How to Avoid Homebuyer's Remorse
A recent survey from Bankrate found that a large number of homebuyers—44% to be exact—regretted buying their home. When broken down into age demographics, that number jumps up to 63% for millennial homeowners.
At Elevate Mortgage Group, we don't want anyone to ever feel like they made a bad decision in purchasing a home. So we wanted to look at why these numbers are so high and what you can do to make sure you're not one of them.
Why Buyers Regret Buying Their Homes
The first step to avoiding homebuyer's remorse is to understand the reasons why people regret their purchase. You can't avoid the most common pitfalls unless you know what they are.
According to the Bankrate survey, the #1 reason for regret was unexpected maintenance costs, followed by buying a too small home. All of the reasons, in order, are:
- Maintenance & other costs more expensive than anticipated
- Home is too small
- Don't like the location
- Feel like it wasn't a good investment
- Too high of a mortgage payment
- Mortgage rate isn't the best
- Home is too big
Below, we will tackle the biggest of these issues with solutions on how you can prevent regret in these areas.
How to Prepare for Maintenance Costs
The main way to counteract this regret is to understand—really understand—how much actual money you can expect to spend on maintenance costs for a house.
Most people usually know that they will have to pay for maintenance when they own a home, so that part's not the shocker. What shocks them is how much it ends up costing to do it.
While there is no one set way to predict the future, and thus no exact calculation for home maintenance and repair costs, there are a couple of general guidelines you can use to estimate and prepare.
Calculating Estimated Maintenance Costs
The first, and most common, guideline is based on the cost of your home. Sometimes referred to as the "1% Rule," it states that you should budget for and save up 1% of the cost of your home to use for maintenance each year.
There are failings to this "rule," however, which is why another guideline takes a different approach. The "Square Foot Rule" recommends that you plan on budgeting $1 for every square foot of your home.
This rule also has its limitations. As a general guideline, it works about as well as the 1% rule, but neither really addresses the factors that are most likely to influence your maintenance costs.
To get the most accurate estimate, you should look at the home you're buying and then consider the following factors:
- Climate in your area
- Local geography
- Condition & age of the home
Homes in areas where there is lots of rain, snow, freezing temperatures, high winds, etc. will naturally experience more wear and tear than homes in more stable or moderate climates. Additionally, areas that are prone to pests like termites will also require more maintenance.
To take this one step further, the specifics of where your home is located can also be problematic. Is the home by a river, for example, where it could be affected by floods and rising water? Or at the bottom a hill, where water collects, or in a neighborhood with lots of large trees, where roots could grow through the pipes? All of these could potentially up the maintenance needs of the home.
Finally, the older a home is, the more maintenance it will need as different elements meet their lifespan. However, this could be offset by the condition of the home, and how well the previous owners took care of it, so you will need to factor in both.
Once you've examined these factors and determined which ones apply to the home you're thinking about buying, you can start calculating.
Example of Calculating Maintenance Costs for a Home
Let's say the home you like is listed for $270,000. It's 2300 sq. ft. and is located in a city that has heavy snowfall and occasional freezing rain. It was built in 2004, so it's about 15 years old.
It's in a neighborhood that is fairly suburban, and there are no large trees in the yard. It's also at the top of a hill, away from any rivers or floodplains, so you don't have to worry about those geographical factors.
There's only been one previous owner, and they took good care of the house, even replacing the furnace and water heater within the last year. However, the roof is still original, and it only has a 20-year lifespan, so that would need to be replaced within a few years after you bought the home.
Now that we're familiar with the home we'll be calculating for, we can start by getting our baseline number. To do this, we'll take the average of the 1% rule ($2,700) and the square foot rule ($2,300), which is $2,500 for this example.
Next it's time to factor in the unique circumstances this home is facing. The general rule we like to follow is to add an additional 10% for each category (climate, local geography, condition, and age) that the home has issues in.
So we'd add 10% for "climate" thanks to the snow and freezing rain, nothing for the local geography factor, nothing for the condition, and, thanks to the upcoming roof repair, 10% for the age of the home.
Altogether, this means we'll be adding on 20% of $2500 to the original $2500 estimate. This calculation will take two steps, as outlined below:
- $2500 x 0.20 = $500
- $500 + $2500 = $3,000
So, for this example, it looks like we should plan on saving up $3,000 per year for maintenance of this home, if we choose to buy it. While we may not spend all of it every year, any extra can be carried over to save up for that roof replacement (which alone could cost anywhere from $5,000–$15,000, on average).
If there are certain parts of a home you know will need updates, you can also calculate and budget for those separately.
