By Rich Harvey, CEO & Founder, propertybuyer.com.au
I often wonder how people decide which tasks to tackle on their own, and which they’ll outsource to experts. For example, most completing a small renovation would never dream of doing their own electrical work – but hand them a paintbrush and they’re onto it with the enthusiasm of a Dutch master.
We basically like to “have a go” at something if it’s deemed simple, safe, inexpensive to remedy and unlikely to harm to others.
That’s why I find it confounding so many Australians choose to DIY buying a property.
The procedure for purchasing a home or an investment can be simple, I grant you that. It’s a matter of choosing your property, signing a contract and paying for it on settlement. Aussies have been doing it for years.
But acquiring the right type of property at an appropriate price is not as easy as you might think. Make a mistake and it can deliver financial hardship to both you and your family.
Unfortunately, many don’t discover their go-it-alone approach is failing until it’s too late.
Here are some reasons why you shouldn’t tackle this important task on your own.
Planning
I saw an interesting statistic from MCG Quantity Surveyors recently suggesting around one quarter of landlords could be “accidental investors”. They were referring to people who buy a home and simply choose to keep it as an investment rather than selling it when it comes time to move on.
This approach can be a legitimate investment strategy, but most buyers don’t purchase a home initially with the intention of someday turning it into a rental.
Too many people are buying property without having first put a plan in place around their personal and financial futures. They are compelled by FOMO, or they purchase something on a whim, without thinking about how it will impact them over the long term.
A buyers’ advocate will help keep you on track with your plan as things proceed. For example, I go to the gym and couldn't ride 25 kilometres in 45 minutes cycle class unless I had someone at the front of the room urging me on. It’s the same with property dealings. A good buyers’ agent will help you stick with to the strategy and exceed all expectations.
Asset selection
Everyday buyers don’t tend to devote enough time to logically (not emotionally) thinking about whether or a not a particular property will suit their needs.
Buying the wrong asset means you could, at best, have something that underperforms the market. At worst, it could be a complete lemon that will leave you in a financial black hole.
The wrong property could be something like a home where rectification works will blow your budget. You might purchase in the wrong school catchment or acquire something with town planning restrictions and easements that render it unfit for purpose.
You could end up buying an investment that doesn’t have a secure tenant base. Its growth potential could be stymied by high body corporate fees. It might have a great cashflow profile, but small bedrooms and lack of car accommodation will stunt its capital gains potential.
This is why experts apply their knowledge in a logical, unemotional way to ensure the real estate you purchase will fit your requirements.
Paying too much
When it comes to negotiating a purchase, most DIY buyers need to realise they’re at a disadvantage because the vendor already has an expert representing their interests – and that’s the selling agent.
Going into the ring to talk numbers and contract conditions with a professional salesperson whose entire brief is to secure the best possible outcome for their client makes no sense to me. You will, in all likelihood, be out of your depth.
My advice for D-I-Ys is D-I-Don’t! You can have a specialist negotiator on your side too. A buyers’ advocate understands the process and can deal with selling agents on a level playing field. The savings buyers’ advocates deliver will often exceed their fee too.
As is often the case, if you think it's expensive using a professional try hiring an amateur!
Due diligence
It’s true that buyers have access to sales data via listing portals or even (if they’re lucky) data subscriptions. You may have even attended enough open homes and auction events to feel confident about evaluating a property option before you buy.
But the average purchaser can’t possibly gain the experience needed to do comprehensive due diligence.
A buyers’ advocate not only identifies the most appropriate sales evidence, but also knows how to compare them effectively and appropriately to your preferred listing.
In addition, a buyers’ advocate will make decisions with their head, not their heart.
It’s incredibly difficult to stay dispassionate about a property that you’re buying for yourself. Your research often leads to confirmational bias where you justify and incorrectly weight all the evidence simply because you’ve formed an emotional attachment to the property.
Having a buyers’ advocate on your team helps you avoid that.
So, my advice to D-I-Ys is to D-I-Don’t! Instead, be sure to choose an appropriately qualified and experienced buyers advocate to assist with your next property purchase. Without one you could risk the wrong home, a financial loss, delayed retirement and/or less equity than you deserve.
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