What pitfalls do even smart people make when buying a home?

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Darwin
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Re: What pitfalls do even smart people make when buying a home?

Post by Darwin »

jebmke wrote: Sun Jun 20, 2021 6:40 am
Normchad wrote: Sat Jun 19, 2021 10:25 pm A lot of people fall in love with “the one house” they must have…….
This. Have seen this over and over. Must have and won’t leave.
What about "Must have and will enjoy until I let it go when I'm ready to let someone else maintain it?" The previous owners of my beautiful property did that, and are now renting in their 70's with a nice view of the Pacific. I salute them, and plan to do something similar. It won't make sense financially (renting a dumpy place makes more financial sense). But there IS something to consider about a quality-of-life home of that's a priority for you. Personally, I consider gardening and access to hiking trails worth the admittedly poor financial return of home ownership.
Would I put real money down for a "boring" property? Only if it made financial sense and I needed the money.
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Matahari
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Re: What pitfalls do even smart people make when buying a home?

Post by Matahari »

Normchad wrote: Mon Jun 21, 2021 5:18 pm
quantAndHold wrote: Mon Jun 21, 2021 5:14 pm
Matahari wrote: Mon Jun 21, 2021 4:52 pm Failing to take into account the fact that owning a home which provides plenty of space typically requires concomitant stuff.

Not I, but many of our friends and acquaintances have houses that have been decorated to the nines. And now that they are in the empty-nest, pre-retirement stage of their lives, and none of their kids want their stuff, they are facing having to unload much of their carefully curated furniture and decorative items. And having gotten their houses "perfect," they don't want to leave! Three older couples have houses that are too large and too full of stuff. They are in their late 60s and may end up staying at their houses beyond when it makes financial sense to do so.
Corollary: thinking your kids are going to want your stuff. They have their own stuff now. They don’t want yours any more than you wanted your parents’ old junk.
So true!
For the most part, it's not even junk. Lots of fine china -- service and place settings, chinoiserie, crystal, sterling silver flatware...that type of stuff. One woman has an entire cabinet of Lalique figurines collected over decades -- everyone just gave her these as gifts. In another case, lots of antiques that resulted from the antiquing hobby of that woman in question. Yet another case involves lots of heavy, dark wood furniture that could not possibly fit into an apartment. One woman has an entire room's storage of collected Christmas decorations and ornaments that she probably spends a couple of months setting out and then storing each year. Her husband has a fancy train set that forms part of their "Christmas village" set out for holiday parties.

My mind reels at how much expense went into the acquisition of these things. Perhaps they'll eventually be considered "unwanted junk" and will be liquidated in the future for pennies on the dollar, if not donated outright. It's also possible that their kids and grandkids will have the difficult task of dividing some of these keepsakes.
reader79
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Re: What pitfalls do even smart people make when buying a home?

Post by reader79 »

1. Buying a house that's too big.

2. Keeping more than 20-30% of one's net worth in your primary residence.

3. Not doing due diligence before purchasing (inspection, appraisal)

Even if prices stabilize, costs associated with a big house that may have problems and is overvalued sap one's wealth-building potential. Unfortunately, hot markets cause even the smartest people to make irrational purchasing decisions.
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protagonist
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Re: What pitfalls do even smart people make when buying a home?

Post by protagonist »

I imagine many apartment dwellers pay an arm and a leg for the gorgeous panoramic view....
Until some developer builds a taller building right in front of you.
phxjcc
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Re: What pitfalls do even smart people make when buying a home?

Post by phxjcc »

Sandtrap wrote: Sun Jun 20, 2021 7:04 am Mixing emotions with financial and practical concerns when making decisions.

Sometimes…..
“Wanna” + “Gotta” = “Coulda’” + “Shoulda’”

Not buying with resell in mind.
Not having an exit plan. Financially.
Underestimating costs and overestimating income/assets and resources.
Not doing “due diligence”.
Rushing
Overconfidence (especially smart people…as per O.P)

j🌺
To add:
The important things are:
location,
Mechanicals and structural soundness, and
It MUST have something that differentiates it from other houses.

Pretty colors and nice furniture can hide a crumbling foundation, bad plumbing, a leaky roof and HVAC that needs replacement.

^^^^This is why HGTV is so dangerous, really dangerous, to the naive buyers. Stainless appliances? WHO CARES?!

You can buy a suite for $5,000.

When was the last time you heard someone say: “it has a new roof and new copper plumbing and a new 200 amp panel and a completely new 20 SEER HVAC system.”
Northern Flicker
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Re: What pitfalls do even smart people make when buying a home?

Post by Northern Flicker »

RickBoglehead wrote: Sat Jun 19, 2021 10:36 pm Not hiring a real estate lawyer.
That is state-specific.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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RickBoglehead
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Re: What pitfalls do even smart people make when buying a home?

Post by RickBoglehead »

Northern Flicker wrote: Tue Jun 22, 2021 1:38 am
RickBoglehead wrote: Sat Jun 19, 2021 10:36 pm Not hiring a real estate lawyer.
That is state-specific.
Really? Are there states where real estate agents are qualified to provide legal advice? No. In some states, realtors have had only 40 hours of class, which can be online.

Does the title company that does the closing provide legal advice? No.

Perhaps if a closing is done by the title company's lawyer, you might get legal advice, but they work on the bank's behalf.

I closed on a house, and the bank providing my mortgage and an home equity line of credit had the terms for the line of credit wrong. My lawyer drafted a paragraph that said that if the call recording reflected my recollection of terms (it did), the line of credit terms would be changed and the bank would refund the home appraisal fee (they did).

When I sold a property recently, my lawyer drafted a Purchase and Sale agreement that was non-standard, including a limit of the period that the buyer could bring suit that is much lower than the default. We made other changes as well.

He who represents himself has a fool for a client.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
valleyrock
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Re: What pitfalls do even smart people make when buying a home?

Post by valleyrock »

BradJ wrote: Sat Jun 19, 2021 10:22 pm Not fully understanding what season of life they are in. Many folks want projects, but forget that when you work 40 hours a week and have little kids, those projects become low priority.
Also, not understanding the significance of yard drainage.
Add roof drainage to this one. Make sure to maintain gutters and downspouts. Getting water away from a house helps prevent mold and cracks. Yard drainage is of course tied to this, and installing more than one culvert may help.

Add: line up inspectors before making an offer and use specialized inspectors such as a roofer, and an environmental inspector if needed. Where feasible, change the default, often 10 days, inspection time on an offer to purchase. It can be extended by mutual agreement, but starting out with 15 or twenty days can help get things moren thoroughly checked out with less stress. Plan to pay for some of the inspections, such as a roofer. Actually, one can often have inspections done before making an offer. It's worth the money in my view.

On a roll here.

When running a 24 or 48 hour radon test, have it done at a different time than when the inspectors and agents and you are running in and out of the house. All that door opening and closing over several hours affects the pressures and the results even if the house is closed up as it should be. Learn the significance of the radon results. There's the maximum level and then there's the maximum recommended level. They are different. Radon remediation is not all that difficult nor expensive in most cases.

Don't rely on a real estate agent for much because they usually don't do much and they prefer plausible deniability in favor of blissful ignorance. So, look at the place on Google maps and satellite views to learn what's next door or down the street, and there are many other on-line sources of information such as flood maps and environmental information. If the house is near a sewer plant or other type of operation that has had numerous odor complaints, it helps to know.

As I've also learned the hard way, look up the owner and anyone who is representing the owner. Sometimes, you'll get a hit on the county civil court website. If they've been involved in numerous civil suits involving property disputes especially, then that's good to know.

When the termite inspector comes, remember that they are not disinterested, independent third parties like the main inspector is supposed to be. They are ready and willing to make a proposal for treatment. I've never been able to find an independent termite inspector.

Learn what you can. One very useful source of information is bulletins put out by extension faculty at land grant universities. Great stuff on any house issue.
stoptothink
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Re: What pitfalls do even smart people make when buying a home?

Post by stoptothink »

Matahari wrote: Mon Jun 21, 2021 10:33 pm
Normchad wrote: Mon Jun 21, 2021 5:18 pm
quantAndHold wrote: Mon Jun 21, 2021 5:14 pm
Matahari wrote: Mon Jun 21, 2021 4:52 pm Failing to take into account the fact that owning a home which provides plenty of space typically requires concomitant stuff.

