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A buyer derives value from a property based on how well it satisfies his physical, emotional and financial needs. Whereas a seller's price is based on perception and prevalent market conditions. When the gap between the derived value and price paid is immense, there is buyer's remorse. Why does this happen so often? Contrary to popular belief, it does not occur on account of an elaborate con game, but rather a flawed approach to evaluating a property. As a buyer, you suffer when you disregard your reality and make an impulsive decision based solely on perception.
A couple of years ago, I met a young couple who had recently purchased a home in Mumbai. It was a beautiful 3BHK apartment with a big balcony in an up-and-coming neighbourhood in Central Mumbai. Both worked corporate jobs, loved hosting parties and were expecting a child. Their research had led them to believe this apartment would best suit their present and future needs. Naturally, I was surprised when I recently heard that they were now desperately looking to sell. Turns out, the project and its surroundings did not develop as they had envisioned. Advertisement
This is a classic case of buyer's remorse. A buyer derives value from a property based on how well it satisfies his needs. Whereas the seller's price is a result of a perception he is able to create. After a deal is concluded, if the buyer realises that the value he can actually derive from the property does not justify the price paid he is disappointed. Why does this happen so often? Contrary to popular belief, this does not occur on account of an elaborate con game, but rather a flawed approach to evaluating a property. As a buyer, you suffer when you disregard your reality and make an impulsive decision based solely on perception.
So, what is reality? We derive value from a real estate purchase when it can satisfy our physical, emotional and financial needs. We buy a house because we need a place to live in or purchase an office space to expand our business. We usually shift from renting to buying when the former is no longer economical or conducive. Secondly, in India like in most other countries, owning a property gives you an elevated status in society. Therefore people look at purchasing a home as a way of declaring financial success and improving social status. Lastly, an individual may decide to buy a property as a means of wealth generation.
If you consider purchasing a property for personal use, necessity should drive your decision-making process. Understand your need for physical space; whether it is more bedrooms and bathrooms or a preference for open layout. Prioritise locations based on their proximity to your place of work, your child's school and accessibility to public transport. Include your social and recreational needs; whether it is a gym and playground or proximity to restaurants and friends. Consider all additional space requirements such as parking slots, servant's quarters, utility rooms, etc.
Where you live can say a lot about you. Certain pin codes are highly coveted because of its gentry. If you are used to living amongst a certain kind of people, moving to a neighbourhood with a vastly different gentry might pose to be a challenge. This becomes more tricky to gauge with upcoming neighbourhoods because you are betting on the future.
The quoted price for a property is usually a result of its perceived value and prevailing market conditions. Other commercial terms will depend upon a combination of both parties' financial constraints. Use the help of experts to arrive at the most accurate price and best payment terms for you. Once you have the right figure, negotiate for the best deal.
A seller must create a perception of value to sell his product. This is why most builders attempt to sell a dream. They use their marketing prowess to first create awareness of their project, then an interest followed by desire and finally push you to action. For a buyer, it is imperative to filter out the clutter and focus on reality. While living in a Spanish-style villa might seem exciting it won't help if it is inconveniently located. Similarly having a big balcony will be meaningless if you cannot enjoy it on account of intrusive neighbours or severe air and noise pollution.
Purchasing real estate is one of the largest investment decisions an individual will make in their lifetime. When made well, it not only benefits the current owner but also becomes a valuable asset to pass down to future generations. Today authentic and verified information is easily accessible. There are more stringent laws in place to protect a buyer's interests and rights. Therefore, it is foolhardy not to take the requisite time and expert help to scientifically assess a property.
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