When you’re house hunting, the pressure of competition can move you from “Hmm, I like that, but it’s out of our price range”, to ” I have to have that!” You think about whether or not this purchase will put you way over budget and…..can I cut back somewhere else? Unfortunately that kind of thinking can get you into trouble – trouble that’s totally avoidable. Whether you’re in the middle of a home bidding war or facing 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. Not only that, but you’ll have money left to enjoy things like new furniture, entertainment, and just plain having fun.
Who Has Home Buyer’s Remorse and Why? A competitive real estate market can set buyer’s up to purchase a home that’s either beyond their budgets, or it doesn’t meet their needs. Recent homebuyers, including 64% of millennials, had regrets about their home purchase. The top reason? They were unprepared for maintenance and other home ownership-related costs. In addition, 13% of millennials said they think they paid a higher sales price than they should have. Things in homes inevitably break down, so people should put aside a budget for anything that will need fixing. A good rule of thumb is to anticipate 1% or 2% of the home price for potential maintenance. 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. These shows can create unrealistic expectations for the home buying process and how homes should look. Over 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 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.
How to Navigate House Hunting in a Competitive Market In addition to pressure to exceed their budgets and rising interest rates, buyers are facing hurdles like these five:
1. Requests to Waive Contingencies: More often than not, sellers are seeing bidding wars on their homes but also sellers are wanting buyers to waive contingencies. With an appraisal contingency, if the appraisal comes in low, the buyer has choices. They 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 them – and the buyer has waived their right to cancel. If they cancel anyway, they risk losing their deposit. Some buyers are also waiving contingencies related to home inspections. These investigations are an opportunity to have a home inspector view the home based on disclosures and for the buyer to use findings as a bargaining tool. Eliminating these protections can end up costing money for buyers. The more offers the buyer wites and loses, the mroe risk they’ll tolerate. So, they may waive contingencies and regret it later. Talk to a buyer’s agent at Falvey Real Estate Group who can guide you through this and explain the risks of removing protections and unknow variables.
2. Speed Showings and Decisions: Recently a client purchased a home in an expensive and highly competitive area. He found that with the pandemic, each showing only lasted 15 minutes. That ws one of the biggest hurdles. “We’d see 3, 4 or 5 homes in one day. It’s hard to keep track of what you like and don’t lie with each house. If you’re able to prepare beforehand, create a list of wants and needs in priority order. Immediately after seeing each home, rank it based on the list.
3. Focusing on the Top of Your Price Range: If you’re looking in a micromarket where listings are achieving multiple offers and homes are going above asking price, don’t set your heart on houses at the top of your price range. If $300,ooo is your upper limit, look at houses priced at $250,000 or $275,000. Otherwise, you’re going to be outbid from the gate everytime.
4. The Need to Compromise: There may be times when you have to compromise on location. Experts advise adjusting your search outward geographically, even if it means a longer commute. Buyers may also have to compromise on property types and features. In addition, they should consider doing some DIY projects instead of wanting everything to be move-in ready. You may have to be willing to look at townhouses instead of single-family homes or install carpet and paint on weekends.
5. Information Overload: Many homebuyers will start searching for a home long before actually working with an agent to start the process. Because of the active real estate market we are in, homebuyers have treated the home search as almost a second job, using lunch breaks and evenings to check emails, do online searches and texting their real estate agent about what they want to see. Sacrifices are made – weekend plans may revolve around viewing homes. Some agents hold an accredited buyer’s representative deisgnation but also work with sellers as well as buyers. An agent with a buyer’s representative designation has taken extensive buyer’s representation training. They will provide information to buyers so that they’re learning as much as they can about the market, including the risks involved with different negotiations. If buyers are going to shorten terms or remove protections, they need to be well informaed about the pitfalls.
Learn from experience. The access to information and guidance will help buyers making an offer on a home, especially in a competitive market. Today’s buyer has seen and written offers on many properties before they get their offer accepted. This is common all accross the country. Each is a learning opportunity for buyers about what information they might need to be researching so they can move quickly. When you act on advice from recent buyers and agents, you stay well informed and get good results even in a tough market. And that’s the best way to prevent home buyer’s remorse. Contact Falvey Real Estate Group at 518.45.3912 to learn about the market in your area.