Not I, but many of our friends and acquaintances have houses that have been decorated to the nines. And now that they are in the empty-nest, pre-retirement stage of their lives, and none of their kids want their stuff, they are facing having to unload much of their carefully curated furniture and decorative items. And having gotten their houses "perfect," they don't want to leave! Three older couples have houses that are too large and too full of stuff. They are in their late 60s and may end up staying at their houses beyond when it makes financial sense to do so.
Corollary: thinking your kids are going to want your stuff. They have their own stuff now. They don’t want yours any more than you wanted your parents’ old junk.
So true!
For the most part, it's not even junk. Lots of fine china -- service and place settings, chinoiserie, crystal, sterling silver flatware...that type of stuff. One woman has an entire cabinet of Lalique figurines collected over decades -- everyone just gave her these as gifts. In another case, lots of antiques that resulted from the antiquing hobby of that woman in question. Yet another case involves lots of heavy, dark wood furniture that could not possibly fit into an apartment. One woman has an entire room's storage of collected Christmas decorations and ornaments that she probably spends a couple of months setting out and then storing each year. Her husband has a fancy train set that forms part of their "Christmas village" set out for holiday parties.

My mind reels at how much expense went into the acquisition of these things. Perhaps they'll eventually be considered "unwanted junk" and will be liquidated in the future for pennies on the dollar, if not donated outright. It's also possible that their kids and grandkids will have the difficult task of dividing some of these keepsakes.
My in-laws live in a condo, they have to park their cars in visitor parking because their entire garage (1-car, but with a loft) is full of random garbage (decorations, MIL's crafting stuff, random stuff she picked up at garage sales, etc.). They also have both of their spare bedrooms full of the stuff; my kids spend the night and grandma's every other Thursday and they have to sleep in the living room on an air mattress because of it. I believe they still also have two storage units. When we moved them out of their SFH home ~5yrs ago, we had to rent 3 garbage bins along with the full-size moving truck because they previously had a 2-car garage and a backyard shed (along with the off-site storage units) full of even more random garbage. When they lived with us they took up our entire 2-car garage (after we helped them pair down again) and had several more storage units. MIL's only hobby (along with her grandkids, which she is amazing with) is going to yard sales.
Northern Flicker
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Re: What pitfalls do even smart people make when buying a home?

Post by Northern Flicker »

RickBoglehead wrote: Tue Jun 22, 2021 5:44 am
Northern Flicker wrote: Tue Jun 22, 2021 1:38 am
RickBoglehead wrote: Sat Jun 19, 2021 10:36 pm Not hiring a real estate lawyer.
That is state-specific.
Really? Are there states where real estate agents are qualified to provide legal advice? No. In some states, realtors have had only 40 hours of class, which can be online.

Does the title company that does the closing provide legal advice? No.

Perhaps if a closing is done by the title company's lawyer, you might get legal advice, but they work on the bank's behalf.

I closed on a house, and the bank providing my mortgage and an home equity line of credit had the terms for the line of credit wrong. My lawyer drafted a paragraph that said that if the call recording reflected my recollection of terms (it did), the line of credit terms would be changed and the bank would refund the home appraisal fee (they did).

When I sold a property recently, my lawyer drafted a Purchase and Sale agreement that was non-standard, including a limit of the period that the buyer could bring suit that is much lower than the default. We made other changes as well.

He who represents himself has a fool for a client.
There are states where attorneys are always involved in closing a residential transaction.

In other states, if you are buying a home in today's market competing with multiple buyers, if yours is a custom contract drafted by a lawyer, you will have the disadvantage that the seller would need to have a lawyer vet the contract. A competing offer using a standard sales agreement (templates drawn up by real estate attorneys) will have an advantage. A buyer's agent from a brokerage with a good risk management competency will manage more risk than legal risk, and will refer a client to a real estate attorney for issues where it is appropriate.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
sureshoe
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Re: What pitfalls do even smart people make when buying a home?

Post by sureshoe »

Lots of good stuff above... if I had time, I'd condense them into the list.

Several of them are subjective (like size), but lots of good ones that are not.

I think a lot of the good ones roll up into a category of "thinking about resale as your buying". I've always bought homes I like, but I was lucky and had someone who advised me in my early years about the things to look for that keep you in a good resale market. Like not buying a corner lot. Not buying a house on a main drag, etc. Looking at the schools. Do you have the right number of bathrooms and bedrooms compared to the rest of the neighborhood, etc. Really evaluate if you're "getting a deal" or if you're buying a home with future resale problems.

The other good ones (where maybe the size debate comes some) is buying a house that fits into your financial plan. I know a lot of house poor people.
UALflyer
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Re: What pitfalls do even smart people make when buying a home?

Post by UALflyer »

valleyrock wrote: Tue Jun 22, 2021 6:50 am When running a 24 or 48 hour radon test, have it done at a different time than when the inspectors and agents and you are running in and out of the house. All that door opening and closing over several hours affects the pressures and the results even if the house is closed up as it should be. Learn the significance of the radon results. There's the maximum level and then there's the maximum recommended level. They are different. Radon remediation is not all that difficult nor expensive in most cases.
Radon tests have become very popular in residential transactions, but in most cases actually don't tell you much. Radon levels naturally fluctuate quite a bit and depend on the time of year, the weather, the amount of ventilation, etc...

Hence, in order to be meaningful, radon tests need to be long term, as in continuous testing over at least 90 days and preferably longer. When you are buying a house, running long term tests is obviously not practical, so, instead, people run 48 - 96 hour tests, which, because of the above factors, end up being highly inaccurate and create lots of unnecessary tension between buyers and sellers. If a short term test is very significantly elevated, as in 6.0+ pCi/L or so, that's one thing. In a lot of cases, however, you end up with borderline numbers, like 3.8 pCi/L or 4.2 pCi/L, which in reality tells you absolutely nothing about the radon levels in the residence. In reality, due to the natural radon fluctuations, even low short term results don't really tell you all that much, so just because yours came back at 1.5 pCi/L does not necessarily tell you that a long term test would end up being below 4.0 pCi/L.

Because of the above issues associated with short term radon testing, some of the more sophisticated buyers now offer an addendum that says that if post-closing the seller runs a radon test for a minimum of 91 days using an alpha track device (as opposed to the electronic radon testers) and a lab subsequently reports the radon level of 4.0+ pCi/L, the seller will pay $X towards radon mitigation.
Last edited by UALflyer on Tue Jun 22, 2021 5:45 pm, edited 1 time in total.
GP813
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Re: What pitfalls do even smart people make when buying a home?

Post by GP813 »

Underestimating maintenance and upkeep costs.
EddyB
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Re: What pitfalls do even smart people make when buying a home?

Post by EddyB »

Trying to do things in one market based on an understanding of norms you formed in another market.
supalong52
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Re: What pitfalls do even smart people make when buying a home?

Post by supalong52 »

jfn111 wrote: Sun Jun 20, 2021 8:42 am
pshonore wrote: Sun Jun 20, 2021 7:55 am
LeftCoastIV wrote: Sun Jun 20, 2021 2:37 am [1] Nicest house on the street, or more broadly nice house in a not-as-nice neighborhood.

[2] Paying "full commission" to your agent. A discount agent will provide basically the same service for most homes. Note that even if you are the buyer, ask your agent to share part of their commission. The exception here may be if you are shopping for a home in a new area that you don't know well. If you are paying full commission, ask yourself (our your agent) what you are getting. Professional photos? Staging? Access to unlisted homes before they come on the market?

[3] Waiving title contingency. I know it's a hot market, but don't you want to know that you are actually getting a clean title? Or, if there is some easement that lets your neighbor traverse your property that nobody told you about?, etc... At worst, the seller should provide title docs pre-offer if no contingency.

[4] Don't buy a home that is so expensive that it causes ongoing stress in your marriage
Its one thing to waive contingencies such as financing and inspection. I've never heard of waiving a title contingency and I doubt the mortgage company would allow it. (which might put you in a bind).
I've never heard of that either. :confused
I haven't heard of it either, but I have heard of cases where buyer's don't obtain title insurance for themselves (as opposed to title insurance for the lender).
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RickBoglehead
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Re: What pitfalls do even smart people make when buying a home?

Post by RickBoglehead »

Northern Flicker wrote: Tue Jun 22, 2021 11:08 am
RickBoglehead wrote: Tue Jun 22, 2021 5:44 am
Northern Flicker wrote: Tue Jun 22, 2021 1:38 am
RickBoglehead wrote: Sat Jun 19, 2021 10:36 pm Not hiring a real estate lawyer.
That is state-specific.
Really? Are there states where real estate agents are qualified to provide legal advice? No. In some states, realtors have had only 40 hours of class, which can be online.

Does the title company that does the closing provide legal advice? No.

Perhaps if a closing is done by the title company's lawyer, you might get legal advice, but they work on the bank's behalf.

I closed on a house, and the bank providing my mortgage and an home equity line of credit had the terms for the line of credit wrong. My lawyer drafted a paragraph that said that if the call recording reflected my recollection of terms (it did), the line of credit terms would be changed and the bank would refund the home appraisal fee (they did).

When I sold a property recently, my lawyer drafted a Purchase and Sale agreement that was non-standard, including a limit of the period that the buyer could bring suit that is much lower than the default. We made other changes as well.

He who represents himself has a fool for a client.
There are states where attorneys are always involved in closing a residential transaction.

In other states, if you are buying a home in today's market competing with multiple buyers, if yours is a custom contract drafted by a lawyer, you will have the disadvantage that the seller would need to have a lawyer vet the contract. A competing offer using a standard sales agreement (templates drawn up by real estate attorneys) will have an advantage. A buyer's agent from a brokerage with a good risk management competency will manage more risk than legal risk, and will refer a client to a real estate attorney for issues where it is appropriate.
As I said, we, the Seller, provide the Buyer with OUR P&S agreement. They could have had a lawyer get it, but did not.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
Jeepergeo
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Re: What pitfalls do even smart people make when buying a home?

Post by Jeepergeo »

Amongst the other good items listed, here is another....

Not taking the time to understand the local storm drainage patterns and drainage system (runoff and flood control) and sewerage (municipal sewer system, septic tank, lagoon).

Problems in those areas are difficult and expensive to correct, so for most folks, avoiding them is advisable.
Last edited by Jeepergeo on Wed Jun 23, 2021 3:23 pm, edited 1 time in total.
Dandy
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Re: What pitfalls do even smart people make when buying a home?

Post by Dandy »

For a first time home buyer underestimating other expenses e.g. insurance, heating/air/electric, landscaping, tools e.g. mowers, snow blowers, rakes, shovels, appliance replacements,-- reroofing, repaving, repainting, gutter cleaning, etc.
Homes are great but can be expensive to keep reasonably up to date.
vrr106
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Re: What pitfalls do even smart people make when buying a home?

Post by vrr106 »

Even smart people have emotions and desires. Getting into bidding wars on a dream home or on a home when you have slim pickings is a common one, especially right now and in hot markets. That doesn't mean it's a mistake though - and it doesn't make them any less smart.
mffl
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Re: What pitfalls do even smart people make when buying a home?

Post by mffl »

I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
EnjoyIt
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Re: What pitfalls do even smart people make when buying a home?

Post by EnjoyIt »

mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
Kids don't necessarily need a lot of space. Sure having their own rooms are preferred, but the rooms don't need to be huge. Plenty of us on this forum grew up in much smaller houses, had happy childhoods, and now very successful.

There is nothing wrong with having a big house though I think many underestimate the cost and maintenance behind it. Plus, once the kids are out of the house, now you have a huge home for just two people. You think the kids will come and visit all the time, but those days are not that often during the year.

If someone asked me for advice on how large to go, I would say to figure out what you need and figure out what you would prefer and look for the smallest house that satisfies those needs and hopefully all of those wants. House expenses are some of the largest line items for people. The less you pay just to live the more you have to experience life. If money isn't an issue, then do whatever pleases you.

I'll put it a different way. If someone offered me a larger home with a larger workshop and garage with a car lift and a better media room, I would love it. But to afford it, I would have to work an extra day a week for the next 5 years to pay for it. I am currently employed part time and no way in hell would give up my long weekends for the next 5 years for this. In fact, this is a reality for me. I choose part time work over larger house. I choose spending more time with the kids over larger house. I choose a better work life balance over larger house.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
Normchad
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Re: What pitfalls do even smart people make when buying a home?

Post by Normchad »

mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
The wife and I live alone in the 6000 sq. Ft. Chad Palace.

It’s fine.

Don’t love it, but don’t hate it either. The heating and cooling bills seem perfectly reasonable to me.

But honestly, it is a waste. I never go upstairs. I never go downstairs. We only use about 1200 square. Ft on a regular basis.

I don’t buy big houses because I like big houses. Rather, for the places I want to be, suitable small houses just don’t exist.
teuton33
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Re: What pitfalls do even smart people make when buying a home?

Post by teuton33 »

Buying too little house especially as it relates to location desirability.
EnjoyIt
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Re: What pitfalls do even smart people make when buying a home?

Post by EnjoyIt »

Normchad wrote: Wed Jun 23, 2021 11:21 am
mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
The wife and I live alone in the 6000 sq. Ft. Chad Palace.

It’s fine.

Don’t love it, but don’t hate it either. The heating and cooling bills seem perfectly reasonable to me.

But honestly, it is a waste. I never go upstairs. I never go downstairs. We only use about 1200 square. Ft on a regular basis.

I don’t buy big houses because I like big houses. Rather, for the places I want to be, suitable small houses just don’t exist.


Can you please elaborate on the bolded statement. How is it possible that there are no houses less than 6000 sqft in your area? What makes that area so different? I ask because in a 1 mile radius around my 5000sqft house there are homes ranging from 2000 to 10,000 sqft.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
dboeger1
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Re: What pitfalls do even smart people make when buying a home?

Post by dboeger1 »

mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
Yeah, I think there's a lot of anti-big-home bias from the super cost-conscious Boglehead crowd, but they can be really great if done right. I grew up in large homes as the oldest of 3 kids. My parents were very social and often invited people over for parties and activities. All the spaces in the homes got an incredible amount of use. Using our last big home as an example, we had massive front and back yards where the kids would practice sports (my dad coached basically all of our local league teams). We also had a large outdoor pool that got used extensively during Summers. We had a shed full of tools, including gardening stuff for my mom who had a large dedicated flower garden space with a nice walkway and some shade trees. Inside the home, the bedrooms were all upstairs, which was a quiet place for sleeping. The ground floor had a nice large kitchen which was used extensively (my dad owned and managed a restaurant so it was common for us to host dinner parties at home), as well as a large living room with a comfortable sofa and big-screen TV (this was in the early 90s, so it was a huge CRT which couldn't fit just any room). There was also an office room where we had our computer at the time, which is funny now because it was the days of sharing a single desktop with a dial-up connection. Then there was the basement, where we had sort of a man cave room with another big couch, big TV, pool table, bar, and punching bag. And lastly, there was another basement room with all the kids' toys and video games. One thing I remember very well that I wouldn't appreciate until I was an adult was that it was always possible to go to a separate space to enjoy something privately. Us kids could play outside or in the basement without disturbing our parents cooking or using the computer for business. Ever since a series of unfortunate events cost our family essentially all of our net worth, we've all lived in smaller homes, and it has just never been the same. My father has said many times that while he wouldn't buy such a large home again for all the reasons pointed out in this thread, he has never regretted owning those larger homes at the stages of life when we did, because we got so much use out of them. I think it's one of those things where it's easy to criticize based on one's usage patterns, just like luxury cars or boats, but for people who actually get good use out of them and can comfortably afford them, they may be the best use of money. I think it's fair to say one shouldn't buy too much house for one's needs, but I don't think it's fair to say all big houses are a mistake. I remember being upset as a kid because we couldn't have a dedicated music room where I could leave my guitar stuff permanently set up. I hated having to set and tear down all my guitar equipment every time I wanted to play, and it was worse when I would go through all that trouble and then get interrupted and have to cut my practice sessions short to do something else. In retrospect, it's funny to me that even in our large houses, it never felt like we had enough space.

As for another pitfall I don't think anyone has mentioned, I would say be cognizant of the boundary between regular and jumbo loans. It turns out there's a lot of nuance there that is not obvious and also not easy to research online. I think it's the FHA that sets the conforming loan limit for conventional and FHA mortgages. In our VHCOL area, most homes go for well over that, so jumbo loans are common. At the time we were buying last year, the market was still somewhat unstable and it was right before the current frenzy really became apparent, so lenders were not offering many jumbo loans and were charging higher rates for them compared to smaller conventional loans they could offload more easily. Our budget was tight anyway, so we restricted ourselves to looking at the few bottom-of-the-market homes that we could get a conventional mortgage for given our down payment. The thing that tripped me up is that in doing research online, I discovered that in certain expensive zip codes, the conforming loan limit is actually higher to accommodate higher incomes. However, what I learned the hard way is that just because the FHA technically raises the limit in that area, it doesn't mean lenders will necessarily follow. We went into contract on our home thinking we were well below our higher local FHA limit, when all of a sudden our lender pointed out that our loan amount was just a few thousand over the standard limit, and so we would need a jumbo loan with relatively high interest rate for the time. At that point, we either had to scrounge up money from family to qualify for the lower conventional loan, or just take the higher-rate jumbo loan and refinance later at some fixed cost plus the risk of rates rising. Thankfully, my father-in-law had set aside money to help us buy a house, which I had respectfully declined up until that point, but we ended up using it just to get the loan we wanted. What's weird is that I can't seem to find any information about similar situations online, but I can't imagine we're the only ones to run into this. I think it's just buried under all the information about the straightforward common cases of people being clearly in the conforming or jumbo camp, rather than being on the boundary. We went into contract figuring we had over 20% down so we would be more than fine, but we ended up putting around 30% down because of that confusion. So moral of the story is: don't assume all you need is 20% down to get the loan you want, particularly if you're around the jumbo loan boundaries.
stoptothink
Posts: 9723
Joined: Fri Dec 31, 2010 9:53 am

Re: What pitfalls do even smart people make when buying a home?

Post by stoptothink »

dboeger1 wrote: Wed Jun 23, 2021 12:34 pm
mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
Yeah, I think there's a lot of anti-big-home bias from the super cost-conscious Boglehead crowd, but they can be really great if done right. I grew up in large homes as the oldest of 3 kids. My parents were very social and often invited people over for parties and activities. All the spaces in the homes got an incredible amount of use. Using our last big home as an example, we had massive front and back yards where the kids would practice sports (my dad coached basically all of our local league teams). We also had a large outdoor pool that got used extensively during Summers. We had a shed full of tools, including gardening stuff for my mom who had a large dedicated flower garden space with a nice walkway and some shade trees. Inside the home, the bedrooms were all upstairs, which was a quiet place for sleeping. The ground floor had a nice large kitchen which was used extensively (my dad owned and managed a restaurant so it was common for us to host dinner parties at home), as well as a large living room with a comfortable sofa and big-screen TV (this was in the early 90s, so it was a huge CRT which couldn't fit just any room). There was also an office room where we had our computer at the time, which is funny now because it was the days of sharing a single desktop with a dial-up connection. Then there was the basement, where we had sort of a man cave room with another big couch, big TV, pool table, bar, and punching bag. And lastly, there was another basement room with all the kids' toys and video games. One thing I remember very well that I wouldn't appreciate until I was an adult was that it was always possible to go to a separate space to enjoy something privately. Us kids could play outside or in the basement without disturbing our parents cooking or using the computer for business. Ever since a series of unfortunate events cost our family essentially all of our net worth, we've all lived in smaller homes, and it has just never been the same. My father has said many times that while he wouldn't buy such a large home again for all the reasons pointed out in this thread, he has never regretted owning those larger homes at the stages of life when we did, because we got so much use out of them. I think it's one of those things where it's easy to criticize based on one's usage patterns, just like luxury cars or boats, but for people who actually get good use out of them and can comfortably afford them, they may be the best use of money. I think it's fair to say one shouldn't buy too much house for one's needs, but I don't think it's fair to say all big houses are a mistake. I remember being upset as a kid because we couldn't have a dedicated music room where I could leave my guitar stuff permanently set up. I hated having to set and tear down all my guitar equipment every time I wanted to play, and it was worse when I would go through all that trouble and then get interrupted and have to cut my practice sessions short to do something else. In retrospect, it's funny to me that even in our large houses, it never felt like we had enough space.

I don't think there is really any opposition to large homes, if you can afford it. Also, it really rubs me the wrong way when a massive home is characterized as a "need".

There was, a dozen years ago, the prevailing idea that you buy as much home as you can afford; I think that is essentially what many of us are opposing.
jackbeagle
Posts: 157
Joined: Sat Mar 06, 2021 5:22 pm

Re: What pitfalls do even smart people make when buying a home?

Post by jackbeagle »

Watty wrote: Sun Jun 20, 2021 8:36 am Thinking they will stay in the same house for 30+ years. It happens but your needs will change and "life happens".

Buying a house next to unprotected undeveloped land. The land will be developed some day and it may be rezoned and developed in unexpected ways.

Using the home inspector that your real estate agent recommends. You want the tough home inspector that is not afraid cause the deal to fall apart that your real estate agent fears.

Assuming that a new house will not have problems or assuming that the builder will actually fix the problems. Not getting a new home inspected during several different phases of construction when problems may be visible.

Lee_WSP wrote: Sat Jun 19, 2021 10:13 pm Assuming home prices can only go up in real dollars.
Or thinking home prices can only go up in nominal dollars.
I saw a listing where a house was advertised to be backed up against Army Corps of Engineers land. What are the implications of this?
jackbeagle
Posts: 157
Joined: Sat Mar 06, 2021 5:22 pm

Re: What pitfalls do even smart people make when buying a home?

Post by jackbeagle »

phxjcc wrote: Tue Jun 22, 2021 12:17 am
Sandtrap wrote: Sun Jun 20, 2021 7:04 am Mixing emotions with financial and practical concerns when making decisions.

Sometimes…..
“Wanna” + “Gotta” = “Coulda’” + “Shoulda’”

Not buying with resell in mind.
Not having an exit plan. Financially.
Underestimating costs and overestimating income/assets and resources.
Not doing “due diligence”.
Rushing
Overconfidence (especially smart people…as per O.P)

j🌺
To add:
The important things are:
location,
Mechanicals and structural soundness, and
It MUST have something that differentiates it from other houses.

Pretty colors and nice furniture can hide a crumbling foundation, bad plumbing, a leaky roof and HVAC that needs replacement.

^^^^This is why HGTV is so dangerous, really dangerous, to the naive buyers. Stainless appliances? WHO CARES?!

You can buy a suite for $5,000.

When was the last time you heard someone say: “it has a new roof and new copper plumbing and a new 200 amp panel and a completely new 20 SEER HVAC system.
That was the guy who walked away because the copper plumbing was done via Pro Press instead of sweating the joints :P
UALflyer
Posts: 828
Joined: Thu Jan 17, 2013 10:42 am

Re: What pitfalls do even smart people make when buying a home?

Post by UALflyer »

EnjoyIt wrote: Wed Jun 23, 2021 11:38 am
Normchad wrote: Wed Jun 23, 2021 11:21 am
mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
The wife and I live alone in the 6000 sq. Ft. Chad Palace.

It’s fine.

Don’t love it, but don’t hate it either. The heating and cooling bills seem perfectly reasonable to me.

But honestly, it is a waste. I never go upstairs. I never go downstairs. We only use about 1200 square. Ft on a regular basis.

I don’t buy big houses because I like big houses. Rather, for the places I want to be, suitable small houses just don’t exist.


Can you please elaborate on the bolded statement. How is it possible that there are no houses less than 6000 sqft in your area? What makes that area so different? I ask because in a 1 mile radius around my 5000sqft house there are homes ranging from 2000 to 10,000 sqft.
A lot depends on the area. In a lot of high end areas, every house is going to be 5K+ sq. ft. Likewise, in a lot of areas, there's simply no demand for 2K sq. ft. houses, which are considered starter houses.

There are many areas and subdivisions that actually prohibit lots below a certain size and houses below 3K (some set the minimum threshold at 5K) sq. ft.

As I mentioned above, people who talk about larger houses always being more expensive to own and maintain typically don't quite understand the considerations that account for certain categories of expenses, which frequently don't have all that much to do with the square footage. They also frequently don't understand what appeals to people about larger houses, as they keep thinking that a larger house must have more rooms that don't get used.

Quite often, larger houses don't necessarily have more rooms, or, if they do, they're not the countless empty bedrooms that some people think of. Instead, they may have things like more bathrooms, so that each bedroom may have its own full bathroom, which is something that tends to be a highly desirable feature in every price range. A larger house may have a dedicated office (or two), which is something that people in smaller houses are now paying a premium for creating, as many people have been forced to work from home and will continue to do so. The bedrooms themselves may be larger and they may have larger closets. The master bathrooms may be more spacious, as are master closets. There may be a dedicated entertainment area, such as a true media room, a home gym, a play room, etc...

