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Ben Kingsley Blog post by Ben Kingsley

Are you Paying Too Much for your Property?

Today I want to talk to you about the three biggest reasons why you might be paying too much when buying property.

Number 1, the justify that they can afford it. Let me tell you a little story. Husband and wife couple, do their budget at home and then they head off to speak to their mortgage broker. Their mortgage broker has a suite of lenders available to them. Now, when they sit down and they crunch the numbers and they work out exactly how much they can spend, the mortgage broker tells them that they can spend up to $600,000. But wait, they had in their mind that they only wanted to spend $500,000. So they say thanks to their mortgage broker but $500,000 is our budget, let’s go off and do our research. And so they go into the search engine portal , they put their $500,000 price point in, in the areas that they are looking. Now the challenge is when they actually go out and inspect these properties, guess what, the actual properties that they’re looking at are actually priced at the $550,00 to $600,000 range. The entry level said to them that they should be able to afford it but actually when they go out and speak to the agent, the actual price point of that property is usually higher than what’s loaded in the search engine. Very frustrating, I know. So what actually happens then is they go back and look at properties that are in their $500,000 price point and they are not happy because they’ve seen the $600,000. Same with buying a car. You know, when you see that little bit of extra and you get those extra benefits, it gets hard to justify the original car that you were looking at. So they justify it to themselves. They then think, well, actually, the mortgage broker said we can afford up to $600,000 and the banks were willing to lend us that much so they have this challenge in their mind and they justify it to themselves to want to be able to do that. And they pay too much. And potentially, as they start a family, they might struggle with servicing that mortgage over a period of time. So lesson no. 1 is stick to your budget, make sure you factor in all of those changes in your future budget to know that you can afford it. Now if you can afford it with all those change and you can still justify it to yourself, maybe you’ll but that property.

Point no.2, impatience. You’ve heard me talk about the fear of missing out and it’s a big message at the moment in some marketplaces. People get sick of going out on Saturday mornings, looking at open for inspections, so when they find a property that ticks most of their boxes or all of their boxes, that’s the impatience element that says to them. They get competitive and they basically see the property prices go further than what they are willing to spend in the first instance. They get caught up in the process and they pay too much.

So don’t be impatient. More good properties will come along. I can guarantee you, I’ve been doing this for 20 years, there is always great properties that come into the market.

Now, my final point is this whole idea of falling in love with the property. When someone goes and has a look at the asset or a property, and they just love it. There is an emotional attachment. There is a status attachment to it. They absolutely engaged and they can picture the dinner parties they are going to host, they can picture the kids out in the backyard, they are playing on the swings and you know, they really get themselves in the property. But yet, they haven’t secure it. So come the day of the auction or come the process of buying that property, they always, always go over their budget. And that’s the fear of missing out element that we also talk about before. If you combine those things together, that creates this whole concept of paying too much or paying over the fair market value for what the asset’s worth. It’s really important to understand that when you are going into the property market.

So they are the three reasons why you pay too much when buying a property.

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