December 5, 2011 2 Comments
Ryan has kept us up-to-date on his adventures building a house. Eric and I recently experienced another side of the equation: we sold our house in New York and bought a new house in Iowa.
We have some prior experience with this process. We have bought four houses and sold three during our twenty-four year relationship. We bought our first house in Northern Virginia in 1989, just before we got married. The interest rate was 10.5%. According to the flyer that we received from the selling agent, who was also our agent, we paid more than anyone else in the neighborhood had previously paid for a house there, ever. Yeah us!
When Eric got transferred to Idaho in 1991, we tried to sell it but the housing market had fallen and we were under water. We eventually sold it at a loss, after renting it for less than we were paying on the mortgage for about five years.
We did a little better on our next house, but not much. We bought it in 1992 and sold it in 1993 for the same price. Luckily, Eric’s employer paid the realtor fees so we didn’t lose too much money.
Having learned our lesson — you need to be in a house for awhile if you want your investment to pay off — it took us some time to get back into the market in New York. We moved there in 1993, but did not buy a house until 1999. Luckily, its value nearly doubled during the twelve years we owned it. When we refinanced in 2002, we also put more money down at a time when many homeowners were taking equity out of their properties. We would have paid for the house completely in less than four more years had we stayed.
With that much equity in the property, we were able to put down a very sizable up-front payment on our Iowa house once we sold the New York one. So that’s how it’s supposed to work! Here are some other things I have (re-)learned about buying and selling an existing home:
- Work with an experienced realtor. They are professionals and they know what they are doing. The realtor will keep your expectations in check. They do most of the work and make everything easier. They know the market and what is out there. They are also a buffer between you and the people who are touring your house and making snap judgments about your decorating choices and budget priorities. Being judged is bad for the soul. Also, if you are buying a house, make sure you have your own agent, someone who represents your interests and not those of the seller. Eric and I strongly recommend the realtors we worked with: Mary Anne Hess at Coldwell Banker Prime Properties and Sue Mears at Mid-America Group Realtors. You may get lucky using a for-sale-by-owner approach, but it puts an undue burden on you, the buyer, and the buyer’s agent if you do so, since there’s no way you’re going to know all the ins and outs of the legal, contractual and civic requirements associated with major property transactions in your market. You get what you pay for, especially in this situation.
- Buyers want the latest updates. A friend told me recently that she and her husband were updating their kitchen because they planned to sell it in a few years and move to Florida. This sounded crazy to me. Why spend all that money to put in features that you will not have a chance to enjoy? So it will sell faster, of course.
- You should fix the stuff you know is a problem before you put your house on the market. Every house has issues. You know better than anyone what the issues are with your house. Don’t wait for the home inspector to tell you what you already know. Just fix it.
- Don’t waste too much time looking at houses that have been on the market for months, unless you want to buy a fixer-upper. Houses that have been on the market aren’t selling because there are too many things wrong with them. At least in the markets we have been looking at, a house that has been on the market more than 90 days isn’t selling for a reason. We stopped looking at them to save time.
- If you are not sure what you are doing, ask for help. We should have asked our parents and older colleagues for advice when we bought our first house. I am not sure why we didn’t, probably because we thought we were smart enough to figure it out on our own.
- A house is an investment, until you live in it awhile, and then it becomes a home. Don’t fall in love with a house until you own it. Don’t pay more than market price for a home because you think it is your dream home. If a house is priced right, it should sell for about 95% of the asking price, so you need to start there or below there if you don’t want to pay too much. While it is true that your monthly payment won’t go up by much if you overbid $5,000 for a home, you will notice that $5,000 when it comes time to sell the house.
- Don’t buy more house than you need. Buying a house is a big investment. There are many other investments that you need to make in your life. You need to save for your kids’ college and save for your retirement. You also need to enjoy life along the way, because there are no promises that you will ever make it to retirement. If you buy more house than you need, you are putting too many eggs in one basket and short-changing those other investments (unless you are among The One Percenters).
- It’s the interest rates, stupid! We thought we did well when we refinanced our house in New York at 4.6%. The rate on our house in Iowa is 3.2%. That is a lot of Cheetos (which is what Eric and I call things we impulse buy). If you are sitting on the sidelines wondering whether it is a good time to get into the market, you should act now and buy that house. Interest rates are already starting to go up.
I don’t plan on selling another home soon, and hopefully never will again. I hope Katelin likes this house because we are seriously thinking about handing her the keys, if and when we decide to move on.