The cost of furnishing a larger house isn't necessarily higher, as a large bedroom won't exactly cause you to put three beds in it. You can certainly spend more on higher end furnishings, but that's a matter of personal preferences, which has very little to do with the square footage. There are plenty of people in smaller places who spend a small fortune furnishing them and, because of the square footage limitations, are limited in the types of furnishings that they can use. As I mentioned above, your insurance costs may actually be the same or lower, and you may be able to obtain a significantly better, more comprehensive insurance policy, which is not something that is ever available on smaller and less expensive places. Your taxes will generally be higher, as will your cleaning costs (or, if you do it yourself, it'll obviously take you longer to do so). Your utility costs will frequently be about the same and may even be lower, as it all depends on the quality of construction, insulation, etc... The same goes for the overall upkeep, as higher quality materials that frequently are incorporated into larger, higher end houses can also be much more durable.

In other words, a larger house doesn't have to be the money pit that some posters here mistakenly think every large house is.
jackbeagle
Posts: 157
Joined: Sat Mar 06, 2021 5:22 pm

Re: What pitfalls do even smart people make when buying a home?

Post by jackbeagle »

I don't mean to derail this thread but I'm going to derail this thread. Since we're talking about homes and good (bad) decisions, what do y'all think about THIS? Must read the listing... LOL

https://www.zillow.com/homedetails/5904 ... 3333_zpid/

Image
Northern Flicker
Posts: 8031
Joined: Fri Apr 10, 2015 12:29 am

Re: What pitfalls do even smart people make when buying a home?

Post by Northern Flicker »

RickBoglehead wrote: Tue Jun 22, 2021 2:53 pm
Northern Flicker wrote: Tue Jun 22, 2021 11:08 am
RickBoglehead wrote: Tue Jun 22, 2021 5:44 am
Northern Flicker wrote: Tue Jun 22, 2021 1:38 am
RickBoglehead wrote: Sat Jun 19, 2021 10:36 pm Not hiring a real estate lawyer.
That is state-specific.
Really? Are there states where real estate agents are qualified to provide legal advice? No. In some states, realtors have had only 40 hours of class, which can be online.

Does the title company that does the closing provide legal advice? No.

Perhaps if a closing is done by the title company's lawyer, you might get legal advice, but they work on the bank's behalf.

I closed on a house, and the bank providing my mortgage and an home equity line of credit had the terms for the line of credit wrong. My lawyer drafted a paragraph that said that if the call recording reflected my recollection of terms (it did), the line of credit terms would be changed and the bank would refund the home appraisal fee (they did).

When I sold a property recently, my lawyer drafted a Purchase and Sale agreement that was non-standard, including a limit of the period that the buyer could bring suit that is much lower than the default. We made other changes as well.

He who represents himself has a fool for a client.
There are states where attorneys are always involved in closing a residential transaction.

In other states, if you are buying a home in today's market competing with multiple buyers, if yours is a custom contract drafted by a lawyer, you will have the disadvantage that the seller would need to have a lawyer vet the contract. A competing offer using a standard sales agreement (templates drawn up by real estate attorneys) will have an advantage. A buyer's agent from a brokerage with a good risk management competency will manage more risk than legal risk, and will refer a client to a real estate attorney for issues where it is appropriate.
As I said, we, the Seller, provide the Buyer with OUR P&S agreement. They could have had a lawyer get it, but did not.
The thread is about pitfalls when buying a home. As a buyer, I would not use an agreement provided by a seller. It would require spending money on a house I did not have under contract at agreed upon terms to have the agreement vetted by an attorney.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
Starfish
Posts: 2237
Joined: Wed Aug 15, 2018 6:33 pm

Re: What pitfalls do even smart people make when buying a home?

Post by Starfish »

My main mistake was buying too small of a house (especially in the light of WFH). The extension and renovations cost more than the price difference. Add to this the inconvenience of construction. Moving would be even more expensive.
EnjoyIt
Posts: 5862
Joined: Sun Dec 29, 2013 8:06 pm

Re: What pitfalls do even smart people make when buying a home?

Post by EnjoyIt »

UALflyer wrote: Wed Jun 23, 2021 12:55 pm
EnjoyIt wrote: Wed Jun 23, 2021 11:38 am
Normchad wrote: Wed Jun 23, 2021 11:21 am
mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
The wife and I live alone in the 6000 sq. Ft. Chad Palace.

It’s fine.

Don’t love it, but don’t hate it either. The heating and cooling bills seem perfectly reasonable to me.

But honestly, it is a waste. I never go upstairs. I never go downstairs. We only use about 1200 square. Ft on a regular basis.

I don’t buy big houses because I like big houses. Rather, for the places I want to be, suitable small houses just don’t exist.


Can you please elaborate on the bolded statement. How is it possible that there are no houses less than 6000 sqft in your area? What makes that area so different? I ask because in a 1 mile radius around my 5000sqft house there are homes ranging from 2000 to 10,000 sqft.
A lot depends on the area. In a lot of high end areas, every house is going to be 5K+ sq. ft. Likewise, in a lot of areas, there's simply no demand for 2K sq. ft. houses, which are considered starter houses.

There are many areas and subdivisions that actually prohibit lots below a certain size and houses below 3K (some set the minimum threshold at 5K) sq. ft.

As I mentioned above, people who talk about larger houses always being more expensive to own and maintain typically don't quite understand the considerations that account for certain categories of expenses, which frequently don't have all that much to do with the square footage. They also frequently don't understand what appeals to people about larger houses, as they keep thinking that a larger house must have more rooms that don't get used.

Quite often, larger houses don't necessarily have more rooms, or, if they do, they're not the countless empty bedrooms that some people think of. Instead, they may have things like more bathrooms, so that each bedroom may have its own full bathroom, which is something that tends to be a highly desirable feature in every price range. A larger house may have a dedicated office (or two), which is something that people in smaller houses are now paying a premium for creating, as many people have been forced to work from home and will continue to do so. The bedrooms themselves may be larger and they may have larger closets. The master bathrooms may be more spacious, as are master closets. There may be a dedicated entertainment area, such as a true media room, a home gym, a play room, etc...

The cost of furnishing a larger house isn't necessarily higher, as a large bedroom won't exactly cause you to put three beds in it. You can certainly spend more on higher end furnishings, but that's a matter of personal preferences, which has very little to do with the square footage. There are plenty of people in smaller places who spend a small fortune furnishing them and, because of the square footage limitations, are limited in the types of furnishings that they can use. As I mentioned above, your insurance costs may actually be the same or lower, and you may be able to obtain a significantly better, more comprehensive insurance policy, which is not something that is ever available on smaller and less expensive places. Your taxes will generally be higher, as will your cleaning costs (or, if you do it yourself, it'll obviously take you longer to do so). Your utility costs will frequently be about the same and may even be lower, as it all depends on the quality of construction, insulation, etc... The same goes for the overall upkeep, as higher quality materials that frequently are incorporated into larger, higher end houses can also be much more durable.

In other words, a larger house doesn't have to be the money pit that some posters here mistakenly think every large house is.
Living in a 5000 sqft house that is just 4 bedrooms, I can surely attest that having a larger house does indeed cost more. You mention more bathrooms. That alone is a cost. Each bathroom has plumbing which at some point in life will require updating or repair. You mentioned larger bedroom. We have a huge bedroom where the kingsize bed takes up a very small footprint of the area. The rest had to be filled with something otherwise it looks strange. Heating and cooling increases with larger homes as well. Roof replacement or repair is more expensive. You have more walls and therefor when you repaint it costs more. Not to mention contractors charge more money just because you live in a lager house. Yes, having a larger home costs significantly more to maintain. Plus, the more you have, the more time out of your life you spend maintaining it. Even if you hire out, you still need to take the time to do it, be there for the job to get done and then pay them This is not insignificant.

I will agree, that it doesn't have to be a money pit, but at the end of the day it will cost more and one should analyze is the additional cost worth it and that is a personal decision.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
EnjoyIt
Posts: 5862
Joined: Sun Dec 29, 2013 8:06 pm

Re: What pitfalls do even smart people make when buying a home?

