Key Takeaways
- A 10% overpayment compounds to 18-22% total return drag over a 10-year hold.
- Cognitive biases—anchoring, confirmation, sunk cost, winner's curse—cause systematic overpaying.
- Set a maximum price before due diligence and never exceed it regardless of competitive pressure.
- Always perform independent valuation analysis before viewing the asking price when possible.
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Test Your Knowledge
1.For Valuation Pitfalls That Cost Investors Money, which valuation approach is typically given the most weight?
2.How should investors handle conflicting results from different valuation approaches?
3.What role does market knowledge play in property valuation accuracy?