Buying A House? Due Diligence And Gut Instincts Matter

It seems like the next home buying season is always upon us. And, here we are again. A home purchase is somewhat of a right of passage into adulthood. In recent years, alternative housing has made its way onto the scene. Today, it’s not uncommon for adults to live with their parents, in tiny houses, or remain renters for life. Interestingly, despite changing times, a home purchase still sits atop the list for most people making their way as adults. But, make no mistake, buying a house is an intensive and potentially stressful process. You’ll be dealing with strange people, weird houses, and oh yeah, money. Oh my! When embarking on such an expensive venture, you’ll want to do your due diligence and NEVER ignore your gut instincts.

Know Your Numbers


If there is ONE thing you must know, it’s how much house you can comfortably afford. Note, I said comfortably afford – this number will likely be drastically different from the number the bank says you can afford! Interestingly, mortgage lenders and banks are notorious for approving home purchases that put their clients behind the financial 8 ball. Don’t be those clients. You don’t want to be house poor watching the world pass you by. Trust me, the novelty of owning the home will wear off and you’ll start missing the extra stuff you used to love to do on the weekends.

Related: That One Time I Royally Screwed Up Our Net Worth

Due Diligence Before Buying A House


Doing your due diligence during the home-buying process can save you massive headaches down the road, this goes for first-time home buyers as well as the seasoned variety. Check out this list of things you must employ during your search.

  • Buying A House?

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    Know Your Number: Know how much house you can afford and do not go over that number. Lifestyle creep comes in many forms; biting off more house than you can chew is enemy numero uno. Before you know it, you’ll be living on Ramen noodles and wearing your winter jacket indoors. Listen up, This is experience talking!

  • Don’t Get Blindsided By Taxes: It’s not just the cost of the house you need to worry about. You need to know how much the taxes are each year. You can easily find these numbers by asking your realtor or looking online. Oftentimes, taxes and insurance are rolled into mortgage payments for home buyers, but it’s still nice to know what to anticipate.
  • Get A Home Inspection: A home inspection is a necessity. Word of caution – find your own inspector and don’t use the one your realtor recommends. People are people and, like anything else, it’s a small industry. Your realtor could very likely have agreements with inspectors to give favorable reports in exchange for future work. Save yourself the trouble of worrying about getting an unbiased inspection by hiring your own person. Done.
  • Roof, Foundation, Doors & Windows: Make sure the inspection covers major aspects of your potential new home. You’ll want to know how old the roof is and if the doors and windows are in good shape. And whatever you do, make sure the foundation doesn’t need major repairs. A bad foundation could run a new homeowner into the tens of thousands of dollars in repairs.
  • Talk To The Neighbors: People love to talk! They might even tell you about the water in the basement or the electrical fire that happened last summer. You’ll also want to know how nice (or not nice) your new neighbors are!
  • Do A Drive By: Drive by your potential new abode at all hours of the day and night. Some neighborhoods never change, others change drastically when the sun goes down. Make sure you know what you’re getting yourself into. Literally.
  • Have A Contractor Estimate The Cost Of Repairs/Improvements: Want to tear down a dining room wall and add a 4th bedroom? Get estimates before putting in an offer. The reno cost might justify looking for a different house altogether.
  • Calculate HVAC Bills: Use the square footage to calculate HVAC bills based on the type of heating and cooling units in the home. You can also ask the homeowner or even call the utility companies to get accurate information.
  • Know The Condition Of Major Mechanicals: Major mechanicals like a heat pump or A/C unit could cost thousands of dollars to repair or replace. You’ll want to know the condition of all major mechanicals before placing a bid. If the mechanicals are old or in disrepair, it warrants knocking money off your bid.
  • Ask For Documents: Ask the homeowner for maintenance/repair documents, as well as any manuals that might be useful. Beware if they are unable to produce any such documents. It could mean they haven’t taken care of the home and you’ll be picking up the pieces when the ink dries.
  • Home Warranty: It’s becoming more and more common to write a one-year home warranty into home-buying contracts. It never hurts to ask. If the home was taken care of, the sellers shouldn’t have any problems with agreeing to this condition.
  • Write An Offer Or Walk Away: If everything checks out, your numbers work, and you don’t have angst in your gut, go ahead and write an offer. If, on the other hand, you’re feeling sick to your stomach, you need to Walk Away. Now.

Related: Selling Your House? Here Are some Quick Frugal Tips To Get It Ready To List

Avoid A Money Pit


Fixer uppers are great for a 30-minute spot on HGTV, but they’re not necessarily great when they start to nickel and dime unsuspecting homeowners to death. Don’t get me wrong, in no way am I saying that a property in need of a little TLC is a poor purchase. Just know that if you do embark on such a property, you will need to take extra precautions to protect your investment and make sure you truly bought an asset and not a liability.

Remember, saying you will take down this or that wall and remove the wallpaper from the dining room is one thing, actually DOING IT is quite another. You’d be surprised how much work just re-painting can be when you’re tired from a long week at work and the kids have baseball practice and science projects. Think before you leap.

