Living Below Your Means
What I have Learned

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August 2, 2002

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I know several of you are contemplating buying a home. I wanted to share my experiences over the past 4 days of looking at houses.

A little background: I was planning to have a house built, but after being told to "be patient" by the builder for 4 months, we finally sat down to finalize the plans and prices, and the price is now $10,000 higher than it was 4 months ago. So, I walked away. Good LBMM move.


I went back to looking at homes in the area I want to live in. The new cost for building was $185,000 so I was looking in that range. I found a few houses that were quite nice but had some problems (structural defects, broken windows from the golf course behind it, storm sewer feeding the "lake" right in the backyard, oil pump right behind the property line, doorway to hell in the backyard, blood oozing from the walls, ok..I am starting to exaggerate...). So I was not happy with what I was finding.

So, I ran into this nice older lady who was the realtor for one of the homes I went into. I told her I didn't like the home we were standing in, but there were some in her book that I would like to see. She offered to show me these other homes after her open house was over. So I met her back there Sunday evening.

Since that time just 4 short days ago, I have made 2 offers, been rejected twice, been approved for a loan that is WAY out of my comfort zone and I will never take, and have looked at about 25 houses. I told myself going into this that I was not going to fall for the realtor game. I was only going to use her to gain access to the houses I wanted to look at. The problem is, I starting playing the dangerous "What's Another 10 Grand" game. What's another 10 grand for a way better location? What's another 10 grand for 250 more square feet I don't need? What's another 10 grand for the parquet floors and Corian� countertops? What's another 10 grand for a fence and sprinkler system?

By playing this dangerous game, I have upped the price of the homes I am looking at from $180,000 to $210,000. What's another $30,000? Well for me it's the difference between having furniture or sitting on the floor for the first 6 months. Not a good LBMM move. of today I decided to screech the brakes on this home-touring frenzy I have been in for the last 4 days. I am taking some time to collect my thoughts and center in on what it is I am looking for in a home, and how much home I am comfortable with having. My main concern is resale value. I do not mind paying for a more expensive home in a better location, because that adds to the resale. Flipside, I don't want to pay less for the same home in a bad are or on a lot with problems because it hurts the resale.

Anyhow, this has been quite a learning experience for me. Here are some things I have learned over the last 4 days:

There is no "perfect home." Half the homes I went in were "absolutely perfect" until I went to the next one.

Make a list of your requirements and measure each house against your list. It is very easy to get caught up in the glamour of nice woodwork or a great neighborhood and fail to notice that there is no formal dining room or that there is a portal to hell in the guest bathroom. Use your checklist religiously.

Ask for the moon. Some sellers are willing to do almost anything to work with you, especially when their house has been on the market for more than 3 months. One seller was offering to throw in some furniture with the deal. So in my offer I asked that he throw in all of it (I really did like the furniture a lot). He rejected it, but said it was a very tough decision.

No offer is stupid. The first offer I made was for $200,000 for the house with the furniture. The seller was asking $212,000. I thought this was incredibly low, but it was all I was comfortable with at the time for that particular house. Although the seller did reject the offer, he countered with $205,000, which was $7000 off the original asking price. This showed me that my original offer of $200,000 was not nearly as ridiculous as I thought it was.

Oil pumps and empty fields KILL your property value. Oil pumps are self-explanatory. Noise, noise, noise. The empty field problem is a fear of the unknown. Empty fields are the perfect place for new oil pumps, storage sheds, or APARTMENTS (YUCK)! I avoid these at all costs, and now I am glad I did since the homes near the empty fields sell for up to 20% less than the same houses in different parts of the edition.

Don't be fooled by flash. What is flash? Over and under cabinet lighting, wallpaper, certain paint, a certain mirror in the bathroom, a particular light fixture, the nice new satin nickel finish on the hardware, etc. All of these things are nice. But, all of these things are also very easily changed. Instead, look for a floor plan that works for you and has the amenities that meet your needs. Then put up your own flash or change the ugly flash that is there.

Don't be afraid to test out the stuff. I found one house where the windows were painted shut. Not a major problem, but still a sign of poor planning. I would not have noticed it if I didn't try to open the window. Run the faucets. Flush the toilets. Try out the lights.

Don't feel compelled to buy. I almost fell for this one. My realtor is very very nice. No pressure at all. She just loves looking at homes. So I didn't get any pressure form her. But I still felt pressure because she managed to find 2 homes that had every single thing I had asked for. But...they just were not home. I still don't know what I didn't like about them. But I found myself starting to apologize for not wanting these 2 houses. She reminded me quickly that this is her job and she gets paid to show me as many homes as I want to see. I hadn't forgotten this tidbit, but I had temporarily lost sight of it.

Get pre-approved. Prequalifying isn't worth squat. I was prequalified for $325,000. That is six times my annual salary. I still don't know how they arrived at that figure. But the preapproval is much deeper, and it is much more solid. Get a preapproval letter and include it with each offer. It let's the seller know you are not just wasting time. You are all set and approved to buy. There will be no question for the seller that you qualify for the loan. If a seller has 2 similar offers in his hand, he is going to accept the one that is already approved for the amount of money being offered. Your chances of getting an acceptance of your offer are greatly improved when accompanied by an approval letter.

Get a different approval letter for each offer. I didn't know this one. I wanted to save some time so I asked the realtor if I should just get one letter with my max approval amount and then we could run copies. She said that it is better to get a new one for each offer and write the approval for the offer amount ONLY. She said that if I bid on a $210,000 home and only offer $200,000, but I include an approval letter for $295,000, the seller will most likely not bargain because they will know I have the money. This was wise advice.

Don't be in a hurry. If you are fortunate enough to not have to buy a house in a week, take your time and look at the homes several times. Visit the homes at different times of the day. Talk to the neighbors about the neighborhood and the neighborhood association. I ruled out one neighborhood after talking to a homeowner that said their association was having a lot of internal fighting and turmoil. These are problems I just do not want to willingly walk right into.

Have fun! This should be fun. Make sure it is. If it is not fun, re-examine why you are looking to buy a home in the first place and decide if now is really the right time for you.

If anyone has anything to add or argue about, please feel free. I admit I know very little about buying a house. I just wanted to share the few things I did learn to others who might not know.


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