TL;DR – minimize emotions, protect downside risk, understand that random events can blow up a deal
Buying a home is exciting yet stressful. We have seen enough real estate deals succeed and fail to have learned a few things. Use the following tips to make good decisions and improve your chances of success while buying or selling your home.
1. The best approach is to reduce emotions as much as possible. Do not fall in love with a prospective home. Pay attention to the details of the home to understand if it will fit your needs and lifestyle. But don’t fantasize about living in it yet. Your agent is good at sensing your level of excitement and will use this knowledge against you. Don’t be that couple that overpaid because the place was perfect for them. You work hard for your money. Pay the market rate or better!
2. Focus on the goal and not on the drama that can unfold sometimes. Don’t be shocked by incompetence or unprofessional dealings. All kinds of shitty situations arise in the home buying process. Focus on the goal. If you are selling, your goal is to sell at the highest price in the shortest time. If buying, your goal is to find the best place that fits your needs at the best price. Everything else is noise.
3. Do not stress about things you cannot control. If the financing falls through the last minute and there is nothing you can do, let it go and start over. If an indecisive buyer walks away after wasting months of your time, don’t get upset or blame your agent. Deals fall through for lots of reasons. Do not attribute random chance to anything else.
4. Pay attention to the small print and protect your downside. Ask your agent or attorney about worst-case situations. What happens if my financing falls apart or if the co-op board rejects my application? Understand clearly situations that can lead to you losing your deposit. What happens if you find structural issues after buying? You get the idea. Make a list of worst-case questions and ask your attorney or agent.
5. Do not try to time the market and don’t listen to people providing forecasts of housing prices. It’s nearly impossible to predict markets or to know if the market is in a bubble. Trust me, I spent ten years of my life working in a hedgefund watching others fail at predicting markets. Instead, focus on affordability. Make sure that you can afford the place during times of financial stress, such as losing your job.
7. Try to understand the other party’s situation and empathize with them. But do not compromise on your goal. For example, if you are buying from a seller, who is going to be losing money, express that you understand his situation but under no circumstance overpay for the property. Check out Chris Voss’s book on negotiating – “Never split the difference”. It’s generally a bad idea to communicate directly with the other party. You should let your agent do the talking. But make sure your agent is communicating the right message using the right tone.
8. Use deadlines to your benefit – many deals fall apart because of one party being indecisive and taking too long. Push for deadlines to get the other party to decide one way or the other. For example, if the buyer is taking too long to sign the contract, ask your agent to let them know in a polite and professional tone, that you would like to put the property back on the market by next week but you are still open and willing to move forward with them
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