PROPERTY

Five ways to avoid getting caught up in property FOMO

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As a buyer in the current market, fear of missing out (FOMO) is your biggest enemy as it can easily lead to many years of regret from the moment you unpack in the wrong property, thinking, 'What have I done?'

As a buyer's agent I have never been busier, with the Sydney property market running hot. An astounding number of people are going through properties, and I'm hearing some astonishing sales results. At a recent auction, the property initially had a guide of $3.8 million, which was quickly revised to $4 million and subsequently $4.2 million due to the level of interest. With 10 registered bidders, the selling price was just short of $5 million in the end.

Given this might be what you're up against as scarcity drives prices up and feeds the frenzy, here's my advice: don't panic.

how to avoid property fomo fear of missing out

Easier said than done, right? However, I'm going to share with you a few implications of getting caught up in the FOMO trap and what you can do to avoid it.

1. Stick to your list of must-haves

People are so desperate to get into a property that they are ignoring all of their must-haves and bidding on places that they would ordinarily dismiss. I am talking about those properties on arterial roadways like Parramatta Road.

Lesson: Don't lose sight of what matters to you in a home. Make sure you take a breath and see the property at least twice before making a decision. Usually, on the second inspection, the rose-coloured glasses come off and you can view the property and its surroundings more objectively.

2. Don't believe the hype

When you're in the thick of things, it seems that prices will only ever go up, and stock will keep shrinking. According to CoreLogic data from March, Australian house prices had their sharpest monthly increase since August 2003. Also, CoreLogics's monthly home value index revealed a 2.1% increase compared to the previous month. These increases are widely spread around the nation across regional and capital city markets.

When looking at previous hot market history we see that some potential vendors are encouraged by crazy sales results and decide to sell because they believe they're going to make a killing. This means that more properties will come onto the market, buyers will have more choice, and are likely to steer clear of those properties in that wrong location, with that inflated price tag. Clearance rates drop, the market goes from hot to warm, and buyers have less reason to panic buy.

Typically, we will see a market recalibration, albeit slowly, with prices stabilising as opposed to continued steep growth. It is hard to say when this turnaround will happen, as it involves so many moving parts, and the published reports tend to be a bit behind the current situation on the ground.

Lesson: Better to wait than over-commit or make a bad decision. Keep your head.

3. Pay attention to what is going on in the world

I mentioned above that the property market normally goes through a period of readjustment, but these are not normal times, given we are still living in times of a pandemic. So while there are likely to be changes coming in the housing market because of an increase in vendors' willingness to list, we have also seen the end of mortgage freezes and JobKeeper. While we can't predict the fallout from the end of these programs, one thing that will eventually change is the interest rates, so be sure to take any interest hikes into account for the future - after all, buying a property is a long term commitment.

Before you jump into the property market during these times, seek professional advice from a mortgage broker. If you don't feel comfortable or confident with the level of information provided by the first mortgage broker, seek advice from another.

Lesson: Buy within your means. It's never been more important to get your finances and due diligence ticked off before committing.

4. Do your own research

It's best to remove the state of the market from your thinking altogether, so do not buy into what the latest news stories are spouting, and instead focus on doing your own research. Talk to agents about recent sales or look at the sold section of real estate websites so you are across current values. You should approach hot, warm, or cool markets in precisely the same way: only purchase a quality property that ticks your boxes at a price you can afford.

Lesson: Do your own research and don't believe everything you read or hear in the media.

5. Get a second opinion

I heard of a friend of a friend who was about to put in an offer on a house that her husband hadn't even seen. Luckily, he did see it and they decided the bedrooms were too pokey and didn't proceed with the offer.

Lesson: Two pairs of eyes are better than one. Even better, get a second opinion from someone who isn't emotionally involved with the purchase, has experience with buying property, and who isn't feeling the FOMO.

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Michelle May is the principal of Michelle May Buyers Agents. She helps clients make better property purchasing decisions through her business as well as her podcast Sydney Property Insider. Michelle is passionate about giving buyers back the power in their property buying experience.
Comments
Haydn Davies
May 1, 2021 10.01am

Hi Michelle,

There are a lot of articles like this at the moment. Which is good, but I feel there is a side of this which has been a little over looked. My partner and I bought our place a little over 7 years ago, in that time it depreciated. For a number of reasons, more developments causing the medium down and a small "financial crisis". As such with the house prices now rising, this means we are recovering and may even have some equity in our property again. We are by no means alone in this issue.

I do feel like this side of the storey is overlooked, when analysts and commenting or people are complaining about the sudden rise in house prices. We have ignored the part where everything crashed only a few years ago.

Anyway, just my observation.

Richard Jordan
May 2, 2021 9.07am

Unfortunately all these articles are aimed at the same thing, convincing people that house prices will go up so that agents get more sales turnover and that you will do better at auction since that is how agents can do the least work to get quick sales at below what a good negotiator would achieve. They are all aimed at maximising income for agents so you have to cut through the hype and do your own analysis. Property prices will rise, plateau and sometimes drop but over the long term will rise. The value of your place is irrelevant if you live in it (it's a cost of a roof over your head) and the only true value is when you sell as it is only worth what someone will pay at that moment for your unique property (there are no two properties the same).

Richard Jordan
May 2, 2021 8.52am

FOMO goes both ways, sellers get caught up in the hype and want to sell before the crash and then wonder if they should have held on because the prices keep going up.

Ultimately, hot, warm or cold you need to just treat the market the same.

Richard B
May 4, 2021 5.06pm

Yes, all very good comments to learn from. I too purchased a property in a new group of units in Hobart due to FOMO having gone through an unexpected divorce at 50, and sold 7 years later (2016) at a loss. I got 15k less (before fees) than I paid and had spent $15k on improvements (skylight, security door, blinds and curtains, tint, added bench space, heat pump). I resented losing those dollars as it meant I had to borrow that much more.

I had bought another better located two bedroom home prior to selling. The double mortgage financing / bills forced my hand after a few months on the market.

Come 2021 I'm glad I actually moved when I did in 2016 as my current place would now be unaffordable at my age. What a roller coaster ride, just look at house prices in today's hot in Hobart and nationwide. I'm still no real estate expert today.

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