Money Bite-Size Read:
- In a hot property market, more people want to buy property.
- This can create a fear of missing out or FOMO that pushes people to buy.
- Here’s how to avoid home buying FOMO so you can keep your cool when buying a home in a hot property market.
The Money Bites Take:
While you might feel the fear of home buying FOMO, it’s important to remember why you’re buying a home and know your budget so that you don’t overextend yourself.
Does buying a home seem out of reach?
You’re likely buying in a hot property market, where more buyers are flooding the market. In these markets, there are more interested buyers than a supply of homes, driving up prices. Houses quickly enter and exit the market as buyers snap them up quickly, reducing supply further.
In Australia, house prices are rising sharply.
Prices in Sydney and Melbourne have risen by 19% and 15% respectively in the past year, with record low-interest rates contributing to this rise. With more buyers in the market, many people are jumping into the market and experiencing home buying FOMO.
We know that this kind of scarcity creates fear, and you might end up with a home you didn’t want. It might be that you become so focused on competing with other buyers, you forget why you want to buy a home in the first place. This competitive home buying FOMO is toxic, and it’s high time we kick it to the curb, so you end up with a home you love at the right price.
Here’s how to avoid home buying FOMO:
1. Talk to your family and friends
The inner circle of people you trust likely have your best interests at heart. Bringing them with you at a home inspection means you have access to an objective opinion. This includes being able to identify whether something fits your property wish list or you’re making a fear-based decision. Try and select someone who has bought a home before and has been through the process.
2. Be wary of real estate agents
Real estate agents love a hot property market because they’re paid through commissions. Properties selling quickly for higher prices is music to their ears because they get paid more often and with higher commissions when they get a percentage of the home sales price. When talking to them, keep this in mind and pay attention to whether these conversations induce home buying FOMO.
3. Look at the market you’re buying into
When you buy a home, people often talk about the importance of doing your research. This doesn’t mean reading media stories about rising property prices, designed to facilitate FOMO, as it means that they sell more property advertisements. Instead, it means looking at the areas you want to buy in, looking at property sales histories and identifying what you can get for your money.
4. Write down what you want
You’ll only make a bad property buying decision if it’s not what you want and feels overpriced. The market only affects supply and the amount you might pay for a home. To ensure you get a home you’re happy with, write a list of exactly what you want. That includes the type of home, how many bedrooms it has, its location and the nearby facilities like community parks. Then work out from that list what’s essential and what you can compromise on.
5. Aim to view the property before you buy it
During COVID, many realtors were advertising properties for online viewing only. The issue with this is that photos can be misleading in making spaces look bigger than they are. A better approach is to view the property, ideally more than once and have a building inspector identify any issues upfront.
6. Get clear on what your price range is
When you start looking for property, you’ll be asked what your budget is. You can calculate this by identifying how much money you have already and whether you need more time to build a home deposit. It’s also worth looking at how much you can borrow from a bank and whether you can get preapproved finance.
7. Know what life will be like with a mortgage
Even if you succeed and buy the home of your dreams, you’ll likely need a mortgage. That’s a loan from a bank that you will spend anywhere from 10 to 30 years paying back. Those repayments will need to come out of your budget and limit your future spending. Before buying a house, consider the opportunity cost and whether you would benefit from spending that money on something else like investing first.
Remember that there will always be other homes on the market.
It may feel like you’re missing out, but the right home will be one in your price range that you feel happy living in. So whenever you feel the anxiousness of home buying FOMO, recognise this fear for what it is and what you’re working towards.