All buyers want to ensure they make the right decision when it comes to making a major purchase like buying a home. And buying real estate is not like buying stocks, the transaction itself is a bit more complicated and takes more time and money to complete. Additionally, home buying is a major commitment because it is an illiquid investment, meaning once you put money towards it, it takes a lot more effort to get that money out should you need to. This alone is reason enough to make sure you are truly ready to buy and that you are ideally making a wise purchase for the long run.
Photo Credit @ Kelly Sikkema
However, I think the fear of “buyer's remorse” is even more intense with first-time buyers, which is a shame. This can be the single reason that eliminates someone from ever getting on the property ladder: fear of regretting their purchase. Yes, buying a home is probably the biggest purchase someone has made to date in their life, so it's understandable that it can be intimidating and overwhelming. Sometimes people worry that it might tie them down. Some people struggle with that level of commitment. Not to draw a cliche comparison, but searching for and choosing a home can sometimes feel like dating. You try to get as many of the things you want in a house but at some point you have to compromise and then you are left wondering after, did you settle too quickly? Could you have gotten more? This is very much the wrong mindset to have because it will always rob you of the joy of being able to see what you gained. When you purchase a home, you gain a safe, dependable place to live that will improve your financial situation over the long term. Don't lose sight of that.
The concern regarding potentially having buyer's remorse is normal but I think it's important to learn how to manage the fear so you don't sit on the sidelines while home prices continue to rise over time. Ultimately they will whether you are in the game or not. Sure the property values may dip from time to time, but long term, they always rise due to the scarcity of supply, the increasing demand of population growth and inflation.
Photo Credit @ Mackenzie Grate
Spend your time and energy focusing on the fact that part of the reason you are getting on the property ladder is because you intend to look at the long term picture and use your home as a tool to grow wealth, which will provide for you in the future. In order to get that benefit, you have to make that leap and take that risk. I recommend that you do what most great investors do, they mitigate the risk by taking preventative actions. Here are some ideas that may help you do just that:
Identify your why.
Why are you buying now at this specific moment in time? This is crucial that you ask yourself this question. You have to be honest with yourself too. Is this your idea or is someone telling you to do it, like your parents or your spouse? I recommend that you sit down, by yourself, and make a complete list of reasons why you came up with this idea to purchase. Don't edit the list. Don't judge each reason. Scribble them down as they pop into your stream of consciousness. Once you have done this, take a break and go do something else. Come back to the list at a later date or time and begin to analyze your list. Underline the reasons that are good for you right now. Circle the reasons that are good for you in the future. Cross out the reasons that have to do with other people that aren't important in your life. What are you noticing? Are you really choosing to do this for yourself or because you think you have to do it? Is your why a compelling reason enough to motivate you when challenges arise? Do you want it bad enough to deal with frustrating calls to lenders or having to plunge your own toilet? If the why isn't strong enough, maybe you should hold off for now.
Create a criteria list of "must haves" and put it into writing.
We hit on this in a previous blog post titled "First-Time Buyer's Series: Preparing Your Finances to Make You 'Bankable'" where we talk about educating yourself about real estate. A major part of that is to go into your search knowing what you want most. If you aren't realistic about your budget from the beginning, you probably won't be satisfied with your purchase. However, if you look at your market and you know what is a reasonable expectation (like in order to get a bigger yard within my budget, I'll probably have to look further out), then you will be able to eventually navigate your search through which trade offs work for you and which will still give you the elements in a home that bring the most value to your life. Your real estate agent can help you with this, and a good one will guide you and support you in this education process, but you should still write down what are your "must-haves" versus what are your "like-to-haves." Carry that with you when searching for properties and refer to it often.
Photo Credit @ Kelly Sikkema
Don't go over budget.
Just don't. Being house poor sucks. It causes anxiety, sleepless nights and will ensure that you regret your purchase. Who likes sitting in an unfurnished home or worse yet, racking up more debt on a credit card to furnish it? It's better to hold off and wait to purchase than end up spending more than you can afford without a solid plan to pay for it. Trust me.
Photo Credit @Phillipp Berndt
Don't use money that you will need in the next five years.
This is super important. If you plan to get married and have a dream wedding you have envisioned since childhood, and you know you need this money to pull it off, don't put it into real estate right now. If you plan to go back to school and you'd prefer to pay your way through, save that money for that purpose. Real estate is an investment, but as I said before, it's not a liquid one. You can refinance down the road and pull out cash, but that comes from building equity and building equity takes time to do. If you're lucky, your property will appreciate over time, but don't rely on that to happen. Some markets take longer to do that than others. Some never appreciate but rather depreciate. The cycles of real estate also determine whether or not it is appreciating or depreciating at the current moment. There is no surefire way to time this if you need the money for something else in the short term. Some people will say, well, I can always sell it if I need to. That could or could not be true depending on the market when you need to sell. Plus, even if you were lucky to be in a seller's market when you needed to offload the property, the actual process to sell a house takes just as much time as it does to buy one unless you are selling it at a fire sale with a steep discount to a cash purchaser. If you are doing that, you are in distress and likely losing money already. So please, please, please do not tie up funds that you need in the next five years. That is a surefire way to have buyer’s remorse when the time comes sooner than you think and you need that cash.
