If there was ever a perfect time to delve into buyer’s remorse within the real estate realm, it has to be now. Why? Because 2022 has been a tale of two extremes, with each triggering emotion causing people to doubt their homebuying decisions for differing reasons.
From January through the summer months this year it was a bonanza for sellers and agents. With mortgage rates legendarily low, properties were listed high and sold higher. Bidding wars were the norm, and prospective buyers usually had a limited time to visit houses before having to make quick decisions on what for most would likely be the biggest purchase of their lives.
Nothing causes buyer’s remorse more often and more quickly than rushing into a very expensive purchase of anything, and a house certainly qualifies. So it wasn’t unusual for agents to hear it and try to defuse it.
Then very quickly the market changed. To combat inflation the Federal Reserve raised interest rates in May, June, July and September, causing mortgage rates to jump dramatically. While home prices leveled off somewhat, people were faced with having to pay a significantly higher monthly mortgage payment than they would have months or even weeks earlier.
Thus, buyer’s remorse redux.
Torrence L. Ford, a broker/owner for RE/MAX Premier in Atlanta, acknowledges that 2022 has been challenging, to say the least.
“This year has been like no other,” he says. “It’s been the year with two heads. At the top half of the year things were normal, with sales happening and low rates, where buyers had to make quick decisions. Beginning this summer, we noticed that things were slowing down. The second half of the year has totally changed to a buyer’s market here, and we are seeing $75,000 price reductions and buyers securing $15,000 in seller-paid closing costs, along with builders offering $20,000 buyer bonuses again.”
Ford stressed that working things out with anxious buyers is crucial, lest sales fall through more for emotional than logical reasons. He has a plan for addressing buyer’s remorse.
“What we do with a client getting nervous and thinking about pulling out of the deal is review their options,” he states. “Option one is to renegotiate with the seller. Option two is to ask the lender for any credits that are available. Option three is to ask the seller to extend the closing date to give the buyer more time to save money, pay for a rate buydown, etc.
“We also share news articles with buyers to show them that there may be two more scheduled rate hikes in the months to come, so the time of affordability is now. We simply remind buyers to marry the payment and date the rate.” Meaning if you find a home you love and can afford, don’t let the current interest rates prevent you from buying it.
While it’s the biggest one, finances are not the only cause of buyer’s remorse. When homes are listed and sell lightning fast, people don’t have a lot of time to scope out the area, see where the schools are, etc. They worry that the house may be too big or too small, or in a neighborhood they don’t know well enough.
REALTORS® play a major role in reassuring clients that they made the right decisions. Ways to do that include:
- Making sure the buyer understands all the costs of a house, including taxes, mortgage payments, living expenses, etc. That should all be established well in advance of making offers. A buyer can get caught up in a bidding war, only to realize they can’t afford it after they win.
- Pointing out that homes almost always rise in value, so even if they are not totally happy with the choice they made they can likely sell at a profit in the future.
- Stressing that instead of focusing on the negative they should focus on the positive, which is that they’ll be living in and enjoying their new house for years to come.
- Telling them that in a worst-case scenario they can almost certainly rent out the house for a monthly profit. The rental market is extremely tight nationwide.
Jeffrey Decatur is a broker associate with RE/MAX Capital, in Latham, New York. With 28 years of real estate experience to draw upon, he has his own style of handling buyer remorse, which is to head it off before it occurs.
“Clients getting buyer remorse and backing out isn’t typical in my world,” he says. “That’s something that generally happens with newer REALTORSⓡ because they haven’t managed their clients’ expectations. Where I get buyer’s remorse is when my clients are not catching up to how fast the market is moving. I don’t get the ‘oh, I bought a house and want to back out’ remorse. I get the people who are like, ‘oh, I wish I listened to you more’ remorse.
“How I deal with the potential of buyer’s remorse is to educate clients so they can make a comfortable decision. If they don’t have the right information they’re not going to be comfortable. I try to manage their expectations and tell them every possible scenario, because I’ve come across them all in my almost three decades.
“A common example is a client in a multiple-offer situation, where there were 13 bids and they won. That meant there were 12 bidders they beat out who saw the same value in the house that they did. They may have won because they had more favorable financing, or a better closing date, or maybe I had a better relationship with the other REALTORⓡ than others did. I tell them all the different things that could come up, or that they would think of, to avoid an earworm in them that they overbid, or overpaid.”
Another way Decatur manages a client’s expectations is by stressing that most problems have solutions, and there’s no reason to panic or back out most of the time.
“Say the roof is bad; well, you’re not gonna throw the house away because the roof is bad,” he says. “Instead you work with the seller for the financing to replace the roof.
“So when you go through that kind of scenario with your client they’ve had their expectations managed, and now it’s just a matter of getting a free estimate on the roof, and the seller will get an estimate and they’ll come to a happy medium.
“I’ve never had anybody back out of a transaction because they felt they were in over their head, or had that buyer’s remorse portion of the program.”
The good news currently is that even though mortgage rates have risen, the market is more or less back to normal in terms of houses remaining on the market longer, so buyers don’t have to rush and can bid for a property having done their homework and research.
“Right now buyers can get what they want; they’re back in the driver’s seat,” says Ford. “We also tell them that they may want to consider lower price ranges that still fit their lifestyle and desires, while maybe doing home projects themselves, instead of spending a higher purchase price.”
Although there is more commission money to be made when houses are sold fast for top-dollar prices, Decatur also prefers a more stable atmosphere.
“I’ve never liked the market when it’s too aggressive,” he says, “because I want my clients to be able to absorb what they’re going through and not get beat up here and there. I like a more balanced market, with maybe multiple offers for every other house instead of for every house.
“Each market has its own challenges. For sellers now it’s completely opposite to what it was earlier this year, and prices are plummeting. Now buyers have become picky, and sellers are the ones who fear missing out. The fun part of real estate is if you wait long enough the pendulum always swings the other way.”