Boo Hoo: Your Emotions Are Screwing Up Your Deals

Girl sobbing

I‘ve been doing GoodPlace for more than a year now, and the longer I am doing this, the more I’m realizing that the biggest factor in property is not financial but emotional. To date, I’ve processed more than 500+ DealMatcher requests, and have collected a fair number of interesting anecdotes which you can read below:-

  • “I paid $30,000 more than the next offer because my wife just fell in love with the place.” (very common!)
  • “I know that the asking price is fair because I’ve done the JPPH price search like you advised me, but I just wanted a good deal.”
  • “I spent more than $200,000 fixing up the place. So either I sell it $200,000 above market price, or I won’t.”
  • “This is a beautiful home. I won’t sell it for cheap. And so I will wait for someone who will appreciate it as much as we do to buy it.”

(Million dollar) decisions that are made purely on emotions are prone to buyer’s remorse, and indeed, any agent will share with you horror stories of sellers chickening out just before the dotted line is signed.

As Sean Teo (a negotiator with Metroworld who signed up with us through GoodLeads.my) told me over lunch just yesterday here at SetiaWalk, he had had cases where the seller had gotten cold feet even when the buyer’s cheque was already posted to the seller. The result? Buyer got pissed off big time, bridges got burned, poor agent’s hard work which turned up zilch… all because of a seller who made an emotionally charged decision which he then regretted.

Buy Low, Sell High? No Shit.

I’ve taken the mickey out of property investment Gurus enough times already this week, but it still irks me when I read yet another of these shysters spew crap about things that they know jack about. The biggest Guru mantra has got to be “buy low and sell high” – which is as true (and as equally useless) as “to make a profit, you need to make more money than you spend“. This is easy to say, but almost too hard (nay, impossible) to do because we are all emotional beings.

Leonardo Dicaprio

It’s really not that hard to know a market’s low and high points (read this guide on “market timing” if you want to know), and the reasons people cannot buy “low” and sell “high” are purely psychological. As the Mentor once told me, to be a successful investor I just needed to know two things:- (1) how to time the market, and (2) how to manage my emotions.

Many of the guides that we have developed here at GoodPlace are written to provide rather “rigid” frameworks in order to take the emotions out of the picture. For example, the recent guide on developing “property workout plans” also come with PDF templates with step-by-step instructions. Every field in the template is to be filled with cold, hard facts and numbers. As you’ll see, there’s absolutely no room for fluff and ambiguity.

Excuse Me, Your Greed Is Showing

Greed is the emotion of the most destructive kind. I don’t mean get all preachy but I don’t really care much for the Gekko-ish “greed is good” mantra which seems to permeate into the minds of most punters in the stock and property markets.

The problem with greed is that it makes you fearful of losing out. It’s easy to fall in love with a deal, but the truth is that nothing is so good that you’ll need to jump or it or it will go away. And like the old adage goes, if it looks too good to be true, then it’s too good to be true. I’ve seen enough deals now that I am convinced that there’s absolutely no shortage of good deals that will come your way if you’re good at what you do.

Nobody’s Gonna Tell You Your Baby Is Ugly

Now almost every seller I know suffers from what I call the “Ownership Pride“. If you’re a serious investor, don’t succumb to pride or you’ll routinely find yourself losing deals and/or paying a premium for otherwise reasonably priced properties at fair value.

This is particularly relevant to home owners who are looking to sell their property. Understandably, given that they have lived in the property, and perhaps raised a family there, they have built an emotional connection to the place over the years. What many agents tell me is that these seller-owners typically over-value their property by at least 10-15%, and for that reason they will find it hard to get anyone interested in their property. Also, many agents particularly shy away from these sellers because their properties are almost impossible to sell given their (unjustifiable) premium.

To compound to the problem, these home owners are often “blind” to obvious defects on their property which would lower down the valuation even further. However, savvy buyers will often avoid these buyers altogether because there’s no point arguing against emotions.

All In All…

As the purchase of a home is usually the single most expensive financial transaction that we Malaysians would make in a lifetime, we owe it to ourselves to make the wisest decision possible. As such, being mere mortals, it can be impossible to completely take our emotions out of the picture. However, we can keep ourselves in check and recognize the red flags when we see them (i.e. when we try to make irrational justifications for lower/higher prices).

