Are you thinking about buying a home? Your first home? Or maybe you have a home but you’re itching for something new. Did the sexy rock-bottom interest rates of 2020 seduce you into thinking that now is the right time to finally make the leap into homeownership?
You feel buying a home is a good idea, but you’re cautious. Am I ready, you ask? What if I end up hating it?
Having buyers remorse when buying a home is a very real thing. Not only is it the most expensive purchase of your lifetime, but buying a home is as much an emotional commitment as a financial one. And it’s not an easy purchase to undo once you’ve signed the paperwork, agreed to pay a lender hundreds of thousands of dollars (via your mortgage) and prepped for move-in.
So, what is buyer’s remorse when buying a home, and how can we avoid it? As with most financial woes, when it comes to homebuyers remorse, “an ounce of prevention is worth a pound of cure.”
What is buyer’s remorse when buying a house?
Buyer’s remorse is a sense of regret or anxiety someone gets after they make a purchase. Typically, buyer’s remorse applies to expensive purchases, like a house, car, or other large expenditure (like the Chanel purse I bought in Paris that one time…I digress.)
Generally, people experience anxiety and buyer’s remorse when buying a home for one of two reasons:
- Money stress – Making a large financial commitment means you’re on the hook to the lender and thus in a lot of debt. Even if it is low interest, “good debt”, owing someone that much money can be stressful. Especially if the purchase pushes you to the edge of your comfort zone.
- FOMO – Fear of missing out on a better option. You feel “tied down” to this purchase and that you’ll be unable to act on something better you may want more in the future.
Signs of buyer’s remorse after buying a house
Even if this is your first time buying a home, you’ve likely had experience with buyer’s remorse before. Maybe you overspent on a night out at a bar, or took a job in another town when you really wanted to live close to home. Anytime we make a decision we immediately regret, this is remorse. Putting “buyers” in front of the word “remorse”, just means some type of money is involved.
- Honestly, buyer’s remorse is just a combination of familiar feelings like guilt and shame, and the “symptoms” often mirror anxiety: sweaty palms, shortness of breath, panicky thoughts.
- You may also experience the “morning after” effect wherein you thought the home was exceptional when you toured the property and made the offer, but now you feel underwhelmed by what you ended up with.
- I imagine the “signs” of homebuyer’s remorse are the same as when shopping for a smaller, less expensive item, but then multiply everything by 100 because a home is expensive. And you have to live with it longer in order to recoup closing costs and down payment.
In my own experience, I bought my first home at age 26 when I was newly engaged. The relationship didn't last much past closing, and I soon found myself in a fixer-upper I'd planned to renovate with someone in a neighborhood I didn't feel super comfortable living in by myself. It all worked out, but I distinctly remember that, “Oh no, what did I do?” feeling in my gut once I faced the reality of being a single female homeowner.
It all worked out in the end, but take note: home buying isn’t something that should be rushed into, no matter how competitive the market is where you live.
How common is buyer’s remorse when buying a house?
There are many aspects to the home buying process, and so you can end up with a handful of home buying regrets.
- You can regret the location you purchased in.
- You can regret not buying enough house (or buying too much)
- You regret buying that fixer upper when you’re all out of energy to do repairs.
- You can regret choosing your lender or interest rate.
- You can regret letting a large chunk of liquid cash go for the down payment and closing costs (after all, it took you a long time to save up that money!)
With so many mistakes to be made, it's no surprise home buyer's remorse is so common.
- 44% percent of homeowners in a 2017 Trulia study regretted buying a home (top regret being they wished they’d gotten a larger home!)
- In a generational homebuying study by Bankrate 63% of millennials experienced remorse when buying a home (nearly double that of Baby Boomers)
- Similar data from J.D. Power found 1 in 5 regret their choice of lender
How to handle buyer’s remorse after buying a house
Recently, I was reminded of just how scary buying a home can be. I just closed on my first investment property and it still scares me a few weeks later. Like makes-my-tummy-flip-every-time-I-think-of-it scary.
Here are some ways I've tried that I feel are helpful in handling buyer’s remorse (…or a potential case of it) after you’ve closed on the home and taken possession.
Acknowledge that being scared is normal.
Any time we do something that is unfamiliar to us (like buying a home, paying a lot of money for something, signing legally binding paperwork), it is perfectly natural to feel anxious. Are you scared because it is unknown? Or is something larger at play?
Realize this time is only temporary.
Are you nervous because you spent too much? It is easy to overspend on a home, but even if you buy inside of your budget that “super tight” feeling is also normal because you’re coping with homeowner’s insurance, ballooning utility payments, and maintenance – things you don’t have to contend with as a renter.
This “house poor” feeling generally only lasts the first year you are in the home. Once you’re through swapping over utilities, buying furniture, and splurging on small home projects, your outgoing expenditures will slow.
Make a list of all the reasons the home makes you feel grateful.
Particularly during the pandemic, there are more reasons than ever to both love (and hate) your home. We’re spending more time within four walls than ever. Maybe now you’re grateful you have that extra bedroom you were worried about paying for before. Perhaps you’re glad you went with the upgraded kitchen now that we have to fix more meals at home. Whatever the reasons are, write them all down.
