There’s no doubt that owning a house changes people’s lives, largely for the better.
For one thing, real estate is the basis for most people’s wealth. Studies show that owners accumulate more dollars than renters.
Then there’s the happiness factor. In a Bank of America report a couple of years back, more than half of the nearly 2,000 current or soon-to-be owners said the emotional factor of their homes held more weight than the investment aspect.
Homes give their owners pride, bring their families and friends together and provide a place to unwind, decorate, dine, work on hobbies and generally do as they please. Nearly two-thirds of the respondents told BoA they were more emotionally attached to their places than they expected, with more than 80 percent saying they’d never go back to renting.
But this isn’t a love letter to homeownership. Rather, it’s a warning: Some homebuyers, even those who absolutely adore their places, have “buyer’s remorse” – second thoughts about their purchase.
Polls Show Scope of Regrets
Money was the top regret among the 1,000 buyers surveyed last year by Flyhomes.com, an online real estate brokerage. About 40 percent said they spent more than they were comfortable with, and 20 percent said they flat-out spent too much.
In another study, 43 percent of homebuyers polled by LendEDU believe they made the right decision. But 47 percent said they made the wrong one. Thirty percent said they should have waited because of their finances; 20 percent, for social/life reasons; and 7 percent because they were unprepared to be owners.
Similarly, a survey of 2,250 people by personal finance site Nerdwallet found that about half would have done something differently if they could go through the process again. And 20 percent wished they’d saved more money before taking the leap. Among the other regrets: “should have gone with a larger house,” “should have waited” and “house was too expensive.”
These findings are interesting because a survey by Midwest builder Lombardo Homes found that 82 percent of buyers said they’d be willing to go over budget – to the tune of $31,000, on average. At the same time, 63 percent said the pandemic has caused them to lower their sights by an average of $28,400.
Another poll, this one by LendingTree, shows roughly the same. Buyers, it found, are willing to go beyond their budgets to acquire what they consider “the perfect house.” And a Realtor.com poll found that 1 in 5 buyers had to bump up their budgets to get what they wanted.
Leave Wiggle Room
Of course, there is no such thing as a perfect house. Listen to what some Flyhomes survey respondents had to say: “property taxes higher than expected,” “should have purchased a larger house,” “kitchen too small,” “not enough bathrooms” and “upkeep and maintenance cost more than thought.”
Yes, reality sometimes bites. But buyers can take some steps to protect themselves from making these kinds of mistakes.
To get an exact handle on what you can afford, get preapproved by a lender. Once the lender goes over all your documentation, you will know exactly how large a mortgage they are willing to commit. Add that amount to the cash you have for a down payment and closing costs, and you’ll know exactly how high you can go without breaking the bank.
Next, set your sights a little lower than your maximum amount, the folks at Flyhomes suggest.
These days, with bidding skirmishes and outright battles breaking out all over, it’s so tempting to raise your offer to beat out the other buyers. If you aim a little lower initially and find yourself going toe-to-toe with others, you will have the wiggle room to do so.
In other words, search below your max so that you can comfortably bid up. LendingTree Chief Economist Tendayi Kapfidze agreed.
“I urge buyers to be very cautious about going over budget,” he said.
Watch Where You Buy
If you are lucky enough to come in under budget, you might even have money left over to start taking care of some of the things the survey respondents griped about: Pay those higher-than-expected taxes. Add on to the house – perhaps expanding the kitchen or adding the extra bathroom you didn’t realize you needed. Take care of the maintenance and upkeep you failed to consider when you were going gaga over the place. And remember, you’re also going to need cash to turn the house you bought into your home: purchasing furniture, window treatments, tools and more.
By the way, lots of people underestimate maintenance costs. But “if you are stretched financially and under-invest in maintenance, it can diminish the value of your home,” warned Kapfidze.
Another way to stretch your budget is to look farther afield. Identify your favorite neighborhood and then widen your circle. By doing so, you’re likely to grab more square footage and better amenities for less money.
“We too often see people overlook beautiful neighborhoods with great schools just because they aren’t ‘buzzy,’” said the Flyhomes brokerage.
Realize, though, that another lament – this one voiced by 10 percent of participants in a BankRate.com poll – was not about what they bought, but where. These folks purchased in less-than-ideal neighborhoods and were sorry they did.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at firstname.lastname@example.org.