In strong seller’s real estate markets, home buyers are faced with enormous challenges to become the winning bid due to multiple offer situations, rapidly rising prices, appraisal challenges or financing difficulties. Even in a balanced market, many interested home buyers in Silicon Valley do not purchase property within a year of beginning, and some elect to be permanent renters. My best estimate is that half of those who want to buy a home do not do it within 12-18 months.
Why do able home buyers not buy? Here are a few things which can be the cause:
- they get priced out of the market (because they want to wait and see if prices get better – but they do not!)
- they realize that they cannot easily buy with FHA or VA financing and don’t want to put more down (even if possible)
- they are too uncomfortable with the terms required to purchase (as is or perhaps few or no contingencies)
- they get discouraged and they get burned out
Today we’ll address burnout and home buying, and what can be done to mitigate or avoid it.
Home buying burnout tends to happen when would be home owners go at the house hunt too hard for too long. Is it a sprint or is it a marathon for you? You need to pace yourself accordingly.
Super motivated home buyers tend to purchase property fast, within a month of looking in person. They usually have done a whole lot of online research or background work first, though, so that they are mentally prepared. These buyers often understand that there is no perfect house or perfect place for them, and they are ready to make compromises as long as they get most of what they want, or the most important elements of what they want. These savvy home buyers do not get burned out – because for them, it’s clearly a sprint. Work hard, work fast, move in, all done!
Less motivated, or less rushed/urgent (or more picky) buyers want or need more time. “I don’t want to rush, I want to find the right house”, they will say. Makes sense, too, since it’s not like reselling a car if the fit isn’t so good after all. Frequently these buyers will say “I’ll look on my own and will reach out to you when there’s a property I like and we can chat about it and then maybe see it”. They know that it might be a 2 or 3 year search for that ideal diamond of a home. They aren’t going to be at open houses every weekend. They will be selective about their time as well as their agent’s. When a good home shows up on their radar, they’ll get more info. If it looks good then, they will dive deeply into this property – very intensely learning about every facet so that their long journey to owning this property is successful after the closing too. These sophisticated buyers do not burn out either, because they pace themselves (and their agent) and only go “full bore” when a really good match.
Note: As a Realtor looking to spend my time wisely, when I hear a buyer say to me “I’m in no rush” or “I may need to write 100 offers” or “we are looking for that rare house”, I know that I am going to run, not walk, from them. What real estate sales person wants to schlep you to houses over a year or two? With each passing month, the odds of your buying decrease. No, that is a bad business decision for me. When you’re ready, let’s go look in earnest. But if you want to play with maybe someday if the right deal comes along, forget it.
Indecision: When buyers are indecisive about where to live, how much to spend, whether they want a single family home or if a condo or townhouse will do – in other words, when there are many, many unresolved issues, and when they spend a lot of time house hunting despite the lack of focus, then burnout can happen too easily. Initially, all buyers have some areas not quite decided. If many items are up in the air, it would be wise to do some research online or by talking with people who’ve bought recently or with a good Realtor or two, casually visit areas or open houses, and otherwise get most of the priorities lined up before spending lots of free time looking at real estate for sale. Included in that priorities list should be a time frame.
Different pacing: Sometimes buyer burnout is the result of two or more people buying together who have either different priorities, time frames, budgets desired, etc. I have sometimes seen one buyer who’s ready to buy now, move in and get on with life – but the second buyer is the long-term sort. Either way approach can work, but if one is sprinting and the other doing a marathon, you get a different kind of frustration and burnout happening. This seldom works.
Market changing quickly, and not keeping up (learning): When prices rise fast, buyers need to keep pace or they will find that in multiple offers they are not the winning bid. In fact, often to be successful, what is necessary is to jump ahead of the curve. (And yes, overpay.) It is discouraging to lose out over and over. It is also an opportunity to learn. One year I had a young couple who lost out on about a half dozen offers. They were so cautious that it was costing them, because each home was more expensive than the one before. Finally I went back and did a little study of where their offers were and where the sale price ended up being. In each case, they were low by about 5% – consistently. When some buyers understand this, they “add in” the amount they’re typically low and then are successful. Another approach is to say “prices are going up at 10% per month, so if a home closed this week at X price, let’s make our offer X plus 10%”. That’s keeping up.
Another example – A few years ago, I had a lovely couple who were both of the long-term pacing. They were going to purchase a house for the next 20 years so it needed to be right. Unfortunately they had a hard time compromising even on small items (they could get 95% of their wish list in budget and in the right location). The weeks turned into months. And then the market changed. Over the course of 4 weeks or so, the then buyer’s market did a full turn about and because a seller’s market. They had trouble accepting this and kept thinking (hoping) it would reverse back. Prices began to rise. Now they would need to make more compromises (but get 85-90% of what they wanted). They could not adjust, they were tired from house hunting, and stayed put in their rental. And they are still renting today. Had they bought a home then, even getting “only” 9/10 of what they wanted, they’d have gained about $100,000 in equity already since the pricing was still very low then compared to now.
When burnout hits, take a break, regroup, re-evaluate your strategy. What does your real estate agent say needs to change? He or she is your partner, so ask for and take seriously guidance from your trusted real estate professional.
Better yet, sort out your priorities and pacing upfront, be determined to understand and keep pace with the market, and avoid burnout altogether to start with.
