5 ways to avoid homebuyers remorse

Amy Hoak's Home Economics

June 24, 2013, 9:45 a.m. EDT

Five ways to avoid home buyer’s remorse

When buying or renting, consider these points first

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By Amy Hoak, MarketWatch

Anyone who has ever bought a home—or rented one, for that matter—has likely heard this standard piece of advice: Don’t commit to more than you can afford.

True, heeding that warning is wise. Just ask anyone who spent too much on a house at the market peak and lost it to foreclosure.

Reuters

The listings site Trulia reports that 50% of homeowners have regrets about their current home or the process of choosing it.

But there are other questions you should be pondering before and during your home search to find a place that’s best for your needs. Housing designer Marianne Cusato wrote a whole book, “The Just Right Home,” about how people can search their souls to find a home that’s a perfect fit.
“Right now, it’s a great time to purchase,” she said, especially given low mortgage-interest rates. “But you’ll lose more money by jumping into the wrong house than waiting until interest rates tick up.”
The average rate on a 30-year fixed-rate mortgage was 3.93% for the week ending June 20, Freddie Mac reported. But given today’s home prices and income levels, mortgage rates would have to be nearly 7% before a family making the median income would be priced out of a median-priced home, according to Freddie Mac. “Rates would have to increase considerably more before the reduction in demand for home purchases would be substantial,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release.
So take a breath. It pays to critically consider your housing options.

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For example, unexpected expenses can catch homeowners off guard, Cusato said. Or, if you decide after a couple of years that you need to move again, you’ll be spending money on another round of closing costs.
Even if a bad choice doesn’t cost you money, it could mean the difference between loving and tolerating where you live. A recent survey by Trulia, a real-estate website, found that 56% of renters and 50% of homeowners have regrets about their current home or the process of choosing it.
Homeowners most commonly wished they had bought a larger home, according to the survey of 2,000 consumers. Renters most commonly wished they had bought instead of rented.
To avoid buyer’s remorse, Cusato said she recommends considering the following:

1. What is the home’s proximity?

As the adage has it, the three most important considerations when buying real estate are location, location and location. After all, you can change much about how a home functions and looks after you purchase it, but you can’t change the location of the lot on which it is built.
But there’s more to it.
“Proximity is where the place is in relation to what you do every day,” Cusato said. “Think about where you have to go to take the kids to school, where you go to work, where you get groceries. What do you want your lifestyle to be in your free time?”
During the housing boom several years ago, many people bought in far-flung suburbs, thinking they were saving money. But some ended up spending 30% of their incomes on transportation alone, Cusato said.
Plus, a well-placed home will buy you more free time, which can be very valuable to a busy family.

2. What hidden costs are in store?

Perhaps your list of must-haves includes a large yard for the kids to play in. But before buying all that land, Cusato said she advises considering whether it’s worth the expense of keeping it up. After all, many kids today spend large chunks of their days engaged in activities away from home.
In this case, think about how you want to engage with your outdoor space before committing to a rent or mortgage, she said. If all you want is a pretty scene through a window, maybe a unit in a condominium makes more sense for you—that way someone else is on the hook for the upkeep.
Also consider what it will take to heat and cool the space before buying it. Ask for a year’s worth of utility bills from the seller. If you can’t get that, said Cusato, ask for the months of January, February, August and September—traditionally the coldest months and the hottest months.

3. Ask yourself: Is it what you really want?

Or is it what someone is telling you that you want? It’s easy to go with the flow and do what you think most people do: rent after college, then buy a starter house, then a move-up house, then a retirement home in Florida. Instead, focus on meeting your needs, Cusato said.
Don’t worry too much right now about the resale value of the home.
“Worry about the next owner later. When we actually meet our needs, there are a lot of people who have those similar needs, too,” she said.

4. Ask yourself: Is this what you really need?

Take a reality check. Will it be enough space for your family a few years down the line, or will you have to move if your family grows?
Can you afford this home now and in the future? Don’t stretch, figuring you’ll have a bigger income down the line, Cusato said. If you get a raise, it should make your budget that much more comfortable.
“It’s really easy to push that limit. Maybe you push the limit on the mortgage or the rent, but then get ambushed by how much it is to get to and from [the house] or how much it is to maintain it,” she said.
While a lot of people are probably smarter about staying within their means after the recent housing bust, it’s still easy to get swept up—especially if you qualify for a larger mortgage than you thought you would.

5. Have you mastered the balancing act?

Buying a home is a balancing act among function, cost and delight, Cusato said. A home isn’t sustainable if you can’t easily live in it or can’t make the payments, or if you simply don’t like living there.
But “there’s no such thing as the perfect house at the perfect price in the perfect place,” either, Cusato said.
You’re best positioned to meet your needs if you can articulate them from the start, she said. That way, you’re not wasting time seeing places that are too expensive or just don’t fit your desires.
And don’t rule renting out, either.
“In the new rules of real estate, I think that homeownership is not a given,” Cusato said. “We’re redefining what the American dream is,” and it doesn’t always mean owning a big house in the suburbs.