I have been involved in the real estate industry since 1998. I have been an agent, a principal, a franchiser CEO, and in recent years working in real estate marketing, publishing, and auctioneering.Â Yet on Saturday morning conducting an auction in the inner west of Sydney I had a light bulb moment. Most buyers make dumb decisions!
Here I was auctioning a property that could potentially had achieved 100k more 6 months ago yet buyers were nervous. These same buyers in a frantic market would be crazily bidding against other people and paying 100k more then the price on Saturday and be jumping up with joy if they were the winners. Yet these same people were too scared to buy at such a discounted level. Why is this?
This is because it’s very stupid to make a decision on real estate based on the market and not on your life! In fact,Â they will look back in the very near future and be sayingÂ Â we should of bought that in June 2011.
At the moment the media has scared buyers. This fear is stopping buyers from making a decision with a view the market has not bottomed. However, think about it. The only time a buyer will know the market has bottomed is in fact when it’s obvious it has started to go up. Because at this point a buyer will be able to look backwards and say that was the bottom back then, and at this time you will be paying a price that is in fact higher than the bottom. Furthermore, at this point with the market rising buyers will be competing with more buyers. Furthermore, there will be less listings for a buyer to pick from which will mean they will have to be content with what’sÂ available in a limited supply. Finally, in a market that’s rising a buyer will most likely have toÂ encounter a higher interest rate environment .
All these reasons above, clearly show that the main reason a buyer is not making a decision at the moment is the law of social proof. This law basically says when everyone is buying, you jump in and buy as well. When everyone is holding back, you hold back as well. Â Essentially humans are like sheep. Driven emotionally and not logically in critical decisions.
Next time you meet a buyer who is procrastinating simply ask them “Are you buying a home based on the market or based on your life?”