Real estate buyers' Number One Mistake is assuming - that's guessing, hoping, ignoring, and NOT knowing.
Assumptions can be very expensive in real estate. For real estate buyers this may be an expense that only materializes after they have spent their money and moved in to their new house or condominium unit. Assumptions lie at the heart of buyer's remorse.
With the wide range of financial, legal, and lifestyle complexities involved in real estate, buyers' assumptions are often clarified in hindsight. When buyers discover the gap between reality and their assumptions, their responses usually begin with "I thought...," "I believed...," "I hoped...," and often "I assumed." Suddenly, they realize what they did not know or understand, and what that ignorance has cost them.
"Buyers think [read assume] they can use a coastal condominium unit as a second home during parts of the year and rent it out when they are not using it to help offset the cost of ownership," explained Ralph De Martino CRS, GRI, RSPS, broker/owner of Miami-based Ocean International Realty, which specializes in coastal second homes for international buyers. "If the condo doesn't allow 30, 60, or 90 day rentals, they won't be able to rent out, and will have to foot the whole bill of ownership.... Without me asking them directly, their intended form of use would not be mentioned because they assumethat they can rent short term. In our market, most condo buildings have more stringent restrictions."
De Martino, having identified a common assumption, is quick to stress that he does not let prospective second-home buyers make this mistake. His advise for buyer is simple: "They should get an agent that knows what they are doing with condos and who asks exactly how will they be using [the unit], so the end result will be exactly what they want."
Professional expertise is the antidote to assumptions, but it is not always easy for real estate professionals to apply. The added frustration for them is the resistance they meet while exploring what prospective buyers know about real estate and what they reallywant and need. The sales processes that professionals take prospects through are designed to uncover assumptions, objections, and other limiting factors, but this aim is only achieved with cooperation from prospective buyers.
"Sometimes buyers get so upset with the process that they give up, and in some instances walk away from the deal, and end up fighting over the escrow check with the seller," said Realtor Kay Conageski, PA, of Miami-based Keyes Company, who targets first-time and international buyers. "It's truly unnecessary because knowing what to expect eases a lot of this frustration."
Conageski explained by email that she consistently found condo buyers did not understand that they must go through the condo associations approval process in order to purchase a unit.
"Educating these buyers is the key to a successful transaction," stresses Conageski. "Knowing the ins and outs of various condo buildings is the job of a good agent, and eliminating unnecessary stress for their buyers is the real estate professional's responsibility. They have to hand hold in a lot of cases, and should assist the entire way to make the process less chaotic for everyone."
This article draws on my recent research with the MIAMI Association of REALTORS® (MIAMI), which also generated my column, "Avoid Six Way Too Common Condo Buyer Mistakes," however, I must stress that assumptions are not just a problem in condominium sales. Buyers, sellers, and professionals must be wary of their assumptions and those of others whether dealing with commercial or industrial real estate, home buying and recreational purchases, leases of any type, and real estate markets in all locations.
"Many condo buyers have a belief (read assumption) that the real estate market is frozen in time," emailed Realtor Patricia Rotsztain, Director of Operation and Broker Associate at Decorus Realty and MIAMI Governor. "There has been so much press about the real estate bubble, foreclosures, etc. that buyers still expect to find an oceanfront condo in a hot area for peanuts. It doesn't happen any more...the market has changed completely and the demand keeps pushing prices up."
Buyers may not understand the full effect of international buyers on their local markets. In "hot" areas like Miami and South Florida, competition for properties takes on global scale, placing even greater emphasis on having the right information for every aspect of the purchase.
Rotszain makes no assumptions about where problems lie: "Buyers need to look at the current numbers and talk to a trusted advisor (Realtor) instead of searching in sites where the information is not updated and they can see a property that was sold 4 years ago as a 'current listing.' Realtor.com updates information every day, so it is a much more reliable source of information.... The best approach for buyers is to work with reputable professionals who will show buyers the right data and help prevent costly mistakes. In my case, I have a network of attorneys, CPA's, inspection companies, etc. Spending a little money on an inspection, talking about tax implications, and setting up the right structure from the beginning can save money and headaches."
Assumptions - calculated and unconscious - are common distractions and counter-productive elements in thinking and problem-solving. Assumptions involve, and can create, inconsistencies, contradictions, disparities, problems and questions. Professional expertise is essential to tease out assumptions that prospective buyers may not be aware they were using as a standard for evaluating properties and making buying choices. What assumptions are undermining your real estate efforts?
For Agents: "Anti-Oops Assumption Busting " - Take this Assumption Busting Test for Professionals to learn what's undermining your effectiveness. This exercise is excerpted from Chapter 5 of the business ebook What's Your Point? Cut The Crap, Hit The Mark & Stick! with permission of Catapult Publishing.
All the joy of the season and the Happiest of New Years to you and your families.