Although this is officially the flu and cold season, there’s another disease that can strike in any season without warning. Fortunately, it is never fatal, but it can cause long-term serious consequences.
However, it can be prevented, usually with the first aid of an experienced real estate agent who recognizes the symptoms and knows the most successful treatments.
What is this dread disease?
Purchase Bob Bruss reports online.
It is “home buyer’s remorse.” This disease usually occurs at two times in the home purchase process: (1) shortly after a home buyer signs a written purchase offer to buy a house or condo, or (2) shortly after the sale closes and the buyer fears the home purchase was a very bad decision.
BUYER’S REMORSE CAN STRIKE WITHOUT WARNING. Having been a home buyer’s remorse victim, I now fully understand the symptoms and the cure.
Although I had bought and sold several investment properties, plus two personal residences, my case struck unexpectedly the first night I spent after acquiring title to my personal residence house which, up to that time, was my most expensive real estate purchase.
I still recall, after signing the closing papers, lying in bed unable to sleep that first night after taking title because I feared inability to afford the mortgage payments.
To make matters worse, that same day I told a colleague at the college where I taught real estate classes about what I thought was my great home purchase. She replied, “I can’t believe you paid that much for a house in this economy.” Her remark compounded my home buyer’s remorse.
HOW TO CURE BUYER’S REMORSE. Whether you are a home buyer or a real estate agent whose buyer catches buyer’s remorse disease, there are several easy cures:
1. LIST THE PROS AND CONS OF HOME OWNERSHIP. Sometimes the obligations of home ownership overwhelm buyers so much they forget the benefits of why they want to own the home. Personally, that’s how I cured my buyer’s remorse attack.
As I was lying awake, unable to sleep, I decided I had to do something. So I started writing on the notepad I always keep on my bed, all the benefits I could think of for owning the home. It was quite a list.
My advantage list included the superb location (although the price was a bit high compared to homes in nearby communities), income tax deductions for my high mortgage payments and property taxes, probable appreciation in market value, nice neighbors (except one with a barking dog!), good condition of the home as proven by several inspections, low down payment, quiet area, and a nice view.
Next, I wrote down the disadvantages of owning the home. This list included the high mortgage payments, property taxes, insurance cost, need for a new roof in a few years, bare landscaping, and ugly blue bathroom tile.
My advantage list far outweighed the disadvantage list. Thankfully, I then I fell asleep.
2. CONSEQUENCES OF BACKING OUT OF A HOME PURCHASE. When I awoke the next morning, I found my pro and con list by my bedside. Still not completely cured, I then thought about what might have happened if I had tried to get out of my home purchase.
Although there are legitimate ways to cancel a home purchase contract before the sale closes, such as including contingency clauses for the buyer’s approval of a professional inspection report, or a mortgage lender’s appraisal for less than the accepted purchase price, sometimes buyers just flat out refuse to complete their purchase without any justifiable reason.
For example, I recently read about a $4 million home purchase that fell apart because the buyers changed their minds about buying. Now the sellers are suing for “specific performance” of the purchase because there aren’t any other prospective buyers for their unique home. If the sellers win, the court could order the financially able buyers to complete the purchase.
However, home sellers rarely sue buyers for specific performance of the contract, although there are precedent decisions allowing such a legal remedy. More frequently, sellers sue defaulting buyers for lost profits as monetary damages if the home later sells for less than the first buyer’s purchase offer.
Home buyers who are considering defaulting and refusing to complete their purchase should discuss the possible legal consequences with their attorney and the real estate agents (who might sue the defaulting buyer for the real estate sales commission).
UNEXPECTED EVENTS USUALLY ARE NOT VALID REASONS TO CANCEL A HOME PURCHASE. Unless included in the written purchase offer as a contingency clause, such as a home inspection report revealing serious defects or a lender’s appraisal for less than the purchase price, home buyers usually cannot cancel their purchase due to unexpected events.
Examples of such events include unexpected out-of-town job transfer, unemployment, divorce, illness or death in the family, financial hardship and inability to sell a previous home.
Although these reasons create empathy for home buyers, they usually are not legally sufficient for the buyer to refuse to complete the purchase without becoming obligated to pay damages to the home seller.
MEDIATION OR ARBITRATION CAN PREVENT A LAWSUIT. If a home buyer doesn’t recover from their buyer’s remorse and defaults on the home purchase, before resorting to a lawsuit for damages, home sellers should consider the alternative legal remedies of mediation and arbitration, if specified in the sales contract.
Mediation and arbitration of disputes are usually much less expensive than a lawsuit. Most printed home purchase contracts now provide for these alternatives, if the buyer and seller agree. Even after a seller files a lawsuit, the parties can agree to these remedies.
Dispute mediation means a skilled mediator tries to get the home buyer and seller to agree upon a reasonable settlement of their disagreement.
The big benefits of mediation include (a) low cost compared to a lawsuit, (b) fast resolution within a day or two, and (c) often a compromise which means neither party really “wins” but both parties are satisfied with the result.
But binding arbitration is much different. If the home buyer and seller agreed in their written purchase contract for arbitration of any dispute which might arise, that means instead of filing a lawsuit, an arbitrator chosen by mutual agreement will hear the dispute evidence and decide the outcome.
Disadvantages of arbitration include a non-appealable decision, no jury trial, court rules of evidence usually don’t apply, and no recourse if the decision is contrary to statutes or precedent court decisions.
Advantages of arbitration usually include a resolution of the dispute at a lower cost than a lawsuit and a relatively quick decision compared to a court trial. Arbitration judgments are legally enforceable after a court of competent jurisdiction confirms the decision.
SUMMARY: Home buyer’s remorse can be a serious problem that is, fortunately, never fatal. Buyers and their real estate agents should consider the pros and cons of the home purchase and understand the alternatives to the buyer’s default. Usually the advantages of the home purchase outweigh the disadvantages and, after reconsideration, the buyer lives happily ever after in their home purchase.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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