Have Buyer's Remorse With Your Home? Here's What to Do
Caveat emptor – buyer beware – is a well-known phrase in real estate. It refers to instances when buyers must take caution and be smart with their money. If you throw caution to the wind, you could end up regretting your decision.
Buyer’s remorse isn’t uncommon. According to an October survey from Hippo, a home insurance company, more than three-fourths of U.S. homeowners who purchased a home in 2022 experienced buyer’s remorse.
“A home purchase is most likely one of the largest purchases you will make in your life, and it can be an emotional rollercoaster,” says Marcy Downey, a mortgage loan originator at Motto Mortgage Signature Plus based in Florida.
- What is buyer’s remorse?
- What causes buyer’s remorse?
- Legal options are limited.
- Take your time.
- Have a budget and get pre-qualified.
- Have an in-depth conversation with a real estate professional.
- Include contingencies in the purchase contract.
What Is Buyer’s Remorse?
Buyer’s remorse is a feeling of guilt or regret after making a purchase. “Buyer's remorse is like an awkward yearbook photo,” says Alex Young, a Wisconsin-based Realtor and broker. “Everyone knows about one and they all come with a story.”
In real estate, buyer’s remorse is when a new homeowner regrets the home they recently purchased and feels as if it was the wrong decision. “It is the feeling of regret and fear over making a life-altering decision without 100% certainty,” Young says. “A buyer wants to feel like they are not going to be the awkward yearbook photo everybody is going to remember – for better or worse.”
What Causes Buyer’s Remorse?
According to Young, the risk buyers take when purchasing a home or making a decision during the home buying process is often not what directly causes buyer’s remorse. Instead, it highlights existing issues the buyer may already have.
“This can be seeded fears of making a large financial decision, purchasing a home to appease a significant other, getting caught up in the emotional pressure of competing offer situations – this list goes on,” Young claims.
Another common reason for buyer’s remorse is when buyers feel they overpaid for the home or discover the overall monthly payment is more than they originally budgeted, Downey says.
“To prevent this, it’s important to understand the whole scope of your financial commitment,” Downey notes. “Your housing payment includes the mortgage principal and interest, a portion of your annual property taxes and homeowner’s insurance for your escrow payment.” You could also have private mortgage insurance and other housing expenses like homeowners association and condo fees.
Finding problems with the house after closing – whether undisclosed or new – is another cause of buyer’s remorse. “Other instances of buyer’s remorse can include realizing that the location is not quite what you wanted, or the neighborhood isn’t as safe or convenient as they thought it was going to be,” Downey adds.
Legal Options Are Limited
Managing buyer’s remorse is complicated and there are few legal options available. Federal law says that borrowers have the right of rescission, which is the right to cancel certain types of loans within three business days of signing the closing documents. However, this is only an option if you took out a home equity loan or refinanced your mortgage. This is why it’s essential to work with an experienced real estate agent or representative to guide you through the contract process, Downey says.
“In real estate, depending on where you are located, contracts contain contingencies such as appraisal and financing contingencies that safeguard your purchase for a set amount of time,” Downey explains. Contract contingencies give buyers the flexibility to renegotiate or withdraw if the home doesn’t appraise at the purchase price, financing isn’t approved, the inspection doesn’t go as planned or you are unable to obtain insurance, she adds.
Buyer’s remorse is difficult to avoid, but there are ways to overcome and manage this feeling.
Take Your Time
Slow down and take time to find a home you like in an area where you want to live. Base your decision on what you, the buyer, want instead of the opinions of those around you. “Go back a few times before putting an offer in and bring a family member or friend with you to take a more critical look at the home so you don't make any emotional or impulsive decisions,” Downey says.
Think about the size and space of the home and if it will fit your family’s needs. Be present during the inspection and go back at different times of the day to get a feel for the neighborhood, Downey suggests. Talk to neighbors and check out social media pages for the neighborhoods and schools. Look at the property appraiser’s website and look at the history of the property including permits, sales and tax estimates, she adds.
Have a Budget and Get Prequalified
Getting preapproved for a mortgage not only tells you if you qualify for a mortgage, but it also gives you a good sense of what you can afford.
“I do a lot of legwork upfront to make for a smoother and less stressful process for my clients by determining how much a buyer can qualify for and making sure they are comfortable with their all-in monthly payment,” Downey says. “There are many guidelines in place to make sure people don't qualify for more than they can afford.”
Have an In-Depth Conversation With a Real Estate Professional
Talk with a real estate professional to understand what’s driving the decision to purchase. The real estate agent should also be familiar with the area you are looking in so they can better guide you.
“A true professional will ask the right questions to better understand your needs and an even better professional will be the one to tell you if it's not a good time (or reason) to purchase,” Young says.
Include Contingencies in the Purchase Contract
“If you want to limit the chances of buyer's remorse include contingencies around non-negotiable aspects of a purchase,” Young advises. Inspection, financing and appraisal contingencies are meant to protect all parties involved in the transaction, and Young points out that they can be strategic points of an offer.
Communication is key. “The greatest way to avoid buyer's remorse is to communicate – clearly and often,” Young says. “Nobody in the homebuying process is a mind reader, so unless something is verbalized and made known it can't be addressed. It's also better to know about issues before they get out of hand and cause much larger, and more expensive, issues.”
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