Wednesday, July 18, 2012

Lessons Learned As A First-Time Home Buyer (My Experience)

Since we're house-hunting right now (sort of), I find myself thinking back on our first homebuying experience and trying to decide what I've learned. I also want to post a few of the more in-depth DIY projects we did during our remodel here, so I thought it might be good to introduce how we ended up purchasing good old 1521. Here's what happened. I'm curious to know whether others' home buying processes were as drawn-out and circuitous, or whether that was just us.

We Asked Ourselves, "Should We Buy?"

Back in the summer of 2009 we waffled and waffled about whether the time was right for us to purchase our first home. Tyson had his first "real" job, with a more decent salary than we had anticipated. The $8000 tax credit for first-time homebuyers had been created. We were expecting our second child and living in a two-bedroom basement apartment - another bedroom would be nice. Interest rates were low (well, they seemed low at the they're loooooooooooowww!). Likewise, prices had fallen, putting more properties within our price range.

But still, we weren't sure buying was the right thing for us at the time. Though only a two-bedroom, our daylight basement apartment was almost 1500 square feet. It was in a house that was only about five years old, and it had a walkout entrance to a huge fenced backyard. We were renting from a friend, and our rent was low. So low, in fact, that the rent vs. buy calculators pretty much told us it was financial sixes between renting and buying. Because of that, it ended up being the $8000 tax credit that swayed us. We figured the $8000 would be our "profit" from the house, since we thought if we bought a house we would only stay in it for three years before selling. We knew it was likely that home prices would continue to drop in that time (and look, they did!). Besides the tax credit, the only real driving force behind deciding to buy a home was wanting three bedrooms -- hopefully a master bathroom, a garage, and some enclosed yard space (but those things were negotiable).

Looking back, I wish I hadn't let myself be so influenced by outside factors and incentives like the $8000 tax credit. For those of you who don't know the end of the story, I'll clue you in. We bought a home and took the credit, but we ended up moving out of the home after less than a year to take a promotion in another state. Because the credit required the home owners to occupy the home for the next three consecutive years, we had to pay back the entirety of the $8000 credit. Ironically, we moved back into the home 17 months later, so at the end of the three years we are here again, but that doesn't mean we get the money (or even half of it for spending half of three years here).

As I was thinking about this I realized that I am letting the current market conditions (low prices and low interest rates) heavily influence my decision to sell our home and buy another right now. The numbers make trading up attractive (mixed with the fact that we really are outgrowing our place), but I shouldn't let myself feel rushed because of those factors. In truth we could wait another year (or more), save up more money, and see where things shake out with our income and desire to stay in this area. If prices change, so be it. They won't change THAT dramatically. If interest rates go up, so be it. Our current loan is at 5%, which seemed really low at the time we got it. The same interest rate (if rates go up that much) wouldn't be the end of the world.

We Took Time To Educate Ourselves About the Market and the Process

I attended a first-time home buyer workshop offered by our local college. That's where I first found our agent, who was also a member of our family (or had been). I spent hours on the MLS getting a feel for the market and figuring out what properties were a good value. I peppered my agent with questions.

We Made a List of Must Haves and Would-Be-Nices.

As I mentioned, one of our only "must haves" was a third bedroom. Another was a good location. We also wanted something that would put is in a good equity position. Maybe a house with an unfinished basement we could complete ourselves to raise the property value? Maybe a fixer-upper? Maybe something with an accessory apartment we could rent out? Maybe something priced below market by a motivated seller?

On our list of "would-be-nices" were things like a master bathroom, covered parking/garage, air conditioning, and a fenced yard or patio.

We Found Out What We Could Qualify For, Then We Set Our Budget Realistically Below That Amount.

With only a few "must haves" on our list, we found it very difficult to narrow down potential properties. The first step, which helped a lot, was to talk to a loan officer and find out how much loan we could qualify for. Then, knowing the bank will give you more than will really be financially comfortable to pay back monthly, we set our budget significantly under that amount. Now we knew we should look at properties up to $160,000. Perhaps slightly above that, in case we could put in a lower offer on a higher-listed property to bring it within our range.

We Looked at Properties. LOTS of properties.

Because our list of must-haves was so small, and because it was our first time looking at properties with a view to buying, we started out looking at one or two each of various types of properties: a couple big old single-family fixers (needed way more work than we could handle/afford), a couple duplexes (the locations were bad), a few reasonably priced small older homes in the heart of town (some places were nice and a couple places were awful, but Tyson decided he didn't want the maintenance issues and headaches of an old house, plus, the locations weren't that great), a newer bank-owned property (it was trashed and it didn't seem like a very good deal for the work it needed), a brand new townhouse in the town where Tyson worked (we liked it a lot but worried that the announced amenities would never be built and that the developer would later lower the prices on the new units, leaving us upside-down {which ended up happening to the people who bought there - good call, us}), and a single-family home in that same town (on which we decided to make an offer, see next section).

We Made Some Offers. We Made Some Mistakes.

At the time, Tyson was working in a town called Hyrum, a sleeply little rural community about ten miles outside of our main city of Logan. We thought living there would be nice because of the non-existent commute. We could also get more house for our money out there.

A four-lane highway connects Hyrum to Logan. We looked at a corner house that faced into a nice neighborhood but had a side facing the highway, right where the speed limit slows as the road comes into town. It was a three bedroom, two-bath rambler on a nice-sized .30 acre lot. Built in the late '80s, it had the same color of brick and siding as the house I grew up in. Maybe that seemed comforting to me? It was single-level and had been updated and well taken care of.

A few of the upsides were the nice cul-de-sac neighborhood, the convenient location, the single-level living, the two-car garage, the large fenced yard with sliding doors from the master and dining rooms, and, most of all, the master suite. The master bedroom was very spacious and had a walk-in closet and a huge bathroom with a jetted tub and separate shower. I fell for the idea of that master bedroom.

You see, by that time in our marriage we had lived in five apartments and had never had the luxury of a big tub, let alone the luxury of a master bathroom. Heck, one of our apartments didn't even have a tub (just the tiniest shower ever), and our trailer had a tub that was only 10 inches deep!

"A" marks the house. The busy highway is beyond the stop sign.

The downsides of the house were the price (at the top of our range), the location (side facing the busy highway), and the fact that it had no air conditioning (not even a swamp cooler). We decided to put in an offer anyway. We offered $4000 less than the asking price, which had already been reduced. We were met with a counter-offer. They countered with the same asking price. Deterred by their unwillingness to negotiate and the downsides of the house, we decided not to counter back. We moved on.

Someone else bought the home a couple months later. I've always wondered what the final selling price was. We pass the house at least once a week, since it is on the way to my in-laws' house. I still kind of picture our life there. What it might have been. Would we still have decided to take the promotion and move to Pennsylvania? Would we be kicking ourselves for not having air conditioning? Would we have a swing set and a garden? Would we be thinking of adding on a family room? The new owners haven't taken very good care of the house. The fence is broken, the grass in overgrown, weeds are everywhere, and they often park a couple of motorcycles right on the front lawn. I feel sad for that little house, the first house I wanted enough to ask it to be mine.

To Be Continued...(In which a canal breaks above a home on the day we were going to put in an offer on it.)


I think that's probably enough words for one day. I'm curious, what year did you buy your first home? Did you offer on any homes besides the one you ended up in? Do you ever wonder what might have been?

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