What pitfalls do even smart people make when buying a home?

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Zillions
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Re: What pitfalls do even smart people make when buying a home?

Post by Zillions »

chazas wrote: Sun Jun 20, 2021 5:39 pm On of my short stints (2 years) resulted in my biggest gain and resetting the comps for an entire neighborhood. You can’t plan on it but you can’t plan on anything.

Another unexpected 2 year stint resulted in a significant loss because we bought in the “wrong” zip code. It was a gorgeous house and a great bargain if you considered the replacement cost. That was a lesson.

How was it a "wrong" zipcode?
RickBoglehead wrote: Sat Jun 19, 2021 10:36 pm Not hiring a real estate lawyer.
How does a real estate attorney help? Here in California, I was told that the realtor representing the buyer does all the work.

I will be buying soon, so I'm trying to learn as much as I can before jumping into the purchase. Thanks!
chazas
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Re: What pitfalls do even smart people make when buying a home?

Post by chazas »

Zillions wrote: Sun Jun 20, 2021 5:42 pm

How was it a "wrong" zipcode?

Location not considered “good” enough by the upscale folks in the market in that smaller city.
BradJ
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Re: What pitfalls do even smart people make when buying a home?

Post by BradJ »

Zillions wrote: Sun Jun 20, 2021 5:38 pm
Watty wrote: Sun Jun 20, 2021 8:36 am
Using the home inspector that your real estate agent recommends. You want the tough home inspector that is not afraid cause the deal to fall apart that your real estate agent fears.

This is one of my biggest concerns too, as we will be househunting soon.

Almost ALL LOCAL home inspectors in the area seem to know all the realtors. I doubt you can find a truly "independent" home inspector, unless you call someone from over 100 miles away (!), and then they may merely tell you to hire a local inspector!

How can we get around this?
BradJ wrote: Sat Jun 19, 2021 10:22 pm Not fully understanding what season of life they are in. Many folks want projects, but forget that when you work 40 hours a week and have little kids, those projects become low priority.
Also, not understanding the significance of yard drainage.
We've never owned a house and would appreciate more info on yard drainage and where to learn more? Thanks!
Any home you are interested in should be viewed during and after a good rain fall, if possible. Does the neighborhood have good drainage systems? Are any of them right by your home? Does your yard slope toward the house or away from it? These are questions you need to investigate before buying.
Xrayman69
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Re: What pitfalls do even smart people make when buying a home?

Post by Xrayman69 »

Not fully appreciating the “commuting cost” (time and expense) because “we love the house “
brian91480
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Re: What pitfalls do even smart people make when buying a home?

Post by brian91480 »

Zillions wrote: Sun Jun 20, 2021 5:42 pm
chazas wrote: Sun Jun 20, 2021 5:39 pm On of my short stints (2 years) resulted in my biggest gain and resetting the comps for an entire neighborhood. You can’t plan on it but you can’t plan on anything.

Another unexpected 2 year stint resulted in a significant loss because we bought in the “wrong” zip code. It was a gorgeous house and a great bargain if you considered the replacement cost. That was a lesson.

How was it a "wrong" zipcode?
RickBoglehead wrote: Sat Jun 19, 2021 10:36 pm Not hiring a real estate lawyer.
How does a real estate attorney help? Here in California, I was told that the realtor representing the buyer does all the work.

I will be buying soon, so I'm trying to learn as much as I can before jumping into the purchase. Thanks!
You'll be offered to purchase TITLE INSURANCE at your closing... for probably about $1,000. This is optional. I've always said "no thanks" to this... never had a problem.
littlebird
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Re: What pitfalls do even smart people make when buying a home?

Post by littlebird »

stoptothink wrote: Sun Jun 20, 2021 10:54 am Other than resale value, why should I want a large yard?
To put more space between you and multiple neighbors?
EddyB
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Re: What pitfalls do even smart people make when buying a home?

