A Guide to Avoiding Homebuyer’s Remorse

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Updated on Thursday, November 8, 2018

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John Watkins, 27, in Tampa Bay, Fla., set a personal goal in high school to own a home before he turned 30. He accomplished his goal three years ago when he decided on a new build in a quiet but rapidly growing suburb. The home checked all of the boxes on his wish list: It had an open layout, high ceilings and a large master suite.

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But coming from living in an apartment, Watkins said he didn’t consider the enormous responsibility that came with homeownership.

“I can’t say that I completely regret the purchase, but I don’t think I would do it again if I had the chance,” Watkins told MagnifyMoney. “I vastly underestimated the time and expenses that go along with having a home, especially in an HOA.”

Watkins may be best described as a conflicted homeowner. While he’s proud to have achieved his goal of homeownership and is glad he bought the home as an investment, (he said similar homes in the area rent for $1,000 more than his monthly mortgage payment), the extra costs and work often outweigh the positives.

In addition to the mortgage payment, Watkins said he now has additional expenses he didn’t think of before, like water softener and salt, cleaning supplies, lawn treatment, pest control and holiday decorations. On top of that, he said, there’s an endless list of things that need to be done with the home.

“Days where I just want to go home and relax, I’m forced to work in the yard or face fines,” Watkins told MagnifyMoney. “Just yesterday I came home after work, opened the door and was smacked with a wave of heat as if I had just opened an oven door.” He spent the rest of his evening unclogging the AC condenser drain line with a shop vacuum.

3 key tips to avoid homebuyer’s remorse

A recent Bank of the West study found 68% of millennial homeowners experience buyer’s remorse for one reason or another. Of those homeowners, 44% reported having issues with space after closing. Most often, they discovered property damage, felt stuck after purchasing or realized the space didn’t quite work for their family. In addition, 41% of millennial homeowners with buyer’s remorse said they felt they had stretched themselves too thin financially with the home purchase.

To help prospective buyers avoid similar regrets, MagnifyMoney asked real estate and financial experts for their best advice for aspiring homeowners.

1. Rent before you buy

“Don’t be afraid of renting if you need a place to live but aren’t committed to the location or can’t find a house that meets your nonnegotiables,” said Arielle Minicozzi, CFP at Chandler, Ariz.-based Sphynx Financial Planning.

You can consider renting a home as a test run. With renting, you will have the opportunity to experience what it’s like to actually live in the home without the commitment to a mortgage. Renting gives you the chance to see if the space works for your family, get an accurate survey of the neighborhood, evaluate the HOA and see if you’re OK with the new commute to work.

“Even though you’re not building equity, renting is far more cost-effective than buying a home and selling it shortly thereafter, and less [of a] headache than finding a renter or making other arrangements if you need to move.”

2. Check out the neighborhood

“Your neighbors and the neighborhood make a world of difference when it comes to loving your home,” said Lorena Peña, chairperson of the San Antonio Board of REALTORS.

Peña suggested prospective buyers drive through the neighborhood at different times of the day to see what the area is like at different times. The drive also serves as a way to test the roads for your commute. Peña recommended going for a test drive in the morning and evening and around school drop-offs and pickups.

“When you visit the home you’re considering buying, take off your blinders. Be sure to notice the lawns of the neighbors, how well kept they are and, if you see any neighbors outside, stop to say hello. The current neighbors have firsthand knowledge about the neighborhood,” said Peña.

If the neighborhood has an HOA, Peña recommended looking at the rules before you buy, as you want to ensure your personal standards align with the association’s.

Jorge Guerra Jr., the residential president of Miami Association of REALTORS recommended you “identify your needs and what you are looking for, whether it pertains to safety, commute or the community,” prior to your test drive so when you go, you can accurately evaluate whether the neighborhood meets your needs.

3. Always get an inspection

“The inspection period is the best time to perform due diligence on ensuring that the property meets your needs or the needs of your family,” Guerra told MagnifyMoney.

Guerra recommended hiring a licensed professional and said that’s especially important for first-time homebuyers.

“Hiring a specialist in the four primary areas of electric, roofing, plumbing and mechanical (A/C) is your best bet — you definitely want to have the expert on your side,” said Guerra.

The inspection will cost a fee that most often won’t be included in closing costs. According to HomeAdvisor, the average home inspection costs around $326. Making sure you get the inspection done can help you avoid more costly or more severe repairs you’d be responsible for if you bought the home as is.

The inspection report should detail cosmetic and structural damage. Once you have the inspection report, you can decide whether to ask the seller to make the repairs prior to closing, or handle them on your own.

