Counting the Days

Counting the days only takes us one day closer to death.

We need to live in the moment; multitasking isn't all that it's cracked up to be.

Do things that matter. Spend time with people and less time at work or on menial tasks.  Put your device away.  Be present and enjoy every moment. You never know when it might be your last.

Time flies. Time stands still. Time moves on. Don't let time pass you by.

Home Buying Process Part 4: Making an Offer and Getting a Home Inspection

When you are checking out a home, remember that the furniture and decor won't be there.  Colors can be changed, wall paper or paneling can be removed, and appliances can be replaced.  These are small issues in the grand scheme.  Unless that is, you want a perfect home where you don't have to lift a finger to make it your own.

As I've previously mentioned looking in the country can be challenging.  There are less options so you need to be less picky about these "swappable" items.  Instead focus on the location, land, neighbors, and bones of the house. These are the non-negotiables. You can always add on or build a garage/barn in the future if you need more space.

The location-Is it a good location for you?  Close enough to work? Far enough from neighbors? Close or far enough from the road? You will be responsible for the upkeep of your driveway.  If rain washes away the stone you will have to replace it.  If it's paved, you'll have to patch it or fix cracks.  In the winter, you will have to plow when it snows. Do you mind taking the trash down the long lane?  If it's close to the road, will the sound of passing cars bother you?  We visited one home whose windows rattled when cars drove past because it was sooooo close to the road.  Is it on a highway with lots of traffic noise?  Even some county roads have a great deal of traffic-are you prepared for that?  Is it near a railroad?  Will the sound of honking engines or rattling cars bother you?  Is it near high tension power lines?  Some people claim there are increased risks of cancer when you live close to power lines.  Are you willing to take that risk?  Is it near a ditch or drain?  Some counties make you pay extra taxes for the "privilege" of having them.  Sometimes you are even forced to pay an additional fee when the county does maintenance on them.  Are you willing to do that?  Does the property bump up to a State or National Park? There are pros and cons to this.  It can be an "extension" of your property.  You won't have to worry about neighbors building in that direction.  However, people will be hiking trails and exploring next to your property.  Some may even venture onto your property.  You may want to explore that section of the park to see how likely "surprise visitors" might be.  You may also want to look into any special restrictions that may apply.

The land-If you are wanting trees and it's barren, it's going to take a while (or a lot of money) to get shade.  A woods doesn't appear over night and similarly forested areas require work and money to clear.  If the land drains toward the house, you've got problems.  If you can, visit after a hard, heavy rain. See if there is flooding on the property. We drove by one 15 acre property after spring rains had hit and realized if we bought it, we'd have less than 4 acres of "dry" land if there was ever a hard rain or a quick melt.  We don't want to pay for that much useless land. (This is where those drives come in; you never know when a home might go on the market.)  Do you own the rights to the land or does someone else own rights to it (i.e. mineral rights)?  Is the terrain super steep or ever changing?  This can make farming or mowing more difficult.  If you just want to hike or hunt, it wouldn't be an issue.

The neighbors-Do they maintain their property or does their yard look like a tornado hit it?  Are they people you could rely on in a pinch, or would you feel like you'd need to lock your doors?  Feel free to go up to neighbors' homes and ask their opinion of the property you are considering; it gives you a chance to learn something you might not already know about both the property and the neighbors.  

The bones-Is there mold?  I know that mold can be removed, but it's rather costly.  Typically, mold is a great warning sign for other problems such as foundation cracks, leaking roofs, improper ventilation, and poorly installed objects.  Is the home leaning or collapsing?  If so, there are probably some very costly structural issues.  Sometimes the issue can be stopped without too much expense.  A friend was able to stop the home collapsing towards the failing chimney in the center of her house by adding a series of floor jacks.  Whenever someone spills something at the table, the person sitting closest to the old chimney puts their hands out to try to stop the spill while others go to get paper towel.  Spills always go towards their chimney.  Is the wiring old? If so, you'll want to replace it so the house doesn't burn down. You may need to replace the circuit box, too.  If you aren't capable of rewiring yourself, you'll need to hire an electrician which costs money.  Does it have good plumbing or is it rusting or cracking and needing replaced? How is the exterior? Is the siding in good shape?  If it has a wood exterior, is the wood buckling? Does it need repainted? Repainting is a long process and while it costs less than siding it is still fairly expensive unless you wait for a paint sale like I did. Are the windows properly sealed? What about the roof? Does it have multiple layers of shingles or are shingles missing? New metal roofs will last 25+ years, but they are expensive.