Post by EddyB »

brian91480 wrote: Sun Jun 20, 2021 11:16 pm
Zillions wrote: Sun Jun 20, 2021 5:42 pm
chazas wrote: Sun Jun 20, 2021 5:39 pm On of my short stints (2 years) resulted in my biggest gain and resetting the comps for an entire neighborhood. You can’t plan on it but you can’t plan on anything.

Another unexpected 2 year stint resulted in a significant loss because we bought in the “wrong” zip code. It was a gorgeous house and a great bargain if you considered the replacement cost. That was a lesson.

How was it a "wrong" zipcode?
RickBoglehead wrote: Sat Jun 19, 2021 10:36 pm Not hiring a real estate lawyer.
How does a real estate attorney help? Here in California, I was told that the realtor representing the buyer does all the work.

I will be buying soon, so I'm trying to learn as much as I can before jumping into the purchase. Thanks!
You'll be offered to purchase TITLE INSURANCE at your closing... for probably about $1,000. This is optional. I've always said "no thanks" to this... never had a problem.
A lender will require title insurance, though.
UALflyer
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Re: What pitfalls do even smart people make when buying a home?

Post by UALflyer »

rocket354 wrote: Sat Jun 19, 2021 11:38 pm When you buy a lot of house it might look great and you might feel great, but again like buying an expensive car you soon "adapt" and it's just another house. But the payments go on for even longer than a car. And the maintenance and repairs will be more, and the insurance and taxes will be more, and the utilities will be more, on and on and on.
It's not nearly as straightforward as it sounds. Although people should absolutely not overspend, a ton of people also fail to realize just how dangerous underspending can be.

Buying a cheaper house in a less attractive area will frequently expose you to some combination of a longer commute, lower quality public schools (this is a consideration regardless of whether you have school aged kids, as better public schools help with property values; there are a few exceptions, such as in certain very high end areas, where homeowners automatically send their kids to private schools), less stable neighborhoods, etc... This will frequently mean a lot less appreciation or even depreciation.

In terms of house sizes, while in general larger houses are more expensive to maintain, you may actually be surprised to find out that a spacious and well built house can have similar or even lower maintenance and utility costs than a house that's half the size. It's obviously true that a larger house doesn't necessarily mean that it's built well, just like there's nothing out there preventing smaller houses from being built well. It is just that as a practical matter, most smaller houses are built as "budget" options, while many larger houses are built on larger budgets, which allows them to incorporate things in them that may cost more up front but in the long run will also save money.

Smaller houses are not necessarily cheaper to insure. In fact, a lot of people out there are surprised that in a number of situations, larger and more expensive houses can actually be cheaper to insure, as a lot of insurance carriers have noticed that their loss data shows that larger houses are better able to withstand various natural disasters. Also, the construction quality also has a significant effect on your premiums, and most well built houses also tend to be larger.

This is the reason, for instance, that some of the best insurance carriers that offer the most comprehensive insurance policies will not even insure smaller and less expensive houses, as their loss data shows that larger and more expensive houses have fewer claims (even though the claims severity tends to be higher).

Having said all that, it's not all about the size. If you have a larger but poorly built house that lacks any protective features, is located in a way that makes it susceptible to various natural disasters, is far away from a fire station, etc..., it'll be more expensive to insure than a smaller house without all these negatives. The point here is that the cost to rebuild is just one of many factors that affects your premiums, so a lower dwelling value should not be taken as an indication that it'll be cheaper to insure.
montanagirl
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Re: What pitfalls do even smart people make when buying a home?

Post by montanagirl »

runner3081 wrote: Sat Jun 19, 2021 10:34 pm Buying a house that is way too big.

We have a family of 3 in a 2-story house at 1,900 square feet.

Wish we had a 1-story, 1,400 square foot house.

Same. If we'd waited, just another month...
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djpeteski
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Re: What pitfalls do even smart people make when buying a home?

Post by djpeteski »

Not understanding the cost to transact real estate. It costs real dollars to buy and sell a home. For a trade in home, that we recently completed, it costs us about 50K for what most would consider moderately priced homes. Trading homes every few years will rob you of wealth. I have never heard a financial adviser talk about that.

