Buyer’s remorse isn’t just for late-night impulse buys on Amazon Prime.
A recent Freedom Debt Relief survey reveals telling data about the prominence of buyers remorse among homeowners. More than a quarter of respondents said the cost of owning a home is a burden, and they would rather rent.
And even many satisfied being homeowners expressed various regrets around their homeownership, including the following:
- They should have saved more for the down payment (69 percent).
- Their monthly mortgage payment is too high (52 percent).
- They were not aware of all their mortgage options (41 percent).
- They are unable to afford needed upgrades to their home (60 percent).
- Maintenance and repairs are more effort and cost than they expected (59 percent).
- Their property taxes are higher than planned (50 percent).
- They should have shopped around more for a mortgage (57 percent).
When it comes to purchasing a home, the stakes are high. Often it makes more financial sense to rent for the time being.
If you are planning to buy, be sure to consider some common regret-inducing mistakes homeowners make — and what you can do to avoid them.
1. Underestimating the commitment level involved
Contributor: Ron Humes, VP Operations at Post Modern Marketing
If finding and contracting a new home is like a sugar rush, buyer’s remorse is the sugar
crash the next day. For many people, it is the realization that they have pulled the trigger and committed themselves to one of the most substantial and important investments of their lives. Buyer’s remorse is more common in first-time homebuyers and people who have not moved in a long time. It can range from a mild questioning of a decision to a paranoid state filled with anxiety and tears.
Do this instead: Analyze, strategize, and counsel
While a home is a personal choice in a buyer’s personal life, it should be treated like a well-strategized business decision. Make certain the buyer has a firm grasp of their exact needs and wants in a home. This process will be different for each buyer based on their personal tastes and experience with the housing market and options. It is easy to get caught up in the emotion of home shopping, especially in a market where homes are selling fast and buyers are competing for properties.
A home should never be an impulse purchase. Analyze all the information and sleep on the decision, if needed, to be comfortable before making the offer. If you need input from others, bring those individuals on the home showings whenever possible.
2. Buying a fixer upper you can’t afford to repair
Contributor: Klara Donovan, Blogger at Her Happy Heart
In 2008 my husband and I bought a cheap, old home in a cheap, old area. It was all we could afford at the time, but we thought that any house purchase would be a good investment in the long run. After 10 years of fixing all its problems and renovating it completely on the inside, the housing market crashed hard. We had to choose between cutting our losses and selling it for a lot less than we purchased for (not to mention the thousands we had spent fixing it up), or continue pouring money into it and hoping that the market picked back up.
We knew it was due for another couple of big repairs (full roof restoration and some fencing) within a year or so, and for that reason we chose to sell at a big loss, but are glad we did, as the market has only dropped further since we sold it.
Do this instead: Save more money than you think you need
The lesson we felt we learned is that if you can only afford to buy a cheap, old home, you can’t actually afford to buy a home. Had we been renting, we wouldn’t have been paying mortgage interest, council and water rates, or the thousands spent on renovations, and we would have been able to save up to buy a much better home a few years down the track. Instead, we are now renting and beginning to save for a home deposit from scratch.
3. Prioritizing home wants over an emergency fund and other financial needs
Contributor: John Grimes, Realtor at BHGRE Metro Brokers
Sometimes as a couple shops, they discover that their needs are needs and wants and not within reach in the price range they started out in. The budget can creep up at times. Being house poor is no fun. Having no emergency fund, and worrying about inevitable home repairs can be stressful.
Do this instead: Buy less house than you can afford
It is very important that they draw the line at a level they're comfortable with going forward with no rosy assumptions of increased income. Ideally, a dual income couple should buy a house that either one of them can swing on their one income. That almost never happens, but it would reduce stress in the household. Buying below one's means leaves room for savings, vacations, entertainment, charitable giving, and other priorities.
4. Focusing only on the down payment
Contributor: Luke Babich, CSO/Co-founder of Clever
According to our studies, while Baby Boomers often had the financial means to put down 20 percent or more for down payments, Millennials prefer lower down payments to ease the capital requirements but have to deal with higher interest rates and larger mortgage payments.