Now that you've looked at those items, you can look at the cosmetics.  Will you need to remodel to fit your needs?  If so, how much can you afford to spend on fixing carpet, woodwork, toilets, showers, can you save up to fix them in the future.  All of this weighs into how much you should be willing to spend.

Have your realtor pull comps in the area, or do the dirty work yourself through your county's online GIS system or Auditor's Office.  Some online systems have search categories where you can find comparable properties that have sold in the last year or so.  Also, keep a list of any home that you thought was interesting but didn't place an offer on and see what the sale prices were. It will help you figure out how much you should offer.

It's not a bad idea to find out how much you'll owe in taxes each year and get an insurance quote BEFORE you place an offer. Your bank will require you to have homeowners insurance. We learned that out in the sticks fire protection is more limited so insurance costs go up.  There's also apparently a distance in which some insurance companies will refuse to insure your home due to the slow response time of fire departments.  Certain features such as fire places or wood exteriors cause rates to increase.  Know how much the house will cost to insure or if it can be insured before you place an offer.

Also be prepared to put ernest money down to show a buyer that you are serious about purchasing their property.  This amount will ultimately be wrapped into the closing costs, but it tells the seller that you are serious about the home. You can offer anywhere between a couple hundred or thousand dollars.  We've always done $500-$1,000 depending on the home.  And speaking of closing costs, I recommend splitting them 50/50.  We've had great luck with that, but you can always try to get the seller to pay all costs.  Just know it's not as common as it once was.

Know that the property may be priced to sell or it may have some added wiggle room.  You have to ultimately decide how much it's worth to you.  We got in a bidding war for a property a few years ago and put in our "best" offer.  We later found out that even though it was over the asking price someone had gone even further over the asking price. We knew what our limit was and stuck to it. Don't let a bidding war cause you to spend more than what you can afford.

All offers you make should be conditional based on passing an inspection by a professional!  Despite keen observations, sometimes you just miss something or overlook the severity of it.  A second set of eyes can keep you from wasting thousands of dollars or living a life of regret.  We have been saved by a home inspector twice. It was well worth around $1,000 to save thousands. If they come up with major issues and your offer was conditional, you are able to back out of the purchase and your ernest money is returned.  If you back out of the offer and you did not have this clause written in your offer, you could loose your ernest money if you back out.

If there is something on the property or in the house that you want included in the sale, make sure it is included.  We were even advised to make sure that a pellet stove was included-even though it was the only way to heat the house simply because it might be moved by the previous owner.  Usually there is a sale sheet that tells what the house will come with, but it never hurts to make sure you request those important items they may have just forgot to list in your offer. It's also important if you want the curtains, mirrors, etc. to stay that you request them as well.  You may even see if they are willing to throw in or sell a tractor or picnic table.  No item is off the table unless they previously say they won't negotiate it.  Remember, the worst they can say is "No." So, why not ask?

Once your realtor places the offer, be prepared to wait.  The offer will give them a time frame in which they have to respond; you set the time frame.  I've heard of times ranging between 12 hours and 3 days.  We usually give them 24 hours, mostly because I might go insane if I had to wait 3 days to find out what they thought of their offer.  Sometimes, the response comes within a couple of hours, sometimes you wonder if they will answer at all.

After the offer is accepted, be sure to set up the inspection within the first week.  You may have other requirements based on the type of loan you choose. If an issue arises during the inspection you can ask to have it fixed or ask for a certain amount off of the price of the house so you can fix it.  If you have them fix it, make sure that they use a certified individual and not using their "Uncle Bob."

