Buyer’s Agent Considerations: Understanding Risk
One common mistake among new investors or those aspiring is to assume that there’s very little to no risk involved in acquiring property. Part of a buyer’s agent responsibility is making sure that investors do not enter a deal or strategy that involves more risk than they can tolerate. To understand a buyers risk tolerance involves buyer profiling. Profiling is a step that buyer’s advocates/agents employ when advising investors for the first time.
Risk Profiling and Other Buyer’s Agent Responsibilities
Individuals may not realise it at first but each person differs according to the level of risk he/she is comfortable with and that there are different categories. Just as properties and investment strategies can be classified into low risk, medium risk, and high risk, people can be grouped into low risk tolerance, medium risk tolerance and high risk tolerance. However, that’s only in the simplest form of classifications. There are additional risks that home buyers and investors encounter when making a purchasing decision. It’s a buyer’s agent’s responsibility to educate and elicit this self-awareness from investors.
Often when not aware of risk levels, amateur investors are easily lured into investment schemes that offer the possibility of high returns. Unknown to them, high returns more often than not equate with high risk. There is a danger in acquiring an investment that’s high risk or even medium risk when the investor can only tolerate low levels of risk. Further to financial implications, it can lead to sleepless nights and heightened stress levels for the buyer. When an investment decision leaves you troubled and unable to enjoy your quality of life, it’s not worth it. When an investor becomes anxious, the strain to their well-being can lead to them selling their investment too early and/or at a loss.
Another one of the many buyers’ agent considerations is making sure you understand that there are several kinds of risk you’ll be facing as an investor that are inherent no matter what strategy you use.
Market risk is a type of risk that everyone takes on when entering real estate. Should anything happen that would affect the entire market, such as a crash or a real estate bubble pop, all properties could be affected. A buyer’s agent’s role is to explain that while diversification does reduce risk, it does not deflect market risk as a whole.
There is no such thing as one size fits all when it comes to property investing, so everything should be determined on a case by case basis. Investors need to take into consideration their personal risk profile, investment strategy, disposable income, borrowing capacity, goals and timeframe to achieve them.
A qualified and skilled buyer’s agent will discuss your risk profile and that of your strategy with you before you buy. If you want to buy property in Melbourne, then consult with a local expert. Due to inherent market knowledge, a buyer’s agent in Melbourne is able to give you important local insights, compared with an advocate based elsewhere.
For more information or to discuss your property investment plans, call or contact our expert team today.