Graham Wood is Executive Editor of Digital Media for REALTOR® Magazine. He can be reached at firstname.lastname@example.org.
Tackling Buyer Remorse
Some pandemic purchases have led to misgivings. Here's how to help.
July - August
- Even the most well-qualified clients can feel pangs of regret after a closing. Now that life in the U.S. is opening up again, some of those buyers who won bidding wars and bought quickly could be having doubts.
- Listen closely to the fear and anxieties that clients are telling you and meet them at their need level.
- If your clients’ doubts about their purchase are not chiefly about finances, they may just need time to adjust to the new home and envision its possibilities for the future.
Jacinda Bauman’s second thoughts about the 5,000-square-foot home she and her husband, Joe, closed on in March didn’t hit her immediately. After all, their “pandemic purchase”—just seven blocks from their longtime home in Oak Park, Ill.—checked all the boxes for the family of four, including their 13-year-old daughter and 8-year-old son. Joe, a computer programmer for a hedge fund, would no longer be relegated to the corner of a half-finished basement during his 70-hour workweeks.
At their old 1,350-square-foot house, space for Zoom schooling was limited, and the kids’ toys took over the house during the long months when everyone was always home. All four of them shared a bathroom. At the new house, a 1920s brick half-Tudor, there are four full bathrooms.
But a few weeks after their April 1 move-in date, Bauman’s husband returned to his office in downtown Chicago, and the kids’ schools had fully reopened. “I looked around at all this space and thought, ‘What did we do?’ We don’t really live in any more rooms than we used to in the old house,” Bauman says.
Recent home buyers, whose lifestyles changed overnight in the pandemic, may have rushed to purchase a property to accommodate a new housing or location preference. Add to that the pressures of an intensely hot seller’s market—which is forcing many to waive contingencies and push their budget to the maximum to have a shot at winning a bidding war—and even the most well-qualified clients can feel pangs of regret after a closing. Now that life in the U.S. is opening up again, some of those buyers could be having doubts.
Bauman says her agent, Patty Melgar Hooks of Coldwell Banker Real Estate, has been vital in helping her sort through the moments when she questioned her family’s decision to upsize. “It’s important to really hear the fear and anxieties that clients are telling you and meet them at their need level,” Hooks says. Her 11 years as an emergency room nurse before she got into real estate have served her especially well in these times, she adds. “The hospital was also an environment where people didn’t know what to expect.”
The counsel that Melgar Hooks offered Bauman before, during, and after the purchase was, indeed, therapeutic. Bauman and her husband bought the new house for $663,000 in January, shortly before inventory became even scarcer and prices more expensive. Hooks helped Bauman see that waiting until May to list their old house would be advantageous to them as sellers. Gaining a better understanding of the propitious timing for both transactions made Bauman feel better about the two mortgages they carried while getting their old home ready to list, the significant expenses for new furnishings, and the cost of the move itself.
The likelihood of regret is highest among younger buyers. A Bankrate survey in April found that nearly two-thirds of millennial homeowners had misgivings about their recent purchase. At least for now, clients who feel they overpaid for a home or who were ill-prepared for the ongoing maintenance costs don’t need to feel trapped. Prices are expected to keep rising in the near term, said National Association of REALTORS® Chief Economist Lawrence Yun in May. If buyers choose to turn around and sell quickly, they may even see a profit.
But even more important is helping clients avoid regret, which starts well before they put a single offer on the table. Katie Falk, a team leader with Keller Williams Realty in Whitefish Bay, Wis., says her buyer consultations become “quasi-psychological evaluations” of her clients’ market readiness. She learns about their tolerance for bidding wars and ability to scale up their budget. “Those who can’t tolerate that kind of risk are more prone to buyer’s remorse. My advice to them might be to sit the market out a while longer,” Falk says.
In an environment where “the list price is just the starting point for negotiations,” it’s important to have the “kindness” to help clients understand which homes are and aren’t in their reach, says Cassie Kurowicki, a sales associate with EXIT Realty 1st in Chelsea, Mich. One tactic agents are using to win bidding wars is to submit an offer with an escalation clause, which automatically raises the offer against higher bids, usually in increments of at least $1,000. The buyer establishes the cap. You’ll want to check your state and local laws, as some prohibit escalation clauses. Also, consult an attorney about best practices to ensure you’re representing your client’s interests properly.
But the realities of a seller’s market can rattle buyers even after an offer is accepted. When buyers feel disadvantaged, “a part of them feels like they’ve got to win back some of what they gave up,” says Adam Gurske, CRS, GRI, a sales associate with Matchmaker Realty in Gainesville, Fla. Many sellers will choose to move on to the next bid rather than keep haggling.
Employing these strategies can help clients stay calm and confident in a fast-moving market.
- Don’t speak about the market in vague terms. It’s important not to use oversimplified language like “Yeah, it’s a hot market,” when educating buyers about the current dynamics, Gurske says. Discuss the supply-demand imbalance as specifically as you can, noting what kind of offers are most likely to be competitive.
- Be extra prepared to handle objections. Buyers may be spooked by unexpected items like a hefty home inspection report, Gurske says. “They start tallying up all the things that are wrong, and they feel like it doesn’t justify the price.” When this happens, he tries to refocus his clients on the terms of their sales contract, informing them that in a seller’s market, “you’re not going to find others who’ll be more willing to negotiate with you.”
- Discuss renovation costs up front. Many buyers target fixer-uppers because they’re less expensive. But home improvements costs are soaring, and those will take a chunk out of your client’s budget, says Devin Ratoosh, sfr, a sales associate with Red Oak Realty in Berkeley, Calif. Because buyers are paying 20% to 40% above list price in his market, “an unexpectedly expensive project on top of that can be a problem,” Ratoosh says.
- Help clients find other ways to save. Ratoosh saved one buyer $10,000 by suggesting that he reframe his back porch rather than entirely rebuild it. The reframe took care of the pest damage that needed to be fixed. “Little things to help them save can make them more confident in their purchase,” he says.
In the end, if your clients’ doubts about their purchase are not centered on finances, they may just need time to adjust to the new home and envision its possibilities for the future. Melgar Hooks helped Bauman see the long-term benefits of buying a larger home. “We’ll have a lot of options here,” Bauman says. “I’ll get to have my art studio, and there’s room to have parties. Looking ahead, we’ll have space for the kids to come back if they need to. We’ll be ready if there’s another pandemic.”