For example, in our hypothetical situation, we know if we bought this house we would need to replace the roof within a few years. Before buying, we could do a brief search of average prices for roof repairs or replacements in our city to see what it might cost, and then we can adjust our estimate to accommodate the cost of that specific repair.
If the furnace or water heater were also 15 years old, and hadn't been replaced, those are other expenses we could research and factor in. The same goes for any landscaping, fencing, plumbing issues, etc.
How to Avoid Buying a House That's the Wrong Size
With the second most common regret being a too small home, and the seventh most common a home that's too large, we wanted to take a moment and talk about how to avoid these issues with size regret.
The biggest issue with homebuyers is that they buy for the house that works now without considering what the future might hold.
Factor in Your Future
If you're single or part of a young couple, and you want have a family one day, you should probably consider homes that would accommodate those changes. Otherwise, when they happen, the home that fit you comfortably will quickly start to feel too small.
Even if you don't have family aspirations, you might want to fill your home with pets. If you've always dreamed of having 3 dogs and 5 cats, a larger home will make all of you more comfortable.
Plan for Your Lifestyle & Personality
Taking a look at your overall personality and the lifestyle you want to lead can also help clue you in on what size of home would meet your needs.
For example, are you someone who loves to entertain and throw parties? You'll probably need a bigger space for that.
Are you more of a maximalist or a minimalist? If you find that you tend to collect and accumulate things (and there's nothing wrong with that!), you'll want to make sure you plan for a bigger home that will hold all of your stuff.
On the flip side, if you're a minimalist and/or an introvert, you probably won't need as big of a space to feel comfortable and content. If you get a space that's too big, trying to fill it with furniture (or people) could easily become stressful and overwhelming because it goes against your nature.
So before you buy a house, really consider your needs, future plans, and personality traits. If you can be honest with yourself in these three areas, you're much more likely to buy the right size of home.
Location, Location, Location
We all know where you live is a huge part of the homebuying decision. Everyone agrees: location matters! But if that's the case, why is it the third most common reason for regret? At Elevate, we have a couple of guesses.
Visit the Home in Person, and Not Just Online
Today, a lot of people use the internet or apps to search for homes.
While this is a good place to start, it's critical to still make sure you actually visit the home in person. Doing so not only helps you make sure that you really love the home itself, but it also helps you get a feel for the neighborhood and how it might affect you.
For example, maybe you find a home that seems perfect online. Then you visit it, and while the home is still beautiful, you realize that it's miles away from your favorite pizza place, with no promising replacements in sight. Or it's right next to a dog park and you have cynophobia.
While these are just (hopefully) humorous examples, the point stands that sometimes you don't realize what's really important to you, in regards to where your home is located, until you're face to face with it.
Figure Out What You Want from a Location
The second reason is that people don't really know what they want out the area they live. This could manifest in a couple of different ways.
The first and most obvious is that you've idealized a certain type of lifestyle without really considering if it would work for you.
As an example, maybe you've romanticized the idea of living in the country, surrounded by acres of fields and rolling hills. But in reality, you're a city person at heart. You love the convenience of living near restaurants and grocery stores. And you actually hate the smell of cows. It's important to realize this about yourself before you buy a home in a place that you'll end up hating.
So how do you that? The main answer is lots and lots of self reflection. Basically, you really need to think about and evaluate what it would mean to live in a specific area. What would you be giving up to live there? What would you be gaining?
You will really need to think about the pros and cons of living in a certain area. It can help to actually write them down and list them out. Then look at them and how they align with what really matters to you in your life. Are the cons (the smell of cows, a thirty minute drive to the grocery store, etc.) things you could live with, or do they outweigh the pros?
Another way you might not be considering what you really want out a location is that you are only looking at what fits your needs now and not at what will also fit in the future.
Going back to the family example in an earlier section, maybe you know you really want a family one day. It's super important to you, but not in the cards right now. So instead you buy a home that matches your lifestyle now, close to downtown but far away from the family-friendly neighborhoods with good schools. This can cause regret for the location if and when you do start that family.
Because you deserve to be happy in both stages of life, not just now and not just in the future, you should focus your housing search that allows you proximity to amenities that work for both. So maybe you looks for a house a mile farther from downtown, but near a good school. That way you're still close enough to enjoy the nightlife, but when your life changes, you'll still be happy.
Even if your future plans don't involve a family, you should still make sure that whatever home you buy will work for whatever they happen to be.
Avoid Regret with Help from Elevate Mortgage
Hopefully these tips can help you regret your home due to the cost of maintenance, its size, or its location. And for help preventing some of the other factors of regret—including the mortgage payment costs and having too high of a mortgage rate—let our team at Elevate help you. We do our best to make sure you can afford your home by offering competitive rates, favorable terms, and a realistic look at your situation.