Also taking the advice of real estate agents with a grain of salt. In order to sell real estate well you have to have a personality that does not mesh well with those who are conservative financially.
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BrooklynInvest
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Re: What pitfalls do even smart people make when buying a home?

Post by BrooklynInvest »

A few lessons I've learned, sometimes the hard way -

Buying and selling is expensive. Aim to own the house for a while.

Income fluctuates. Plan accordingly.

New properties aren't necessarily lower maintenance than old, at least here.

Location, location and.... size. It may not be the square footage that's the primary issue but the layout's gotta match the circumstances well. I once had a 750 sq foot apt but was two (very small) bedrooms and the second bed made all the difference in the world.

Good luck OP!
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simplesimon
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Re: What pitfalls do even smart people make when buying a home?

Post by simplesimon »

lazynovice wrote: Sun Jun 20, 2021 3:43 pm
invest2bfree wrote: Sun Jun 20, 2021 1:39 pm
marcopolo wrote: Sun Jun 20, 2021 1:23 pm
invest2bfree wrote: Sun Jun 20, 2021 1:09 pm
KlangFool wrote: Sun Jun 20, 2021 8:44 am OP,

1) Spend too much on the house. Then, they have to co-sign a student loan for their kids.

2) Spend too much on the house assuming that they will be fully-employed continuously until retirement age. Then, they became permanently unemployed or under-employed in their 40s and 50s.

3) Spend too much on the house. Then, they could not contribute to their tax-advantaged accounts. The additional housing expense carry an additional 20+% to 30+% tax burden. They assume the house appreciation will save them. But, it is obviously false if they know how to calculate. Somehow, they wonder they could never get ahead financially when they are supposedly frugal. Aka, they do not eat out and they packed their lunches.

The house is the #1 factor that destroys my peers financially.

The house is not a home. Home is where your family is. The well being of your family should be more important than a house.

KlangFool

Amazing answer agree with you 100%.

Actually was in a relatives house for a week.

Wife is a Doctor, husband a software Engineer probably making $600k a year.
They live in $1.5 million huge house with high utilities, Kids going to private school for $5k a month , a servant for $2.5k a month.
Include their fancy cars etc , Iam projecting their expenses to be $200k a year. Basically breaking even with very little savings.
Older kid is getting ready for college and wants to be doctor. Now I project $50k just for that kid per year for the next 6 years.
If they are making $600k/yr, $200k in expenses does not seem unreasonable. How is that barely breaking even? Not everyone needs to live like a miser.
Yeh may be was little harsh. I see them saving only 20% of their income.

Also I dont see them retiring any time soon and they are my age around 46.
So they are saving $120,000 a year, living in a home they enjoy, educating their kids, enjoying their careers and even employ someone providing income to others. Sounds awful! :shock: :shock:
Only on Bogleheads....
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tipswatcher
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Re: What pitfalls do even smart people make when buying a home?

Post by tipswatcher »

JustGotScammed wrote: Sat Jun 19, 2021 10:11 pm Would be curious about the underrated mistakes that can be made when buying a home even for those who do their homework.
I wrote about real estate for many years, and one of the most fascinating seminars I ever attended was a Sun City presentation for sales people on "upselling" their new home customers. The suggestion was get the customer in the door with an attractive base price, and then sell them on upgraded countertops, upgraded cabinets, upgraded flooring, appliances, bookcases, etc., etc. The house itself had very little profit built into it, but the upsells were hugely profitable, and a very easy sale. "Well, you could have that laminate countertop, but for just $2,000 more ... " The presentation was gleeful and getting more money out of buyers. I came away from that thinking, "They think customers are suckers."

My advice at the time was: Pick materials and appliances that match the neighborhood's quality, and if you are going to upgrade something, upgrade that builder-quality heating and air system to something near the top of the mid-range quality.
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stoptothink
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Re: What pitfalls do even smart people make when buying a home?

