What is buyer’s remorse, and how to avoid it
June 7, 2021
What is buyer’s remorse?
When you purchase a home, the last thing you want to do is immediately regret it. However, according to a recent survey by Bankrate, buyer’s remorse is rampant among homeowners. Nearly two-thirds—or 63 percent—of millennials have regrets about their current home purchase. Overall, 44 percent of homeowners have expressed that they experienced buyer’s remorse after purchasing their home.
Psychologists believe buyer’s remorse stems from cognitive dissonance, specifically post-decision dissonance. When you are deciding to purchase something, you have options. You can choose between different things or back out of the sale. If you go through with the purchase, you may begin to regret the decision.
This happens because you no longer have options and are battling different emotions. You become unsure if you made the right choice, what the outcome would have been if you choose something else, or if you would be happier not purchasing at all.
Common causes of buyer’s remorse
When purchasing a home, you may overlook many different factors, which may become regrets in the future. Here are some of the most frequent reasons homeowners experience buyer’s remorse:
Eighteen percent of all homeowners listed unexpected maintenance or hidden costs as their most common regret. This number spiked to 25 percent when looking only at the millennial demographic. Other regrets include:
- House size – 17%
- Poor location – 8%
- High monthly mortgage payments – 7%
- Not getting the best rate available – 6%
- Poor investment – 7%
In 2020, homeowners spent an average of $13,138 per household on maintenance and home improvements, according to HomeAdvisor’s 2020 State of Home Spending report. Of this amount, $3,192 was for routine maintenance, $1640 was for emergency maintenance, and $8,305 was for home improvements.
Where you live can impact the amount you spend on maintenance and home improvements. In the Midwest, where hurricanes, earthquakes, and other natural disasters are less frequent, home emergency spending is the lowest. The type of home you own, and the age, will also affect these costs.
Regardless of all the variables, homeowners should plan on spending 1 to 3 percent of the purchase prices on annual maintenance. If your home was $350,000, you should expect to spend at least $3500 and up to $10,500 each year for repairs and upkeep.
Hidden costs are unforeseen or unbudgeted expenses. It is essential to prepare for all scenarios when you purchase a home by calculating all costs first. Here are some of the more obvious but often overlooked costs involved with owning a home.
- Property taxes are determined by the town or city where your home is located. Previous tax information is available so you can see what taxes were and if tax amounts are high for a specific town or city.
Some areas have much higher taxes than others, so it is helpful to be aware of this when you decide where to buy a house. Property taxes also, typically, increase yearly, which will change your mortgage payment if you pay your taxes out of an escrow account.
- Homeowners Association (HOA) and Condo fees cover the upkeep of common areas, exteriors, and any shared structures. Estimates show that the average cost is $200 per month but can vary between $100 and $700 depending on what the HOA provides, according to data from Investopedia.
The HOA stipulations will vary for each property so, do not rely on second-hand information to learn what the fees and rules are. If you cannot find the information on the HOA’s website, ask your realtor to contact the HOA directly.
- Homeowner’s insurance is a necessary part of owning a home. The national average for home insurance is $1312 per year for a $250,000 home. However, the location and condition of your home will affect your premium.
If your insurance is part of your escrow account, it will be in your mortgage payment. If your insurance premium increases, your mortgage payment will subsequently increase.
How to buy without regrets
If you are buying a home, there are some steps you can take to reduce your chances of experiencing buyer’s remorse.
- Have adequate savings. It may be tempting to use the entirety of your savings for your down payment but, that can be a mistake. It is crucial to have a sizable savings buffer when you complete the purchase of your home.
Although you do not want to anticipate problems with your new home, you should have the means to deal with them if they happen. Otherwise, you may start your homeowning adventure feeling overwhelmed from the get-go.
- Have a budget and stick to it. You might be inclined to increase your budget every time you see a house just a little outside of your price range. But you have a budget for a reason, and if you stay at or below budget, you will be one step closer to loving your house when the sale is final.
- Be thorough and do your homework. Do not rush into an offer because you are feeling frustrated. Be patient and keep looking for a house that is right for you. Think about whether you can see yourself living in a home for a considerable amount of time.
Consider the location. Visit the house at different times during the week and the day. Make sure it meets your expectations before you lock into something you will not be able to change.
- Always get a home inspection. Home inspections can save you a lot of money in unplanned emergency repairs. In the current, ultra-competitive market, it may be tempting to make your offer more attractive by waving the inspection. But the defects and deferred maintenance an inspection can reveal are not worth the gamble.
- Work with a real estate agent. Real estate agents are an invaluable source of knowledge when you are buying a home. Find an agent that you feel comfortable and relaxed with and makes you feel confident as a buyer.
All regrets aside, 79 percent of Americans still consider owning a home as part of the American Dream, and 68 percent believe it is a necessary step to retire. If you are looking to buy without regretting your decision, contact us. We will ensure you have the information you need to get home happy.
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