By Mandi Woodruff | Yahoo Finance – April 29, 2014
When Jennifer Berry, 41, purchased a home in Grand Rapids, Mich. with her husband in 2001, they had a simple plan: live there for 10 years or so, cash in on the equity and upgrade. Thanks to the financial crisis, things didn’t quite go as planned. Her husband’s business failed, they separated and she was forced to sell the home at a loss.
“Instead of gaining equity, [our home] actually lost equity and I ended up literally paying someone to buy it just so I could get out from under it and save my credit score,” says Berry, who now rents her home. “I’m looking at retirement in 20 years and thinking about having to take out a 30-year mortgage now and worry about [the upkeep] drives me crazy.”
Berry isn’t the only one suffering from homebuyer’s remorse. One out of four homeowners admit they wouldn’t buy their home again if they had the chance, according to a recent survey by real estate brokerage Redfin.
The biggest factor contributing to homebuyers’ remorse appeared to be affordability. Nearly one-third of homeowners who reported a household income of less than $100,000 said they were unhappy with their decision. In contrast, just 14% of homeowners who earned more than $100,000 said they were unhappy, according to the survey.
Younger homeowners were also more likely to have regrets. About 28% of homeowners under 65 said they regretted buying their home, compared to 14% of senior homeowners. And one in five homeowners with kids still living at home said they regretted their home purchase as well.
Redfin’s findings come around the same time as new home sales have begun to lag in the U.S. Sales of single-family homes fell by 14.5% to an eight-month low in March, with just 384,000 units sold. Experts have blamed slow sales on bad weather, low home inventory, rising mortgage rates, and a rise in vacant homes (homes that are under repair or being rented). Whatever the case, one thing is certain — buyers today are at a distinct disadvantage when it comes to finding a home that meets every point on their checklist.
“One of the biggest regrets homeowners have is feeling pressured [to buy],” says Marshall Park, a Redfin agent based in Washington, D.C. “There aren’t enough homes on sale now, they’re sort of under the gun to buy their home.
Half of homeowners admitted to having regrets about their home purchase in a similar study by Trulia released last August. The majority of people with buyer’s remorse said they regretted choosing a home that wasn’t large enough for them. One in five homeowners said they wish they’d inspected the home more carefully before moving in — a trend that doesn’t surprise Park.
In order to compete with other bidders, he’s seen many homeowners signing contracts and moving in without getting a professional home inspection.
“In competitive markets like D.C., it’s not rare to just forego a home inspection or say you won’t ask for any repairs,” he says. “People are doing that and purchasing properties they could possibly have to dump tens of thousands of dollars into later.”
This is the kind of mistake that Trulia real estate expert Michael Corbett says is a “disaster waiting to happen.”
“I would never waive an inspection,” he says. “I would pass on the house before I’d waive on an inspection, mainly because I may get to a house and realize [too late] that there are issues.”
In other cases, owners said they loved their home but were unhappy with their chosen neighborhood. Neighborhood-related complaints made up four of the top 20 homeowner regrets in Trulia’s report. Fourteen percent of homeowners said they wish they’d vetted their neighborhood more, and 15% wished they had picked one closer to work.
“Very often our clients fail to do basic research and end up living in the right house but the wrong town,” says Ali Bernstein of Suburban Jungle Realty Group, which specializes in helping New York City renters transition into suburbia. “Agents are there to sell you the house, but the way the real estate market is set up, they don’t tell you about the towns. You’ve got to find a town that fits your personality.”
So how can you make sure you get through the whole home buying process without disappointment? Here are a few tips.
Don’t bite off more than you can chew. Your housing costs should typically take up less than one-third of your total household budget (or 40% for those who live in high-cost areas like New York or San Francisco) — property taxes and homeowner’s insurance included. Free mortgage calculators are plentiful online and can give you a pretty good estimate of what you can afford in your area.
Think beyond the inspection. In addition to a home inspection, don’t kid yourself into thinking maintenance costs end there. “People forget about the ongoing homeownership costs,” says Corbett. “Not just the closing costs, but the ongoing homeownership costs and keeping a slush fund for ‘invisible systems’ like electric and plumbing that will eventually break down.” Keep an emergency savings account flush with at least $1,000 to handle any unexpected maintenance issues.
Hire a good real estate agent. In Redfin’s survey, more than 30% of homeowners said they felt like their real estate agent wasn’t very helpful, and another 8% said their agent was the worst part of the homebuying process. Always vet your real estate agent. Ask trusted friends and family for recommendations and come up with a list of your top picks. It’s wise to arrange to meet in person at their office. Not only will you get a sense of their personality, but you can take a look around their workspace to see how seriously they take their job.
Get to know your neighborhood. With such low inventory out there, buying a home can feel like a dog-eat-dog competition. Take the time to vet your choice of neighborhood before rushing a bid on a home there. That means driving by at several times throughout the day — morning, noon and night — to get a feel for the environment. You might discover a nearby highway makes too much noise at night, or morning school bus traffic that could make your commute a disaster.
Test your homeowner smarts — take this quiz to find out if you’re smart enough to own a home.
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