Mon Mar 01 2021
The time has come for my wife and I to buy a house. We’ve cast our net in most of Rhode Island, since it’s really small, as well as some close by parts of Massachusetts. We’ve been doing a lot of self-education and researching, as well as financial planning in preparation for making the big purchase. I think we’ve saved and budgeted pretty well, however we’re definitely not in the shape Dave Ramsay wants us to be in - not that we’re trying to be. With the stock market in the shape it’s in and the interest rates so low, I’d much rather hold on to as much cash as possible to get a better return.
Needless to say, it’s definitely a sellers market in terms of houses and it’s crazy out there. As I mentioned that we are not doing this, apparently other people are and they’re scooping up houses all over the place. There’s not at all that much new inventory and the existing houses on the market are going way over asking, in some cases $100k over! I’ve read that new construction was really curtailed with the crisis of 2008-2009 and still hasn’t recovered resulting in a big shortage of homes.
Going to showings during COVID seem more laid back than what it was before since there aren’t a ton of people inside during an open house. The only thing to be aware of is getting an appointment or timeslot and waiting in a line, but other than that I’ve really liked it.
There have a been a good amount of houses where sellers do a great job of cleaning the place up and preparing for guests, while there are a rare few houses where there is absolutely zero effort to make a good showing. The worst part is the house is touted as very nice and nothing being wrong. I almost feel insulted when I see a ridiculously high asking price, and almost feel like the sellers are taking advantage of the market. Feels like a money grab.
In searching for a bank and to just being able to see houses in general, we started getting some preapprovals. We went to RocketMortgage for our first since it was online and fairly easy. We held onto this one for a few weeks until our buyers agent recommended getting preapproved by a local bank or credit union. There’s plenty of advice out there saying to get multiple preapprovals and this is exactly what we did.
In addition to the preapprovals, we narrowed our choices down to a few banks that had the rate we were looking for, offered discounts when possible, and had a good reputation. We made sure to ask all the important questions like interest rate, if points were required, estimated closing time, all for our desired loan term. When we found a lender we liked, we asked for a loan estimate.
Another thing we needed to research was an attorney to look over any of our documents once an offer was an accepted, as well as a home inspector. It was good to do these things beforehand since there’s usually only 10 days to get these sorts of things done and you’ll need to move quickly. Buying a home is already one of the most stressful times in life and it’s a good idea to try and minimize as much of that stress as possible.
Luckily, the insurance offered through my wifes employer includes legal assistance with a specific availability for buying a home. This was perfect since it minimized the amount of searching in the dark we would have to do. Last was finding a reliable home inspector, but this was made easier by some suggestions our buyers agent made. Once I looked up the different inspection companies, as well as finding a couple on my own, it was easy to narrow down the list and make a decision.
After a couple months of searching and 2 failed offers later, our 3rd offer was accepted! We were elated to hear the sellers had chosen us, and that we were the first offer in that day. It also might have helped that we went to view the house on every day possible, stuck around the property asking, and I believe having a really good buyers agent. Our agent did a great job at presenting us as the best buyers possible for the house!
A couple things we had learned at this point were that the process of escalation clauses with offers were no longer allowed simply because they were getting out of hand. These clauses were to the point where buyers had no cap on the amount they would increase their offer to win the house, making it pointless for any buyer that didn’t have one. Also, litigation letters were made illegal as of January 1, 2021 so you weren’t allowed to brag about yourselves in a heart-felt letter to the sellers.
At this point though, we were under a huge time crunch since the sellers were buying a home in Georgia along with this sale and were going through a 30-day close, meaning we had to do a 30-day close as well. This greatly reduced the great list of lenders we had obtained and reduced it down to only 1, leaving off a couple that had super low rates!
In order to prepare funds for the down payment, our lender recommended keeping track of all records of transfers to the account we would be paying the bank with. This made sense since they would want to prove where the money was coming from and it wasn’t appearing out of thin air. One piece of advice I have is to try and get all of your funds into one or two accounts in the same bank prior to putting in an offer. You might not have time to transfer money around in that ten days if you have to do things like connect banks, make trial deposits, and then actually transfer the money and wait for it to clear. Luckily we thought of all this beforehand but I imagine this is just another small thing that’s easy to overlook that creates so much stress during this period.
One thing I was worrying about was the home inspection, especially the process of just selecting one. I was worried I would pick on only to find out they weren’t thorough enough or overlooked obvious things. Looking at lots of online reviews though I quickly saw the people leaving bad reviews had vastly different expectations of what a home inspector is responsible to detect. This eased my nerves a little and the inspection ended up coming back perfect!
Now my wife and I are just waiting to close which will happen later this month, so we should be moving in during May or June. I really can’t wait for this to happen and not have to move again for at least a few years.
Written by Steven Wright who lives and works in Sacramento building useful things.