Warning for South Africans who want to buy a home

Experts warned that South Africans looking to buy a home should be careful of cognitive biases, which can lead to them making a bad investment.

The acquisition of a home represents one of the most significant financial and emotional commitments most people make in their lives.

However, this emotionally charged journey can often lead even the most astute buyers towards unconscious psychological traps known as cognitive biases.

Lew Geffen Sotheby’s International Realty’s CEO for the Johannesburg’s Craighall and Randburg offices, Cobus Odendaal, explained that purchasing property is inherently a balance of head and heart.

“While the emotional connection is what makes a house a home, it’s the objective, data-driven decisions that protect your investment.”

“In the current market, where Lightstone data indicates mid-price segment growth, understanding these biases is not just helpful – it’s essential for making a sound purchase.”

Odendaal said buyers need to enter the buying process with clear eyes, as there are psychological pitfalls that can derail a property purchase.

A common pitfall buyers need to be wary of is the fear of missing out (FOMO). When a listing generates multiple offers, the perceived scarcity of the property can trigger a compulsion to bid.

Often, the property in question does not even fully align with the prospective buyer’s criteria. “Bidding fever takes over because the sense of urgency in competitive markets is palpable,” Odendaal noted.

“However, FOMO can lead to overbidding or waiving crucial contingencies. It’s vital to remember that property is a cyclical market; opportunities are perpetual, but a poor financial decision can have long-term consequences.”

Odendaal recommended that buyers draft a definitive list of non-negotiable requirements prior to viewings. This list can be consulted whenever the buyer is faced with pressure.

He also advised prospective buyers to base their offer on comparable sales data rather than competitive anxiety.

Pitfalls for buyers

Another trap buyers should avoid, Odendaal said, is loss aversion. After investing time and emotional capital in a property, the prospect of withdrawing can feel like a defeat.

This is often the case even in the face of a negative inspection or unfavourable terms. However, this bias causes potential buyers to prioritise avoiding a perceived loss over securing a potential gain.

Odendaal urged buyers to treat each stage of the purchase process as a strategic business decision and implement a mandatory reflection period before committing.

He added that buyers should ask a critical question: “Knowing what I know now and about the home’s future soundness, would I make an offer on this property today?”

The halo effect is another common pitfall which can lead buyers to make a poor property investment decision. This can happen is, for example, a home has a beautiful kitchen or a landscaped garden.

These positive features may lead the buyers to overlook significant flaws in layout, location, or maintenance needs. “A single exceptional feature can disproportionately influence perception,” Odendaal said.

“We advise clients to conduct two distinct viewings and do them at different times of day: one for emotional response and a second, critical tour focused solely on practical and structural elements.”

Buyers can stay grounded by using a detailed checklist which covers storage, noise levels, plumbing, and natural light during the walkthrough. They should also photograph and review details later to assess the property objectively.

According to Odendaal, buyers should also be careful of “anchoring bias”. Often, the initial listing price becomes a psychological anchor, skewing a buyer’s perception of value.

This can create reluctance to submit a lower, yet market-related offer, even when the property is overpriced or requires substantial investment. Buyers can avoid this trap by conducting independent market analysis.

They should review recent sales of comparable properties in the area, evaluating them on square meterage, condition, and location to establish a data-driven valuation, independent of the seller’s asking price.

Confirmation bias and the sunk cost fallacy

Odendaal explained that confirmation bias is another psychological trap which could result in buyers choosing the wrong home.

Once emotionally invested in a home, buyers may subconsciously seek information that confirms their decision while dismissing critical red flags, such as red-flag inspection reports or impractical commute times.

This can be avoided by appointing a trusted, objective third party to act as a “devil’s advocate.” Buyers should encourage them to challenge their assumptions and identify potential drawbacks they may have minimised.

The final trap Odendaal warned buyers to avoid is the sunk cost fallacy. Months of searching and a possible slew of rejections on offers can lead to exhaustion.

This puts pressure on buyers to “just get it over with” and settle for a sub-optimal property or price. This fallacy prioritises recouping past investments of time and effort over making a rational future decision.

If fatigue sets in, Odendaal urged buyers to pause the search. They should recognise that the time and resources already expended are irrecoverable, but an ill-advised purchase represents a far greater future liability.

He added that emotion is not the adversary in the home-buying process; it is the catalyst that transforms a building into a home.

The objective, Odendaal said, is to channel that emotion wisely alongside rigorous financial due diligence. The goal should be a purchase that makes emotional and financial sense.

“By acknowledging these psychological biases, buyers can leverage tools like checklists, market data, and the guidance of experienced professionals to navigate the process with clarity.

“The most successful outcome is a home that feels right today and remains a prudent investment for years to come.”