When thinking about buying property, most buyers referring to the real estate market think in terms of prices – average price, increasing & decreasing prices and so on. Ideally instead of price, as a smart property buyer you should be thinking in terms of the property’s value in the marketplace.
Take the example of a person driving a car who is new in a certain area, does not have a smart phone and does not ask for directions. So he keeps moving around in circles. But all smart property buyers that I know will not be driving round and round. They will stop and ask for directions, leave their egos aside and get all the information that they need to make intelligent and well informed purchases. This attitude of seeking information in turn improves their financial success both in the short term and long term.
As a buyer of property, do not hesitate to get in touch with property appraisers, valuators, real estate agents etc. and inquire about property values in the marketplace where you intend to buy property. Ask questions such as, “Are property sales prices going for fifteen percent over ready reckoner tax assessments or five percent lower?” These are the kind of statistics that are useful for you to know in the market because they will give you a base or a standard which will help you compare different properties that you are evaluating in the market for a purchase.
Armed with this kind of useful knowledge, you may find that homes in the area of your interest are being sold on average of 110 % of ready reckoner value. This information would then become a useful benchmark for you when you are looking at various properties to buy and especially in cases where sellers are demanding more than the current market trends. You should not dismiss the sales values that property owners have set. A property seller might be selling his property at 120 % of ready-reckoner values and yet his sales price could be on target because of certain factors which can be investigated by you.
Do Home Buyers of High End Homes Overpay?
This is a question that is bandied around every-time we hear or read about an industrialist or a famous figure buy a property for a jaw-dropping figure in the property market. Well, I would say that there are indeed times when high net-worth individuals do tend to overpay for real estate. But as I said it only happens on the rare occasion. Most seasoned home buyers and business people are not in the habit of throwing money around! But there are times when a flamboyant HNI might rationalize the high purchase price of a particular property by saying, “I have to have this property. It suits my family’s purpose. And I don’t want to wait longer for something else to come on the market. I know I am overpaying for this one but I don’t care. I can afford it and I want it.”
On the other hand, there are less affluent buyers who do not do their research well and end up overpaying for a property without realizing it. When an affluent person overpays it doesn’t hurt him / her so much. But when someone of average wealth overpays it does tend to pinch. That is why it is important for every buyer whether super rich or just rich to understand value in the marketplace so that they do not end up overpaying. It is crucial to talk to home loan officers, builders, real estate consultants and so forth to arrive at a true picture of current rates in a certain area.
Don’t Fret Over Minor Details
When you are buying a home you should be looking at the big picture – the property, the location and the usefulness of the property for yourself and your family. You should know exactly what the goals of your family are when buying property and the property you buy should fully meet those goals.
Do not harp on minor details like worry about a missing tub in the bathroom when your goal is to have a west-facing property preferably close to the beach where you can go for long walks with your children and your dogs. Unlike luxury home buyers who prefer bare-shell properties with their interior designers designing their dream interiors from scratch, we have seen that home buyers in lower price ranges can get hung up on details about the quality of the wall paint, wiring, kitchen and bathroom accessories etc. According to me that is not big-picture thinking – focusing on minor things when you are making the biggest purchase of your life!
Most Important Big Picture
What then is the most important fact that you should be obsessing over when buying property? The Location!
Even when you are assessing which location you should buy your home in, ask yourself these questions:
- Is the best location I can afford?
- Will this location improve my family’s lifestyle?
- Is this the best location within the neighbourhood that I’m looking in?
No Perfect House
I know of property owners who have purchased properties and began renovation projects that lasted over a year and cost them a fortune! There is one particular gentleman I know who renovated his property for two years – and yet he wasn’t satisfied with the outcome! So what did he do? He tore the house down and started over with a new design plan all over again!
It always helps to factor in “big-picture” thinking when buying a house. With this type of thinking, you compromise on smaller things such as flooring issues or lack of modular kitchen in exchange for a house that is situated in the perfect location that you have dreamed about. Location is the most important factor when buying a house. When you have found a property in the right location for you and your family and which ticks all the right boxes, go ahead and buy it!
If you want a home in an older and more genteel and classier part of the city you might have to compromise on certain things like lack of modern amenities in the building and inside the house. But buying that house would be a valid decision for you when you consider the “big picture”.
Other “big picture” things you should consider when buying a house are factors such as whether the house is located near noisy environments like highways, train stations, airports etc. Other factors that should dissuade you from buying certain houses are properties that are very old, or properties that look ugly and unappealing or are situated in depressing places like next to open sewage drains or slums.
If the home that you are buying has the above mentioned qualities then you should think long and hard about moving forward. A normal kitchen can always be made into a modular one or you can always change the paint, flooring, wiring or introduce a bathtub in your bathroom. But how do you divert a stinking gigantic “nallah” flowing past your apartment building or how do you prevent the noise of passing planes and trains from keeping you awake at night?!
Buying homes such as these will only make sense if they are priced way below property rates in your area for you to consider buying such properties if at all. But do remember that reselling properties such as these will be next to impossible in the future.
What Can and Cant be Changed
As a buyer you should be aware of the difference between the things that you can and cant change. As mentioned above, if the property that you have shortlisted falls in the right location, has privacy and meets other factors then you shouldn’t be too concerned about the interiors of the property which can always be renovated and remodeled according to your tastes.
But location, views and privacy cannot be changed and neither can anything be done about the public infrastructure surrounding your house. So when buying any property always focus on the “big picture” items that make your house more valuable in the long run and help you get a quick sale and a good resale value whenever you wish to sell it in the future. Good luck 🙂