Flawed thinking – the non-sensical things buyers and sellers think and do when buying or selling property and how it gets in their way of securing a successful outcome is the topic we discuss with Miriam Sandkuhler.
Transcripts:
Kevin:   Investing in property isn’t always as easy as it looks. You know, good people, with anything, make lots of things look really, really easy. And that’s why they’re so good at what they do. But flawed thinking in property investment is something that we should look at from two sides, both the buyer and the seller. Helping me to do that, Miriam Sandkuhler from propertymavens.com.au.
Kevin:   Good day, Miriam.
Miriam:   Hi, Kevin.
Kevin:   Flawed thinking.
Miriam:   Flawed thinking, yeah.
Kevin:   Yeah, tell me … Well, firstly we’ll deal with, maybe with buyers, hey? What do they do?
Miriam:   Absolutely. So I think over the decades, buyers have been conditioned to think that buying property is really easy, and to be honest, signing the contract’s easy, but also so is making mistakes is really easy. And buying property is actually quite complex and buying an A grade property is really difficult. So, unfortunately, people put less time into research and due diligence on buying a property than often what they do on buying the latest phone.
Kevin:   Do you think that they just rely too much on some of the information they hear? You know, in shows like ours, with respect, and without doing their own due diligence and taking responsibility for their own decisions?
Miriam:   Yeah, absolutely. Look, free advice isn’t free. Often it’s sales advice or it’s biassed advice. And you’ve got to understand, you get what you pay for. So it is, “Buyer, beware.” So when someone makes that mistake, and they’re basically gambling with hundreds of thousands of dollars if they’re not doing their due diligence or getting expert advice, you know, they can’t really turn around and go, “Woe is me.” Because they had the choice of paying for a professional and choosing not to use one. So, yeah, it is, it’s, “Buyer, beware.” And you hear mostly about people doing well. You never hear the stories of how people get it wrong, because often they’re too embarrassed to share it or it puts them off property investing for life and they think property is a bad thing, but they don’t realise their lack of due diligence was what the issue is.
Kevin:   Yeah. Any other good advice you’ve got for buyers to get their thinking straight?
Miriam:   Yeah. So people confuse cheap property with being a good property. You know, the reality is, a bad property at a discount is still a bad property. So people need to understand that cheap … You know, if everyone wants a bargain, just cause you get a property at a discount doesn’t mean it’s actually a good property. So be aware of that.
Miriam:   Waiting for the market to hit bottom before you buy is a little bit nonsensical because they usually don’t know it’s the bottom until they’ve missed it and it’s started rising again.
Kevin:   That’s right.
Miriam:   Cause otherwise, how are you gonna know where the bottom is? And when I say to clients, you know, “Great, can you tell me when that will be?” They just look at me blankly, because of course they don’t know. So sometimes that’s an excuse to procrastinate or do nothing.
Miriam:   The other flawed thinking that people make is they look at what they’ve bought and how they’ve invested and they see that they’ve made some money, and they might’ve had say 3% capital growth for over five years, but they don’t realise they’ve actually missed out on possibly 10% capital growth if they had more knowledge and bought better. So they mistakenly convince themselves they know what they’re doing cause they’ve made some money, but they don’t realise what they’ve lost.
Kevin:   Yeah. “Any gain is better than no gain at all.” That’s the thinking.
Miriam:   Yeah. Yeah. And, unfortunately, any gain automatically gives them confidence in their ability to buy. And sometimes it’s just dumb luck. So they mistakenly think that they don’t need help because through circumstance or dumb luck they’ve made a little bit of money and they think, “Great, we’re off and running, we can do it ourselves.”
Kevin:   Yeah, the unfortunate part is is that many people never learn that lesson until they actually make a mistake, which in some cases can be quite devastating.
Miriam:   Oh, totally. And I’ll never forget, I had a lady once, and it was just to understand where she was coming from. I said, “Would you pay an expert $10,000 to ensure you don’t make an $800,000 mistake?’ And she said, “No.” And I went, “Okay, well good luck with that.” I just couldn’t understand her thinking. She’d rather make an $800,000 mistake, than pay a professional 10 grand to ensure that she didn’t.
Kevin:   Yeah, well in that case it’s a matter of, “Oh, well I’m not going to make that mistake anyway, so I won’t have to invest that money.” But, you know, sometimes, as I said, we learn the hard way, don’t we? By making the mistake. Yeah.