4 ways to avoid stretching yourself too thin financially

If it’s not a physical regret homebuyers had, it was a financial one. About 41% of the millennial homeowners with regrets in the Bank of the West study said they felt they had stretched themselves too thin with their home purchase.

Below are a few tips prospective homebuyers can use to keep their home purchase in line with their financial resources.

1. Start planning early

“The two best things a prospective homebuyer can do to avoid feeling stretched too thin are to set a budget well before looking at homes and to save more than he or she thinks is necessary,” Minicozzi told MagnifyMoney.

Saving enough begins with planning early. Like with most financial goals, the earlier you plan, the better. Minicozzi said starting earlier can give you more flexibility when prioritizing your goals and buy some time to weather any market fluctuations so “you can afford to invest your money more aggressively than someone whose time horizon is shorter.”

Minicozzi added taking your time finding a home that meets your budget may take some of the pressure off when you’re deciding on a home.

2. Consider the hidden expenses that come with homeownership

Remember, the down payment isn’t all you’ll be responsible for once you become a homeowner. In addition to the down payment, you may need to pay for closing costs like the application fee, appraisal fee, primary mortgage insurance and other fees. Closing costs generally amount to about 2% to 7% of the home’s purchase price.

Try not to use everything you’ve saved on the down payment and closing costs. If you have leftover funds, Minicozzi said, you can use them to make home repairs or updates, purchase furniture, start an emergency fund or invest.

3. Reduce your down payment

According to the Bank of the West survey, about 56% of millennial homeowners have dipped into retirement funds for down payments. While there are advantages to making a sizable down payment, like avoiding mortgage insurance or qualifying for a better mortgage rate, many options exist for buyers looking to make smaller down payments.

“If a buyer has good cash flow but little savings, using a lower down payment loan — like a conventional 3% down or a USDA loan with 0% down — is a good option, as long as he or she also has an emergency fund or builds one up,” said Minicozzi.

We’ve rounded up some of the best low down payment mortgages here.

4. Shop around with different lenders

Comparing your loan offers with multiple lenders is one of the best ways to save money on your mortgage.

For example, a recent study from MagnifyMoney’s parent company, LendingTree, found borrowers in the Tampa area (where Watkins’ home is) could save $73 in monthly payments or, up to $871 a year on a median home price of $225,000 by comparing rate offers. To get an idea of your potential savings, you can start your loan search here.

What to do if you feel stuck with a home you regret

“When someone purchases a home, the sale is final, even if they regret the purchase,” said Peña. “However, there are options for the new homeowner.” She suggested consulting your real estate agent to weigh your options if you find yourself feeling remorseful after closing on a home. Peña suggests considering the following choices.

Sell the home

You could try to sell the home right away and get out of the mortgage. However, Peña warned: “Purchasing a home is a sound investment and, depending on the market, immediately putting it up for sale does not guarantee you will get the same price from another buyer. “

Rent out the home

You keep the home and use it as an investment property. In this case, you could rent the home out while you build equity and sell it later on. If you don’t have experience or don’t feel comfortable managing the property, you may want to consider hiring a reputable property manager.

Renting is what Watkins is planning to do with his home. He said he and his partner will likely continue to live in their Tampa Bay home for another five years, refinance if possible and then rent it out.

“We should make enough profit from that to fund the majority of our next place (and possibly our forever home), which will be a similar home but with an acre or two of land,” Watkins told MagnifyMoney.

Vacation rentals: If the area is popular with tourists, you may have the option to use it as a vacation rental.

“Those that may regret purchasing a home can easily cover the mortgage with this side business while building equity,” said Peña.

Re-evaluate your budget

If you’re feeling cash-strapped now that you have a mortgage and other auxiliary expenses of homeownership, Minicozzi recommended reviewing your budget to see where you can cut back. If you’ve cut back all you can on discretionary expenses, the next step is increasing your income. Consider asking for a raise, picking up a side gig or possibly selling valuable items.

“If you have extra room in the home, you can even think about renting out some of your space. Just make sure to talk to a financial planner or tax expert to evaluate the tax implications,” said Minicozzi.

Bottom line

You’re pretty much stuck with a home once you buy it, so you should take care and try not to rush your decision-making process. If you are considering a purchase, try out the tips above to feel secure.

Watkins gave the following advice based on his personal experience: “I believe that no matter which path you go down, you’ll always find things that you like and things that drive you nuts. Do more research than you think you should, go visit the neighborhoods that catch your eye and talk to the current residents. Find a place that matches your lifestyle and not just your idea of a perfect home.”

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