Post by stoptothink »

littlebird wrote: Sun Jun 20, 2021 11:23 pm
stoptothink wrote: Sun Jun 20, 2021 10:54 am Other than resale value, why should I want a large yard?
To put more space between you and multiple neighbors?
And if I don't hear them (which is the case), the benefit of that is? I've lived in both scenarios, I'll take the tiny (or nonexistent) yard and being "close" to my neighbors over the added cost and hassle of a large yard any day.
UALflyer
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Re: What pitfalls do even smart people make when buying a home?

Post by UALflyer »

am wrote: Sun Jun 20, 2021 7:35 am
runner3081 wrote: Sat Jun 19, 2021 10:34 pm Buying a house that is way too big.

We have a family of 3 in a 2-story house at 1,900 square feet.

Wish we had a 1-story, 1,400 square foot house.
I agree. I don’t understand what the appeal of a 5000+ sq foot house is other then maybe showing your wealth to others? No one needs that much space and then it creates a bunch of extra work and expenses. Then it’s tougher to sell as well.
What someone "needs" has always been and will always continue to be very subjective and will depend a ton on the area, your financial situation, your family situation, etc... People also don't need granite countertops, power windows in their cars, etc...

In many areas in California, a 1,500 sq. ft. house may go for $1M, while in many areas in Texas a 5,500 sq. ft. house (with a 2,000 sq. ft. finished basement) may go for $450K.

Just like everything else in life where every decision that you make comes with both pro's and con's, the same applies to house size. Underbuying can be as big of a problem as overbuying, as those who have underbought will frequently be forced to sell and buy something different that much faster, which will require them to pay substantial transaction costs, etc... Covid has greatly exacerbated this trend, as people suddenly found themselves stuck at home and, for a lot of people, the work from home trends are here to stay. Hence, there's this giant remodeling boom now and prices are up significantly, as people are being forced to pay a substantial premium to create more usable square footage, set up home offices, etc... Those who had purchased larger houses typically had significantly more flexibility, so many of them are able to avoid the current huge remodeling premiums.

As for what's easier to sell, it depends on the neighborhood and the area. A property that doesn't fit the overall character of the neighborhood tends to be more difficult to sell, which can mean a larger house, or a smaller house, or a super modern house in a very traditional neighborhood, or a very traditional house in a super modern neighborhood, etc... Hence, while a 5K sq. ft. house surrounded by 2K sq. ft. houses can be difficult to sell, so can a 2K sq. ft. house surrounded by 5K+ sq. ft. houses.
stoptothink
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Re: What pitfalls do even smart people make when buying a home?

Post by stoptothink »

UALflyer wrote: Mon Jun 21, 2021 7:55 am
am wrote: Sun Jun 20, 2021 7:35 am
runner3081 wrote: Sat Jun 19, 2021 10:34 pm Buying a house that is way too big.

We have a family of 3 in a 2-story house at 1,900 square feet.

Wish we had a 1-story, 1,400 square foot house.
I agree. I don’t understand what the appeal of a 5000+ sq foot house is other then maybe showing your wealth to others? No one needs that much space and then it creates a bunch of extra work and expenses. Then it’s tougher to sell as well.
What someone "needs" has always been and will always continue to be very subjective and will depend a ton on the area, your financial situation, your family situation, etc... People also don't need granite countertops, power windows in their cars, etc...

In many areas in California, a 1,500 sq. ft. house may go for $1M, while in many areas in Texas a 5,500 sq. ft. house (with a 2,000 sq. ft. finished basement) may go for $450K.

Just like everything else in life where every decision that you make comes with both pro's and con's, the same applies to house size. Underbuying can be as big of a problem as overbuying, as those who have underbought will frequently be forced to sell and buy something different that much faster, which will require them to pay substantial transaction costs, etc... Covid has greatly exacerbated this trend, as people suddenly found themselves stuck at home and, for a lot of people, the work from home trends are here to stay. Hence, there's this giant remodeling boom now and prices are up significantly, as people are being forced to pay a substantial premium to create more usable square footage, set up home offices, etc... Those who had purchased larger houses typically had significantly more flexibility, so many of them are able to avoid the current huge remodeling premiums.
You do have a point, but I really don't like the use of the word "forced". In this country and day and age, nobody is "forced" to sell because they underbought; almost all of us are living in residences that would be massive (per person) to most of the rest of the world. We're 4 in <1500sq. ft., both of us WFH, and we have more space than we need (we still have an entirely empty bedroom). Even when my in-laws were living with us (in that currently empty bedroom), space was never an issue. Wife and I both grew up with larger families, in smaller homes than we currently live in - how come our parents were never "forced" to move? It's a want.
Last edited by stoptothink on Mon Jun 21, 2021 8:06 am, edited 1 time in total.
Rus In Urbe
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Re: What pitfalls do even smart people make when buying a home?

