How to avoid home-buying remorse in a hot housing market
As more people rush to snap up homes and take advantage of super-low mortgage rates, inventory is shrinking and homebuyers are compromising on their dream-home expectations.
The problem? Zillow scrolling and homeownership FOMO could lead to flat-out regrets.
Nearly 1 in 4 American homebuyers experienced buyer’s remorse after closing on their new home, according to a 2020 . But you can’t simply “return” a house like you would a new pair of jeans that doesn’t fit.
So ahead of home shopping, follow these tips for avoiding buyer’s remorse.
Before you even step foot in an open house, take 30 minutes to call a bank or credit union and ask for a pre-approval. During this process, the lender pulls your credit, reviews your income and debt, and looks at your cash balance. Based on that information, the lender will tell you how much you can borrow and what your monthly payment might look like. Use this information to guide your budget and later show sellers the pre-approval, meaning that you’re serious about your offer.
Create a budget
Overspending can lead to buyer’s remorse, so get familiar with all the expenses that come with homeownership. To make a realistic budget, you can:
Ask the bank to estimate your monthly mortgage payment, which should include property taxes and may include private mortgage insurance.
Get quotes for homeowners insurance.
Ask about monthly fees, if you’re buying a home or condo under a homeowners association.
Estimate home repairs and maintenance. Plan to spend around 1% to 3% of the home’s purchase price each year on these expenses.
Here’s a good rule of thumb to use: These costs combined should equal no more than 30% of your monthly pretax income.
Keep calm in a bidding war
We’re in a competitive seller’s market, which means “you might be asked to exceed the list price to secure the home,” said Nobu Hata, CEO at Denver Metro Association of Realtors.
So if you were pre-approved for $300,000, for example, then you might want to look at homes priced around $275,000. That gives you some wiggle room to offer more than the listing price. But don’t get caught up in a bidding war; make sure the house is worth the higher offer.
“Ending up in a house that you're just ‘meh’ about will inevitably cause remorse,” said Nicole Rueth, producing branch manager of Fairway Independent Mortgage Corp. in Englewood, Colorado.
Don’t skip the inspection
An inspection can reveal major problems that you just can’t see during a quick tour with an untrained eye.
Take a first-time homebuyer Rueth knew who, caught up in the frenzy, waived the inspection so she could get to the closing table quicker.
“What do you know? The house had major roof and plumbing issues,” Rueth says. “She overshot her budget, and she couldn't afford all of this.”
When you do get an inspection, the inspector will hand you a report that details any problems with the home. “Be real with yourself,” Rueth said. “What are you willing to fix and not fix? Are you a handyman?”
Get offline altogether
Knowing your neighborhood inside and out will help you see if it’s a good fit. Hata suggests driving through the area during the day, at night, and over the weekend. Pull crime statistics, talk to neighbors and check home price trends. Check out the amenities, including public transit, parks, stores, restaurants, day care options, and gyms. Listen to your gut. If you have major reservations about the area, consider moving your search to another neighborhood.
Think about your future plans
Maybe you were happy with the home when you bought it — but then buyer’s remorse kicks in later when you need more room. While a change in plans is hard to predict, you can “make sure everyone has the same bullseye and holds each other accountable,” Rueth said. “Don’t sacrifice the long-term requirements for the short-term gain.”
When home shopping, ask yourself these questions, Rueth said:
What’s important to me and my family?
How long do I want to own the home?
Are my family dynamics changing anytime soon?
How long do I plan to live in this area?
What is my maximum budget?
Keep in mind: Buyer’s remorse is normal, even if you do all of the above. The good news is that it usually passes when you focus on making the house your home.
Read more information and tips in our Buying/Selling a home section
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