Miriam:   Absolutely. And then it’s too late to do anything about it. And then there’s a whole lot of other stuff and emotions that come into play and all the rest of it. So that’s on the buyer’s side. And then, of course, there’s the vendor side that has flawed thinking as well.
Kevin:   Okay, let’s walk through some of them.
Miriam:   Okay. So typically what they think their property is worth versus what the market value is or what someone’s prepared to pay for it. So they’re often starstruck with their own property. They often delude themselves into thinking that their property is worth much more than everything else in the street because they have an emotional attachment to it.
Kevin:   Yeah. And I’ve heard them say too, “Oh, but look, I need $600,000 so I can buy my next house.” Well, it doesn’t matter what you need, it’s what the market wants to pay you. That’s what it’s worth.
Miriam:   Exactly. The market is always based on what someone’s willing to pay for it. So when they put themselves in a vulnerable position of maybe having bought first and then having to sell for a price because they’ve maybe bought, spent too much beforehand, that’s where they’re totally vulnerable and where they can also kill their campaign totally. Sometimes not understanding the speed of a campaign and not preparing for it. So, for example, it might be that they list their property in a private campaign, private sale, and they could get an offer in the first week. And then I start thinking, “Oh, well, no, let’s wait for a better offer,” because they’re actually not emotionally or mentally ready to move on. So they kind of think, “Well, if we wait, we’ll get a bigger and better offer down the track,” but of course there’s no guarantee of that. And often we know that sometimes the first offer is often the best.
Kevin:   Yeah, that’s a dilemma for agents too. And no matter how many times I’ve had to tell someone that, they always say, “Oh, yeah, that’s just you talking.” But the fact is, Miriam, that the pool of buyers currently in the market now is likely where that early buyer will come from, they’re extremely educated cause they’ve been in the market, they know value, and they’re probably frustrated enough to make you an offer that is reasonably good.
Miriam:   Yeah, absolutely. So sometimes timing the offer and understanding where the campaign’s at, you know, should really dictate when you put that offer in. Because it is about understanding you’re working with a vendor, and the vendor will make up stuff in their own head if you’re too enthusiastic sometimes as well.
Miriam:   The other thing vendors do is they want to wait to the top of the market before they sell.
Kevin:   That’s a bit like the buyers, only in reverse.
Miriam:   Exactly. It’s exactly like that. But, again, sometimes markets can be slower to to rise, and much more quickly do they fall. So the risk in that is you don’t know it’s the top until you’ve missed it. And then if you’re on the downhill slide and you’re not coping with the fact that it’s a downhill slide, you know, you can be resistant to taking less money than what you thought you’d get while it was on the upside. So that’s where they create problems for themselves in. And as we spoke about before, maybe putting on a ridiculous reserve based on emotion because they’re either genuinely not intending to sell, so they’re sabotaging, or they’ve put themselves in a position where they’ve bought and they need more money and therein lies their justification.
Kevin:   It’s funny, you know, when real estate agents either buy or sell a property, it’s almost like they go to vendor school and they learn all this stuff that you’re talking about because they do exactly the same thing. Even them, as the most educated people, they’ll wait for a better offer on a property that might be selling, or they’ll wait for the bottom of the market to secure a better buy. It’s almost like we go to to seller and buyer school.
Miriam:   Well, it’s quite fascinating. From a psychological viewpoint, you know, if you can stand back and just observe it, it’s quite fascinating to look at how people think. And then, for me, having conversations with buyers and vendors around, “All right, well, I appreciate where you’re coming from, however, did you think about this?” Or, “Did you know that?” Same as when people say to me, “I only want to pay extra property,” it’s like, “Well, that’s great, but what you want to pay is irrelevant. You know, we have to consider where the market’s at and where the competition’s at. So let’s focus on what you need to, you know, pay to buy it rather than what you want to pay. Because, of course, no buyer ever wants to pay more than they want to pay. And no buyer ever wants to pay too much. And no vendor ever wants to sell for less than what they want either.” But if you don’t shift your thinking on either side, often you can end up without getting the outcome.
Kevin:   Great stuff. And, Miriam, always makes a lot of sense. Thank you so much. And I hope we’ve snapped a few people into reality, not just buyers and sellers, but real estate agents as well. Miriam Sandkuhler from Property Mavens. Thank you so much for your time.
Miriam:   You’re very welcome, Kevin.