Closing on your dream home should be a time of excitement and joy. But buyers are often stuck with a nagging feeling that something just isn’t right after they complete their purchase. They wonder, “Did I spend too much money? Is this my forever home?”
This is called buyer’s remorse, where a time of happiness can quickly turn into one of regret and sorrow for a number of reasons. According to a homebuyer survey from Bankrate, 64% of homebuyers aged 25 to 40 have regrets about their home purchases.
Unfortunately, homebuyer’s remorse is common. But that doesn’t mean it has to happen to you.
We’ve dug into the research and gathered expert opinions to help you understand the root causes of homebuyer’s remorse and the steps you can take to avoid regrets throughout your homebuying process. Hint: Preparation and flexibility are key.
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What is homebuyer’s remorse?
Homebuyer’s remorse is typically a feeling of regret you have after you purchase a home. Its causes can involve many different factors, including spending too much money or not getting the exact house you wanted. It’s similar to the general feeling of regret you could have after making any type of purchase.
For example, if you buy something online that looked great on your computer screen but didn’t quite live up to expectations when you received it, you might have buyer’s remorse over the purchase.
But it’s one thing to regret a simple online purchase and quite another to regret what might possibly be the biggest financial investment of your life, or buying a home. If you compare house prices, homes can easily range from the hundreds of thousands to millions of dollars depending on the location and type of home.
And the homebuying process isn’t typically short. Knowing how to buy a house and going through the steps can take a lot of time, especially if you’re a first-time homebuyer. According to a 2020 report from the National Association of Realtors on buyer and seller profiles, homebuying searches often took eight weeks with a median of nine homes looked at.
So if you think about how long the process can take and the amount of money involved, it’s not surprising that many people have some sort of regret about buying a home. It is interesting, though, to see what might be causing their homebuyer’s remorse.
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Common causes of homebuyer’s remorse
You’ll likely have a better chance of avoiding homebuyer’s remorse if you know what causes it. Here are some of the common buyer regrets after buying a home.
Spending too much money
How often does the average person spend tens or hundreds of thousands of dollars on a purchase? According to Statista, the average U.S. sales price of new homes has risen to over $400,000 in 2021. It goes without saying, but buying a home isn’t like taking a trip to the grocery store. This might be the biggest single amount of money you ever spend in your life.
And after taking into account the purchase price, you still have to figure in closing costs, inspections, and other expenses. In addition, if you close on a home and then interest rates drop, you might regret not waiting just a bit longer to finalize your purchase and save money.
Sudden loss of savings
Buying a home could very easily wipe out a large chunk of your savings. If you’re used to having this financial security, it could be scary to suddenly see it disappear, even though you knew it was going to happen.
Choosing the wrong neighborhood
It’s not easy to figure out the feel of a neighborhood if you aren’t living in it 24/7. How is a prospective homebuyer supposed to get to know their neighbors when they only visit the home a few times before deciding whether to purchase it?
And it’s difficult to predict how home values might shift in different neighborhoods over time. They could go up, but they could also go down. If they go down after you’ve purchased a home, you might feel like you chose the wrong neighborhood to live in.
Choosing the wrong house
Everyone has their specific preferences when it comes to homes. This could include yard size, style of home, and square footage. You might even be interested in doing certain home improvements or maybe you’d rather not have to worry about improvements.
But what if a home ends up being too small or too big for your tastes? Or if you have to put too much work into a home before it’s up to your standards?
Whatever your preferences are, it’s possible you don’t end up with everything on your dream home checklist. And you might only fully realize that after you’ve already purchased the home.
If you’re used to renting homes, you might not be used to taking care of your own maintenance because in the past it was typically handled by your landlord. But when you own your home, its maintenance becomes your responsibility.
Unfortunately, home maintenance isn’t always predictable and can be both time consuming and costly. Having to deal with maintenance — including that of the unexpected variety — can be stressful and may be a cause for homebuying regret.
Could have had a lower mortgage rate
The homebuying process typically takes some time, but certain steps might feel a bit rushed when you think about them later. For example, comparing mortgage rates is an important step for buying a home, but pressure to get the home you want in a hot market could influence you to make quicker decisions than you’d like.
“I think people are experiencing buyer’s remorse because the market was pushing them to make decisions faster than they were mentally prepared to,” says Treasure Davis, a top real estate agent in Colorado Springs, Colorado, who has over 16 years of experience and has sold more than 2,000 homes. “People weren’t taking the time upfront before they started jumping into the market to be educated on the options and the areas and how the market was trending.”
You might end up with a mortgage rate you’re not happy with. Or you could have second thoughts about not waiting to see if mortgage rates drop. Either way, you could have some regrets.
