The 7 key threats to good home buying: Mal James

The 7 key threats to good home buying: Mal James
The 7 key threats to good home buying: Mal James

So, what is better training to buy a home - business management training where you learn about budgets and goals and organisational structure, or crisis management where you have to deal with threat management, stress and fatigue and on-the-spot decision making?

There’s no doubt that you need to bring a knowledge of budgets and cash-flow and goal-setting to the home-buying process.

They are the skills that help offset the emotion that can often cloud that process.

But once you’ve laid a solid plan, and once you’ve found a home that fits your well-thought-through goals and it’s time to negotiate to buy that home – that’s when crisis management comes into play.

It may seem strange to describe buying a home as a crisis, but it is a situation full of uncertainty and unexpected threats.

As a homebuyer you’re in a position of little knowledge or power and you can often lack the ability to read the signals being put out by people who are experts in their field.  If you get it wrong, it can be potentially disastrous – you can end up with the wrong home (or no home) or end up paying too much for a home.

It’s how you deal with uncertainty that makes all the difference when you’re buying a home. If you’re used to having everything sorted out and tabulated and double-checked, then dealing with the unknowns associated with negotiating on a home can feel pretty unnerving.

We think negotiating on a home is a bit like being an airline pilot or a firefighter – you have to anticipate the worst, while staying calm, and be constantly on the lookout for information and signals that will tell you what to do next.

Business Management Concepts

Crisis Management Concepts

Budgets

Understanding Human Error

Goals

Situation Awareness

Organisational Structure

Error Chain

Synergize

Threat and Error Management

HR

Pilot, Co-Pilot and Crew Concept

Technology and IT

Checklisting

Marketing

Understanding Cultural Differences

Win-Win

Communications

Training

Stress and Fatigue

Sales

Decision Making

 


Here are some of the aspects of crisis management that apply equally to negotiating on a home:

Situation awareness - You need to know who to deal with in the negotiating process and who your competitors are, and you need to focus on your goal without being distracted by trivial issues.

At James, we always have two advocates negotiating, one to oversee the negotiation, and another to attend to all the nuts and bolts of the negotiation. That gives us the overview of the situation that means we can focus on the process.

Here are some examples of a lack of situation awareness:

  • Negotiating with one agent when somebody else buys through another agent

  • Focussing only on hiding your identity from the agent so he doesn’t know you will bid at auction only to see it sold beforehand without you being contacted

  • Talking to agents on many matters e.g. what homes you last visited and liked – that will give a clear guide to your capacity to pay for this current home.

  • Negotiating hard and getting the price going down but forgetting about another buyer who comes in from the side and takes the prize

  • Finding a minor problem (like some minor water damage) in the dream home and turning it into a major issue and not buying. Another version is reading a building inspection report as negative when its actually positive when compared to others.

  • Listening to a lawyer talk about a very negative clause and changing your mind on buying only to find that lawyer includes that clause in all their contracts as well, and sees it as no big deal.

  • Extreme cases, but it happens more often than many sellers think – buyers refusing to buy a home because they “hate” the agent –forgetting they are not living with the agent after they purchase.

Understanding human error – Nobody gets it exactly right always – not even us! The point is to recognise that this can and does happen (on all sides) and when an error is recognised that you have a plan to rebound from that to your advantage.

Dealing with the error chain – In plane crashes it is rare that one thing causes a crash, it is more often a chain of events. It’s the same when it comes to homebuying disasters.

Here are a couple of examples:

  • Under spousal pressure – under work pressure – under agent pressure – no time to make the right decisions. You pay too much – and the result is an unhappy family

  • You have no plan – no advice – no process – no due diligence – no checks or validation. You end up with the wrong home – and the result is an unhappy family

Make sure you don’t get caught up in a chain or errors that lead to a disastrous outcome. Our job can simply be to break the chain before the results become catastrophic.

Threat and error management - Good knowledge, good systems or processes, good training, good advice and good management break the Chain of Errors – which is what you need to do.

Some key threats in good home buying:

  1. You

  2. Other Buyers

  3. The Selling Agent

  4. Your Buying Agent

  5. Market Movement

  6. The Seller

  7. The Targeted Home

One solution is to manage “exact valuation errors” (where you miss on something you should have bought for a few dollars more) we developed the control price system or range of values which replaced the outdated  “one price valuation with one willing buyer and one willing seller” concept.

Mal James is principal of James Buyer Advocates, which advocates on behalf of buyers of property over $1 million. Mal writes weekly auction reports, advice and in-depth market analysis on James' website.  This article was orignally published on Property Observer on June 27, 2013.


Mal James

Mal James

Mal James is principal of James Buyer Advocates, which advocates on behalf of buyers of property over $1 million.

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