The Three Most Destructive Emotions in Real Estate and the One Way to Combat Them

When I am standing around at Starbucks waiting for my Americano I always take a look at the headlines in the paper. And lately, I find myself feeling jolts of fear and hope as I read the headlines about the Canadian housing market. Last month, Canada’s housing market was recovering, set to plunge dramatically, and ready for a soft landing. Check out just one week of headlines last month:

  • “UBC Expert Says Urban Home Values Set To Plunge” – cbc.ca September 9, 2008
  • “Resale Listings Surge While Sales Slump” – Globe and Mail, September 3, 2008
  • “Ontario Leads Rebound in Home Construction” – Financial Post, September 9, 2008
  • “Toronto’s Luxury Condos a Bargain Compared to Other World Cities” – Toronto Star, September 8, 2008
  • “Housing Starts Dive 60%” – Calgary Herald, September 10, 2008
  • “August Housing Starts Better than Expected” – cbc.ca, September 11, 2008
  • “Central Okanagan Sees Big Dip in Housing Sales” – Globe and Mail, September 11, 2008
  • “Soft Landing Predicted for Real Estate” – Montreal Gazette, September 10, 2008.

Each of those headlines instill either a sense of fear that the market is crashing and it’s going to be ugly, or hope that the market is going to be o.k. and we won’t suffer at all. But my emotional reactions to those headlines last less time that it takes for the Starbucks Barista to ask me if I want the extra shot in my coffee… you see, I know the objective of each paper is to sell more papers. And, the bigger the feelings of hope, fear or greed they can inspire the more papers they will sell.

FEAR:

The feeling of Fear may cause an investor to panic and sell everything or, it can cause them to freeze in fear of taking any action at all terrified it will be the wrong thing to do. Either way, you’re not doing the right thing. If you do nothing then you aren’t moving towards your goals, and if you panic then you will be following the herd of people using the headlines to make their decisions. And you want to buy when THOSE PEOPLE are selling, and sell when they are buying!

HOPE:

Hope often leads to making decisions without all the details. Your friend buys a stock and says the price is going to rocket to the sky, and you buy it with the hope that they are right. You read an article in the paper that says that King West in Toronto is going to be THE Hot Spot to live in next year, so you buy a condo there hoping that the article’s prediction comes true. Ever heard the saying “hope is not a strategy”?

GREED:

When the market is going up, investors will overextend themselves only seeing the money they will make not the risk they are taking. They will make hasty decisions for fear of missing out on the next big gold rush of an investment. The market’s been going up and up, and they think they have to get in at any cost and want to make the money that everyone else seems to be making. The next thing you know, the market cycle starts heading downwards and everything flies apart.

So, you can now recognize the three destructive emotions for a real estate investor. But what can you do to help keep them from controlling your decisions? It’s simple… you only need to do one little thing!!

Set your real estate investing goals and evaluate everything you do against those goals.

One of my favourite quotes comes from Alice in Wonderland:

“Would you tell me, please, which way I ought to go from here?”

“That depends a good deal on where you want to get to,” said the Cat

“I don’t much care where…” said Alice

“Then it doesn’t matter which way you go” said the Cat

-Lewis Carroll, Alice in Wonderland

You will avoid making decisions based on fear, greed and hope if you know where you want to go. You will look at the potential real estate purchase or sale, check it against your goals and your plan, and make your decision based on whether it moves you closer or further away from your goals.

And if you do that, you can ignore the media! It doesn’t matter if everyone else is terrified, hopeful or filled with greed. You have a plan and are working towards that plan. You will look for specific deals with criteria from your plan, and if something meets your criteria you will buy or sell, no matter what the headline says is happening.

Choose the Best Real Estate Agent

Buying and selling a house in Calgary city is not a simple and straight forward process. Without the help of a real estate agent, it is a tedious process to buy a new house or sell your old house. Especially in a modern city like Calgary where the demand for houses is raising day by day, the process is even more difficult. Under the current situations, it is quite impossible to sell a house or buy a new one by yourself, as a single person, without the help and guidance from an agent. Hiring a realtor would be very beneficial and helps in reducing your stress. Hence it is very much important to go for the best Calgary real estate agent. There are certain things to be kept in mind before hiring a Calgary real estate agent.

Initially, have a talk with a lot of agents. This helps you to hire the best one among them. You could select the best agent, who makes your work and life easier. It is also equally important to have a good understanding with your realtors. Only then your work will be reduced and they would take your unique needs into consideration, thereby responding to your desires and requirements. Secondly, it is a finer option to hire an experienced Calgary real estate agent, since they have more idea on the current market rates and trends. Hiring experienced realtors may be costly, but they would get you the best deal and hence it is highly recommended to go for experienced agents than other realtors. There are a lot of realtors in Calgary who advertise in plenty about their firms but finally do not keep up their word. Hence try to find an agent with references, so that you could consult those reference persons to get an idea about the particular real estate agency. If your realtor has a long list of references then it implies that you have chosen a good realtor.

First of all it is better to research a real estate market. Ensure that your agent well knows about market rates and satisfy your requirements. Don’t give preference to those Calgary realtors who first smiles at you. This is the common mistake that most of the people in Calgary do. They go for the real estate agents whom they have met first. People don’t even tend to test whether the realtor has a good knowledge in marketing. Check each of the realtors thoroughly and make sure that they communicate with you honestly. A good realtor would provide you the names of their past clients and may feel happy and proud to make you have a talk with those clients.