If all goes well, you'll be ready to close. Closing typically takes place between 30 and 45 days after the offer is accepted.  Before you close, be sure to demand to do a final walk through. Make sure they have removed all items they were supposed to remove and that they left all items they were supposed to leave. When we bought our first home, our realtor said that we didn't need to do a final walk through, getting receipts for items fixed would be enough.  We wish we'd done a final walk through.  For example, the previous owners had "Uncle Bob" write a receipt that he'd "fixed" the bathroom fan. One day, when I was getting ready, the vent fan fell and took a chunk of facial skin from me before hitting the ground. Had we inspected the fix, we could have seen his shoddy work.  We would have also realized they took all the curtains and one of the mirrors that they had agreed to leave. Side note: If your realtor is from the same company as the seller's realtor, beware.  They may be looking out for themselves and not you.  Also beware if the realtor knows the seller.  They may not have your best interest in mind, but may in fact because of a bond with the seller be making sure the seller comes out on top.  Don't ask me how I know this.

During the final walk through, if you notice that something is damaged make note of it.  All these things can be fixed before you sign, but please, don't be petty about little things that don't matter.  The home you are buying has been lived in and will not look "like new."

Home Buying Process Part 3: Finding your new home

In previous posts I've discussed how we narrowed down what we're looking for as well as how to finance your purchase.

First, if you are really serious, you need to treat home shopping like a part-time job.  Homes are going to go up for sale and in hours they can be sold. While that's not always the case, it can be.  Brace yourself for let downs!

While you may have a realtor "helping" you, many times they are just using a search service to generate matches and email you. They may not follow-up with an email or phone call, so you may still have to make the contact.  I daily check a variety of source for potential purchases. There are plenty of apps to help you as well.

My paranoia may stem from the time I pushed our realtor to get us to see a home at 11 am the morning it was listed.  Apparently, someone else scheduled a 9 am showing and by the time we had finished the tour, they put in a cash offer.  Mortgages just can't compete with cash offers.  That home sold within 3 hours of being listed!!! We actually bought our current house the day it went the on the market.  Because of those experiences, I guess my poor brain thinks if I slack off, I will miss a great opportunity.

1. The most common way to get a home is with a realtor.  You want someone who feels like a friend.  Friends contact you right away when something exciting happens, they ask questions to make sure they understand you, and they truly care about what happens to you.  We had a really crappy first realtor who came very highly recommended.  We stuck with her because of that recommendation; we never should have done that, but we were first time home buyers and learned a lot about what not to do!  Looking back, she didn't get to know us.  She saw us as a way to earn more money.  She even gave us some pretty bad advice which is part of why I want to share with you some of the things we've learned.  Remember, if you are using a realtor (which I still recommend) make sure you spend some time getting to know them.  We love our current realtor. (She has helped us through making several offers that have fallen through for a variety of reasons.  I'll share more about a couple of those in a future post.) She took time to get to know exactly what we were looking for and has even spared us a few visits by asking the right questions to another realtor about some of our "non-negotionables."
2. You can also go for drives through the neighborhood or area you are looking to purchase.  If you are willing to buy for sale by owner home, do this!  Some realtors won't even mention a for sale by owner home.  Many sellers won't list the homes on the web and they usually aren't even mentioned in the for sale column of the local paper.  I'm not sure how these people think they will sell their house, but I think they are truly counting on people driving by and spreading the glory of their home by word of mouth.  
3. Looking online is an increasingly popular approach. There are plenty of apps to help you as well.  Trulia had great mapping feature where you could draw your own search area and then use settings to narrow down specifics you are looking for in that area. They've redone their website/app, and as of writing this, I don't see the pen icon that let you draw, but you can still zoom in and search the area that fills the window.  Realtor.com allows you to easily look at price history.  
   
   This can be helpful in determining how much you should offer or to get a feel for how much value they are adding to the improvements they've done.  It may also help you better understand how much under asking price you can safely offer if the home has been on the market for awhile.   You could also search Craigslist (buyer beware) or Forsalebyowner.com.  Just know that these sites still won't have all the for sale by owner options on them.  Again, driving is a great way to make discoveries.
4. Buy from a friend.  We know people who have mentioned how cute a friends' house is and they've said, "Wanna buy it?" Little did they know that they had been thinking of up/down sizing or changing locations.  We've even had people tell us that they'd sell us their home.  The problem is, they don't live in our little area. But hey!  It might work for you!

Home Buying Process Part 2: Financing

You can dream big, but at some point you're going to have to shell out. I may want a 3 story Victorian home and a huge bank barn with a cupola on 100 acres with lots of Arabian and Quarter horses, a small dairy and cheese making area, but can I really afford it? Nope.

