Process beats intuition when buying property in wake of Autumn auction anxiety: Mal James

So the Melbourne market has started hot and the pressure is on to make a decision – and make it quick.

There’s a home! Buy it! Deal done – phew!

If that sounds like you, you might want to consider three key issues:

1) Were you born smart or were you born lucky?

2) Are all homes the same i.e. are all investments good?

3) What do you base your actions on?

In answer to the above, I’ve always subscribed to the theory it’s better to be lucky than smart.

And, in answer to point 2, if you think all homes are the same, then you had better be lucky because that’s not smart.

Which brings me to point 3 – your actions. What makes you do what you do?

If you’re like me then a lot of what you do is habit – you follow a routine, even if it’s not that good for you. My after dinner routine goes something like this: around 8.00pm I feel like a chocolate – I tell myself that I’m a bit overweight and that chocolate is not helping me, but then I go to the fridge and get a chocolate and then I eat it. I feel good for a short time and then...

I’ve received a cue, I’ve made a decision, I’ve acted and I have achieved an outcome. But it’s a routine decision rather than a good one.

Is making a decision on buying a home for you much different from making a decision on eating a chocolate?

It goes like this: you receive a cue (that look from across dining room table when there simply isn’t enough room for your growing family) – you follow a routine (hop on the internet, ring your bank manager) and you seek a reward (sometimes that reward results in more children, but that’s another story).

So back to where we started, the Melbourne market has started hot and, oh my god, it’s time to panic.

Is there a better way?

The answer is undeniably – yes!

For you to act, you first of all have to make a decision. But it’s the quality of the decision that will determine the quality of your outcome.

So how is a quality decision made? Is it based purely on information?

To buy property in Melbourne’s $3m-plus segment you certainly do need quality information – although that can be hard to find in this secret world where almost everything is undisclosed.

But even if you do have access to quality information, is that all there is to buying a home well?

All information alone does is help you make an intuitive decision.

For many people, their whole life is based on intuition. Intuition is what they rely on to make decisions, because no better conduit is in play. And guess what, most of those types of decision-makers live in the outer suburbs – cruel but true.

Intuition in home buying, like anything else, can be brilliant – but it can also be a disaster.

Which is why, as you get older, you tend to rely less on intuition alone for the bigger financial decisions.

Just as if I’m needing to make an important legal decision, at 53 I find I’m less into intuitive unqualified legal experts and more into process-driven lawyers.

Which brings me to the second part of good decisions – process.

In home buying, many people just dart around like a pinball out of the slot – reacting to agents, to words, to results, with no manner of reason. You would be so much better off and increase your chances of a good outcome if you just followed a basic process.

Think through these things:

• What do I want?
• Does this home give me what I want?
• Is it a good home?
• How much would others reasonably expect to pay?

A proven complete process we use at James Buyer Advocates is Clarity – Assess- Value – Negotiate.

More colloquially you could put that process as: Right home? Any good? How much? How to?

Going back to the lawyers for a second – sure, you could stand up in the court room and defend yourself without any training. But wouldn’t you increase your chances if you knew the rules – if you could follow a process?

Same with doctors – they don’t just make it up as they go along when operating, they follow proven successful processes.

And don’t you think you would get a better result in the first place  in court or in a surgery with an expert doctor or lawyer rather than trying to do it yourself?

The point is that better outcomes come from better decisions. And better decisions are made when a proven process is followed by a qualified expert rather than an inexperienced person relying on intuition.

Intuition is not as effective as expert analysis for many things. That’s the case in your job, and  in pretty much every other profession. It’s the case in selling homes and there is no logical reason why it would be any different when it comes to buying homes.

Using an expert and following a process works better than acting under pressure on intuition alone.

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.