How I Bought a House for Under Market Value in a Red-Hot Market

The idea is to do what's best for you, no matter how hot the market may be. 

My husband made an offer on a home last week. That in itself would not be at all interesting. What's curious is that he offered below market value and the owner accepted. We're set to close in less than six weeks. 

If you're in the midst of house hunting and feel frustrated by these weird times we're living in, I thought it might help to share how things worked out for us. Here's my advice. 

Come up with a plan

I hate being house poor. I've done it and know how miserable it feels. Long ago, I promised myself it would never happen again. The only way I was willing to buy another house was with a plan. In a nutshell, here's what I came up with:

• Decide how much I want to spend on a mortgage each month and look only at houses that fall in that range. 
• Disregard my emotions. Buying a home is a financial transaction, first and foremost. 
• Work only with people who respect our boundaries.
• Be willing to walk away. 

I didn't go house hunting. While I was at home preparing our house for sale, my husband toured home after home. I received photos and lots of commentary, but never actually saw any of the properties he toured. Since he knows me so well and because he's done a perfectly fine job purchasing other houses without me, I knew he'd do a good job.

Still, it was a team effort. I like to think that I was the coach.

Enlist allies

It took me years to realize how much difference the right real estate agent makes. This time around, I knew we couldn't afford to work with the wrong people. After interviewing several agents, I felt comfortable that the people we were going to work with respected our desire to live below our means.

In addition to carefully choosing real estate agents, I wanted to make sure we worked with the right loan officer, someone who would remind me of my desire to stick to a budget. We got lucky there, too. 

I discussed my anxiety around house hunting with one friend and my grown children. I hoped someone would remind me of all the practical reasons I have no desire to overspend. You know, just in case I went off the rails. It's a good thing I did.

Stick to the plan

Frustrated by what my husband was finding early on, I asked him to go see a house I'd fallen in love with on the internet. He was equally smitten. However, it was $200,000 over my self-imposed budget. It also broke my rule about only touring homes priced within our budget.

Still, I spent several hours rationalizing the house. I knew we could put more down than we initially anticipated and also knew we qualified for a much larger mortgage than my budget called for. 

When I mentioned it to my daughter-in-law, she quickly reminded me of my financial goals. She was halfway through the list when I realized how foolish it would be to make such a large emotional purchase. 

Rather than feel sad that we weren't going to buy a house that my husband described as "looking like something we would buy," I felt nothing but relief. I knew that if we stuck to our plan and didn't go over budget, we'd be happier in the long run.

Respect rising interest rates

Everyone has a different tolerance for debt and the resulting payments. One of the things we've learned over the years is that we're most comfortable when we can live on one of our salaries. That way, if one of us can't work for some reason, we don't have to worry about meeting our financial obligations.

The Federal Reserve obviously did not get the memo. Right in the middle of the search, the Fed raised its federal funds rate, which helped influence mortgage rates higher. Rather than adapt our monthly budget to accommodate a higher payment, I lowered the price of homes my husband should tour. (As an aside, I recognize how patient he is and I appreciate that he respects my opinions). 

Look for two-week old listings

The rising rates made it crystal clear we needed to change our approach. We're moving to a popular college town and the moment a lovely, move-in ready house hits the market, offers pour in. After momentarily contemplating a home $200,000 outside our budget, I didn't trust myself to get into a bidding war. 

We decided to only consider homes that had been on the market for two weeks or more. During normal times, a listing would still be considered somewhat fresh after two weeks, but in this wild market, 14 days or more is an eternity.

As he continued his search, my husband ran across a 7-year-old ranch style home that had been on the market for nearly three weeks. Inside, it was pristine and obviously cared for. Outside was a different matter. 

Based on the photos, I'm not sure I've ever seen a home so devoid of curb appeal. Not a bush, flower, or tree to be found. The yard is dry, brown, and brittle. The patio in the backyard is about the size of a postal stamp and it's tricky to visualize how nice the yard could be one day.

The sellers had dropped the price the day before, and after coming up with a plan for what we might do to make the outside as lovely as the inside, my husband made an offer. I'd researched the market value of the home and knew he was coming in a bit low. Still, they accepted. 

I will never again underestimate the role curb appeal plays in selling a home. 

Because we came in under budget, we have extra to spend to fix things up. My husband called earlier today to say he has contractors lined up to give him bids on everything, from a new privacy fence and patio, to an underground sprinkler system to bring the yard back to life. 

Oh, and we're going to plant bushes, flowers, and trees. So many bushes, flowers, and trees.