By doing your due diligence and listening to your gut, you’ll likely avoid buying a money pit. Trust me, you do not wanna be this poor sap played by Tom Hanks in the 80’s comedy, The Money Pit.

Avoid A Money Pit at all costs! Enjoy this clip at our expense…

Price Be Damned. It’s Our Dream House!


It’s no secret that Mr. MMM and I made plenty of financial missteps before meeting each other. In fact, we almost made a huge one just before tying the knot. We said, “Price Be Damned! It’s Our Dream House”, and with that, we marched forward with an offer.

porcelain tile - buying a house

Our post-reno porcelain tile floors 🙂

Not surprisingly, there are a plethora of emotions wrapped up in buying a house. We imagine ourselves on the porch in the summer with some lemonade. We can see holidays with our families in the great room. Whatever your imagination dishes out, most of us are emotionally invested before we even make an offer. This, my dear, is dangerous. And, we too fell into the trap. Emotional involvement in a business transaction can lead to a very slippery financial slope, a slope that isn’t easily corrected if something goes awry.

We nearly slipped down that slope. As I mentioned earlier, six months before getting married we found our ultimate dream house. There was only one problem, one huge problem. The sticker price was way more money than we set out to initially spend. When I say it was more money than we set out to spend, I mean by a lot. In truth, it was $100k more than our original max budget. Yikes! Angst, anyone?

Related: Why We Love Being At Home

Angst In Your Belly


Mad Money Cat - buying a house

Mad Money Cat pays cash for custom homes.

In my opinion, the best piece of advice I ever received when making a big purchase was to listen to my gut. But, I didn’t listen. Despite the angst, we went under contract anyway and started a stint of sleepless nights and heart palpitations.

By the grace of something outside of our control, there was a problem with the home inspection and we were able to cancel the contract. Phew. Full blown panic mode averted. Read all about how we nearly committed financial suicide here! Note: That event was the trigger for the birth of this website! 

Ultimately, that was our last foolish money move. After that, we embarked on a custom home renovation that we paid for with cold, hard cash.  That’s right, baby! We’re now charting a course towards financial independence and listening to our guts Every. Step. Of. The. Way.

Have you recently purchased, or are in the process of purchasing a home? Have you listened to your gut? Tell us about your experience!


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  • Tonya@Budget and the Beach Apr 27, 2017, 9:30 am

    The whole home-buying concept to me is so foreign, and I’m in my 40s. There was a time where I felt like I was missing that boat, but living in LA, it’s just incredibly difficult to buy anything, so I put it out of my mind. I’ve gotten such great info through blogs though so that if for some reason I ever can or want to buy, hopefully I’ll be armed with really sensible info!

    • Mad Money Monster Apr 27, 2017, 9:48 am

      I absolutely feel like I can trust the information I find in blogs more than some of the mainstream information floating around out there. The myth that you need to buy a house to build wealth is just that, a myth. Personal finance blogs opened my eyes to a completely different way of living and wealth accumulation. #LoveLA

  • Colin @ Building-Income Apr 24, 2017, 10:54 pm

    Great article!

    There’s a saying in investment real estate that “you make your money in the buy.” This holds true when buying a home as well. If you don’t take care during the due diligence period, you can over buy and find yourself in an unenviable for years to come.

    One thought on property taxes is to understand there is a difference between “assessed value” and the price you’re about to purchase the property for. If the property has been dramatically upgraded, an assessor may not be fully aware of this and the assessed value may lag behind what the market thinks the property is worth.

    Once the property sells, however, this becomes the new base line value for the property. A buyer could be in for a rude awakening if the difference between the assessed and the purchase is substantial.

    Take some time and calculate what the taxes will be based up on your purchase price. You’ll be glad you did that homework up front so your not caught off guard when the new assessment arrives in the mail

    • Mad Money Monster Apr 25, 2017, 8:36 am

      You are absolutely right! My husband and I also have a rental property that I bought when I was much younger and much dumber 😉 – it was at the height of the 2007 market. I definitely did not make money in the buy. I didn’t even know about such a thing at the time. Thanks for sharing!

  • Mrs. Groovy Apr 24, 2017, 6:43 pm

    These are some terrific, practical pieces of advice often not mentioned in posts about home buying, especially knowing the condition of the major mechanicals. Thanks for sharing.

    Our home was new and luckily everything was still on warranty. But now, we’re searching for land in the country 3 hrs north of us, in the vicinity of Mr. Groovy’s family. The hardest part is trying to gage the neighborhood when you’re looking out in the sticks.

    • Mad Money Monster Apr 24, 2017, 7:46 pm

      That is a VERY good point! I guess trees tend to make good neighbors 🙂 Maybe the Frugalwoods would have some pointers.

  • Ms. Frugal Asian Finance Apr 21, 2017, 9:01 pm

    There’s so much work involved before and during the house buying process. I felt fortunate we could afford to buy our own home, but I’m also happy all of that paperwork and search is over. That said, we definitely don’t mind doing it again 😉

    • Mad Money Monster Apr 21, 2017, 9:21 pm

      It is definitely A Process. I’m glad you had a good experience. Having all your ducks in a row and cash in the bank makes a huge difference 🙂

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