Well add this to the list of “No chit Sherlock” observations coming out of the last two years. Seems that just over 70% of recent homebuyers have buyer’s remorse. In Feb '21 we noted that 44% of homebuyers had buyer's remorse, these new stats are bonkers. This number is a bit of a surprise and the reasons have to do with price but also with just about every other aspect of the buyer's transactions. Put politely, these buyers are now in a position that no one wants to be in…and they have only themselves to blame. Sure, the market over ’21 and the first part of ’22 was bonkers, competition was fierce. But how many of these mournful buyers made the cardinal sin of not qualifying their agent? Most of them.
Unqualified Real Estate Agents
So many unqualified real estate agents are in the mix, unfortunately many failed to properly guide buyers. A worm easily clears the bar to entry and retention for real estate agents, that will never change. The industry lives on agent fees; realtor local-state-national fees, license, desk, MLS, training, advertising, etc etc and any sales are gravy. During Covid, the agent population soared to record highs, over 3 million in early 2022. That’s insane given the reduced number of transactions completed mid 2020 – mid 2022. It’s an industry with perhaps 20% of full-time professionals, the rest are dangerously unqualified. Fortunately, the lifespan of these “hobby agents” is usually less than two years. The industry doesn’t care, that they pay the fees is the only concern. Agents lean of people they know for business and many buyers feel obligated at some level to use them, even when they intuitively know disaster awaits. Five minutes on Google and calling a few references can validate an agent, so simple and yet many buyers never did that. Many spend more time researching a restaurant than they do an agent to represent them in a major financial transaction.
Buyers Gone Wild
It was historically competitive, the Atlanta area never saw such low housing inventory. Buyers streamed here flush with cash from NY, CA, IL and other areas, local sellers had stacks after they sold and the "regular" buyers had a tough road trying to compete. Buyers that sold homes had the mentality of playing with "house money"; since they received more than they should have, just roll it into a purchase as it all washes out in the end. Many buyers overpaid just to “win”; the only winner was the seller. Not only were ridiculously unsupported prices paid, but many buyers waived all contingencies. No due diligence, inspections, finance, appraisal, survey…all waved. Homes were purchased “as is” and some buyers never visited the home, relying on the agent to “zoom” them in or make the decision for them. And just when it couldn’t get dumber, buyers were permitting sellers to remain in the home after closing, for weeks or months often at no cost. Let that rattle around, what in the hoohah are you thinking?
Betting it All
The market over 2021-mid 2022 was unrealistic. For those buyers in it, being similarly unrealistic seemed to be required. But at what cost? Buyers not only overpaid and waived everything, some bought homes in locations that weren’t targeted. Close to 30% had to liquidate savings or borrow against investments to purchase a home. Over half of buyers purchased homes in need of repair – and many purchased homes only to incur massive repair and maintenance bills. Now as the markets balance and rates rise, these “all in” buyers are facing a harsh reality. Prices are moving back to pre-pandemic levels and if these buyers should have to sell in the next year or so, it's possible the paper losses will be realized. Those that remain in place will likely have some protection as the Greater Atlanta real estate market has a firm foundation and we don't expect the "Zoom crash". Balance, yes - crash, no.
Win by Losing
That remains the most common phase our buyers heard; that and “do not chase”. We didn’t need to change our approach with buyers, it’s been cautious and conservative since ever. Of course, adjustments had to be made during this time, we placed many buyers in homes over this period. However, measured risks were taken after thorough review and consideration. Every buyer we had physically walked the home they purchased, every home had an appraisal+ level data analysis and we structured offers to allow at least a verbal opinion on homes from an inspector or contractor. In other words, experience in how to manage contracts and deals matters. Most important however, was being OK walking away when things got too stupid.
The Real Estate Hangover
As the market balances, hobby agents are thankfully quitting. As mortgage rates rise, buyer pressure decreased and the craziness is subsiding. As contingencies return, concessions are made or contracts are terminated. Those buyers that decided to use ineffective agents or simply to “win” are likely to feel pain as balance returns. The value of an experienced and effective agent cannot be understated, this is a lesson that many buyers over the last few quarters are likely to learn.
The Hank Miller Team puts 30+ years of full time sales & appraisal experience to work for you. Act with complete confidence & make sound, decisive real estate decisions. 678-428-8276 and firstname.lastname@example.org Posted by Hank Miller on
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