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Smart Home Security Gets Even Smarter — and Easier

Once upon a time, installing a smart home security system was complicated and expensive. To get one, you had to call a professional company. They’d send an installer out to drill holes in your walls and run wires throughout your home. You’d spend big bucks for the installation and a multiyear maintenance and monitoring contract. 

But now, technology has changed that completely. You can DIY a smart home security system with moderately priced equipment. Your options include smart door locks, security cameras, video doorbells, and motion sensors you can install yourself. Smart home security systems run on Wi-Fi, Zigbee, or Bluetooth, with no wiring needed. And you can monitor these systems with an app on your phone. 

Because of this simpler, more affordable technology, home security devices are more popular. Market researchers NPD Group report that half of U.S. consumers now own at least one smart home device, up from 35% in 2020. And smart security devices are one of the most popular smart home devices. They had higher sales gains, at 44%, than any other category in 2020, says NPD Group. 

If you’re thinking of joining the fan club by adding smart home security to your house, here’s an overview of the most popular device categories.

Smart Door Lock

A smart door lock is a Wi-Fi- or Bluetooth-enabled device that lets you lock and unlock a door via an app on your phone.  Smart locks work by opening and closing a deadbolt electronically. This form of keyless entry lets you open a door with an icon tap or a voice command. That way, you won’t be fumbling for keys while your arms are full of groceries.

Pros

  • You have a lot of control over comings and goings at your house. You can see who opened the smart door lock and when, so you can check if your kids got home from school on time. You’ll know if the dogwalker showed up at noon. And you can do it while sitting at your desk at the office. “I love knowing every time my door opens or closes,” says Christy Roth, a smart home tech expert in charge of Home & Distribution Software and Devices at Schneider Electric in Spring Hill, Tenn.
  • You can give out virtual keys. These codes will let a guest or family member unlock the door with their phone. You can set the keys to expire or work only during specific times. You won’t have to leave a key under the doormat or give away house keys you won’t get back.
  • Burglars can’t pick them. Smart locks don’t have a key slot, so they’ll foil analog burglars.

Cons

  • If you lose power or your phone, you may not be able to get into your house. If you don’t have power you won’t have Wi-Fi. And that means you can’t open your smart lock. The same chain of events happens when you lose your phone. You need a backup plan, like being able to log into your smart lock from another device. It’s the digital equivalent of a spare key.
  • They use batteries. If the batteries die, you won’t be able to unlock the door. You must change the batteries periodically.
  • Digital thieves can hack them. They can try to override your entry code and unlock your door. The good news: Your lock will alert you that there’s been an unauthorized entry.
  • They’re more expensive. Smart locks cost $150 to $300, significantly more than a dumb lock.

Video doorbell

A video doorbell lets you see who’s at your door when you’re not home. The device, also called a doorbell camera, uses Wi-Fi to stream live video to your phone. Here’s how it works: When someone rings the doorbell or when the camera detects motion, an app will notify you. The video doorbell will then livestream video to your phone so you can speak to the person at the door. You can record the video and save it to your phone or the cloud, which comes in handy if you want a record of who did what on your porch. “A video doorbell is a must-have in my book,” Roth says. A lot of people agree. As of 2020, about 20 million U.S. homes,16%, had video doorbells. Industry analysts predict that number will grow significantly as more people adopt smart home technology.

Pros

  • You can answer the door wherever you are. Whether you’re on the other side of the door or the other side of the world, you can see who is at your door and ask them what they want.
  • They help stop porch pirates. Roughly 36 million Americans say they’ve had packages stolen from their porch in the last year. When a delivery person leaves a package, a video doorbell will alert you so you can bring it inside or tell the person where to stash it. If porch pirates beat you to your package, a video doorbell can help police catch the thieves because you’ll have them on camera stealing your Amazon Prime delivery. “If someone knows you’ve got a video doorbell, they’ll probably think twice about stealing your package,” says Steven Hummel, manager of the Consumer Technology Association’s market research team. “They add a lot of security to your home for not a lot of money.”
  • You don’t have to rush to the door every time the bell rings. Instead, check the app on your phone. If it’s a friend, get off the sofa and let them in. If it’s a stranger, you don’t have to interrupt your “Ted Lasso” binge.

