Realtor Magazine recently published an article about “Advice Young Adults Need to Avoid Buyer’s Remorse” and we thought it was worth talking about here on our McIlvaine Home Team blog. We don’t want our clients to experience buyer’s remorse. Some of it may be unavoidable, but major homeowner regret is something we want to help you avoid. Here’s a list of the biggest regrets and our response to them:
#1 Maintenance/Other Costs were more expensive than expected
It is easy to overlook the costs of home maintenance when dreaming about your new home. When issuing a loan approval, Lenders don’t factor in future costs for home updates and repairs because they aren’t factored into mortgage price. You should always keep them in mind. We encourage our clients to be wise with how much they spend on a home, keeping money in savings or ensuring cash flow that will be available for unexpected costs. According to the article, Porch.com estimated that the average cost for maintaining a home is around $16,000 per year (or 1% of their overall home cost each year). I’m not sure that number is entirely accurate, but the costs can be high. Some years you may not spend much, but others years the water heater will break and then the dishwasher will go, and did you notice that leak in the ceiling? Homeownership, though a great investment for the long term, is certainly not without headaches. Go into your purchase with eyes wide open. Do the home inspection so you are aware of what might need repair in the coming years.
#2 Bought too small of a house
My advice here is two-fold. In Northern Virginia that small house probably still came at a high price tag. If it’s all you could afford then look at it as an investment and let’s talk about when you might be able to sell for a profit and move up. If you can afford more from the start, then spend some time thinking about how you want to use your home. Do you enjoy hosting? Have friends and relatives that want to visit? Like clean spaces or are you ok with clutter from kids, spouse, roommates? We bought a home that has a lot of space because we like to host and have visitors. Although my wife sometimes feels like it’s more space than we need, we are thankful for it when the house is full and it’s serving our needs in this stage of life.
#3 It’s in a bad location
It’s always a good idea to get to know the area where you’re looking to buy to make sure it’s a good fit for you. How is the commute to work? What amenities does it have? (Pool, shopping, parks, etc) Does it have a neighborhood feel or do people mostly keep to themselves? The article doesn’t mention if this statement means “bad neighborhood” or “bad location for me.” In terms of good/bad neighborhoods, Realtors are prohibited from sharing their opinions on a neighborhood. It’s your responsibility as the potential buyer to look up crime rates, school info and more to make sure the neighborhood is one you would feel comfortable living in. If you plan to buy in the next 6 months to a year you should begin deciding on neighborhoods you want to consider now. Do test drives during rush hour, check out the shopping, ask people who live there what they like or don’t like about it.
#4 Don’t think it’s a good investment
If your realtor doesn’t help you determine this before purchasing the home then you need to find a new Realtor. Some people just want a certain home in a certain neighborhood no matter if there will be good ROI down the road. But if you are looking at your home as an investment then you need to be sure that it’s worth it before you sign the contract. Some homes are a better investment than others and you should know the facts before you make a purchase.
#5 Mortgage payment is too high
Lenders may approve you for a higher mortgage payment than you should take on. Know this and resist the urge to “go big” when in fact you know you should be conservative with your mortgage payment. The beautiful home with high end updates may seem great for a little while but the shine wears off when you can no longer travel, eat out, and buy other luxuries because you’re strapped to make your mortgage payments monthly. You must meet with a lender in order to qualify to purchase a home but I recommend you determine what mortgage you’d be comfortable with before you even meet with a lender. Do you have a budget? If not, start there. You know how much money you earn and what your other expenses are, so be honest with yourself. That way, if the lender approves you for much much more you can do some self talk to remind yourself of why you shouldn’t spend that amount.
#6 Didn’t get the best mortgage rate
Mortgage rates fluctuate and no one has a crystal ball to know what will come down the pike. It is virtually impossible to time the market. Following trends and knowing the key indicators for interest rates will help you make a more informed decision. Be careful of teaser rates. Many lenders advertise the Annual Percentage Rate (APR) and then when you figure in the lender points etc. and the Annual Percentage Yield (APY) can be much better. Ask the lender what their APY is and if you are comparing lenders, compare on the APY not the APR. While rate is important, think about the service the lender will provide you. Do your homework to find a good, reputable lender and trust him or her to get the best rate possible at the time. Using your cousins best friend may seem like a nice thing to do, but not all lender’s have the same skills and experience and it’s YOU who is stuck paying the price for years to come.
#7 Bought too big of a house
Big houses come with bigger bills for cleaning, energy, repairs, etc. In talking with one of my clients recently, they shared that by downsizing from a large single family home to a one level condo, they will be saving $17,000 per year! Assess your needs, how you will use the home, and decide if buying a larger home will support or hinder your lifestyle. Take time to make this decision before you begin looking!
Thankfully the article noted that over 60% of the young adults surveyed said, “They didn’t regret their home purchase.” Buying a home is truly living out the American Dream and we want it to be a good experience for all of our clients. These tips just will help you live it out even better and avoid being among those with regrets!
Considering BUYING a new home this year? Let’s talk!