Updated: Jan 13
5 Reasons Why People Overpay And How You Can Avoid That?
Overpaying to purchase a property is a common theme. But why does this happen? Why do buyers overpay for properties they've chosen?
Read on to learn 5 common reasons why buyers tend to overpay to acquire properties.
1. Price Guides Reliance
Many property buyers make an offer based on the selling agents' or vendors' quote rather than based on their own informed research. You can't really blame them as they are just doing their job of representing their vendors. Researching takes a lot of time and effort that someone busy living their lives is too busy to commit. So these buyers misplace their trust in the real estate agents hired by the property vendor to sell the property at the highest price possible.
In areas where real estate agents may underquote to attract potential buyers, many buyers would mark up the price on the agent's price guide and assume that they're paying a fair price. They are not. They are appraising the worth of the property and risk overpaying by blinding marking-up the price.
Price guides are unreliable. Your buyers' agent can help you assess the worth of the property independently with search, data sources and their own market intelligence.
2. Making an emotional buying decision
Buying a property is an exciting process and rewarding when you finally find the perfect place with every feature and benefit you want. But it can get stressful when the thought of another buyer snatching it instead comes to mind. Don't let it get the best out of you. You don't have to pay tens of thousands of dollars, or maybe above market value because you're scared another buyer will snatch it from you. Just because you can afford to do so, it doesn't mean you should.
What you need to do is calm down and remember that there are other properties out there that can be your perfect place. If you miss one, you will find another one. Overpaying for the property you want to buy is a risk you carry when you have not done your proper research for that respective suburb.
3. Market movement
Some buyers take too long in searching for the right property. This allows the shift in the market. If it is taking a buyer 12 to 24 months of property search, then they may not be comparing prices accurately.
4. Time constraints
Property buyers with time constraints may also be under pressure to buy quickly and may lead to overpaying for the property. This is the reason why real estate agents love to deal with time-constraint busy professionals, buyers who may have sold and need to buy urgently in the open inspections.
5. Opportunities missed
Some buyers overpay for the properties when they have lost previous auctions. They tend to get tired of doing regular visits and missing the time with their families on weekends. The likelihood of overpaying for the property increases when the buyers missed out more properties to another buyer.
Most buyers struggle to know the subtle differences between paying the right market price for an in-high demand property, and simply overpaying when they don't have to.
How to avoid overpaying for a property?
The property market has always been in favour of the property vendors, who are usually represented by real estate agents tasked to achieve the highest sale price. The buyer is left-under represented, under-resourced and unprepared, and as a result, they pay more than what the property is worth.
This is where Get RARE Properties comes to your assistance. We are an independent buyers' agent here to guide you through the complexities of purchasing properties. With us in your team, you can ensure that you'll get the right property at the right price. As an experienced property investor and negotiator, we look at the property as a business transaction and do not let the emotions creep in. We will help you choose the best deal at the right negotiated price and save you from the undue stress making the process very pleasing and rewarding.
Next steps: Should you want to learn how the author built his $5m balanced portfolio in 7 years, and aspire to own something similar, feel free to get in touch via email at firstname.lastname@example.org or book an appointment here.
Disclaimer: This article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser.