Thursday, February 9, 2012

Backwards hunting

(originally written June 27, 2011)

I don't claim to be an expert on anything I write about - I'm merely recounting the experiences Garry and I are going through and what we've learned from making the choices we made.

To sum it up - we failed miserably the first time we tried to do this whole house-buying thing.

The story begins in the spring. We loved to take walks and bike-rides around our neighborhood. At one point we came across a house that Garry had fallen head-over-heels in love with that was for sale. We looked it up on the web and found that it was probably more expensive than we could afford. At the time we had no clue what we could afford, but assumed that it was more expensive than we could manage.


After obsessively checking the MLS listing on the internet for a few weeks heard that the price had dropped and there was an open house scheduled, we (being the curious folk we are) decided to go and take a look.

This is where we met Jen, our realtor, She was filling in for her co-worker at the open house. After meeting with her we toured the house and were dazzled by the shiny new appliances and posh paint colors. So blinded were we by the stone fireplace that we didn't even realize the drastic slope of the floor in the den.

In short, it was a disaster.

But, we soldiered forth with blinders on. We scheduled an appointment with a broker (again, not really doing any homework ahead of time and talking to multiple lenders) and were pre-qualified for a mortgage. It was lower than what the sellers were asking, but we thought maybe, just maybe, we could get them in our price range.

We ended up negotiating to the top of our price range. Yep, the very top. And in the process we lost the stainless steel washer/dryer. We didn't care much at the time though, we were so focused on just buying that house.

Next came the inspection. We invited my grandparents to come and give it a look too. At that point our dreams of owning that house came crashing down. I can't even tell you how many red flags (literally) there were in the inspection report. Needless to say, we were pretty upset, more so with ourselves for not noticing all of those issues in the first place and spending the $400 on the inspection when we shouldn't have needed to.

The really awful part was telling Jen we wanted to back out of the deal. Garry and I are nice people and we hate going back on our "word" so to speak, but that's why we made sure to put the inspection report contingency in there. The sellers were pretty desperate, and we felt bad. At this point they came back offering their above ground pool and $1,000 toward any and all repairs. It wasn't enough to sway us, knowing that it could cost at least $20,000 to fix everything that was flagged.

Somewhere in the middle of all of this craziness, we took our first-time home-buyer class and learned where we went wrong - we didn't pay attention to the important things and kind of went into the situation backwards. We thought about putting house-hunting on the back burner until after our September wedding, but we thought "why not give it one last effort?" We really didn't think we'd find something we would fall in love with in such a short time, and it would give us some practice at looking for and evaluating homes.

After telling our realtor, she was determined to find us a home we would love, and after two weeks of "power house-hunting" we managed to find a cheaper, yet much nicer, house that fit what we were looking for.

The realtor, myself and my mom all had lists of houses to look at, and this house was on all three. On our second visit to the house, Garry and I felt really comfortable there. We sat in the living room and chatted a while, and you know what? It just felt... right.

From there we had the company offering us the grant come and inspect the house, After reading the report and not noticing anything that was beyond what we could handle, we put in an offer based on those problems (we knew we would need to replace the water heater and furnace within the year). Since we were approved in the grant program, we were able to overlook some minor issues that the program would take care of.

We also took into consideration the information listed on Zillow.com. This website gives you information including an estimated value of the property, recent taxes paid and transactions, and some other basic information. We found out the seller bought the house four years ago for a specific amount, so that's what we offered. Garry and I know the local economy pretty well and that people aren't making any money on their houses. We also didn't want to get caught up in negotiating back and forth for weeks (since we wanted to close in the beginning of August) so we offered what we thought was a fair price. It must have been, since the seller agreed to it within a few days without counter-offering (that's not really the whole story, but it would take forever to relay that here).

The next inspection went much smoother since we knew exactly what to expect. There were no surprises, so we decided to continue forward. Things were getting really exciting (and stressful) at this point.

This afternoon we're meeting with our broker to fill out our formal mortgage application. Since we're participating in this grant program we have a very sizable down payment which makes our mortgage request a lot lower than what we were pre-qualified for. During this meeting, our broker will also give us a "good faith estimate" which details all the closing costs and includes what our monthly payment will be (including mortgage, taxes and insurance).

The other great part about being part of the grant program is that we won't have to use all of our reserve money we had saved toward the closing and down payment. We can save some of it for moving expenses and other expenses we'll have in the short run (like a new furnace).

Our goal is to consistently have at least $5,000 in our "house fund" to repair or replace anything. That way, if a major repair is needed we don't completely deplete either of our bank accounts or get into any serious financial trouble. We'll also have money to make some equity-building upgrades as well. Considering our house payment is pretty close (about $30 more a month) to what I'm spending per month on our wedding, our lifestyle won't change much. Also considering we won't be paying rent on top of wedding expenses (even with slightly higher utilities in the house) we're actually saving a little bit of money to put into our house fund.