Do this instead: Consider all costs to owning a home
To combat this, I'd recommend anyone considering buying a house to make a balanced analysis of whether or not they can actually afford to buy a house. There's a common saying that just because you can afford the down payment does not mean you can afford the mortgage! Make sure you factor in important variables: house maintenance (which is on average $13,000 a year), mortgage payments, home insurance, and security.
5. Making renovation decisions independently
Contributor: Scott Bates, finance blogger at Money and Bills
I bought a home on a concrete slab with a flat roof line with no attic space. The original floor heating system of 50 years went out and there was no option to fix it. My plan when buying the house was to just put in central air and heat. Because there was no under floor space or an attic, the cost of the retrofits were going to be way too high to make it worth it. I found this out after buying it! So I put in a wall furnace and AC unit instead. This is one of several mistakes I made, but the biggest overall.
Do this instead: Consult a professional regarding potential improvements
When buying a fixer-upper home you need to get advice from a home improvement professional on its overall potential for making the improvements you're expecting to make.
6. Not tracking project costs
Contributor: John Bodrozic Co-founder of HomeZada
When you don’t budget and track costs on home remodel projects, you can end up way over budget. Plus, you don’t have a record of costs that can help you adjust the tax basis of your home at tax time.
Do this instead: Budget and record expenses from day one
Keep thorough digital records of your home remodel projects. This can help you in the future when you decide you want to sell the house, since it is your biggest financial asset and largest expense.
7. Skimping on a home inspection
Contributor: Wally Conway, President of HomePro Inspections
There's an old adage that there are no good surprises in real estate. If a buyer is surprised after moving into their dream hope, it is a surprise of damnation not delight.
Do this instead: Pay more for a highly-qualified inspector
The single best way to avoid buyer’s remorse is to have clarity on what you are buying and have protection for the unexpected.
Your home inspection should be performed by the most experienced and technically competent home inspector that money can buy. Most buyers are taking on a 30-year mortgage, and that’s a long time to live in regret. It's also 360 mortgage payments! Wouldn't it seem wise to invest a mortgage payment to ensure that you have done as complete a job in due diligence as is humanly possible?
Consider protecting your home after the inspection is done by choosing a home inspection that includes in the inspection fee protection to cover the cost of the unexpected problems that will come up with home ownership, such as live sewer line failures, mold, and roof leaks.
8. Missing preventable red flags
Contributor: David Pipp, Personal Finance Blogger at Living Low Key
Shortly after we moved in to the house, we had a massive rain storm and ended up with water in our basement. It wasn't until that issue arose that we noticed there were no gutters on the back side of the house where water got in. $2,000 later we had new gutters on the house and our water problem was fixed.
Since we moved in, we have had to add a water filtration system to the well, replaced both of the decks on the house, replaced a leaking toilet and countless other small fixes totaling close to an additional $10,000. Next summer we plan to have the house re-insulated because it gets really cold during the Minnesota winters.
Do this instead: Get a second home inspection
We finally have the house at a point where we are happy with it and have fixed most of the issues. If I were to buy another home, I would hire two separate home inspectors. As a first-time home buyer, I didn't know what to look for and I realize now that my home inspector I hired wasn't that good. Having two separate opinions, plus my newfound knowledge of being a homeowner, would definitely help us catch some of the things we missed the first time around and save us a lot of time and money on our next house.
9. Not getting a home warranty
Contributor: Jlyne Hanback, REALTOR® Keller Williams Realty
One of the biggest regrets that I have seen home buyers have in the past is when they don't purchase a home warranty! Many home buyers are not prepared for the unexpected expenses that can come up after their purchase, such as an air conditioner going out or a refrigerator needing to be replaced. I know of a client who didn't purchase a home warranty and their air conditioner stopped working two days after closing, even though they had an inspection done on the home.
Do this instead: Get a home warranty!