I try not to get too caught up in wishing my home had (x) or (y). I love home projects and can get way too involved in them if I allowed myself to go down that rabbit hole. BUT if you’re having second thoughts about your home because of something that is relatively easy to fix, I urge you to consider pulling the trigger on these upgrades, and here’s why:
If it is an inexpensive fix, it will save you more money, in the long run, to love your home than to try and sell it early on.
Selling a home and moving is an expensive business. Wouldn’t it make more sense to invest in the asset you already own?
What happens if homebuyer’s remorse shows up later on?
I also know what it’s like to live in a home for a few years and then get bored. My gypsy soul loves a change and shaking things up, so I’m always down to move into a new house or start a new adventure every two years or so. But this isn’t always feasible or affordable, and now I have my husband to consider (and he’s definitely not down for that….all of the time.)
In times like this, I have to remind myself of all the reasons I love the home we bought and why we are in it. I try to recall why I was drawn to the property, all the reasons it worked for us, and how I felt those first few weeks in the home.
Make a daily visual of the “why” behind your home if that is helpful to you. Visualization exercises aren’t just for goals or decorating your home – they can also reaffirm what’s important to you.
What to do if you want out
If you truly feel you made a mistake and want out of the home, consider becoming a landlord and renting out the space. Depending on your financial situation, you may not be able to buy another home, but you could rent something that is less maintenance or in your preferred location. If you rent to friends of friends and use software like Cozy.co, renting actually isn’t that scary. My husband and I both used Cozy and had great experiences as “landlords” of our properties. I just listed our homes on social media and Offerpad and ran credit checks and never had a problem.
If you live in a hot market, you may be able to sell the home after a year or so. Maybe you’ll make a smart profit, but at the very least, you want to be able to break even on the purchase. Run the numbers on your purchase and closing costs to determine your “break-even” point on the sale. Factor in 6% in commissions for both buyer and seller real estate agents.
You’re not stuck. You can get out of a home if you’re that unhappy. It will just cost you time, money, and hassle.
The #1 Fix for Homebuyer’s remorse
Obviously, the best way to handle buyer’s remorse is to prevent it. Having a very clear idea of what you can afford and what you’re looking for in a home purchase goes a long way to making sure the home you do purchase is a great fit.
How to avoid home buyer’s remorse by staying in your budget
In this post, I advocate for taking your housing budget and subtracting 20% to come up with how much you can really afford after factoring in new expenses (like the aforementioned insurance and maintenance.)
As a loose metric, try to aim for spending no more than 30% of your take-home income on your mortgage payment each month. Like I recommend in the other article, I really dig the calculator on Credit.com for helping you come up with a budget for this. Keeping your housing budget in these parameters will ensure you’re able to afford the home and keep up the lifestyle you’ve become accustomed to.
One final tip: You can regret a lot about the home buying process, but one thing I’ve found in my personal experiences over the last seven-year writing about money and real estate is that very few people who bought in their ideal/preferred location (and stayed on budget) regretted it later on.
How to avoid home buyer’s remorse by considering all your lifestyle factors
I am very pro-homeownership. This isn’t a secret. But I also believe home ownership isn’t for everyone, the same as babies and dogs aren’t for everyone. One of the first chapters of my book The Millennial Homeowner is dedicated to helping prospective buyers determine if they are actually even ready to buy a home at all.
I can’t tell you if owning a home is right for you, but what I can tell you about homeownership is that is a lifestyle.
You don’t have to enjoy DIY projects or gardening, but you do have to be involved in maintaining the home. So it’s best not to hate home maintenance. If you travel a ton, or would rather cut off your fingers than sit around waiting for the handyman, maybe homeownership isn’t in the cards for you right now.
If you like being fairly unencumbered and able to take a job or vacation on a moment’s notice – homeownership isn’t great for these things either.
But I do believe home buying is good for your personal finances, and buying a home you feel lukewarm about now (it’s called a “starter home” for a reason) can help you build equity and get into something you truly love later on.
What about the cooling off period?
Legally, a “cooling off period” entitles buyers to seven days to back out of a transaction, but this doesn’t apply to real estate.
A home buyer can cancel a mortgage refinance or HELOC with a lender up to three days after closing. This is called the “Right of rescission” but it doesn’t really help first-time homebuyers because it doesn’t apply to home purchases.
This is why it is very important to take advantage of the due diligence period that kicks off once the contract is signed by both buyer and seller. This allows a potential buyer to get an inspection, double (and triple) check financing, kick the tires on the home a little bit and be absolutely sure about the purchase before moving forward.
These measures are in place to benefit both buyer and seller so use them. This can go a long way to avoiding home buyers remorse.
Very few escape the home buying process without some regrets, and my goal with this article is for you to be TICKLED PINK with your purchase.
As common as home buyer’s remorse can be, it is completely preventable if you do your homework before home shopping to ensure the homes in your search are the best for your lifestyle and your own personal financial situation.