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The three types of property buyers and the cycle of emotion in buying a property

ByDavid Gordon

Over the last 11 years as a buyers’ agent and being involved with more than 1,000 transactions, I have seen an incredibly wide range of buying emotions associated with each purchase.  I have found that there are three distinct types of buyers: 

  1. Active Buyers – these buyers have a positive self-image, take the initiative and seek out the best deals by researching extensively.  They are regularly looking at their financial position and willing to calculate the returns and mitigate the risks.  They have a plan and end goal with their property investing. They expect the property to perform well and review the rents at least yearly. They are usually time-poor, leveraging the search function out to a buyers’ agent.  As soon as they have some equity or additional cash they are looking to expand their portfolios.
  2. Reactive Buyers – these buyers take action only when prompted and realise often too late that to achieve their financial goals they should have started five years ago.  Reactive buyers often suffer from “paralysis of analysis” and try to gather up so much information that they end up getting confused.  The reactive buyers need reliable information to make decisions but take a long time to get their act together.  They might respond to a special offer and think that just buying one or two investment properties will get them to financial freedom rather than embarking on a specific plan.
  3. Passive Buyers – these buyers sit on sidelines and watch others make money, thinking they should do something but lack the motivation to get going.  They are less trusting of others and need proof that property investing actually works.  They fear failure and therefore procrastinate rather than taking action.  They are wary of real estate agents and believe the world is full of sharks ready to devour them.  They are very frugal with money but still want to achieve financial security. 

Which one best describes you?

What are your personal property goals for 2012 and beyond?  Are you seeking to upgrade and find your dream home?  Do you want to create a portfolio of 10 properties that pays you $120,000 per year and provides you financial freedom?  Perhaps you haven’t really set a goal yet or perhaps it’s something you’ll get around to later because it seems like too much hard work to research the right kind of properties. 

In buying a home or investment property, you are likely to encounter a whole range of emotional highs and lows.  I have developed a “Cycle of Property Emotions”.

When starting out I see buyers full of optimism and confidence and with high expectations of finding the perfect home or deal of the decade.  The buyer approaches the search with enthusiasm, believing that the search will show up hundreds of excellent properties. One is found, bought and the champagne is popped for the celebrations (jubilation!). 

However, buyer’s remorse and worry soon kicks in when the buyer discovers a few cracks in the wall (or the tenant missed a week’s rent).  You start to get nervous and have a few restless nights wishing you had done more due diligence before signing the contract. You become alarmed when reading a negative media article that suggests there is a property bubble and prices are 40% over valued.  This gives way to dread and panic starts to set in as you think, “perhaps I really have made a terrible mistake and should have stuck my money under the mattress”.  Depression overcomes you when you consider how long it took to save up the deposit.  Shadows of gloom appear when you remember you have to explain yourself to your accountant in July.  But then the market begins to turn, some positive stories come out, interest rates drop a little and the future is looking bright again. This gives way to relief that you didn’t sell the property prematurely and holding for the long term was OK and provides the confidence to buy once again. 

Whatever stage of the property buying cycle you are at, be aware of the range of emotions that you are likely to experience.  Consider your overall strategy and don’t be reactive to something that can be managed, like a bad tenant.  It’s important to manage your emotions during the buying cycle.  Many of our clients have commented that they found having a buyers’ agent on their side helped them ride the rollercoaster of emotions and stopped them making expensive mistakes.

(article by Rich Harvey at www.propertyobserver.com.au)

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