Last Updated on July 18, 2023 by Luke Feldbrugge
Home buyer remorse is a normal occurrence, but after the price escalation and bidding wars of the past few years, it’s more of a problem than it used to be. A new survey from the National Association of Realtors (NAR) reports that 30% of buyers who bought during the pandemic now regret spending too much on their property. Another one quarter of all buyers (26%) felt that they bought too quickly and were rushed into the decision. That’s not just a problem for home buyers. As a real estate agent, awareness of home buyer remorse increasing is important.
The NAR report goes on to say that almost half of the buyers reported that home ownership was more expensive than they anticipated, that maintenance is more work than they thought it would be, and that they compromised too much for their home. The list of regrets is rather long, but it’s worth a read.
The problem with home buyer’s remorse is that it can affect your business for years, especially if you depend on repeat buyers or if a lot of your referrals come from your client base. If a large portion of your customers are not happy with their purchase decision, that’s a lot of business that may not return or recommend.
Home buyer remorse is a big deal – even bigger now in the wake of fierce competition of the latest housing boom. It’s tempting to just list the causes and maybe some solutions (there aren’t many) to homebuyer’s remorse, but that’s missing the point. What makes more sense is detection and prevention. Let’s face it, if your buyers are having second thoughts about some aspects of their new home, it may be too late. There’s very little opportunity to go back and fix things, except in the case of costly repairs or even more costly renovation. Prevention is best if you can head it off.
Will this make your job as a real estate professional more complex? Yes. Will detection and prevention help your business in the long run? Absolutely.
Detecting Common Causes of Home Buyer Remorse
The dissatisfactions listed by buyers make sense. In dating apps, these would be called red flags, and in many cases, it’s easy to see them. Similarly, the solutions or preventions for these first-time home buyer mistakes are going to be obvious in some cases. Your part is to control your desire to sell a particular home, and really focus on the needs and wants of your clients.
This comes in at number one on the list of reasons for home buyer remorse and it’s no wonder it’s the top regret. People get excited about a home, learn that there are multiple offers on the table and they begin to ignore their budget. If you are their agent, you may need to be the voice of reason. It’s tempting for an average home buyer to imagine that they can stretch their budget a bit to afford the monthly mortgage payments. Help them to discern what is a stretch and what is a sprain –or even a stress fracture. Spending too much money month after month can take its toll on a new homeowner and they may pass the blame if payments become difficult.
Of course, the rising interest rates contribute to the problem. Mortgage rates during the last year rose faster than buyers could keep up with them.
Even very wealthy buyers are subject to this feeling of regret. A recent report on luxury trends indicated that almost a quarter of the ultra wealthy are not satisfied with their property because of:
- Lifestyle changes
- Property size
- Remote location
- Neighborhood amenities
- Return to office work
Help your clients make the right decision when it comes to making offers and spending more than their budget will handle. There are plenty of online calculators you can direct them to. In addition, have them pay attention to the appraisal because if the mortgage lender thinks they are paying too much, they should take that seriously. Finally, have them get pre-approved for a mortgage if they haven’t yet, and explain why it’s in their best interest to have pre-approval when making offers.
2) No Inspection
The house looks great, right? Do we really need a home inspection? If that comes up, reinforce the important safety concerns and potential issues that may arise without an inspection. This was popular during the pandemic housing boom, where buyers were trying to find any competitive advantage during a bidding war for a house. Many were all too willing to say, “we don’t need an inspection,” if it would make the sellers more interested in the offer. We get why they did that, but it was risky, and now they are sorry they made these concessions during the home buying process.
The easy fix for this, if you encounter a buyer waiving the inspection, is to encourage an inspection before they buy the house unless you believe it is the must-have concession to give them a competitive advantage.
Another thing to address with your clients is to make sure they understand the difference between an inspection and an appraisal; especially if they are first time home buyers.
3) Buying a Home Sight Unseen
Another home buying trend that emerged during the pandemic housing boom was looking at a new house remotely via a video feed and making an offer only based on that. It’s no surprise this raises some red flags, but desperation pushed a lot of people into rash decisions like this. You can advise against this, of course, but what about those buyers moving into town who just can’t tour a house due to time constraints? In this case, over communicate to prevent home buyer remorse. Tour the home yourself. See if the home ticks all the boxes for your client (maybe have them complete a house hunting checklist for you) and advise them accordingly. This is a great opportunity to be their trusted advisor and advocate.
Excessive repairs can quickly turn a dream home into a money pit in the eyes of new owners. First time homebuyers are particularly vulnerable to the sticker shock from repairs. They also don’t anticipate the need for repairs that more seasoned buyers automatically factor into their purchase.
The inspector will be able to help a lot in managing their expectations, but you probably can spot a few worrying aspects of a house before any offers are made. A lot of buyers gloss over big repairs or maintenance – such as a new roof – and should be watched carefully.
There’s not much of a solution to this except to warn them, tell them to budget for repairs and keep them realistic about home ownership. If they talk a good game about doing a lot of the repair work themselves, make sure they have the skills to do it. Thinking you can fix plumbing by watching YouTube videos, and actually being able to fix plumbing are two different things.
5) Neighbors May Cause Home Buyer Remorse
Having unfriendly or indifferent neighbors can ruin the home owning experience for many buyers. This one is a wild card, because there aren’t too many outward indicators about the quality of the new neighborhood (aside from the upkeep of the yards around the house a client is interested in). You can direct a client who is interested in better understanding the safety of a neighborhood to local community websites, and have them check how many police calls are made. But in terms of measuring the friendliness of a neighborhood, it’s tricky, and it’s not something you can legally advise your clients on. They must do their own due diligence and maybe even walk the neighborhood. That may help buyers get an impression.
6) Location, Location, Location
As real estate agents, we hope that buyers take location seriously. But sometimes they don’t do their due diligence. If they fall in love with the perfect home, they may ignore some of the location factors that don’t fit in with their lifestyle. These may become an issue later, and a potential source of home buyer remorse. For example, if they have kids, the location of the home needs to be in a good school district and not near a busy road. If the home is not close to their work, they need to take the commute into account. All commutes are not created equal, and the ones with the worst traffic jams can take a toll on homeowners over time.
Discuss their needs in advance. A home is not just about bedrooms and bathrooms; it’s about the whole package – schools, churches, groceries, shopping, parks and entertainment.
7) Size can Cause Home Buyer Remorse
If a buyer has remorse over their home being too big or too small, it’s probably because they weren’t clear in their own mind about how much space they needed. That’s where careful questioning in advance will help. You, through your experience, probably have a good feeling about how much space a family of four needs, so that’s what you bring to the table.
If it looks like your clients are making compromises about how much space they need, verify they can live with those compromises. Likewise if they are committed to as much square footage as they can afford, confirm they are thinking about the livability and usefulness of their home, not just the size.
Too big or two small may be a real deal breaker when it comes to potential home buyer remorse. Preventative conversations can play a big part in helping your clients get the home they really want instead of one they may regret later.
8) Property Versus House
Some buyers who fall in love with a house don’t take the whole property into consideration. Is the yard right for their family, especially in terms of space? Yards can be improved or adjusted to the needs of the family, but you really can’t add to them. If the neighbors are too close, that can also be troubling. What about the views? If the buyers can live with the views, that’s great, but if they can’t, it can wear on them day after day. The only way to detect this is to make sure they are paying attention to the whole property as they go through the showing. Practice asking preventative questions of your clients throughout the home-buying process.
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