3 Ways to Avoid Buyer's Remorse When You Purchase a Home

Avoiding buyer's remorse isn't rocket science. It's about setting goals and sticking with them.

House hunting of late has become just that -- hunting. With more potential buyers than there are properties for sale, fierce bidding wars and sky-high prices have become the norm. If you're lucky enough to buy a home, the last thing you want is buyer's remorse. Here are three ways to avoid that.

1. Don't overpay

A LendingTree survey of more than 1,000 house hunters found that 64% are willing to bust their budgets to pay for their dream homes. Hopefully, you are not among them.

Think about your housing budget. You probably sat down and figured out how large a mortgage payment you can afford without stretching yourself thin. However, getting caught up in the house hunt and spending more than you budgeted can leave you in a precarious position when things inevitably go wrong with the house. If it's not a leaky window, it's a worn out dishwasher. You can count on unexpected homeownership expenses.

A common way to experience buyer's remorse is to move into a home that costs more than you can realistically afford after all your monthly expenses are paid. It also leaves you less for things like weekend getaways, soccer tournaments for the kids, nights out with friends, and money to invest in your future.

2. Don't skip contingencies

Nothing will make you feel sorry about buying a house faster than learning how much you'll need to spend on repairs. Even when you have a home thoroughly inspected, it's next to impossible to account for all the "extras" that arise following move-in day. What if the hardwood floors -- covered by large area rugs -- are a mess after the previous owner moves out? What if the temperature gauge on the oven isn't working correctly, or there's a problem with soil erosion on the side of the house?

You may not see it now, but there's an excellent chance you will eventually regret any contingency you waive to "win" a bidding war. Long after the home seller is off on a new adventure and the real estate agents have deposited their commission checks, you're left to wonder what you were thinking. Let's take a quick at what waived contingencies could mean to you down the road.

Home inspection

Home inspectors are trained to save you money by pointing out common problems with the home, whether it's a structural problem or a water heater that's about to heat its last tub of water. Waiving a home inspection means walking into a house with little idea of how much hidden problems are likely to cost.

Specialized home inspection

Anything outside the scope of a standard home inspection -- like a swimming pool or chimney inspection -- requires a specialist. If you waive a home inspection, you also waive the right to bring in a specialist for a problem that could end up costing more than expected and leaving you sorry you ever bought the house.

Home appraisal

If you're taking out a mortgage, the mortgage lender will insist on an appraisal. Let's say you offer $400,000 for a house that appraises at $325,000. By waiving the home appraisal contingency, you're telling the seller that you'll pay the $75,000 difference.

Consider this: If you invested that $75,000 in an investment product averaging a 7% annual return, it could be worth $147,500 in 10 years, nearly double its current value.

Could your home increase in value by 7% a year? It's not likely. What's remarkable about 2020 and 2021 is that they are not the norm. A perfect storm of events, including a global pandemic, has caused housing prices to hit the stratosphere. During "normal" times, the average home appreciates by less than 4% per year, according to a Black Knight report.

Once the fevered excitement of buying a home passes, you don't want to be left with the knowledge that your money could have been better spent.

3. Don't overdo the concessions

Most of us have a wish list of features our dream house would surely include. But in a market as tight as today's, it's easy to forget about your wish list.

The first few months in your new home may be fine because you'll be excited to own it. However, if you dreamed of a kitchen with an oversized center island but find yourself making meals in a tight galley kitchen, the appeal may wear off fast. If your children are stacked on top of each other in their bedrooms because you purchased a home that's too small for your family, regret is likely to set in.

In short, if the house you're tempted to buy is nothing like the house of your dreams, don't invite buyer's remorse.

Once you're in a house, the goal is for you to enjoy all the perks of homeownership, without regret. You can make that happen by sticking to your budget, insisting on contingencies, and being honest with yourself about what you truly want in a home.