Martha's thoughts

In short, for the buyer:-

  1. Don’t “chase the deal” and low-ball the seller.
  2. Do the JPPH price search and crunch your numbers.
  3. Don’t have ridiculous price expectations especially when you have been looking at fake ads.
  4. Don’t ask me to find you a unit “below market value”. 😉
  5. Don’t fall into the “last day today” trap.

And for the seller:-

  1. Don’t “chase the deal” and high-ball the buyer.
  2. Do the JPPH price search and crunch your numbers.
  3. Don’t expect too high a premium for fixer uppers.
  4. Don’t price yourself out of the market.
  5. Don’t let “Ownership Pride” cloud your judgement and sabotage your sale.

All in all, do make your decision based on hard numbers and analysis like I would always recommend, but temper your decision with the emotional factors that may drive your decisions consciously and subconsciously.

And finally, if you’re a seller and you’ve already made an offer and you’ve got the buyer’s cheque in hand, then go ahead and sign the document. Don’t be a flip-flopping douche!

About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

Comments

  1. Hi, I’m from Singapore. Just came across your site today and I think it is very good.Will surely read more of it in time to come.

    I noticed from the little I read however that most of your analysis and commentary centres upon the KL area. I wonder if you have any opinions on the JB area, you know that ‘over-hyped’ area called Iskandar?

    I say ‘over-hyped’ because it seems the general consensus is that a bubble is forming there, with prices set to fall precipitously.

    Anyhow, my girlfriend and I recently purchased two properties. One in Puteri Harbour and the other one at Tanjong Puteri, you know, the R&F development next to the Causeway. I guess we got it for emotional reasons – I guess we told ourselves if we were to hope other people down the line like it, we would have to like it ourselves.Is that wrong?

    I suppose the other thing is that we were also a bit taken by the fact that we could never hope to get those kind of ‘luxury properties’ in Singapore so we told ourselves, worst come to worst we could stay there and work in Singapore. That was before the authorities on both sides raised the tolls a whopping 600% in all. We still can, I guess, but it is not so pleasant any more.

    Any thoughts?

    • I am a Singaporean too, who travels frequently to KL & JB for work & leisure. My thoughts on buying JB property is that the safest route is to leverage on an existing SG property eg HDB to rent out, while staying in JB.

      With high holding cost, eg interest rate, which erodes your profitability in flipping JB or KL property, it’s kinda hard to flip for decent investment gains, unless you are a savvy player. And surprised why you did not get a landed though. Any reasons for buying a ‘luxury condo’, instead of landed?

      • Hi YC, don’t know really. I guess in Singapore we are so used to living in apartments (I’ve stayed in one all my life) so I guess we were attracted by the facilities and the locations (one each at Causeway and 2nd Link {Puteri Harbour}- no landed there). Also we thought it easier to maintain…

        As for flipping, we are not in it to flip. If we can rent, that would be great. But I understand if it is difficult to rent in KL, it may be harder in JB. So I guess we may yet stay there… But it now costs S$13.10 just to cross the Causeway and back. Imagine doing that everyday….

        And of course problem is we have two apartments – haha. I told my gf after those two purchases, we ain’t going for any more showflats.

        • Hi Jason, once the RTS is up, I guess it will be much easier to rent out R&F, while staying at Puteri Harbour yourself and travelling via 2nd link/ferry.

          If you have a SG property for renting out eg HDB, that reduces your risk immensely while servicing your SG loan mainly through CPF. It results in much welcomed cash flows.

          • Thanks. I hope to be able to do that. You can imagine how we felt when it was announced that the Malaysia intended to put the station at Bukit Chagar. Of all the potential sites that was the furthest.

    • Not too optimistic about Iskandar for the short term. The fundamentals are sound, but politics override all other factors most of the time.

  2. Spot on Khai Yin! I would just add something: Don’t regret, learn your lesson and move on.

  3. Good sharing.
    But,
    May I know what is JPPH price search?

  4. I think it is possible to buy a property below the ‘market value’. In a falling market, and using JPPH as a guide, surely there are opportunities to buy a property below the JPPH price point?

    And as for why the agent wouldn’t want such a deal himself, sometimes it boils down to quantum, ie affordability.

    • Unless you’ve got good deal flow, usually “value buys” don’t come easily. Like everything else when it comes to making money, you need an edge.

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