Post by EnjoyIt »

dboeger1 wrote: Wed Jun 23, 2021 12:34 pm
mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
Yeah, I think there's a lot of anti-big-home bias from the super cost-conscious Boglehead crowd, but they can be really great if done right. I grew up in large homes as the oldest of 3 kids. My parents were very social and often invited people over for parties and activities. All the spaces in the homes got an incredible amount of use. Using our last big home as an example, we had massive front and back yards where the kids would practice sports (my dad coached basically all of our local league teams). We also had a large outdoor pool that got used extensively during Summers. We had a shed full of tools, including gardening stuff for my mom who had a large dedicated flower garden space with a nice walkway and some shade trees. Inside the home, the bedrooms were all upstairs, which was a quiet place for sleeping. The ground floor had a nice large kitchen which was used extensively (my dad owned and managed a restaurant so it was common for us to host dinner parties at home), as well as a large living room with a comfortable sofa and big-screen TV (this was in the early 90s, so it was a huge CRT which couldn't fit just any room). There was also an office room where we had our computer at the time, which is funny now because it was the days of sharing a single desktop with a dial-up connection. Then there was the basement, where we had sort of a man cave room with another big couch, big TV, pool table, bar, and punching bag. And lastly, there was another basement room with all the kids' toys and video games. One thing I remember very well that I wouldn't appreciate until I was an adult was that it was always possible to go to a separate space to enjoy something privately. Us kids could play outside or in the basement without disturbing our parents cooking or using the computer for business. Ever since a series of unfortunate events cost our family essentially all of our net worth, we've all lived in smaller homes, and it has just never been the same. My father has said many times that while he wouldn't buy such a large home again for all the reasons pointed out in this thread, he has never regretted owning those larger homes at the stages of life when we did, because we got so much use out of them. I think it's one of those things where it's easy to criticize based on one's usage patterns, just like luxury cars or boats, but for people who actually get good use out of them and can comfortably afford them, they may be the best use of money. I think it's fair to say one shouldn't buy too much house for one's needs, but I don't think it's fair to say all big houses are a mistake. I remember being upset as a kid because we couldn't have a dedicated music room where I could leave my guitar stuff permanently set up. I hated having to set and tear down all my guitar equipment every time I wanted to play, and it was worse when I would go through all that trouble and then get interrupted and have to cut my practice sessions short to do something else. In retrospect, it's funny to me that even in our large houses, it never felt like we had enough space.

As for another pitfall I don't think anyone has mentioned, I would say be cognizant of the boundary between regular and jumbo loans. It turns out there's a lot of nuance there that is not obvious and also not easy to research online. I think it's the FHA that sets the conforming loan limit for conventional and FHA mortgages. In our VHCOL area, most homes go for well over that, so jumbo loans are common. At the time we were buying last year, the market was still somewhat unstable and it was right before the current frenzy really became apparent, so lenders were not offering many jumbo loans and were charging higher rates for them compared to smaller conventional loans they could offload more easily. Our budget was tight anyway, so we restricted ourselves to looking at the few bottom-of-the-market homes that we could get a conventional mortgage for given our down payment. The thing that tripped me up is that in doing research online, I discovered that in certain expensive zip codes, the conforming loan limit is actually higher to accommodate higher incomes. However, what I learned the hard way is that just because the FHA technically raises the limit in that area, it doesn't mean lenders will necessarily follow. We went into contract on our home thinking we were well below our higher local FHA limit, when all of a sudden our lender pointed out that our loan amount was just a few thousand over the standard limit, and so we would need a jumbo loan with relatively high interest rate for the time. At that point, we either had to scrounge up money from family to qualify for the lower conventional loan, or just take the higher-rate jumbo loan and refinance later at some fixed cost plus the risk of rates rising. Thankfully, my father-in-law had set aside money to help us buy a house, which I had respectfully declined up until that point, but we ended up using it just to get the loan we wanted. What's weird is that I can't seem to find any information about similar situations online, but I can't imagine we're the only ones to run into this. I think it's just buried under all the information about the straightforward common cases of people being clearly in the conforming or jumbo camp, rather than being on the boundary. We went into contract figuring we had over 20% down so we would be more than fine, but we ended up putting around 30% down because of that confusion. So moral of the story is: don't assume all you need is 20% down to get the loan you want, particularly if you're around the jumbo loan boundaries.
I don't think anyone is saying "don't buy a big house." I think the conversation is don't make your home the largest part of your expenses. If one can afford a 6,000 sqft home while still saving plenty for retirement then more power to them, but there are downsides of owning a large house. Just look at yourself who is now grown up and thinks a big home has so much value. If you grew up in half the size, you would not even thought such a thing. I don't know about our parents situation, but may it have been possible if they did not have such large houses they would be in much better financial position today? Probably.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
LittleMaggieMae
Posts: 939
Joined: Mon Aug 12, 2019 9:06 pm

Re: What pitfalls do even smart people make when buying a home?

Post by LittleMaggieMae »

RickBoglehead wrote: Tue Jun 22, 2021 5:44 am
Northern Flicker wrote: Tue Jun 22, 2021 1:38 am
RickBoglehead wrote: Sat Jun 19, 2021 10:36 pm Not hiring a real estate lawyer.
That is state-specific.
Really? Are there states where real estate agents are qualified to provide legal advice? No. In some states, realtors have had only 40 hours of class, which can be online.

Does the title company that does the closing provide legal advice? No.

Perhaps if a closing is done by the title company's lawyer, you might get legal advice, but they work on the bank's behalf.

I closed on a house, and the bank providing my mortgage and an home equity line of credit had the terms for the line of credit wrong. My lawyer drafted a paragraph that said that if the call recording reflected my recollection of terms (it did), the line of credit terms would be changed and the bank would refund the home appraisal fee (they did).

When I sold a property recently, my lawyer drafted a Purchase and Sale agreement that was non-standard, including a limit of the period that the buyer could bring suit that is much lower than the default. We made other changes as well.

(OK, I've never bought a house that cost more than 200K (and one of those was uninhabitable) - maybe a lawyer is more important for houses in the million dollar range? )

He who represents himself has a fool for a client.

What kind of legal advice does a buyer need? Especially if it's a typical sale contract on a typical house?

I've been to quite a few closings (and done a few long distance). Sometimes I've hired a real estate lawyer sometimes not. As far as I can tell - no one at the closing was conniving and trying to take advantage of me at the last minute/stress of the closing.

In fact, I had reviewed most of the documents in the days before the closing. No surprises at the closing.
BradJ
Posts: 485
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Re: What pitfalls do even smart people make when buying a home?

Post by BradJ »

Starfish wrote: Wed Jun 23, 2021 1:12 pm My main mistake was buying too small of a house (especially in the light of WFH). The extension and renovations cost more than the price difference. Add to this the inconvenience of construction. Moving would be even more expensive.
This is a great point, buying the right sized house is key. Despite people's opinion of Dave Ramsey, the guy has three great rules of real estate buying:
1. 20% down
2. 15 year loan
3. 25% of take home per month should be your mortgage (ex 1000 paycheck would equal 250 mortgage).

Finding the best home that fits within those rules is paramount. We downsized years ago, with young kids, and regret it to a certain degree. One positive aspect it did bring our family was an extremely cheap mortgage that helped us sleep better at night.
tjtv
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Re: What pitfalls do even smart people make when buying a home?

Post by tjtv »

BradJ wrote: Wed Jun 23, 2021 3:13 pm
This is a great point, buying the right sized house is key. Despite people's opinion of Dave Ramsey, the guy has three great rules of real estate buying:
1. 20% down
2. 15 year loan
3. 25% of take home per month should be your mortgage (ex 1000 paycheck would equal 250 mortgage).

Finding the best home that fits within those rules is paramount. We downsized years ago, with young kids, and regret it to a certain degree. One positive aspect it did bring our family was an extremely cheap mortgage that helped us sleep better at night.
Finding a home that fits within a budget of 25% of your TAKE HOME pay on a 15 year mortgage is impossible in many areas of the country.
BradJ
Posts: 485
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Re: What pitfalls do even smart people make when buying a home?

Post by BradJ »

tjtv wrote: Wed Jun 23, 2021 3:27 pm
BradJ wrote: Wed Jun 23, 2021 3:13 pm
This is a great point, buying the right sized house is key. Despite people's opinion of Dave Ramsey, the guy has three great rules of real estate buying:
1. 20% down
2. 15 year loan
3. 25% of take home per month should be your mortgage (ex 1000 paycheck would equal 250 mortgage).

