CBA research warns home hunters to ditch their emotions
A NEW Commonwealth Bank survey of more than 1,000 home buyers and investors suggests many purchasers are letting their emotions through the door when purchasing property.
The research commissioned by Commonwealth Bank, in partnership with psychologist Dr Tim Sharp, found that while the majority (75 per cent) of property buyers claim to be rational rather than emotional buyers, in reality, emotions have a significant influence over their final purchasing decision.
The most common emotional characteristics that influence home buyers are:
- liking the feel/vibe of the property (37 per cent);
- an instant attraction to the property (22 per cent); and
- suiting the personality of the buyer (21 per cent).
The research also uncovered differences when it comes to the most influential emotional characteristics between different types of buyers:
- subsequent home buyers are more likely to be influenced by having a vision of what they wanted before they moved in (22 per cent);
- first home buyers are more likely to be influenced by the décor of the interior (19 per cent); and
- investors are more likely to be influenced by the place making them feel successful (17 per cent).
The research also revealed emotions not only influence which property home buyers purchase but also how much they end up paying, with nearly half of recent home buyers (44 per cent) claiming they have paid more for a property simply because they really liked it.
According to Dr Tim Sharp, Executive Coach and Clinical Psychologist, emotions can materialise at numerous points during the property buying process, but they are most influential when it comes to deciding which property to buy and for how much.
"We know that many home buyers start their journey to a new home full of excitement and optimism, but are gradually worn down by the sheer exhaustion of researching and inspecting different properties. More often than not, by the time it comes to signing on the dotted line our heads are crammed with all sorts of emotions that ultimately end up influencing our decision," said Dr Sharp.
Clive van Horen, General Manager, Home Loans, Commonwealth Bank, also believes prospective buyers need to consider the long term implications of purchasing a property.
"Given buying a property is one of the biggest financial decisions most of us will ever make, it's vital the final purchasing decision is based on sound rational judgement and not emotional justification," said Mr van Horen.
RATIONAL DRIVERS VERSUS EMOTIONAL DECIDERS
THE research found the majority of home buyers are initially driven to purchase a property by rational factors, which is particularly interesting considering many home buyers move on to make emotional purchasing decisions.
For subsequent home buyers the most prevalent drivers for purchasing a property are 'needing more space' (25 per cent), 'needing to downsize' (15 per cent) and 'needing to relocate' (15 per cent).
While for investors 'wanting to invest in property', rather than other options (e.g. the stock market - 23 per cent) and 'my investment money is earning limited interest' (15 per cent) are the most common drivers.
"I find these results really interesting, but not all that surprising. When we start looking for a property we have a very clear objective, for example, needing to get a bigger house to make room for a new member of the family.
"But as we go through the different stages of looking for the perfect property we start to become emotionally connected to different drivers, such as imagining 'how great it would be to entertain friends and family in this room' or 'how much the kids would love the garden'.
"My advice to anyone who wants to get the right property, for the right price, would be to constantly revisit their original objectives for buying a new property and use them to assess properties on which they are looking to make an offer.
"Secondly, all home buyers should make sure they only look at properties within their budget and set themselves strict limits when negotiating on the sale of a property, be that via an agent, private seller or at auction.
"And finally, always look at the bigger picture, it's never worth paying more than you can afford simply because you believe this is the 'perfect' property for you."
TO AUCTION OR NOT TO AUCTION
When it comes to deciding how to buy a property, the research found that home buyers have a mixture of emotional and rational reasons for their purchasing preference:
- 56 per cent of subsequent home buyers and 50 per cent of investors prefer to purchase a property via an agent. This is largely because they believe it's less stressful.
- Subsequent home buyers (30 per cent) and investors (29 per cent) believe they are more likely to make an emotional decision at an auction.
- 67 per cent of investors made an offer for their last property through an agent.
- 62 per cent of investors were the lead negotiator in their last purchase, most commonly because they felt they had more negotiation experience or were better at keeping their cool.
- First home buyers are more likely than average to make an offer direct to a private seller.
- Most (55 per cent) buyers who choose to negotiate directly with a seller do so because they believe they can get a better deal.
"While we all have different preferences for how we like to buy a property, the most important thing to remember is that regardless of whether you're with ten other bidders at an auction or one-on-one with the agent, never feel pressured or influenced to go over your budget. Above all, remember to leave your emotions at the door," said Mr van Horen.