Buying Real Estate
When considering a purchase of any kind, you might find yourself battling two opposing forces, waging a neural war inside your head. The first, called the avoidance system, tells you to avoid risks and negative consequences. And, the second being the approach system, which tells you to do whatever makes you happy at that moment. Some surveys show, as many as 44% of all new homeowners experience a level of buyer’s remorse; and it’s no wonder. In Toronto’s real estate labyrinth filled with beautifully staged properties and trick photography, it’s easy to fall in love with the bells and whistles. As such, when buying real estate, the more significant problems beneath the surface get overlooked.
5 Ways to Avoid Buyer’s Remorse on Your Real Estate Acquisition
So, what causes buyer’s remorse when it comes to buying real estate? How can you avoid it in such a high-velocity market that breeds hasty decisions and desperate concessions, just to get a foot in the door? Take a look at these five tips for buying real estate without feeling buyer’s remorse, coming from research and studies, paired with real life lessons from personal experience…
1. Think Long-Term
Warren Buffet attributes his success and investment savviness to “long term thinking”. You should do the same when considering buying real estate in any market. Let’s face it, it’s easy to overpay for a home in Toronto. But, if you peel away the drama, you may realize that in retrospect, overpaying today may mean a deal tomorrow. Regardless of whether you are an end-user, investor, or somewhere in between, there are no short-term plays in real estate if you really want to come out on top.
Think about neighbourhood demographics and appreciation rates. What developments are in the pipeline that will change the market landscape? What will future population and immigration targets look like in those areas? Also, what will it cost to maintain the property over time? Are there any major repairs required that may cost you $$$ in the future? All of these questions and more will allow you to look at the big picture. This way, you can make an informed and confident decision. After all, the best investments are based on where the market is going to be, NOT where it is today.
2. Buy for the Experience
In a 2011 paper, Cornell University psychologists Emily Rosenzweig and Tom Gilovich explain how buyer’s remorse varies across two types of purchases:
- Material purchases: physical objects like electronics, cars, and clothes
- Experiential purchases: experiences like concerts, vacations, and skydiving]
The findings show that material purchases are far more likely to lead to buyer’s remorse because they are “interchangeable.” In today’s real estate market, a “material” purchase might mean the luxury house that inconveniently leaves you house-poor but achieves the goal of impressing your friends. On the other end, an experiential purchase makes sense financially and improves your overall quality of life.
When considering buying real estate, really think about what your experience will be like living there. What will your commute to work look like? What schools will your children attend? Will you have to walk 15 minutes down a violent wind tunnel in -30-degree weather to get to the nearest streetcar stop? Sometimes it makes sense to lower your expectations on the type of home you purchase if it means improving your quality of life.
As human beings, we are more likely to regret an “experience”. So, purchasing a home that grants you opportunities like spending quality time with your family, walking to work, or hosting friends in your backyard will not give you the same sense of lost opportunity cost. This is because you interpret experiences to be unique, not interchangeable. And this is why many homeowners overvalue their own homes – because of the “experiences” and memories they’ve had in it!
We’re seeing that brands and even some listing agents are adjusting their marketing efforts accordingly. We now live in an “experience economy,” where even material items are never just material. So, be critical about what your own reality will be after your purchase.
3. Familiarize Yourself With the Market
If you’re going through a period of post-purchase rationalization, the best way to give yourself peace of mind is to provide yourself with context. You won’t know if something is truly an excellent opportunity until you weigh all your options to see the bigger picture. In Toronto’s resale market, there is little transparency for potential buyers. Most homes are now listed for far under market value and even lower than the actual sale price. This skews the data for would-be buyers gearing up to leap into homeownership or existing owners comparing their purchase to homes for sale down the street. Surround yourself with hard market data such as the actual sold prices and market stats from reputable sources. Also remember, if a home sells for far under market value with only one offer, there’s usually a reason! The grass can sometimes seem greener from the other side of the fence.
4. Complete Your Due Diligence
With every home purchase, there is always a certain level of risk that a buyer will need to assume. This is especially true in a market where quality inventory is scarce, and demand remains high. You can always minimize your risks by conducting your due diligence on the property and the neighbourhood. You’ll want to really understand what you are buying beyond the beautiful kitchen and fully finished basement.
Having a home inspection / status certificate reviewed with a fine-toothed comb prior to finalizing an Agreement of Purchase and Sale can prove beneficial to all parties. We recommend doing this every time. Because we live in the information age where most things are readily available online, utilizing your resources such as bed bug reports, termite prone neighbourhood stats, etc. can prevent any regrets down the road.
5. Partner With a Trusted Agent When Buying Real Estate
When it comes to buying real estate, not every buyer is an expert. But guess what? You’re not expected to be. That is why you hire one. You wouldn’t represent yourself in court if you weren’t proficient in your local law policies and procedures, so why would you represent yourself on the biggest financial purchase of your life?
Partnering with a real estate agent that has experience in your preferred market will expose you to neighbourhood data and quirks, hidden opportunities, updated sales and market values. Considering you’ve already found one, there is no need to look any further.
Let’s Talk About Buying Real Estate Together
It’s a jungle out there, but we’re in this together. Get in touch with us today to learn more about how you can successfully navigate through Toronto’s real estate market and purchase a home that you’ll celebrate for many years to come.
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This article is written by Urban enthusiast and food/travel junkie, Jessica Elizabeth Spillas. As the firm’s multi-talented Business Development Manager and Sales Representative, she is able to pair her passionate approach to buying, selling and investing in Toronto Real Estate with her flair for design and digital marketing. With this in mind, Jessica delivers unparalleled service with every interaction and works hard to keep her clients and colleagues organized and working at top-notch efficiency.