A home warranty is a relatively inexpensive way to protect the major appliances and systems of a home for a specific period of time after the home is purchased. A home warranty can — and should — be negotiated into the contract on behalf of the buyer so that they are protected after
their home closes.
10. Choosing a location with a long commute
Contributor: Steffa Mantilla, Debt Payoff and Wealth Building Strategist at Plantsonify
Instead of renting for a year to get a feel for the area, we purchased a house right away. Our house was 20 minutes from my husband's job but over an hour away from mine. Since we hadn't lived in this area before, we didn't realize the terrible commute times that would be amplified in the winter. I remember there being entire weeks that a commute one way was easily 2.5 hours due to snow. I was also spending $5 each way on tolls every day.
Do this instead: Get familiar with prospective locations
When moving to a new area, rent for a year or two. Yes, it's a pain to have to move twice, but it's worth getting a feel for the area. You'll choose a better location and home in the long run.
Make sure your commute is reasonable. A commute of 30 minutes or less is probably the maximum that is sustainable for the long-term. There will be some days with traffic accidents and other events that push the commute time longer. The less time you spend on the road, the more time you get to enjoy your house and family.
11. Missing neighborhood nuances
Contributor: Gerard Splendore, Broker at Warburg Realty
I sold a one bedroom apartment to a first time buyer and we only viewed it when school was in session, not at the beginning of the day for drop off of end of day for pick up. At the walk through the day before closing the street in front of the building was clogged with school buses and parents in cars. This came as a complete surprise to the buyers.
Do this instead: Visit the property multiple times
I always suggest seeing properties during the week at various times, in the evening and on weekends. This is a great way to avoid any surprises about the surrounding area.
12. Shopping before you’re ready
Contributor: Michael Edlen, Coldwell Banker Residential Brokerage
I have observed dozens of transactions where buyers don't complete a purchase, or may close but then have regrets about it. Although every situation is unique, I think a common characteristic is that they and their agents have not done well in managing expectations.
Do this instead: Hash out a detailed checklist prior to house hunting
It would be helpful if the buyers have a written list of must-haves and another of would-be-nice to have before they start the process of home searching. Buyer’s remorse often results from a delayed realization that the home does not really suit most of their needs, or that the compromises required would actually be too great.
13. Assuming newer means better
Contributor: Daniele Kurzweil, the Friedman Team at Compass
Everyone loves walking into a home and seeing that there is no work to be done. Bring your toothbrush and you are home. Many developers and home flippers are catering to people who want new new new and design their projects to conform to whatever the latest trends are. Our clients walked into an apartment and fell in love with the open concept look with very modern finishes.
Fast forward six months and our clients realized that while an open concept floor plan might be wonderful for a two-story house, in an apartment it poses its own unique challenges. Sound travels, and when you have one big open room you have nowhere to escape to. The modern finishes were beginning to look dated, and since everything was out in the open, it was the only thing they could focus on.
Do this instead: Consider the pros and cons of a new buy or build
Design trends are just that — trends. When purchasing a home, be sure to consider what your needs are. Is this for starting a family? Empty nesters? First-time home purchase? Think of buying a new construction home kind of like buying a car: the second you drive it off the lot, it starts depreciating in value. You are buying new construction because it has never been lived in, and as such you are paying a premium. But when you go to sell, one of the biggest draws will no longer be there...it will no longer be new.
Move forward without regret
Two common regrets expressed by respondents in the aforementioned study is that they should have shopped around more for a mortgage and that they were not aware of all of their mortgage options. The answers to those issues are financial preparation, education, and awareness.
Learn about the different mortgage products available to you. Get loan offers with interest rates from multiple lenders. And before settling on a particular lender, read customer reviews about the top-ranked mortgage lenders. Are there hidden lender fees? Are the loan officers prompt to return calls and emails? Are other borrowers pleased with their experience?
Buying a home, unfortunately, can come with buyer’s remorse. But if you prepare properly and learn from the mistakes of others, you can make the best decision possible without looking back.