Photo Credit @ Jack Harner
Don't plan to move for the next five years, unless you are comfortable being a landlord.
This is for the same reason as stated above. If you come across an unforeseen reason why you can no longer occupy the property, there is a chance that it might be at a time that is bad or difficult to sell. Your way to mitigate that risk is to rent out the property until the market comes back up or is more favorable for you to sell. This will prevent you from losing money if you have made sure that your purchase property could be rented out and cover it's own expenses. If you know you are going to relocate in the next couple of years for work, and you don't feel comfortable with potentially renting it out and becoming a landlord, it's probably best that you hold off buying the property and wait until you know you will be an area for a longer term of time.
Photo Credit @Jozsef Hocza
Buy a property that has good resale value, not a niche property.
The more unique the property, the harder it is to sell because there are fewer buyers for a niche property. I love buying single-family homes because they are starter homes and there will always be more families needing to start out and get on the property ladder. The larger the amount of units I have in a specific investment property, the smaller the number of buyers who have the capability to buy a building that expensive is. That's just how it goes. If you don't want buyer's remorse, try to avoid buying a property that is incredibly unique or expensive unless you absolutely love it and see this as your forever home. If you buy a house styled after the gothic period because you simply love the history of the middle ages, know that is a distinct taste and will absolutely narrow down the number of interested buyers you will have should you need to list it in the future.
Choose a great location over other amenities if you are faced with a compromise.
Again, this is for the same reasons as above. Sure you may outgrow a house and choose to upgrade down the line. It is so much easier to sell a tired or worn down house in a great location than an amazing house in a bad location. Trust me.
Look at market trends over the last decade or two.
If you are nervous as to whether or not buying a house makes sense in your area do the research and look over the trends. While past performance is never an indicator of future performance, it does give you a sense of whether properties generally appreciate or depreciate over the long run. Has your town been growing? Are there more jobs? Are the jobs from a variety of different industries or just one specific company? These all help give you a sense of whether your town is growing or shrinking. Growing towns are usually stronger investments and usually lead to a rise in property values over time.
Photo Credit @ Corinne Kutz
Develop a rebound plan from the worst-case scenario.
This suggestion is from Marie Forleo and I think it's a great idea. Write down all of your "what ifs" and then develop a plan for each and every one. What if the market plummets? Hold on to it and don't sell. What if I get a job in Seattle and have to move unexpectedly? Sell if the market is good, hold on and rent it out if it's bad. What if a crazy neighbor moves in next door? Build a privacy fence and install security cameras. Okay, Okay. You can spend quite a bit of time playing out various scenarios. Maybe just focus on your biggest worst-case scenarios and limit it to two or three. This will give you the reassurance that even if that happens, you will be able to figure it out.
After you buy, quit looking.
Delete your Zillow app from this point on unless you are considering buying an investment property next. If that is the case, recalibrate your Zillow search to meet the needs of your investment search. Seriously, quit researching houses in your neighborhood for at least a year, maybe more. The reason for this is because if you continue to look you feed the mindset of wondering if you could have found something better. Instead, spend time looking up design and decorating ideas and begin to put all your energy in to learning how and making your home exactly how you want it so that you can live your life with maximum value for however long you are in this home.
Photo Credit @ Gustavo Zambelli
Buyer's remorse comes from a place built around a scarcity mindset and fear. You have to work on your mindset if it is something you struggle with and really want to overcome. It is natural that when people spend money, especially large amounts of money, they want the reassurance to know they made the right decision. Find that reassurance in enjoying your home to the fullest right now, in this moment and knowing that you made the decision based on what you want and what works for you.
Find joy in picking out paint colors and making it your own. Find joy in arranging furniture and whatnot so it works for your needs and your lifestyle. Find joy in celebrating the fact that you bought this place and what a huge accomplishment that is in itself. Don't ask for others’ approval. If they give it, great! Then you know it's genuine. If you ask for it, you perpetuate this subconscious idea that you need outside approval to validate yourself and reassure yourself that you made the right choice. You never need that when you really made the right choice for yourself. Go back to your why and focus on that.
And remember the opposite of buyer's remorse is "missed-the-boat-syndrome." You may end up feeling just as guilty that you weren't brave enough to take that leap, especially as you see your dream house get picked up by someone else and/or rise in value overtime. Sometimes not making a decision to do something is making a decision to miss out. It can work both ways depending upon how you look at it.
So happy shopping! I hope you find something that you absolutely love and that you are brave enough to be decisive and make that leap when you find the right property.
Forever Grateful,
Mack
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