So how do I know how much I can afford?  You could ask a bank, but they'll most likely approve you for more than you really should spend.  There is such a thing as house poor.  Most people know someone who has a nice house but can't do anything fun and only sleep in their house because they don't have any money and work all the time.

You can also take your monthly income and find what 25% of that would be like Dave Ramsey suggests.  Or, you can be like us and say, "Golley gee, mortgages suck!  How much are we willing to shell out each month?" We refinanced our current home when the rates were in the 2% range and since we had been paying extra down each month, our refinanced mortgage was small.  It's hard to imagine going back to a big mortgage again.  Here's one of the many places you can go to estimate your mortgage.

Before I go any further, I want to give you a piece of advice that I wish someone had given us.  First, if you currently own a home, do NOT make extra payments on the house if you think you are going to move!  You need to have money for a down payment.  We missed out on a few homes that might have been perfect early on in the search because we didn't realize that saving for a down payment would be better for us than paying down principle on our current mortgage.  Money talks when buying a home; make sure you have plenty of it in reserve.

Also, many traditional banks will not finance anything over 10 acres. If you are purchasing more than 10 acres, you will most likely have to pay that out of pocket.  YOU HAVE BEEN WARNED.  If you go for more of an ag type loan through a co-op so you can finance a large parcel, you may find that you will need a larger down payment (up to 50% depending on the type of loan, your credit, etc.). This is also true of buying land which I'll cover in another post.

Now, when you are considering your monthly payment, don't forget that unless you purchase your home with cash, you will be required to have home owners' insurance and you'll have to pay property taxes, unless you live in a state that as my hubby says "doesn't charge you a rent fee to live on your own land" (no property taxes). Most likely an escrow account will be set up by your lender so that each month an estimated portion of your payments is actually being reserved to pay taxes and insurance for you; meaning you never personally write the check.  You pay the bank each month and they make sure the tax and insurance bills are paid on time. Usually this is non-negotiable.  That's fair enough.  If someone is lending the money, they want to make sure that their investment is protected.  

Plan to have 20% of the total mortgage ready to be paid at closing as a down payment.  Zero down mortgages or mortgages that allow less of a down payment really aren't the best options.  You'll may end up with a higher interest rate, and you don't want to have to pay PMI. (Private Mortgage Insurance-You can't afford the down payment, so they can't trust you; you need to pay them for the privilege of taking a risk on you. You will never get this money back, and it doesn't apply to the principle. What. A. Waste.) Even though some loans may not make you put any money down, you almost always pay for it in additional closing costs and fees.  What you don't pay for in closing costs, you pay for in purchasing freedoms.  For example, if you are buying a home in the country, you may qualify for an USDA loan.  While it offers more buying support, ultimately it can limit the condition of home and/or property you can buy. VA loans for example may not let you have dilapidated out buildings.  Again, they are thinking if you don't have the money for a down payment, you aren't going to have money to fix the house or property so you don't need that extra burden.

You'll also need to decided how long of a term do you want your loan to be.  While some people say only do a 15 year mortgage, I think it depends on your situation.  Sure a 15 year mortgage will probably give you a better rate (and that does matter), but if you are cautious like me, don't sweat it.  Do the 30 year mortgage, but pay an extra payment specifically towards the principle or put an extra payment worth of cash into your savings account-and don't spend it!  Even if you don't use it as a down payment, in a few years you can pay off your mortgage early.

There are also 20 year mortgages, and some banks let you customize the mortgage.  We wanted to make sure that if we did go down to one paycheck, for whatever reason, the mortgage wouldn't be more than 25% of one of our paychecks when we bought this home.  When we went to refinance, because we'd been putting extra down for a few years, we refinanced to a 15 year mortgage and were paying hundreds less per month! We're now paying 2% less than our previous mortgage after the refinance.  Lower rates and paying extra can make a huge difference.  So don't think that just because you have a mortgage you are done. 

Once you've decided on how much you want to spend, the term, and have a down payment ready figure out who your want your lender to be.  If they don't respond to your emails, phone calls, or questions promptly, you don't want to use them! You may get in a bidding war or have issues with a house inspection and need to cancel the mortgage before you are locked in.  If they don't promptly respond it could cost you a house or a huge amount of money. Look at their terms (i.e. can I pay it off early without penalty) and rates.

