Pain not gain in overpaying
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.