Finding the best home that fits within those rules is paramount. We downsized years ago, with young kids, and regret it to a certain degree. One positive aspect it did bring our family was an extremely cheap mortgage that helped us sleep better at night.
Finding a home that fits within a budget of 25% of your TAKE HOME pay on a 15 year mortgage is impossible in many areas of the country.
Fair point.
EnjoyIt
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Re: What pitfalls do even smart people make when buying a home?

Post by EnjoyIt »

tjtv wrote: Wed Jun 23, 2021 3:27 pm
BradJ wrote: Wed Jun 23, 2021 3:13 pm
This is a great point, buying the right sized house is key. Despite people's opinion of Dave Ramsey, the guy has three great rules of real estate buying:
1. 20% down
2. 15 year loan
3. 25% of take home per month should be your mortgage (ex 1000 paycheck would equal 250 mortgage).

Finding the best home that fits within those rules is paramount. We downsized years ago, with young kids, and regret it to a certain degree. One positive aspect it did bring our family was an extremely cheap mortgage that helped us sleep better at night.
Finding a home that fits within a budget of 25% of your TAKE HOME pay on a 15 year mortgage is impossible in many a few select areas of the country.
Let me adjust the above statement for accuracy.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
stoptothink
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Re: What pitfalls do even smart people make when buying a home?

Post by stoptothink »

EnjoyIt wrote: Wed Jun 23, 2021 4:07 pm
tjtv wrote: Wed Jun 23, 2021 3:27 pm
BradJ wrote: Wed Jun 23, 2021 3:13 pm
This is a great point, buying the right sized house is key. Despite people's opinion of Dave Ramsey, the guy has three great rules of real estate buying:
1. 20% down
2. 15 year loan
3. 25% of take home per month should be your mortgage (ex 1000 paycheck would equal 250 mortgage).

Finding the best home that fits within those rules is paramount. We downsized years ago, with young kids, and regret it to a certain degree. One positive aspect it did bring our family was an extremely cheap mortgage that helped us sleep better at night.
Finding a home that fits within a budget of 25% of your TAKE HOME pay on a 15 year mortgage is impossible in many a few select areas of the country.
Let me adjust the above statement for accuracy.
...until 2021. It's pretty darn difficult in my MCOL area now to find anything that meets that criteria for the large majority of "average" families.
tjtv
Posts: 43
Joined: Wed Feb 27, 2019 1:08 pm

Re: What pitfalls do even smart people make when buying a home?

Post by tjtv »

EnjoyIt wrote: Wed Jun 23, 2021 4:07 pm
tjtv wrote: Wed Jun 23, 2021 3:27 pm
Finding a home that fits within a budget of 25% of your TAKE HOME pay on a 15 year mortgage is impossible in many a few select areas of the country.
Let me adjust the above statement for accuracy.

That's just not true though. This problem is not just limited to VHCOL and HCOL areas of the country anymore. What percentage would you say on average an employee takes home, maybe 70% after factoring in taxes/healthcare/401k/etc.? Using that number you'd need to have a gross salary of $432k to afford a $1M home. Or stated another way, someone making $100k could only afford a house valued at $231k. Feel free to use a different number than 70% but it doesn't change the math very much.
Broken Man 1999
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Re: What pitfalls do even smart people make when buying a home?

Post by Broken Man 1999 »

I don't see buying a larger home as a pitfall at all, so long as one isn't stretched by the mortgage. DW and I lived in tiny homes as children. No thanks! Large home was a priority, cars were just transportation. Worked well for us, very well.

DW and I have lived in three homes in our near 50 years of marriage.

First, a 624sqft mobile home (2 bedroom) purchased in 1971 for $4,050. Lived in in for 9 years. Sold it for $5,800 when DD was born. No RE fees to buy, or sell. Sold it to the park where our mobile home was sitting.

Second home was a 1,000sqft villa, purchased for $39,000 from builder. Lived there for 10 years, traded to the builder of our current home. He asked us to find comps, and a couple of villas like ours had been sold recently. He gave the same trade-in value. We also added another DD, and were squeezed for room.

Third and final home was purchased in 1989 for $151,000 minus trade in $$$ from villa. Currently live there. A lot larger, for sure, but no McMansion. We probably had one of the nicest home of DDs school friends other than one of the DDs friends whose father became my neurologist. I put down over half the asking price, as I sold some property I co-owned with my father in my home town. My half of a citrus grove.

Every Friday night lots of DDs friends would come to our home after school, have pizza, and then go to the HS football games. DW and I sold those horrible boiled hotdogs, as we were boosters of the band, orchestra, chorus, and cheerleading Our home was HS central for years. Didn't need to wonder where DDs were, they were at our home along with their friends.

Frankly, we enjoyed our larger home when DDs were growing up, and enjoy it even today with just the two of us. We hosted many gatherings over the years, and since the home had a formal and regular living room, I didn't have to buy a different home as we converted the formal living room to my bedroom, since I cannot get upstairs. We have a 35X25 deck in the backyard that has seen a lot of BBQs over the years, had one last Saturday.

I don't like to go to other's homes as my wheelchair doesn't do well on carpet, and I am always afraid I will nick a wall or something. DDs all have had homes with tile or wood floors to accommodate me.

DW has never lived in a home that wasn't brand new since we were married.

Having a very nice home, with nice furnishings made/makes us very happy, as we both grew up in very small homes. DDs have homes about the same size as our final home, nicer, though. Like us they didn't start out with larger homes.

DDs have great careers, and aren't stretched with payments at all. They also drive reasonable vehicles and keep them for 10 years or so, except ones that were wrecked by others.

So, honestly I don't regret for a minute that we bought and live in a larger home. Never had any financial issues covering the mortgages at all. Largest mortgage we ever had was around $70,000.

We never worked thru a real estate agent, buying homes from builders. Our last home was built by a very respected builder, I had no qualms letting him handle everything. We did negotiate with him, price wise. My father checked out everything, and was impressed by the build quality. His company is now owned by one of his long-time employees, and recently did a master bath remodel for us.

We certainly could have lived in a smaller home, but I don't think we would have been so happy over the years as we were/are.

One thing we did do was to go around to see areas after a heavy rain. Check. Also we bought in a subdivision that all the lots were owned and homes built by the same builder. Eliminated some areas due to traffic congestion. Check.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
lazynovice
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Re: What pitfalls do even smart people make when buying a home?

Post by lazynovice »

EnjoyIt wrote: Wed Jun 23, 2021 11:38 am
Normchad wrote: Wed Jun 23, 2021 11:21 am
mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
The wife and I live alone in the 6000 sq. Ft. Chad Palace.

It’s fine.

Don’t love it, but don’t hate it either. The heating and cooling bills seem perfectly reasonable to me.

But honestly, it is a waste. I never go upstairs. I never go downstairs. We only use about 1200 square. Ft on a regular basis.

I don’t buy big houses because I like big houses. Rather, for the places I want to be, suitable small houses just don’t exist.


Can you please elaborate on the bolded statement. How is it possible that there are no houses less than 6000 sqft in your area? What makes that area so different? I ask because in a 1 mile radius around my 5000sqft house there are homes ranging from 2000 to 10,000 sqft.
Can’t answer for anyone but us. We wanted a decent size lot for our dogs but also to keep decent separation from our neighbors. That was about a third of an acre. We wanted to be a short commute to my office. We wanted a certain level of finishes- hard surface flooring, granite (at least) counter tops. We wanted a three car garage so we could fit two cars as well as lawn equipment, snow blowers, etc. And we wanted a neighborhood that enforced its rules regarding landscaping, no RVs and boats in the driveway, etc. That led to neighborhoods with larger houses. I would not have bought this size house if I could have found what I needed in a smaller one, but thank goodness we had it in 2020!
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
Frank the Tank
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Re: What pitfalls do even smart people make when buying a home?

Post by Frank the Tank »

mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
Heh - I agree. We moved into a larger home 3 years ago (from a 2000 sq ft home to a 3500 sq ft home with a 1000 sq ft finished basement) and love it. Definitely worth it from a quality of life perspective, especially in the past year with the pandemic.

Now, I will say the one thing to look out for in any home buying purchase is underestimating renovation and maintenance costs. Even a house that is in fairly good shape will have issues that you’ll find that you didn’t anticipate. People also seem to overrate the cosmetic or non-structural items that can easily be changed (such as stainless steel appliances) and underrate the structural items that are very expensive and/or difficult/impossible to change. I can deal with replacing a refrigerator easily, but I don’t want to revamp the HVAC system within the first year of living in a house.