Post by Rus In Urbe »

djpeteski »
Not understanding the cost to transact real estate. It costs real dollars to buy and sell a home. For a trade in home, that we recently completed, it costs us about 50K for what most would consider moderately priced homes. Trading homes every few years will rob you of wealth. I have never heard a financial adviser talk about that.
Also taking the advice of real estate agents with a grain of salt. In order to sell real estate well you have to have a personality that does not mesh well with those who are conservative financially.
YES! Absolutely! All those fees and moving costs and little things that need to be done right away to make a house livable---they really add up.

Great suggestions on this thread.

The one I haven't seen is this: Real Estate Agents have a formula for "How Much House You Can Afford." Complete Nonsense. They will show you properties that are way beyond what you want to spend or should spend and they have no interest in you wanting to keep the bulk of your wealth invested so it grows. As others have pointed out, the House is not an investment. This is a fundamental thing to keep in mind.

My most recent real estate purchase (where we have lived for the past 18 years) was far below the house we "Could Afford" but was also within walking distance of my job (I'm now retired but the location still works for us). The value of the house constitutes 7% of our net worth and that feels about right to me....keep that number as low as you possibly can and you'll do fine.
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UALflyer
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Re: What pitfalls do even smart people make when buying a home?

Post by UALflyer »

tipswatcher wrote: Mon Jun 21, 2021 7:48 am
JustGotScammed wrote: Sat Jun 19, 2021 10:11 pm Would be curious about the underrated mistakes that can be made when buying a home even for those who do their homework.
I wrote about real estate for many years, and one of the most fascinating seminars I ever attended was a Sun City presentation for sales people on "upselling" their new home customers. The suggestion was get the customer in the door with an attractive base price, and then sell them on upgraded countertops, upgraded cabinets, upgraded flooring, appliances, bookcases, etc., etc. The house itself had very little profit built into it, but the upsells were hugely profitable, and a very easy sale. "Well, you could have that laminate countertop, but for just $2,000 more ... " The presentation was gleeful and getting more money out of buyers. I came away from that thinking, "They think customers are suckers."
This is a very specific situation that applies to brand new construction and certain homebuilders who play these games. It's the budget airline method of making money, where you advertise a low base fare and then impose ancillary surcharges for various "extras."

Luckily, the resale market works very differently.
nolesrule
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Re: What pitfalls do even smart people make when buying a home?

Post by nolesrule »

Buying a house that's too small can also be problematic.

Family of 4. We went from 1100 sq ft in FL to 1900 sq ft in NJ when we moved thinking the extra space would be enough. But I work from home and the children get bigger. After 5 years, that house that seemed a great size when we got it started feeling claustrophobic.

We have since moved again to NC. Much, much bigger house. But the total costs are actually less because it's not NJ (well, water is more now that the kids seem to take their time on the showers... working on that) and that even includes a shorter term mortgage on a more expensive house.

Size can be problematic both ways.
UALflyer
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Re: What pitfalls do even smart people make when buying a home?

Post by UALflyer »

stoptothink wrote: Mon Jun 21, 2021 8:04 am You do have a point, but I really don't like the use of the word "forced". In this country and day and age, nobody is "forced" to sell because they underbought; almost all of us are living in residences that would be massive (per person) to most of the rest of the world. We're 4 in <1500sq. ft., both of us WFH, and we have more space than we need (we still have an entirely empty bedroom). Even when my in-laws were living with us (in that currently empty bedroom), space was never an issue. Wife and I both grew up with larger families, in smaller homes than we currently live in - how come our parents were never "forced" to move? It's a want.
Aside from the basic necessities, like running water and some form of shelter, just about everything that all of us buy is a want.

