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.
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.
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.
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.
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
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!