Ultimately, look at a house as a consumable expense that happens to have some asset value as opposed to an investment. If you can legitimately afford a luxury consumable expense, then go for it, but don’t trick yourself into thinking that it’s a true investment.
EnjoyIt
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Re: What pitfalls do even smart people make when buying a home?

Post by EnjoyIt »

tjtv wrote: Wed Jun 23, 2021 4:24 pm
EnjoyIt wrote: Wed Jun 23, 2021 4:07 pm
tjtv wrote: Wed Jun 23, 2021 3:27 pm
Finding a home that fits within a budget of 25% of your TAKE HOME pay on a 15 year mortgage is impossible in many a few select areas of the country.
Let me adjust the above statement for accuracy.

That's just not true though. This problem is not just limited to VHCOL and HCOL areas of the country anymore. What percentage would you say on average an employee takes home, maybe 70% after factoring in taxes/healthcare/401k/etc.? Using that number you'd need to have a gross salary of $432k to afford a $1M home. Or stated another way, someone making $100k could only afford a house valued at $231k. Feel free to use a different number than 70% but it doesn't change the math very much.
Not bad. Plenty of $200k homes out there. One of my friends just bought a nice home for $220k. No one said one must live in a $1million home.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
chazas
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Re: What pitfalls do even smart people make when buying a home?

Post by chazas »

mffl wrote: Wed Jun 23, 2021 8:47 am I'm shocked at the number of replies strongly opposed to even a moderately sized home (i.e. 3000sqft). Is there anyone here who has a big home and likes it?

Personally, we're in a 4000sqft home with 4 kids and looking to upsize. Certainly we could end up regretting it, but we already don't regret the 4000sqft home, so we have some prior data on how it might work out for us.

To each his own, I suppose. I do appreciate hearing others' opinions as we're thinking about a change. Good stuff.
Yes. I’m 60 and single and have a 5000 square foot hose with a pool, gym and home theater. I love it. It was also a bargain.
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Nate79
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Re: What pitfalls do even smart people make when buying a home?

Post by Nate79 »

tjtv wrote: Wed Jun 23, 2021 4:24 pm
EnjoyIt wrote: Wed Jun 23, 2021 4:07 pm
tjtv wrote: Wed Jun 23, 2021 3:27 pm
Finding a home that fits within a budget of 25% of your TAKE HOME pay on a 15 year mortgage is impossible in many a few select areas of the country.
Let me adjust the above statement for accuracy.

That's just not true though. This problem is not just limited to VHCOL and HCOL areas of the country anymore. What percentage would you say on average an employee takes home, maybe 70% after factoring in taxes/healthcare/401k/etc.? Using that number you'd need to have a gross salary of $432k to afford a $1M home. Or stated another way, someone making $100k could only afford a house valued at $231k. Feel free to use a different number than 70% but it doesn't change the math very much.
The 25% of take home pay on 15 year fixed is a common statement from Dave Ramsey. What you are missing is the definition of take home pay is taking out taxes only. All the other things you mention like 401k, etc are not included. But the point is to prevent being house poor, not having enough for saving, etc. Not everyone should be buying a house if they can't afford it. Buy cheaper or rent.
FlyerJack
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Re: What pitfalls do even smart people make when buying a home?

Post by FlyerJack »

EnjoyIt wrote: Wed Jun 23, 2021 8:31 pm
tjtv wrote: Wed Jun 23, 2021 4:24 pm
EnjoyIt wrote: Wed Jun 23, 2021 4:07 pm
tjtv wrote: Wed Jun 23, 2021 3:27 pm
Finding a home that fits within a budget of 25% of your TAKE HOME pay on a 15 year mortgage is impossible in many a few select areas of the country.
Let me adjust the above statement for accuracy.

That's just not true though. This problem is not just limited to VHCOL and HCOL areas of the country anymore. What percentage would you say on average an employee takes home, maybe 70% after factoring in taxes/healthcare/401k/etc.? Using that number you'd need to have a gross salary of $432k to afford a $1M home. Or stated another way, someone making $100k could only afford a house valued at $231k. Feel free to use a different number than 70% but it doesn't change the math very much.
Not bad. Plenty of $200k homes out there. One of my friends just bought a nice home for $220k. No one said one must live in a $1million home.
Are there plenty of $200k homes in areas that have jobs paying $100k? I suspect the median income (household income, even) in areas with plenty of those homes is far below that. Therefore, most people in those areas couldn't afford the $200k house if they follow Ramsey's "rule." Without writing an essay on Ramsey's bad advice, I don't think this particular rule is realistic or even helpful for most.
jackbeagle
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Re: What pitfalls do even smart people make when buying a home?

Post by jackbeagle »

FlyerJack wrote: Wed Jun 23, 2021 10:43 pm
EnjoyIt wrote: Wed Jun 23, 2021 8:31 pm
tjtv wrote: Wed Jun 23, 2021 4:24 pm
EnjoyIt wrote: Wed Jun 23, 2021 4:07 pm
tjtv wrote: Wed Jun 23, 2021 3:27 pm
Finding a home that fits within a budget of 25% of your TAKE HOME pay on a 15 year mortgage is impossible in many a few select areas of the country.
Let me adjust the above statement for accuracy.

That's just not true though. This problem is not just limited to VHCOL and HCOL areas of the country anymore. What percentage would you say on average an employee takes home, maybe 70% after factoring in taxes/healthcare/401k/etc.? Using that number you'd need to have a gross salary of $432k to afford a $1M home. Or stated another way, someone making $100k could only afford a house valued at $231k. Feel free to use a different number than 70% but it doesn't change the math very much.
Not bad. Plenty of $200k homes out there. One of my friends just bought a nice home for $220k. No one said one must live in a $1million home.
Are there plenty of $200k homes in areas that have jobs paying $100k? I suspect the median income (household income, even) in areas with plenty of those homes is far below that. Therefore, most people in those areas couldn't afford the $200k house if they follow Ramsey's "rule." Without writing an essay on Ramsey's bad advice, I don't think this particular rule is realistic or even helpful for most.
If you follow the herd (college degree, salaried job) no. You will gravitate to areas that are already "full" and with market pressure having driven prices up before you even arrive. If all you want is a big house and don't care about being walking distance (or even driving distance) from anything, I'd say weasel your way into a high paying railroad, telephone, or power company job and just work all the overtime you can. I have coworkers clearing $200k+ splicing fiber optics as full time, benefited employees. 30 years and still going, near top of seniority for their field office.
EnjoyIt
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Re: What pitfalls do even smart people make when buying a home?

Post by EnjoyIt »

FlyerJack wrote: Wed Jun 23, 2021 10:43 pm
EnjoyIt wrote: Wed Jun 23, 2021 8:31 pm
tjtv wrote: Wed Jun 23, 2021 4:24 pm
EnjoyIt wrote: Wed Jun 23, 2021 4:07 pm
tjtv wrote: Wed Jun 23, 2021 3:27 pm
Finding a home that fits within a budget of 25% of your TAKE HOME pay on a 15 year mortgage is impossible in many a few select areas of the country.
Let me adjust the above statement for accuracy.

That's just not true though. This problem is not just limited to VHCOL and HCOL areas of the country anymore. What percentage would you say on average an employee takes home, maybe 70% after factoring in taxes/healthcare/401k/etc.? Using that number you'd need to have a gross salary of $432k to afford a $1M home. Or stated another way, someone making $100k could only afford a house valued at $231k. Feel free to use a different number than 70% but it doesn't change the math very much.
Not bad. Plenty of $200k homes out there. One of my friends just bought a nice home for $220k. No one said one must live in a $1million home.
Are there plenty of $200k homes in areas that have jobs paying $100k? I suspect the median income (household income, even) in areas with plenty of those homes is far below that. Therefore, most people in those areas couldn't afford the $200k house if they follow Ramsey's "rule." Without writing an essay on Ramsey's bad advice, I don't think this particular rule is realistic or even helpful for most.
A working family of two can probably come together with $100k income. And yes, if a family is making $50k a year, it is probably not in their best interest to be buying a $200k house. Also, some of those very low income neighborhoods have houses selling for $100k or less. Just for kicks and giggles I did a search for homes for under $100k in Tennessee. I have no idea why I chose Tennessee but here it is.
https://www.propertyshark.com/homes/US/ ... le/TN.html

Point being, there is no need to be house poor.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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