­tor of Your Money, which ap­pears in The Advertiser on Mon­days.

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