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Friday, July 25, 2008

Buyer’s Remorse and Seller’s Regrets…

As a full-time real estate agent, I get involved occasionally with buyers and sellers who both have second thoughts, once an agreement is reached.

Buyer’s remorse is a normal reaction that sets in about 24 hours after receiving the good news that the buyer’s offer has been accepted. Up to that point the buyers’ emotions had been driven by anticipation and hope, as well as the thrill of the hunt for the perfect house. Once the offer has been accepted, the reality of the size of the debt obligation sets in, as well as the upcoming responsibilities of being a homeowner (especially for first-time buyers). Thoughts of “What have I gotten myself into?” can quickly take over.

Usually the buyers’ doubts and fears pass quickly, as anticipation again takes over and visions of the fix-up or remodeling that the buyer has in mind take over. If everything goes OK in the inspection, most buyers settle into the waiting period and begin shopping for furniture, appliances or whatever else they’ll need once they own the house. I have to keep them focused upon doing what is necessary with their lender to make sure that the mortgage goes through and that they understand what they’ll need to bring to the closing. Sometimes those verbal estimates that they got in the front-end of the mortgage process turn out to have been low and surprises, in the form of fees and points and other charges start to pop up as the mortgage is finalized. That’s why I always advise buyers to get a written Good Faith Estimate up front, from whatever lender they are using.

Seller’s regrets can come in to variations. If the house sells quickly, the sellers may come to believe that they got bad advice and priced their home too low for the market. If the house has been on the market for too long, the sellers regret not having priced it closer in the first place to where it ended up selling. Of course, both of those scenarios are almost always blamed on the advice given by the sellers’ Realtor. In the latter case, sellers often forget the original pricing advice given by the Realtor, which is often where the house ends up selling after sitting on the market overpriced for months and months.

These days, sellers may also regret what they ended up having to accept and have second thoughts about selling at all, but it’s too late by then. Sellers then have to refocus their worry on the inspect ion and the appraisal, both of which represents “outs” for the buyers, if they don’t go well. I’ve certainly had lots of issues with appraisals lately, since appraisers are still using the “declining market” guidance that they have from lenders to take value off houses (about -5% is the norm these days).

As the agent of either the buyer or seller (and rarely both) I sometimes become the easiest target for venting the emotions of these feelings. What have you gotten us into? If I’ve done my job right (and I certainly always try hard to make sure that I do), I’ve advised the buyers or sellers all along on what their options were and hopefully provided them with good data and analysis of what to offer or how to evaluate an offer. That isn’t always easy in this market. With values dropping like, they have, and the market being as slow as it is; finding Comps to use to advise either side is getting harder and harder. Even appraisers are having difficulty finding Comps in many markets.

As a listing agent, trying to keep sellers at least up with the market on price has become a constant challenge and advising buyers on how low they can go on bids is always interesting. Most sellers end up “chasing the market”, always a little too high and too late with reductions. As a buyer agent, trying to balance out the strident media reports of real estate doom and gloom is the challenge. Most buyers have been conditioned to “low-ball” everything, because they’ve been led to believe that every seller is desperate.

I guess the best way to put the role of the agent on either side of the process is to say that he/she must manage the expectations of their clients. A good agent will work to inform and educate the client through every phase of the process, so that there are no surprises for the clients. Certainly, I can’t manage away a home inspector finding some issues during the inspection or an appraiser being unable to support the agreed upon sale price; however, I can alert the clients (on either side of the deal) of the possibilities of that happening and give them the options available to them to deal with the problems. Most issues can be resolved and the deals go forward, if there are informed and cool heads on both sides.

So, to paraphrase an Ole Blue Eye’s song – Regrets, I’ve had a few; but then again, too few to mention. Real estate transactions should be happy, win-win situations and it is the role of the agents involved to help make that true.

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