Everything about your new home might fit your preferences, except for the commute. It’s easy to think your drive to work each day will be manageable, especially if you have a home you love. But you can’t really know until you start experiencing the daily commute and it takes time away from actually being in your dream home.
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Steps you can take to avoid homebuyer’s remorse
If you want to avoid buyer’s remorse, make sure you’re well prepared for the homebuying process. Here are some steps you can take to help avoid homebuyer’s remorse.
Have a realistic budget
You need to have a realistic budget if you don’t want to overspend on a home. This means setting your maximum price and not going past it, no matter what. Yes, it can be tempting to spring for an extra bedroom or more square footage, but you have to keep your finances in mind. Otherwise, you could easily end up with a higher mortgage than expected and have to start making lifestyle changes because of your financial situation.
Create a ‘wants vs. needs’ list and make sure your home checks the right boxes
Everyone wants different things for their dream home, but wanting something isn’t the same as needing something. You might want a pool, but do you actually need a pool?
Create your wants vs. needs list (be honest with yourself about your needs!) and then see which homes in your search align with the boxes in the needs column. If you find your list of needs is too extensive, you may need to reassess your list.
Understand the different mortgage types so you know your options
Homebuyers have different types of mortgages to choose from, so it’s worth putting in the time to research how each of the loans works and finding out which one might be best for your situation. Depending on your credit score and financial profile, you might only qualify for certain types of loans, which is helpful information to know before starting your loan search.
Vet your lender and compare offers
The fear of missing out, or FOMO, can be a big factor in whether you end up with homebuyer’s remorse. To help prevent FOMO, vet a variety of lenders and compare their offers. This can help you avoid ever thinking, “What if…?” about your choice of lender and mortgage. If you do the research ahead of time, you’ll have more confidence in your final decision.
Understand the closing costs (and roughly how much they’ll be)
Closing costs are a common expense of most home purchases. If you understand this, you won’t be caught off guard when you have to pay them. A simple closing cost calculator can give you a rough idea of what to expect while you’re shopping for homes.
Work with a real estate agent
You might be tempted to buy a house on your own and potentially save money from not having to hire a real estate agent, but you might regret it. If you know what a real estate agent does, you know they can bring a lot to the table. (Seriously, a lot.) This can include helping you search for homes, negotiating and putting in offers on homes, walking you through paperwork and costs, and generally making sure you get the best deal possible.
The typical homebuying process is going to have some bumps. Knowing this ahead of time can help ensure you’re prepared to adjust accordingly when the bumps happen.
“I think that flexibility in the process is really important, especially as you start looking at what you think is important and then realize that might not be the most important thing,” says Davis. “So having communication with whoever is purchasing the home with you and your real estate agent is really important to make sure you’re buying a home that fits what you’re looking for.”
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Concerns that should raise red flags
Some issues should raise red flags and, in some instances, might constitute canceling your contract if they can’t be resolved.
Issues with the home’s title
Common title problems include unknown liens, errors in public records, and illegal deeds. A property title search can help you uncover these issues during the closing process. If you find issues, they will typically need to be resolved before you can proceed with your purchase.
Serious problems found with home inspection
Your home inspection includes a variety of things to check, such as the foundation, basement, roof, attic, and much more. If the inspection comes up with a serious problem, such as structural damage or faulty wiring, you may have a case for backing out of the deal.
Seller won’t handle repairs or offer repair credits
If a home needs repairs and the seller doesn’t complete the repairs or won’t offer you repair credits, you may need to reassess the situation. Talk to your real estate agent about what your options are and if you’re willing or able to walk away from the deal before it’s finalized. You might not want to get stuck with footing the bill for repairs and spending your own time on them unless an agreement is made with the seller.
Home appraisal comes in low
If you and the seller have agreed on a purchase price and the appraisal comes in low, you have to decide whether you want to try and negotiate with the seller, get another appraisal, pay the difference out of pocket, or back out of the purchase. If the seller won’t negotiate, it could make sense to back out.
Financing falls through
Simply put, if you plan to get a mortgage but can’t secure the financing for a home, you likely won’t be able to move forward with the purchase. This will put a hold on your homebuying plans until you can get other means of financing or work out another solution.
To help protect yourself from red flags and other concerns, you may want to think about including contingencies in your contract for different situations. A contingent offer is a deal in which certain conditions must be met.
This could include a home inspection contingency that lets you back out of a deal if the home inspection reveals any substantial issues. Contingencies can provide legal footing for ending a contract if you need to.
If you want to make sure you have a firm understanding of your rights as a homebuyer, work with a top agent in your area. Experienced real estate agents can help you navigate the homebuying process so you can avoid homebuyer’s remorse down the road.
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