Bottom Line: Home ownership has long been a valued tradition across most societies and cultures. Most people aspire to possess their own homes and it is here that the gullible homebuyers are prone to make emotional mistakes.
Considering the overall economic health of an economy is largely influenced by the functioning of its housing market, there is definitely a need to reform the property buying and selling process which allows consumers to be more involved. This is all the more relevant in the present market conditions where, the cost of capital and loans are high and not expected to decrease in the near future – affecting the affordability and availability of homes.
Resultantly, the decision to purchase a house is taking place in a highly constrained environment. Also, biased contracts, lack of transparency in transactions and regulation in development and brokerage services are all factors that are affecting home buyers.
Therefore, as prospective consumers knowing the right questions to ask and if permissible engaging expert advice can definitely help one make a sound investment for your future. Whether you are buying a home to live in with family or for investment purposes, understanding your wants and needs is the way to avoid emotional mistakes. In more organized markets such as the UK, consumers can safeguard themselves and make informed decisions based on a ‘home buyers report’.
The RICS introduced the Home Buyer Report (HBR) in July 2009, which helps provide a clear, unbiased guide to people looking to buy a house. By opting for such a report, consumers can be assured that RICS members will help provide them with requisite professional expertise and independent advice, in making one of the most important decisions of their lives.
As RICS members, who adhere to a set of highly regulated standards and follow a strict code of ethics, professionals act in the best interest of the consumer. Thereby, providing a holistic guide to the entire home buying process – right from choosing the property, to agreeing on the sale/purchase and financing the property, to the completion of the entire process.
Avoidable Emotional Mistakes
Mistake No. 1: Always looking for a better deal. Get out of wishful thinking of a price crash or distress sale. You may end up paying more after few months of wait.
Mistake No. 2: Falling in love at first sight. Remember this is an arranged marriage, so no harm in looking for more option even if the first one you have liked.
Mistake No. 3: Overstretching for perfection. Don’t over stretch your financial capability for that perfect house. You may end up in financial mess and selling that dream house will end up in distress sale.
In India, there is a critical need for such robust practices that coincide with internationally recognized procedures, in order to safeguard and protect consumers, while at the same time having a tangible and accurate approach to determining market value of properties and reporting protocols. Only when such issues are addressed, will anomalies and miscreant practices be eliminated from the system that have existed thus far, due to the lack of regulation and transparency in the practices, procedures and processes; where consumers have been typically been at the short end of the stick.
Sachin Sandhir, Global Managing Director-Emerging Business, RICS says ‘buyer beware’ may sound like a cliché, but it is absolutely essential that a homebuyer protect their interests. Therefore, knowing the right questions to ask can definitely help you make a sound investment for your future. It is critical to understand that the decision to buy any property requires a long term financial commitment.
The ‘urgency’ factor of moving into one’s home will largely depend on one’s disposable income and the decision to invest either in an under construction or resale property. However, prior to making any such decision, it is always wise for the buyer to consider the associated risks that are involved in buying property and evaluate the same, before making a financial commitment.
“For all properties, regardless of age and design, basic checks should include the structural condition of the property; electrical wiring; plumbing; insulation; alterations which have been made to the original floor plan and if the same have been approved and assessed by the local development authority. It is also advisable to consider what the immediate and future maintenance requirements of a house might be,” says Sandhir.
Anshul Jain, Managing Director of Cushman & Wakefield India says one of the most critical mistakes a buyer can make is purchasing a house that they immediately like, even if the total cost they have to incur exceeds their budget. Another mistake could be that they not have an accurate assessment of the total outlay from their pockets, since the lender usually does not cover the service tax, the VAT, stamp duty and registration charges. In addition to that other charges passed on by the developer including legal fees, if any are also not covered by the bank. This could put a strain on the buyers’ finances.
“Getting lured by the project which forces the buyer to overlook the disadvantage from the location is another common mistake. Since it is quite possible that the inconvenience of travelling long distances every day to work may far outweigh the benefits of having additional comforts at home in the long run. Another potential mistake would be falling for marketing gimmicks of the developer including offers of freebies like gold coins, cars, cash discounts and holiday packages etc. influence their buying decision”, says Jain.
Checklist to check Emotional Mistakes
Location
1. Access to shops, transport, schools, hospitals and other civic amenities
2. Is it a residential zone?
3. Is the area prone to water logging?
4. Is there interrupted power supply?
5. Is it a traffic congested area?
Outside the property
6. Does the building look structurally sound?
7. Are there enough open spaces and common areas?
8. Has the project been approved by the government and other requisite authorities
9. Is there scope for further improvement/expansion of the property
Inside the property
10. What is the condition of the house – look for signs of seepage, structural damage
11. Is the size of the house in accordance with your immediate and future requirements
12. Is the flooring intact and level
13. Natural light and ventilation
14. Do the doors and windows operate properly
15. Check for the safety of electrical fitments and plumbing
A section of developers admit that the buyers’ urge to shift into a house of their own often make them blind to the ground realities. A spokesperson of Kalpatru says the common emotional mistakes that are noticed in home buyers are the reluctance to check the background of the developer and past projects delivered by him.
“We would suggest that a buyer should ascertain the reputation of the developer and past projects delivered by him before entering in to any transaction with them. The developer and the project should be selected after conducting a detailed research and understanding the pros and the cons of investing in the project,” he says.
Percy Chowdhry, Director, Rustomjee agrees that buying a property is a huge investment and it is imperative that one dedicates quality time and goes that extra mile sourcing information about the project. It is also important that the customer understand the real estate dynamics which will help him to be more prudent in his dealings. Every consumer has specific set of requirements and hence there will be a different set of influencing parameters while scouring for a place.
“The first and most important thing is to do an in-depth research or study on each of the developers and projects, financing options, the preference in amenities etc. One should do thorough background check on the past projects delivered by the developer and whether they were delivered on time. Real estate agents along with websites and blog sites, now make it possible to obtain the correct information about a project and its developer,” says Chowdhry.
Also, in some cases the buyers let themselves lured by a model apartment on display at the project site. Usually such display units carry superlative interiors since they are done with the specific intention to influence the purchase decision of potential buyers. The buyer should understand that in all likelihood she would not be spending anywhere close to what the developer had spent on the interior of the model flat, which may have been done by top-notch interior firm at exorbitant costs and hence their apartment may not appear as great as model flat.
By: Ravi Sinha
