Is this elementary economics or introductory psychology?
No matter how you view this equation, it is a delicate balance that few people can completely master.
I’d like to take a look at how this applies to your real estate purchasing decision…
On the very first day of Grade-Twelve economics, Mrs. Hrushewsky introduced us to the concept of “wants versus needs.”
A “want” is something that you would like to have. It is not absolutely necessary, but it would be a good thing to have.
A “need” is something that you must have; something you cannot do without. For example, food, shelter, clothing, etc.
Now right off the bat, we can get into a debate over the need-versus-want equation when it comes to clothing.
You need clothing to sustain life since you would freeze without the right clothes as we move into winter. But what type of clothing is an entirely different story. You could get winter jacket for $80, but you might also want a $500 Ralph Lauren jacket to do the job.
I find this to be all too familiar when it comes to purchasing real estate.
I often ask my clients to sit down and make a list of all the criteria they want and need in their house or condo. The results are astounding.
Whether it is the features of the condominium unit or house itself, or the building amenities or neighborhood, the lists are long, daunting, and completely unnecessary.
I recently joined a new gym in order to save a few bucks. I was paying $90/month at The Dunfield Club where I have been for the better part of a decade, and I switched to GoodLife at Davisville for $35/month. The savings is enormous, and I’ve got $55/month back into my pocket for a gym that is in a better location, and has all the equipment I need.
However, there are some things that are lacking: the small things. The faucets in the washroom are on a timer so that when you push down, the water only flows for ten seconds before shutting off. That’s annoying! But it saves the company money, and the savings are passed on to me. They also keep the towels behind the front desk and you have to ask for one instead of using one, two, or fifteen towels at your convenience like at my old gym. But again, this is why the gym is so much cheaper!
In the end, something has to give. You can’t get all the perks you’re looking for at the price you desire. Just like with real estate.
I met a new buyer last week for the first time, and I gave her a blank piece of paper and asked her to write in detail all the things she envisioned in her condo. Her list was as follows:
-1 bedroom, plus den, 650+ square feet
-parking and locker
-granite counters, stainless steel appliances, new kitchen cabinets
-open concept living room
-hardwood in the bedrooms
-large walk-in closet
-lots and lots of windows, sun-filled rooms
-updated decor and paint (to avoid re-painting)
-building to have pool, gym, rooftop terrace and more!
She actually wrote “and more!” complete with the exclamation mark.
I then asked her to cross out three of these things if she had to do without them.
She said she couldn’t do that; she had to have ALL these things.
I explained to her that we might not find what she’s looking for in her budget ($280K), and something would have to give. She told me she “needed” all these things and that they were all “musts.”
I picked apart each point one at a time, and asked her why she needed the walk-in closet? This is a luxury, and something that is rare in a 1-bedroom condo. She told me she had over fifty pairs of shoes and needed the space. I suppose I could analyze the “fifty pairs of shoes” as the classic wants-vs-needs example, but that is a topic for another day, and a good way to show I don’t understand women…
But she stood her ground and said she “needed” all the things on her list, and we’d just have to “make it work.”
Regardless of whether you can find a 650 square foot 1-bedroom-plus-den with parking in the downtown core for $280,000, the issue at hand is that she refused to compromise on her “dream scenario,” and refused to distinguish between what she wanted in a condo and what she actually needed.
At my old gym, the cardio machines were all equipped with their own individual televisions. At first, I thought this was quite “yuppie” and unnecessary, but over time I got accustomed to it. When I started at my new gym, I was actually upset that I had to watch the TV’s on the wall with everybody else.
My new client had become so accustomed to living in her parent’s investment property (rent free, I might add) with all the bells and whistles, that when it came time to purchase, she wasn’t willing to let go of some of her luxuries; some of the things she didn’t essentially need.
I understand that she needs a parking spot, since she has a car. But beyond that, the criteria on her list are not “needs.”
There is no reason she couldn’t look at a slightly smaller condo, or one with broadloom in the bedroom.
Likewise, a gorgeous kitchen is something that she could install herself in a year or two when she is financially able to do so. Right now, she might have to just accept laminate countertops and older appliances to make her budget work!
As for the building amenities, I find these are the #1 most useless “needs” since people rarely use them. A friend of my sister-in-law’s just purchased a condo in one of the buildings I loathe (Mariner Terrace) citing the fact that the building had a bowling alley! A quick question: when was the last time you went bowling? I haven’t been in probably 5-6 years, so how often would I bowl if my building had facilities?
Majority of people rarely use the building amenities, but they tell me they “need” a building that is fully equipped. If you’re not BBQ’ing on the rooftop terrace once a week and using the sauna, pool, gym, and bowling alley constantly, then aren’t these things you can do without? Aren’t these “wants” instead of “needs?”
In a perfect world, we would all have an unlimited budget to work with. But when you have restrictions, you have to make sacrifices. There truly are a host of features that you can do without!
When you’re shopping for a new house or condo, go ahead and make the list of every possible feature of the property and the area or building that you would like. But try assigning a rank or value to these criteria so when push comes to shove, you know what you want versus what you truly need…