Then get a pre-approval letter. Be prepared to provide a lot of personal information including banking info, pay stubs, tax returns, and other lender specific items before you can get that highly sought after pre-approval letter. Usually, you need one of those before you can make an offer on a home, but sometimes properties even require a pre approval letter before you can view them. If you are serious about buying a home, you need this magic pre-approval letter so that when you do find the home of your dreams, you can put that offer in ASAP.  

Home Buying Process Part 1: Deciding what you want

Finding a home (in the country especially) is a process.  For us, it's been a 4 year process and we are still unable to buy what want in the area that we want.  We can find homes outside of our area pretty easily, but within our area it's been a challenge.  These next few posts will detail the steps we've taken in trying to secure our dream home and the ones you'll most likely need to take as well.  If you are looking to buy in the city, well, this should go a lot faster for you.  Our suburbia home took just a couple of weeks to find as did most of our friends' city/suburbia homes.  It's the country homes that you have to brace yourself for the long haul.

Step 1: Decide on the type of home you'd like, the location, and what features you desire and need

For us this was simple-or so we thought.  After 4 years of searching we've revised our list several times, but the main idea is still the same.  In short order, we want a home that has good bones but doesn't need to be completely gutted.  We don't mind putting in some sweat equity, but we are not willing to completely renovate the entire house (yet-ask us again if we are still searching in 5 years).  Hubby thinks that if we have to completely renovate down to the studs in every room, we might as well have built a home with all our specs and not have to deal with any other "old age" issues.  We'd like a 1,500 to 3,000 sq. ft. home with no neighbors directly bordering the property within 40 minutes of each of our jobs.  Herein lies the challenge.  Apparently homes are magnets. When one home is built in the middle of nowhere others just start popping up around it.  To further complicate matters, we work in somewhat opposite directions. So we don't get to use that circle that most people use, we have a fat rectangular line.  We'd like to have between 5-20 acres; see we are flexible!  Hubby wants a large pole barn for his mechanical exploits; I'd like one for animals, but we both realize this is something that we could build.  We're willing to spend somewhere around $200,000 dollars because we know that's probably close to what it will cost to get most of what we want, but we'd rather spend closer to the $150,000 range simply because who wants a big mortgage!  Not us!

Now here's where it gets interesting.  Hubby desires something that's more modern.  If the house is less than 15 years old, he'd love that.  He also likes more sterile modern furnishings.  I on the other hand am a connoisseur of history.  The older it is, the more likely I'll love it.  The more intricate the details, you guessed it, the more likely I'll love it.  Does it look like it's straight out of the 1800s?  Be still my heart! Needless to say, every home viewing is an adventure for our polar opposite desires and we have to remind ourselves that we can change the looks and their ugly decorations are not staying.

So, desires and needs are two very separate things.  Desires are the things that we will say "eh...we can make that happen" whereas needs are the "oh....it doesn't have this; forget about it." For example, we looked at a home that had a bad foundation-NOPE! Not gonna touch that with a 10 ft pole.  Oh, you say you fixed that yourself. Good for you, but I still don't trust your sketchy solution.  We also looked at a "newer" home that had mold (and lots of it) in the attic and basement as well as a variety of other issues.  We could tell that cause of the mold issues were far more extensive than either one of us wanted to tackle.  I mean we're adventurous, but we're not dumb!  (Side note: someone else did buy the moldy house.  Two months later, they put it back on the market and a year and a half later it still hasn't sold again!)

Now if we come across a house happens to be move-in ready, have a two car attached garage, a large pole barn, 20 acres and in our price range would we be okay with that? Absolutely.  However, we realize that the likelihood of that happening is next to nothing.

To summarize, make a list of "must haves" and "would be nices," but also have a list of issues and if they come up, you always walk away as difficult as it might be.

Below are some homes that I think are adorable-be sure to put on your spectacles to read my adorations for each!  Despite the fact they are dreamy, they are not in ready supply.  So, as long as it has good bones and is in a convenient location, we're game.  Also, some of these homes would be out of our league.  In my next post, I'll detail the fun important topic of financing.