Cons

  • Some video doorbells need to be hardwired to your existing doorbell wiring. That may not not be a DIY job, since you’d have to handle electrical wires.
  • Some run only on batteries. They’re easier to install, but you’ll need to replace the batteries every few weeks.
  • They’re more expensive than a dumb doorbell. Video doorbells cost $100 to $350, depending on the features. That’s as much as eight times the cost of an analog doorbell.
  • Some companies try to upsell you on a confusing array of services and features. You can hook your device up to a 24/7 monitoring center or get more storage space in the cloud by paying extra fees. “I can’t tell you how many $1.99 and $4.99 services many of these devices come with,” Roth says. “It can get overwhelming managing and understanding the services you need versus the ones you don’t.” If you know your needs, that will help you sort through which, if any, additional services to get, Roth adds. If you’re a regular online shopper, consider a package detection upgrade that some video doorbells offer. It will alert you when a delivery person picks up or drops off a package. Or you can opt for a basic paid subscription that lets you store, download, or share video for up to 60 days.

Motion Sensor

A smart motion sensor is a battery-powered device that detects when anything or anyone crosses its path and triggers an action. It communicates over Z-Wave, Zigbee, Wi-Fi, or Bluetooth. A motion sensor can do everything from turning on lights when you enter a room to telling you when your toddler is climbing out of her crib.  A lack of motion can also trigger motion sensors, so lights will turn off when no one is in a room. You can run motion sensors through an app on your phone to control devices including smart lights and speakers just by tapping an icon.

Pros

  • You can install motion sensors easily and almost anywhere. You can mount them on the wall or set them on a flat surface in minutes.
  • Motion sensors can lower your energy bills. A motion sensor can tell smart bulbs, smart speakers, and TV sets to turn off when a room has been empty too long or at a set hour each night.
  • You can use them to turn a houseful of smart home gadgets into a smart home. Place motion sensors around your home, link them to your smart devices via your smart speaker, and the sensors can help everything work together.
  • They’re super affordable. You can get a motion sensor for as little as $20.

Cons

  • Motion sensors use batteries. You’ll need to check and change them regularly to keep them working. Most will let you know when the batteries are getting weak.
  • If they run on Wi-Fi, they may hit dead zones in your home and stop working. You’ll need to boost their range with a mesh router ­– also called a mesh network – that pairs two or more routers together to deliver a seamless Wi-Fi network. If your home is larger than 3,000 square feet or multistory, a mesh router is a good idea. A bridge – a device that joins two or more Wi-Fi networks so they can work as a single network – will also boost your home’s Wi-Fi coverage.

Security Kit or Home Monitoring System

If you want your DIY smart home security to go bigger than one or two devices, get a security kit. Also known as a home monitoring system, these kits replace the home alarm systems you used to have a pro install. They generally come with contact and motion sensors, a base station that’s the wireless brain of the system, and touch-screen control panels.

Pros

  • You can customize the system. Adding security cameras, glass break sensors, panic buttons, and environmental sensors will alert you to gas leaks, water leaks, or fire.
  • You can integrate your other smart tech devices. Many home security systems double as smart home hubs so you connect and automate your other smart devices into a single network. You can connect your alarm, your smart locks, your smart thermostat, and your video doorbell and run them all with an app on your phone.
  • You can save money on homeowners insurance. Some insurance companies give policy discounts for homes with security systems that include window and door sensors, smart locks, or video doorbells. They don’t give discounts for individual devices like video doorbells.
  • The kits are more affordable than professionally installed alarm systems. Home monitoring systems start at $200 to $400 for a basic setup.

Cons

  • You will have to pay extra for professional monitoring. Unlike professionally installed alarm systems, you don’t get a team of trained dispatchers who will monitor your alarm 24/7. That’s part of the reason DIY systems are so much more affordable. Many home monitoring systems offer professional monitoring for an extra monthly fee that ranges from $10 to $40.
  • You’re the tech support. Unlike professionally installed systems, there’s not a tech on call to fix glitches. It’s just you and You Tube tutorials.

Smart tech security devices make it easy and affordable to protect your home. You can install many of these devices yourself and only pay for a monitoring plan when you want it. You can keep an eye on your family and your home from any location via sensors and cameras directly from your phone. Video doorbells, smart door locks, motion sensors, and home monitoring systems put high tech security at your fingertips.

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How Smart Home Technology Can Be a Selling Point

You often judge a house by it’s good looks. But guess what? Now you can also judge it by its IQ. Long-buzzed about smart home technology — think smart thermostats, smart lighting, and app-controlled security systems — are moving into more homes. Smart home tech can up your coolness factor and make homes easier to operate. Plus, it may also offer perks when you sell your home one day.

Home shoppers are increasingly looking beyond that killer kitchen upgrade to a seller’s Wi-Fi signal and connectivity. This isn’t just a priority for the techie set. As smart home technology gets more affordable and easier to use, more people are adding devices. Half of U.S. consumers owned at least one smart home device in 2021, up from 35% in 2020, according to NPD Connected Intelligence. The number is expected to grow as homeowners look to save money, feel safer at home, and add convenience.

A Home’s Technology Smarts Matter

Here comes a potential home buyer. Motion-activated lighting automatically turns on as they enter. A smart thermostat adjusts the temperature for ultimate comfort. The smart robot vacuum is keeping the home tidy. The window blinds are adjusting based on the sun’s direction. And the smart speaker is telling them about the home’s features.

Seriously, wouldn’t you be a little impressed?

Four in 10 Americans have bought a smart home device since the COVID-19 outbreak and are more interested in smart home technology, according to a 2020 REALTOR.com study. “The pandemic has driven smart home technology forward,” says Angel Piontek, an associate broker with Coldwell Banker Elite in Fredericksburg, Va. “How we interact with our homes is becoming different. At some point, buyers will expect it.” 

The majority of real estate professionals surveyed by Z-Wave Alliance believe smart home technology can help in marketing a home, according to the organization’s 2020 report on smart technology. In fact, some real estate professionals are already using smart home features as selling points. You may spot more icons on online 3D tours of real estate listings that flag smart technology inside a home. Or, during in-person real estate showings, laminated placards may point to devices and highlight what they do. 

Smart Home Technology Costs and Buyer Preferences

Consumers between 18 and 34 said they would pay more for homes with home theaters, smart speakers in every room, and connected kitchens, according to the REALTOR.com study. In the 25 to 54 age group, consumers said they’d pay more for solar roof tiles and home battery packs. And for those 55 and older, solar roof tiles, smart doorbells, and security systems would be worth extra money.

It’s tougher to validate that smart technology can generate more money in a home sale. Anecdotally, real estate professionals believe it can: “If a home is marketed correctly and has smart home technology, it can sell for top dollar,” says Kristin Triolo, a broker associate with RE/MAX Platinum Realty in Sarasota, Fla.

Fully automating an entire home with higher-end systems could cost upward of $15,000. But an appraiser would factor in such a system at resale, according to Christopher Matos Rogers, an associate broker with the Matos Rogers Group’s Palmerhouse Properties in Atlanta.  

Boosting Marketability with Smart Technology

If you don’t already have smart home technology, some real estate professionals may recommend adding it before you list your home. Tech-savvy generations may expect it. And older adults may be drawn to such systems — particularly voice-controlled ones that support aging in place.

You can easily add smart home technology to modernize an older home and help it compete with newer ones. After all, many homebuilders offer smart home packages to outfit new homes with smart thermostats, app-controlled garage doors, smart lighting, door locks, and video security systems.

Smart home technology investments can range from $20 for adding smart lightbulbs to $20,000 or more for automated solutions that connect systems in one hub for an entire house. For $1,500, you can outfit your home with multiple systems like a smart speaker, smart lighting, and a smart thermostat to increase the home’s smart tech appeal. For about $5,500, homeowners could automate the lights, door locks, and thermostat, and install a smart speaker, hub, and smart plugs in three rooms, according to FixR.com.

Regardless of how extensive your devices are, real estate professionals will typically want to spotlight them. “Buyers may not have a lot of knowledge of smart home technology, but they do know and understand energy savings and cost savings,” Triolo says. For example, a Nest consumer survey estimates that the company’s smart thermostat could reduce a home’s heating costs by 10% and cooling costs by 15%. 

What Else Adds Smart Tech Appeal

Bigger brand names in smart home technology — like Nest, Ring, and Lutron — have instant name recognition when selling, says Piotnek.

Ease of use also counts. For example, having to open several apps on a phone to control various aspects of a home can feel cumbersome, says Ellis Gardner, a broker with Keller Williams Realty in Chattanooga, Tenn. But being able to say, “Hey, Google, turn on my lights!” shows convenience.

With smart devices, you’ll need to be clear about what stays and what goes with the home sale. “It’s a gray area with some of these devices on what’s considered personal property,” Piontek says. For example, digital assistants like Alexa or Google Home may be used as your smart home hub. But sellers may consider these personal property to take when they move. “So, it’s really important to get this all in writing so there’s no question at the end of a transaction.”

3 Ways to Avoid Misunderstandings About Smart Home Tech

Avoid misunderstandings about smart home technology with these three tips:

  1. Find an agent with smart technology expertise. They can help avoid hiccups in selling a smart home and also tend to be savvy marketers of smart tech. Some real estate professionals — like Triolo and Gardner – have smart home certification and extra training through the Residential Real Estate Council, a provider of real estate education and networking. 
  2. Identify which of your smart home technology devices or apps are real property versus personal property. In general, items affixed or hardwired to a house stay — likely your smart thermostat or any switches and mounts. If you plan to take your Nest thermostat or Ring doorbell, replace it before listing. The buyer could figure that anything in the house at a showing will remain with the house. 
  3. Turn over the virtual keys. On closing day, “turning over the passwords in a smart home is like turning over the key to the front door,” says Gardner. For all transferable technology, reset it to factory settings to erase any personal data. Leave instruction manuals or website links for the new owners to open up new accounts. 

Smart home technology is improving safety, security, and convenience in homes. Homeowners should also consider the benefits they’ll have when they sell one day, Piontek says. Just like curb appeal, high home appeal may make your home a standout to buyers.

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4 Smart Home Devices: Which Are Right for Your Home?

When you’re not home, little doubts can plague you. Did I lock the door? Did I leave a key for the housekeeper? Is the AC still on full blast? Smart home devices can resolve those questions and ease your mind. They can also make your home more comfortable and convenient, and save you money. 

Once the exclusive domain of the super-rich and alpha geeks, smart home devices have become more common, user friendly, and affordable. You can equip your home with some basic smart devices like a smart thermostat, smart lighting, and smart door locks for $1,000 or less. You can run these devices with your smartphone or tablet. And in many cases, you can install them yourself; no electrical engineering degree required. 

Here’s what you need to know to get started in choosing the right smart home devices for your home and your budget.

What Are My Smart Home Goals?

Start by deciding what you want to accomplish, and that will lead you to a relevant device. If you want more security, consider a smart door lock. Are you looking for more comfort and convenience? Check out smart lights that come on right before you get home from work. Want to save money? A smart thermostat that uses artificial intelligence to control the temperature in your house may be the way to go. Do you crave a cool, high-tech gadget that’s downright Jetsons-esque? Go for a smart appliance like a fridge that can stream cooking videos.

Do I Need a Hub?

You don’t necessarily need a hub. In the early days of smart home tech you needed a dedicated device that tied all your smart home devices together. Back then, hubs were problematic, because not all devices were compatible with them, and their software needed to be updated regularly. Those old hubs are near relics now. These days, you can run your smart home devices through an app on your phone or tablet. Wi-Fi and the cloud have been game changers in smart home technology because they enable many devices to network together regardless of the make and the brand. 

Many homeowners use a voice assistant like Siri or Alexa as a de facto home hub by tying all their smart home devices to it. Once you do that, you can control your devices with a single unit. If you tie your smart home door lock and smart home appliances to your voice assistant, you can say, “Siri, preheat the oven to 350 degrees and unlock the door,” and consider it done. 

“Voice assistants have made so much more possible in the area of smart home devices,” says John Carey, vice president of Designer Appliances, a New Jersey retailer that specializes in smart appliances. “They can work with so many different products.”

Do I Need a Wi-Fi Connection?

You can run your devices by connecting them to a hot spot device, like a MIPS (Microprocessor without Interlocked Pipelined Stages), which lets you tap into a cell phone signal. A MIPS is basically a little computer that hooks your smart devices to the cloud via a cell phone network. You can also run smart devices through a hot spot on your phone or tablet. But you’ll get the best experience with Wi-Fi hooked up to the internet, Carey says. 

Can Smart Homes Get Hacked?

Although smart homes can be hacked, the damage a hacker can do is limited, says Christy Roth, director of offer management, home and distribution software for Schneider Electric in Nashville, Tenn. “Hackers can’t get to your bank account through your smart refrigerator,” she says. “But they could see what’s in your refrigerator or turn it off.” 

Although appliances can be at risk, homeowners are typically more concerned about risk tied to devices like smart locks and cameras. Carey says you’re better safe than sorry when it comes to security with smart home devices and appliances. “We recommend people set up a guest network that’s separate from their main network and connect all their smart devices to that. That way hackers can’t get on your network and onto your computer, where you store sensitive information.”

4 Smart Home Device Categories

Here’s a quick primer on four of the most popular smart home devices and some pros and cons for each.

1. Smart thermostats — They’re the top-selling smart home device. Around 33 million households in the United States had one as of 2020. “They’re the most natural place to start if you want to get into smart home tech,” Roth says. Smart thermostats let you create programmable temperature settings based on your schedule, the weather, and your own needs. Many smart thermostats incorporate artificial intelligence technology to learn your schedule and adjust heating and cooling according to when you’re home. They’ll turn off the AC while you’re at work and turn it on 30 minutes before you get home from work each day. “They definitely pay for themselves with energy savings,” Carey says.

Pros

  • Smart home thermostats reduce the use of heating and cooling systems when nobody is home. If your HVAC runs less, your utility bill will be lower.
  • They alert you when it’s time to change the filter and can tell you when your last maintenance check was, saving you costly repairs.

Cons

  • They can be complex to operate. “Setting up the profiles for vacation and sleep isn’t easy, so people can end up ignoring them or overriding them,” Roth says. “And the AI can annoy some people so that they override it. That defeats the purpose of having them.” 
  • Some require professional installation. 

2. Smart lighting This includes smart lightbulbs or smart switches. Both can be controlled remotely, via your smartphone when you’re miles away or with a voice assistant when you’re at home. You can program them to turn on or off at certain times and control their brightness.

Pros

  • Smart bulbs are simple to set up; you can screw them into a light fixture yourself.
  • They are easy to scale up; buy more to enlarge your smart lighting system.
  • They let you use whatever bulb you want because the switch is hooked to the cloud, not the bulb.

Cons

  • You can’t get smart bulbs to fit every fixture.
  • They don’t work well in fixtures tied to dimmer switches.
  • They require rewiring to install. You’ll need to call a pro.

3. Smart appliances — Anything that runs on electricity is game for joining the Internet of Things, the ever-growing network of connected devices that talk to one another via the cloud. So, you can get smart microwaves that let you download cooking instructions for frozen food, smart ovens you can preheat before you get home, and smart refrigerators that alert you when food hits its expiration date. “Our biggest seller is smart washing machines,” Carey says. “They’ll alert you when your laundry is done, so you can get it into the drier before it sours.” 

Pros

  • They look cool. What’s not to love about a refrigerator with a touchscreen that lets you see inside the fridge without opening it?
  • They can cut your electric bill. Some smart appliances can calculate energy rates and schedule themselves to run during off-peak hours when electricity rates are lower.  

Cons

  • They’re expensive to buy and repair. 
  • If your internet goes down, your smart appliances become dumb ones.

4. Smart door locks — They let you lock and unlock your house with the tap of a finger or a voice command. No keys required. Smart locks enable remote access, so you can unlock a door to let in a guest while you’re at work. Some locks allow you to monitor entry and exit logs in real time, so you can see if the kids got home from school or if the dog walker arrived on time. Some allow you to set up entry codes that work for only a certain period of time, so you can control who has access to your house.

Pros

  • You don’t have to dig in your purse or pockets for keys. 
  • You can see who comes and goes at your house.
  • Instead of giving out house keys to everyone who needs to get into your home, you can set a code for the cleaning person or the dog walker that only they use. 

Cons

  • They run on batteries. If the battery goes dead, you’re locked out.
  • If the power goes out or your Wi-Fi goes down, you won’t be able to operate the lock remotely.
  • Like all smart tech, smart locks can be hacked. But they have a system that will notify you or the police of an unauthorized entry.

Smart devices are a smart investment as long as they add comfort, convenience, or savings that you value. You’ll be more likely to get what works for you after exploring the most popular options and their pros and cons.

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What You Need to Know About Buyer Love Letters to Home Sellers

Did you hear the one about the dog who wrote a love letter? Not to his owner, but to a home seller. Well, actually the dog’s owner wrote the letter in Buddy’s voice. Buddy described how wag-worthy the house was and how much he craved a game of fetch in the backyard. 

Doggie ghostwriting, which happened IRL, is just one way home buyers are getting creative to motivate a seller to accept their offer. It sounds harmless enough, right? But buyer letters to home sellers can unintentionally create Fair Housing Act discrimination and risks for buyers, sellers, and their agents. And there are more-effective ways to offer what sellers value.

How Love Letters to Home Sellers Work

“A love letter is any communication from the buyer to the seller where the buyer is trying to set themselves apart,” says Deanne Rymarowicz, associate counsel at the National Association of REALTORS®. “It could be an email, a Facebook post, a photo. For example, some buyers send elaborate packages with videos and letters. The communication has the intent of ‘pick me, and here’s why.’” 

Buyers who write the letters typically send them to the listing agents, along with their offers, says Paul Knighton, CEO and cofounder of MORE Realty in Tigard, Ore. “They ask, ‘Would you please pass this along to the sellers?’ They’re doing what they can to get their offer accepted, especially in a competitive market.”

Letters Can Risk Violating Fair Housing Act

While these love letters may seem harmless, they can create a problem if buyers accidentally reveal information in one or more of the seven areas protected by the Fair Housing Act, Rymarowicz explains. Those areas are race, color, religion, sex, disability, familial status, or national origin. “Buyers could say something like, ‘this is down the street from our temple,’ or ‘the hallways are wide enough to accommodate my wheelchair.’ Anything that provides personal information related to one of the prohibited bases for discrimination could result in a violation if a seller makes a decision based on that information.” 

Do Love Letters to Home Sellers Work?

On top of creating potential risk, love letters to sellers aren’t all that effective, Knighton says. Here’s a case in point. Several years ago, one of his clients got 14 offers overnight, ranging from $219,000 to $250,000. “A person who offered $225,000 wanted to send a love letter. I told him, ‘You’re writing an offer that’s $25,000 under the highest offer. A letter’s not going to help.’ He wrote it anyway, but the seller didn’t even read it and took the higher offer. The offer needs to stand on its own.” 

And seller apathy isn’t the only issue. Some sellers may be completely turned off, Rymarowicz says. “They may think, ‘This is a financial transaction.’” 

Beyond communication, the circumstances can suggest Fair House Act discrimination, she explains. Say an offer with a love letter got the house but was less attractive than an offer without a letter. “If the losing buyer doesn’t share characteristics of the seller and the winning buyer does, you could have a situation. If sellers accept love letters, it’s more important that they document the basis of their decision when selecting a winning offer.”

Tips to Avoid Violating the Fair Housing Act

So, what exactly should you do to avoid risk of violating the Fair Housing Act? Here are five tips:

  1. Keep the contract in mind: Knighton says real estate pros at his firm talk to buyers and sellers about contract boundaries. “We say, ‘Please don’t communicate with the other party, because we are in contract negotiations and need to manage time frames.’”  
  2. Focus on objective information: Find ways to differentiate yourself on objective terms. And talk to the agent about how to improve the substance of your offer, Rymarowicz advises. “Can you make a larger earnest money deposit? Can you give them a longer closing date?” 
  3. Proceed with caution: The NAR discourages buyer letters to home sellers and advises caution, according to Rymarowicz. 
  4. Talk to your agent: Don’t be surprised if your real estate agent brings up the subject. “If you’re the seller, the listing agent may talk to you about the potential for Fair Housing violations. They may ask if you want to accept the risks,” Rymarowicz says. If the agent doesn’t raise the subject of buyer letters, the buyer or seller can do so. 
  5. Know your state law: Oregon passed a law governing how letters to home sellers are used. “Effective January 2022, a seller’s agent must reject any communication from a buyer other than customary documents,” Knighton says. A real estate firm filed a challenge to the law, though. And until the U.S. District Court for the District of Oregon issues a final decision, the state won’t enforce the law.

Even if a buyer letter to a seller focuses on the property and not the buyer, there’s little to be gained, Knighton says. “There’s risk, but the reward isn’t there. Instead, focus on writing a really strong offer. That’s what has to stand out.”   

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How to Prevent (Home) Buyer’s Remorse

When you’re house hunting, the pressure of competition can move you from “Hmm, I like that, but it’s too pricey,” to “I have to have that!” You think, so what if paying for this house will put me way over budget? I can cut back somewhere else, right? But that kind of thinking can get you into trouble. Trouble that’s totally avoidable.

Whether you’re in the middle of a home bidding war or facing down a list of must-haves, don’t lose sight of your budget and the risks. That way, you can own a house without home buyer’s remorse. And you’ll have money left to enjoy things like new furniture, entertainment, and just plain having fun. 

Who Has Home Buyer’s Remorse and Why?

A competitive real estate market can set buyers up to purchase a home that’s either beyond their budgets — sometimes hugely beyond — or doesn’t meet their needs, according to a 2021 survey by Bankrate and YouGov. The survey found that recent home buyers, including 64% of millennials, had regrets about their home purchase. The top reason? They were unprepared for maintenance and other home ownership-related costs. On top of that, 13% percent of millennials said they think they paid a higher sales price than they should have. 

“Things in homes always break down, so people should put aside a budget for anything that will need fixing,” says Lawrence Yun, chief economist at the National Association of REALTORS®. A rule of thumb is to anticipate 1% or 2% of the home price for potential maintenance,” he explains. “So, for a $300,000 home, that means setting aside $3,000.” 

One reason home buyers may be tempted to go over budget is they’ve been influenced by the beautiful homes on TV, according to an NAR report on home staging. “The shows can create unrealistic expectations for the home buying process and how homes should look,” says Brandi Snowden, NAR director of member and consumer survey research. Over time, buyers can view features that used to be luxuries as necessities. They believe everyone has them and they should too. One solution: Work with a REALTOR as early as possible in the process. “Make sure your agent knows your budget, so they can help you set expectations and stick to them,” she advises. 

