What Drives Buyer's Remorse?

Before real estate, I earned a BS in Behavioral Science towards the goal of becoming a Licensed Mental Health Counselor (LMHC). Somewhere along the way, my passion for renovating houses overwhelmed the desire to become a therapist, and ultimately led to a career in real estate.

Today, in my work as a Realtor, I am constantly reminded of the complexity of the human psyche as I observe the mechanics of human motivation. When a recent real estate deal went bad due to buyer's remorse, it led me to ask, “What drives Buyer's Remorse? “

You’ve probably heard the term Buyer's Remorse. It's quite possible that you have even experienced Buyer's Remorse. But, what exactly is Buyer's Remorse? Are there preventative measures that a real estate agent can take to discourage buyer’s remorse?

What is Buyer's Remorse?

Definition: Buyer's remorse is an emotional condition whereby a person feels remorse or regret after a purchase. It is frequently associated with the purchase of higher value items which could be considered unnecessary although it may also stem from a sense of not wishing to be "wrong."

Causes: The anxiety may be rooted in various factors, such as: the person's concern they purchased the wrong product, purchased for a bad price, purchased instead of waiting for a newer model, purchased in an ethically unsound way purchased on credit, or purchased something that would not be acceptable to others.

In the phase before purchasing, a prospective buyer often feels positive emotions associated with a purchase(desire, a sense of heightened possibilities, and an intimation of the enjoyment hat will accompany using the product, for example); afterward, having made the purchase, they are more fully able to experience the negative aspects: all the opportunity costs of the purchase, and a reduction in purchasing power. Also, before the purchase, the buyer has a full array of options, including not purchasing; afterward, their options have been reduced to two:
a) continuing with the purchase, surrendering all alternatives, or b) renouncing the purchase. Buyer's remorse can also be caused or increased by worrying that other people may later question the purchase or claim to know better alternatives.

According to social psychologists, Buyer's Remorse is a form of cognitive dissonance, which is an uncomfortable feeling caused by holding two contradictory ideas simultaneously. The "ideas" or "cognitions" in question may include attitudes and beliefs, the awareness of one's behavior, and facts.

The theory of cognitive dissonance proposes that people have a motivational drive to reduce dissonance by changing their attitudes, beliefs, and behaviors, or by justifying or rationalizing their attitudes, beliefs, and behaviors. Buyer's remorse, when evidence exists that it is justified, is a classical example of cognitive dissonance. One will either seek to discount the new evidence, or truly regret and try to renounce the purchase.

Dissonance normally occurs when a person perceives a logical inconsistency among his or her cognitions. This happens when one idea implies the opposite of another. For example, a belief in animal rights could be interpreted as inconsistent with eating meat or wearing fur. Noticing the contradiction would lead to dissonance, which could be experienced as anxiety, guilt, shame, anger, embarrassment, stress, and other negative emotional states. When people's ideas are consistent with each other, they are in a state of harmony, or consonance. If cognitions are unrelated, they are categorized as irrelevant to each other and do not lead to dissonance.

A powerful cause of dissonance is an idea in conflict with a fundamental element of the self-concept, such as "I am a good person" or "I made the right decision." The anxiety that comes with the possibility of having made a bad decision can lead to rationalization, the tendency to create additional reasons or justifications to support one's choices. For example, a person who just spent too much money on a new car might decide that the new vehicle is much less likely to break down than his or her old car. This belief may or may not be true, but it would likely reduce dissonance and make the person feel better.

Because it is often easier to make excuses than it is to change behavior, dissonance theory leads to the conclusion that humans are rationalizing and not always rational beings.

Whether rational or irrational, Buyer's Remorse is very real, and can be detrimental if not acknowledged and addressed. You can't deal with buyer's remorse until you accept it for what it is -- raw, naked fear.

After you've signed the contract to buy your dream home, you may be experiencing Buyer's
Remorse if you do one or more of the following:

1. Read ads in the real estate section of your local newspaper or look online even more intently than you did before you signed the contract. You're searching for similar or nicer houses with lower asking prices (you forgot that most houses read a lot better in ads than they eyeball when you tour them!)

2. Spend Saturday and Sunday touring open houses. Reading ads isn't enough for you. You pound the pavement, looking for better buys than you got. Seeing, after all, is believing. (Speaking of seeing, you may see the remorseful sellers making the rounds of the same houses that you're looking at, trying to find less-nice properties with bigger asking prices.)

3. Discuss your purchase with friends, neighbors, business associates, and the guy standing behind you waiting in line to buy movie tickets. You accept as gospel any wild guess they make, that confirms your suspicions).

After going through these exercises prior to closing and for a couple of months after the purchase (until you're emotionally and physically exhausted), you'll probably discover that your fears are groundless. There's nothing wrong or unusual about your concerns. What is wrong is letting these fears gnaw away at you secretly instead of openly confronting them.

For some agents, buyer's remorse is so common in their market that they've learned to proactively address the problem before it ever comes up in the transaction.

One example: An agent once said that when a qualifying a customer she asks whether they've ever bought a new car. Usually, the answer is, "yes." Then she ask whether they experienced the "uh-oh feeling" when they drove the car off the lot. Again, the answer is usually yes. She explains that the "uh oh" feeling is also common after people buy a house.

This agent said that since she started doing this, she's had several clients tell her that when the feeling came over them, they remembered their conversation and laughed. As a result she's never had anyone stop a transaction because of buyer's remorse.

If a real estate agent cannot prevent buyer's remorse, then the agent could at least prepare clients for the possibility that they may experience some sort of dissonance during the deal.

Want to avoid Buyer's Remorse?
Get the facts. Facts defeat fear. The faster you get the facts you need, the less you'll suffer.

A home can have more than one correct price. Pricing and negotiation are arts, not precise sciences. Don't beat yourself up with asking prices. You're okay as long as your home's purchase price is in line with the sale prices of comparable houses.

And, if it makes you feel any better, nearly all home buyers are traumatized by the same concerns while purchasing a home.

Sources.
www.wikipedia.org/wiki/Buyers_remorse
http://www.askraveis.com/