These people rushed to buy homes during COVID. Now they regret it.
Hot real-estate markets across the US led to a number of buyers snapping up homes without performing due diligence
Stella Guan spent months searching for a home to buy, getting outbid again and again in the white-hot real-estate market of the Los Angeles suburbs. Finally, her offer on a "beautiful" Santa Clarita house was accepted in August, she says. The graphic designer, 30, paid roughly $600,000 for the house. But after sleeping there for only a few nights, she had an unfortunate realization. "I was like 'uh oh, I hate this house,' " she recalls. "I hate this house so much."
Looking back on it, she reflects, "I should have seen all of the warning signs, but the pandemic housing fever got the better of me."
A house, unlike expensive jewelry or clothing, cannot be returned if the buyer is unhappy with it, so a cardinal rule of home buying is 'don't rush into a purchase.' But in 2020, millions of Americans did just that.
HOW THE REAL ESTATE MARKET HAS BEEN CHANGED IN 2020 BY MULTIGENERATIONAL LIVING
Fleeing small apartments, buying vacation homes or simply looking for a change of scenery amid the crushing boredom of lockdowns, people scrambled to buy houses amid the pandemic, spurring bidding wars and supercharging real-estate markets across the country. Now, many are discovering the pitfalls of these hasty purchases, ranging from buyers' remorse and financial strain to damage caused by unexpected problems.
This spring especially, "people were so panicked," said Priscilla Holloway, a Douglas Elliman agent in the Hamptons, a popular spot for New Yorkers seeking refuge from the pandemic. "Buying a home is a huge commitment. You have to be thorough. But people were getting all crazy, and they weren't as thorough as they usually are."
Many home buyers were apartment dwellers looking for larger spaces to shelter in. "It was a land grab for houses," said Cheryl Eisen, CEO of the interior design and property marketing firm Interior Marketing Group. "People wanted out of apartments."
At the same time, inventory dropped as many homeowners hesitated to list their properties in the pandemic. The result is that much of the country saw a price spike and bidding wars, brokers said, leaving buyers with little to choose from. In these conditions, many are tempted to waive inspections or skip other due diligence they would normally perform before buying a home.
HERE'S WHAT YOU CAN GET FOR $3M IN TAMPA, FLORIDA
This summer, Ms. Holloway said she helped a family move after discovering that the Hamptons house they had just bought had an infestation of wasps' nests in the backyard. The family didn't find the wasps until after closing because they had waived the inspection in the midst of a bidding war, says Ms. Holloway, who wasn't representing them at the time. Deciding the property was unsafe for their young children, they immediately put the Westhampton Beach home on the market. Ms. Holloway and a colleague helped them find another house to buy.
Over the past two years, the insurance company Chubb has seen large, non-weather-related losses increase in frequency and severity, according to Fran O'Brien, division president of Chubb North America Personal Risk Services. She attributes these losses in part to hasty home purchases: Buyers moving from a small city apartment to a large home in a rural area may not be well versed in how to prevent the pipes from freezing, for example.
"People are moving to places that they don't know a lot about," Ms. O'Brien says. "They're thinking, 'this looks like a nice place to live' for amenities it may have. They don't understand what risk there could be with that home."
People are even more likely to overlook those risks, she said, when they are in a hurry to snap up a home before someone else does. "You run into this lack of awareness and lack of time, which is not a good combination."
A HomeAdvisor report found that Americans did an average of 1.2 emergency home repairs in 2020, up from 0.4 in 2019, while emergency home spending jumped to an average of $1,640, up $124 from the 2019 average.
Nature had an unpleasant surprise in store for Richard and Meaghan Weiss when they bought their first home in Northern California after moving from Brooklyn.
When Covid hit, the couple left their Brooklyn apartment to stay with Ms. Weiss's parents in Sonoma, Calif. Ms. Weiss was pregnant and they had a toddler at the time. "Being cooped up in an apartment, not being able to see people in New York, sounded like a miserable existence," said Mr. Weiss, 40, who works in commercial real estate.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
After a few months they decided to relocate permanently to the Bay Area, where Ms. Weiss grew up, and started looking for a home to buy. They found the market to be "super-duper competitive," Mr. Weiss said. They were outbid on one house and backed out of a contract on another when they found out it had serious foundation issues.
Finally, they were able to buy a four-bedroom house they loved in the East Bay, paying about $100,000 over the $1.89 million asking price to beat out another bidder. "We were a little bit overeager because we'd been burned twice," he said. "We probably didn't do the due diligence we should have and looked at everything as thoroughly as we probably should have."
They closed on the hillside house in November. When they returned a few weeks later to move in, "we see all these holes in the siding," Mr. Weiss said. On closer inspection, they found that the wood on one side of the house was "absolutely devastated," with some 90 holes in it. It turned out that the culprits were acorn woodpeckers living in the large oak trees surrounding the house. "Come to find out, it's a systemic problem in the neighborhood," Mr. Weiss says.
The seller hadn't said anything about the birds, he says, and coming from Brooklyn, he and his wife didn't know to ask. Since then they have tried various deterrent devices and consulted with exterminators, but the only permanent solution is to replace the home's wooden siding with cement at a cost of roughly $150,000.
If it weren't for the frothy pandemic market, Mr. Weiss believes, they would have discovered the problem before closing. "I think we would have been slower and more thoughtful and more methodical," he says. "Buying a home becomes emotional. Because we were emotional from losing the first two and the competitiveness, we just kind of dropped our level of diligence and plowed through."
CLICK HERE TO READ MORE ON FOX BUSINESS
Ms. Guan started bidding on houses in the L.A. suburbs even before she moved there from the New York City area in July. She had a good experience with her first home purchase, a New Jersey condo, and with interest rates low, she was eager to jump into the California market. "I thought it's going to be the same as New Jersey. I'll enjoy the ownership and make money in a few years."
But she arrived in L.A. to find "the most insane housing market I've ever seen," she says. Every house seemed to get 15 or 16 offers, she says, and sell for $100,000 over its asking price. Her offer was eventually accepted on a circa-1975 house with a renovated kitchen in Santa Clarita. At that point, she had been outbid on seven other houses, she says, so she was determined to get this one, even when the inspection revealed toxic black mold and asbestos. "I was really trying to get out of where I lived," she says. "I spent five to six months looking. All of these factors made me say, 'OK, I have to just face it, I can't back out.' "
She sold the house a few months after buying it. After the repairs, agents' fees and transaction costs, she says, "I lost a lot of money." She now lives in a rented studio in L.A.'s Koreatown, where she says she's much happier. "It still hurts," she says, but "it's just good to have my money back and move on to other things. And never see the house again."