Over the past year, the worsening imbalance between supply and demand has pushed homebuyers to the edge. Bidding wars and seller-friendly concessions have become the norm as buyers vie for their chance to own a home, even if it’s far from what they originally hoped for.

Although bidding wars are slowing and asking prices are leveling out, NerdWallet’s latest market analysis shows buyers are still feeling the pressure to do whatever it takes to purchase a home, which, unsurprisingly, can lead to dissatisfaction and regret.

“There are many reasons a buyer might regret their home purchase, or aspects of it,” the report read. “And in 2021, even more than in the past five years as a whole, the risk of buyer’s remorse is high. The heavily tilted seller’s market means most buyers are making sacrifices in order to successfully close on a home.”

Here are a few ways to make sure your clients don’t rue the day they bought their home.

Encourage buyers to separate wants from needs

The first issue for homebuyers, NerdWallet said, is the breakneck pace homes are being snapped up. Prior to June 2020, the five-year average for days on market was 41 days. However, that average has plummeted to a mere 18 days as low-interest rates keep buyers on the playing field.

To avoid wasting time during the home search, NerdWallet suggests buyers take more time to calculate a reasonable purchasing budget and create a list of wants and needs, so they can quickly identify the home that has everything they need, even if some of the bells and whistles are missing.

“Get specific: Know which features you’re willing to compromise on and what’s out of bounds in regards to [the] sales price,” the report read. “Making decisions such as ‘Do we really need a third bedroom?’ or ‘Can we afford another $50,000?’ on the fly is risky, at best.”

Don’t sacrifice everything

Although parsing the difference between a buyer’s wants and needs is important, NerdWallet noted the best way to avoid regret is resisting the urge to dismiss everything on the nice-to-have list.

“The number of homes on the market has fallen by about 55 percent from September 2019, when it last peaked, according to residential listing data from Realtor.com,” the report noted. “The supply of homes being offered for sale is paltry, so buyers are unlikely to find one that satisfies their wish list.”

Being flexible is a must in this market, but sacrificing too much could leave [buyers] with a home that’s a far cry from the one [they] envisioned,” it added.

Ask buyers what their most important wants and needs are, and be willing to search longer or even pause the homebuying process if you foresee more-fitting inventory coming down the pipeline in the upcoming months.

Pull back on exorbitant offers and waiving contingencies

The past year has been an unusually strong sellers’ market where buyers are even battling over clearly overpriced homes. When offering four or five figures above the asking price hasn’t been enough, some buyers have resorted to waiving contingencies — a move that can come back to bite.

“When pitted against an all-cash offer for asking price or above, buyers who must borrow might try to entice the seller by taking dangerous risks, like forgoing a home inspection,” the report read. “But 10 percent of homeowners who have purchased in the past five years regret not getting a pre-purchase home inspection, and 13 percent of these recent buyers say they regret discovering their home had significant problems in need of repair.”

Before making an offer, NerdWallet said, it’s important to know your buyers’ purchasing threshold and be willing to walk away from a deal that could cause major headaches in the future. “Winning isn’t everything. Don’t let the competition pressure you into forgoing important protections or going over budget,” the report added.

Stop buyers from stretching their budget to the max

Many homebuyers, especially first-timers, don’t understand that just because they’ve been pre-approved for a certain loan amount doesn’t automatically mean they can afford it. Although they can afford a monthly mortgage, additional homeownership costs such as appliance repairs and purchases, regular maintenance and insurance could easily push them over the edge.

“Five years ago, in July 2016, homes were selling for $245,100, or $278,100 in today’s dollars, according to data from the National Association of Realtors,” the report read. “Now, the typical sales price is $360,000, nearly $82,000 more [and] incomes have not kept up.”

“What this means is a buyer’s money won’t go as far today,” it added. “Add to that the ongoing costs of homeownership, and it’s clear how quickly home buyers can get in over their heads.”

To avoid regret and possible foreclosure, help buyers create a holistic budget that accounts for their mortgage and the costs for maintaining their home on a monthly and annual basis. That will give them a more realistic idea of how far they can go to get the home they want.

Email Marian McPherson

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
The best event in real estate kicks off next week! Tickets are selling quickly.Register Now×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription