Avoid emotional ties when buying home

9/16/2012
BANKRATE.COM
Potential buyers tour a home for sale in the Highland Park neighborhood of Los Angeles, California.
Potential buyers tour a home for sale in the Highland Park neighborhood of Los Angeles, California.

Real estate agents say emotional mistakes are common among homebuyers, who sometimes let good deals pass them by. Or worse, buyers overpay for “dream homes” because they let feelings cloud their judgment.

But buyers shouldn’t beat themselves up for getting emotional. Buying a home is often the biggest purchase a person will make. Homebuyers “need someone in their corner who can counsel them and make sure they are making a smart investment, not an emotionally driven purchase,” says Nick Jabbour, a New York City real estate agent and vice president of Nest Seekers International.

Buyers should be aware of emotional mistakes many of their peers make. Here are five common errors, with advice on how to avoid making them.

Mistake No. 1: Always looking for a better deal. Every market has its up and downs, but today’s market has conditioned homebuyers to think there’s always a better deal just around the corner. While prices could drop further (and mortgage rates might decline), it’s risky for buyers to play the odds now, says Eileen Meehan, an associate with Re/Max Properties in Saddle River, N.J.

Mistake No. 2: Falling in love at first sight. Nick Jabbour, vice president of Nest Seekers International and a New York City real estate agent, tells homebuyers to “look at no (fewer) than five properties before we sign any contracts. ... Jumping on the first or second home that a buyer looks at will often result in buyer’s remorse, overpaying and the inability to sell at a reasonable price down the line.”

Infatuated buyers who leap at a property tend to overlook the value of the process itself — from inspection to appraisal, says Fiona Dogan, a Realtor in the Rye, N.Y., office of Julia B. Fee Sotheby’s International Realty.

Mistake No. 3: Overpaying for perfection. Jabbour gets concerned when homebuyers insist they’ve found the perfect home and are eager to make an offer.

“The emotional attachment will sometimes become so high” that buyers “will overpay or overextend themselves financially,” he warns. Buyers “must consider an exit strategy from the beginning to avoid losing money when they sell.”

Mistake No. 4: Equating “short sale” with “deal.” In real estate, a deal is a deal, and the terms “short sale” and “real estate owned,” or “REO,” are marketing buzzwords designed to lure bargain-hungry buyers, says Matt Joseph, broker and owner of West Avenue Realty in Miami.

“I see buyers running into the trap of buying a foreclosure or short sale thinking they are buying way below market value, when they are really overpaying,” Joseph explains.

A good deal is a matter of the property’s historic price, current market conditions, and the home’s features, as well as the buyer’s own needs. Weighing all the factors isn’t easy. But, Joseph says, buyers dramatically decrease their chances of making emotional mistakes by working with professionals who know the local market.

Mistake No. 5: Lowballing instead of negotiating realistically. All homebuyers want the lowest possible price, but there’s a big difference between firm negotiating and lowballing, says Tracie Hamersley, senior vice president at Citi Habitats in New York City.

“It’s best for a buyer to make a realistic bid,” Hamersley says. Lowball offers risk being rejected out of hand or lengthening the process and annoying the sellers.