How to Navigate House Hunting in a Competitive Market

In addition to pressure to exceed their budgets, buyers are facing hurdles like these five: 

1. Requests to Waive Contingencies

Tamara Suminski, a real estate agent at Beach Real Estate Group in Manhattan Beach, Calif., is seeing not only bidding wars but also sellers wanting buyers to waive contingencies. “With an appraisal contingency, if the appraisal comes in low, the buyer has choices. They can choose to try to renegotiate with the seller, bring in the difference, or cancel. When they remove that contingency and its protection, and if the home doesn’t appraise at the right level, the seller is not very likely to renegotiate with them. And the buyer has waived their right to cancel. If they cancel anyway, they’re risking their deposit.”

Some buyers are also waiving contingencies related to home inspections. These investigations are an opportunity to have a home inspector view the home based on disclosures and for the buyer to use findings as a bargaining tool, Suminski says.

Eliminating these protections can end up costing money for buyers. And the more offers the buyer writes and loses, the more risk they’ll tolerate. So, they may waive contingencies and regret it later, says Suminski. Talk to a buyer’s agent who will guide you through this and explain the risks of removing protections and unknown variables, she advises. 

2. Speed Showings and Decisions

Bryan Yap recently bought a home in an expensive and highly competitive market — Orange County, Calif. He found that with the pandemic, each showing lasted only 15 minutes. That was one of the biggest hurdles. “We’d see three, four, or five homes in one day. It’s hard to keep track of what you like and don’t like with each house. What I would do differently is take notes immediately after viewing a home. If you’re able to prepare beforehand, create a list of wants and requirements in priority order. Immediately after seeing each home, rank it based on the list.”

3. Focusing on the Top of Your Price Range

“If you’re looking in a micromarket where listings are achieving multiple offers and homes are going above asking price, don’t set your heart on houses at the top of your price range,” Suminski says. If $300,000 is your upper limit, look at houses priced at $250,000 or $275,000. Otherwise, you’re going to be outbid from the gate every time.”

That was the process Yap used when he was looking. “I would look for homes $25,000 under my max budget. I went on Zillow and looked at homes that were sold recently and tried to calculate the average over-listing price those homes were being sold for and factor that into my offer price.”

4. The Need to Compromise

Yap’s must-haves were three bedrooms, two baths, and being closer to the city center of Anaheim. “I was able to get three beds and two baths, but I did have to compromise on location. I also had to compromise on price, which was doable because I could still afford it. To compete with all the potential buyers, I knew that we had to either offer an over-list price or remove some contingencies.”

Suminski advises adjusting your search outward geographically, even if it means a longer commute. Buyers might also have to compromise on property types and features. In addition, they should consider doing some DIY projects instead of wanting everything to be move-in ready. “They may have to be willing to look at townhouses instead of single-family homes or install carpet and paint on weekends.” 

5. Information Overload

In the two years before he started searching for a home, Yap did a lot of reading. “It was a massive plan I had to come up with and stick to so that I’d be able to afford buying a home.”

Because of how hot the Orange County market is, agents scheduled showings as soon as a house was listed or showed “coming soon” status. Yap treated the home search as “almost a second job,” using lunch breaks and evenings to check emails, do online searches, and text his real estate agent about what he wanted to see. “I had to make a lot of sacrifices. People wanted to set plans with me for the weekend, but I said, ‘Sorry, I have to go view homes that day.’” 

He primarily credits his real estate agents, including Sumiski, for keeping him informed. “They made all this possible. I learned a lot from them.”

Some agents, like Suminski, hold an accredited buyer’s representative designation but usually work with sellers as well as buyers. “An agent with an accredited buyer’s representative designation has taken extensive buyer’s representation training,” Suminski says. “They’ll provide education to buyers so that they’re learning as much as they can about the market, including the risks involved with different negotiations. If buyers are going to shorten terms or remove protections, they need to be well informed about the pitfalls.”

Learn from Experiences

That access to information and guidance will help buyers making an offer on a home especially in a competitive market. “Today’s buyer has seen and written offers on many properties before they get their offer accepted,” Suminski says. “That’s common across the country. Each is a learning opportunity for buyers about what information they might need to be researching so they can move more quickly.” 

When you act on advice from recent buyers and agents, you can stay well informed and get good results even in a tough market. And that’s the best way to prevent home buyer’s remorse.