The fear of high house prices and rising interest rates coupled with constantly worrying about insufficient income can trigger anxiety. This reaction to stress is also known as the “fight-or-flight” response because it evolved as a survival mechanism, enabling people to react quickly to life-threatening situations. Whilst missing out on a house is hardly life-threatening it does affect people because housing is a primary need. We might even argue overspending at auction is a clear manifestation of the “fight”.
Fear can also be an incredible positive motivation. Fear is excellent when it gets us out of harm’s way. However, it can also motivate us to make knee-jerk reactionary decisions that aren’t in our best interest. As our current real estate market has become more favorable for sellers, buyers are asking us when will the market will cool off.
We are noticing signs of fear in certain pockets of the market. So, here are some points for both buyers and sellers that aim to remove fear and replace it with reason.
Two terms commonly used are fear of missing out (FOMO) and fear of overpaying (FOOP) and to avoid this
- need to create a spreadsheet to track comparable property;
- should examine the suburbs, not the city – often fear is because people are comparing a city or state’s performance rather than where they want to buy;
- need to remember long term investments ride rises and falls in markets;
- must consider the land value rather than the house value;
- should determine the amenity value – transport, schools, shopping, recreation are state assets and never depreciate and
- must consider the access to amenities – the closer the better.
- should try and remove personal feelings about the house and focus on what you need to do to get buyers to buy your property;
- must think about what is in demand in your area that buyers want and you have;
- need to understand that if there a loss of equity on paper remember you will likely recoup that on a purchase in the same market;
- need to consider not setting a price and just like a hot market wait and listen to offers. Some people will be ridiculous and offer very low but most serious purchasers will be in a normal distribution range and
- need to meet the market by considering the buyer variables. If the banks are lending less, employment is problematic or your property lacks what is highly desired – be realistic.
Confident and rational decision-making are the keys to real estate success regardless of the market.