When you’re house hunting, the pressure of competition can move you from “Hmm, I like that, but it’s too pricey,” to “I have to HAVE THAT!” Then you think - "what if paying for this house will put me way over budget? I can cut back somewhere else, right?" But that kind of thinking can get you into trouble and is avoidable.
Whether you’re in the middle of a home bidding war or facing down a list of must-haves, don’t lose sight of your budget and the risks. That way, you can own a house without home buyer’s remorse.
Who Has Home Buyer’s Remorse and Why?
A competitive real estate market can set buyers up to purchase a home that’s either beyond their budgets —sometimes hugely beyond — or doesn’t meet their needs, according to a 2021 survey by Bankrate and YouGov. The survey found that recent home buyers, including 64% of millennials, had regrets about their home purchase. The top reason? They were unprepared for maintenance and other home ownership-related costs. On top of that, 13% percent of millennials said they think they paid a higher sales price than they should have.
“Things in homes always break down, so people should put aside a budget for anything that will need fixing,” said Lawrence Yun, chief economist at the National Association of REALTORS®. “A rule of thumb is to anticipate 1% or 2% of the home price for potential maintenance,” he explained. “So, for a $300,000 home, that means setting aside $3,000.”
One reason home buyers may be tempted to go over budget is they’ve been influenced by the beautiful homes on TV, according to a NAR report on home staging. “The shows can create unrealistic expectations for the home buying process and how homes should look,” said Brandi Snowden, NAR director of member and consumer survey research. In time, buyers can view features that used to be luxuries as necessities. They believe everyone has them and they should too. One solution: Work with a REALTOR, (like myself!), as early as possible in the process. “Make sure your agent knows your budget, so they can help you set expectations and stick to them,” she advised.
How to Navigate House Hunting in a Competitive Market
In addition to pressure to exceed budgets, you may find yourself facing hurdles like these:
1. Requests to Waive Contingencies
In today's current real estate market, bidding wars are common. And on top of that, some sellers are also asking buyers to waive contingencies. This is a bad idea for the buyer. For example, with an appraisal contingency, if the appraisal comes in low, you have choices as the buyer. You can choose to try to renegotiate with the seller, bring in the difference, or cancel. When they remove that contingency and its protection, and if the home doesn’t appraise at the right level, the seller is not very likely to renegotiate with you. And you have waived your right to cancel. If you cancel anyway as the buyer, you're risking your deposit.
Some buyers are also waiving contingencies related to home inspections for greater offer appeal. These investigations are an opportunity to have a home inspector view the home based on disclosures and for you to use findings as a bargaining tool.
Eliminating these protections can end up costing a lot of money in both the short and long-term.
2. Speed Showings and Decisions
Take your time when touring a home. The pandemic has created a need for fast 15 minute showings, which makes it hard to see AND remember everything. When you can, check the windows, check the closets, check the crawlspace if it's a home you love. Create a list of wants and needs and tick them off as you see them in the house so you know when leaving that home, it had exactly what you were looking for in a home.
3. Focusing on the Top of Your Price Range
Focus on homes $25k below your max budget so you have room to outbid another potential buyer. If you go at your max range, you may find yourself spending much more than anticipated, leading to that home buyer's remorse.
If you're considering a move, please reach out and I can help provide you with the guidance you need to feel good about your decision.
In good health,
Dan