This is the reason that I don't really see any point in semantic debates over the distinction of a "need" or a "want." My point is that while overspending has unquestionably gotten plenty of people in trouble, when it comes to homebuying, underbuying can also expose you to substantial direct and indirect costs, stress and inconvenience. Homebuying decisions are always complex, but the advice of buying for today without much consideration of future needs/wants can be quite problematic.

In fact, as long as the purchase is affordable, buying somewhat more than your immediate needs/wants with an eye towards the future is more likely to keep you more comfortable and content both now and in the future, which will be a lot more likely to keep you in the same place and eliminate substantial transaction costs associated with buying and selling.

Over time, people tend to greatly appreciate additional flexibility and creature comforts that come with nicer places and better locations and, long term, these types of places can be a better buy than buying and selling places every few years.
Last edited by UALflyer on Mon Jun 21, 2021 8:55 am, edited 1 time in total.
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jandres12
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Re: What pitfalls do even smart people make when buying a home?

Post by jandres12 »

You should always get a hold of and understand the future land use and zoning maps for the area from your local jurisdiction. If zoning is planned development (PD) get a hold of the PD documents and understand exactly what uses are allowed and where.

Look up the floodplain map from FEMA, as well as the soils maps from NRCS. These will provide a lot of useful information to inform the drainage concerns that others brought up.
Wannaretireearly
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Re: What pitfalls do even smart people make when buying a home?

Post by Wannaretireearly »

Wow. Great responses.

Just a few adds:
Think about how you'll grow in the new house:
- a downstairs full bath/bedroom is almost a deal breaker as far as I'm concerned. Ability to age in place. Or at least think about how easily this can be added.
- related to above, I generally avoid HOA's. There is no way we could have expanded our house and made it very modern looking outside with a HOA.
- financially, staying with one mortgage (now paid off) has been my best move imo. So, really think about the location of the house, neighborhood, accessibility, lot size/potential. Plan as if you will not move!

Edit: the one thing I've seen smart folks around me do is rush into buying 2 to 3M houses. It's not just the upfront/recurring cost, but being in the frenzy and rushing into the largest financial decision of your life!
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stoptothink
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Re: What pitfalls do even smart people make when buying a home?

Post by stoptothink »

UALflyer wrote: Mon Jun 21, 2021 8:40 am
stoptothink wrote: Mon Jun 21, 2021 8:04 am You do have a point, but I really don't like the use of the word "forced". In this country and day and age, nobody is "forced" to sell because they underbought; almost all of us are living in residences that would be massive (per person) to most of the rest of the world. We're 4 in <1500sq. ft., both of us WFH, and we have more space than we need (we still have an entirely empty bedroom). Even when my in-laws were living with us (in that currently empty bedroom), space was never an issue. Wife and I both grew up with larger families, in smaller homes than we currently live in - how come our parents were never "forced" to move? It's a want.
Aside from the basic necessities, like running water and some form of shelter, just about everything that all of us buy is a want.

This is the reason that I don't really see any point in semantic debates over the distinction of a "need" or a "want." My point is that while overspending has unquestionably gotten plenty of people in trouble, when it comes to homebuying, underbuying can also expose you to substantial direct and indirect costs, stress and inconvenience. Homebuying decisions are always complex, but the advice of buying for today without much consideration of future needs/wants can be quite problematic.

In fact, as long as the purchase is affordable, buying somewhat more than your immediate needs/wants with an eye towards the future is more likely to keep you more comfortable and content both now and in the future, which will be a lot more likely to keep you in the same place and eliminate substantial transaction costs associated with buying and selling.

Over time, people tend to greatly appreciate additional flexibility and creature comforts that come with nicer places and better locations and, long term, these types of places can be a better buy than buying and selling places every few years.
Pretty simple, use a word other than "forced". "Want to upgrade" makes a lot more sense in your post. How you phrased it suggests that individuals have no choice but to buy more home if they initially bought a more modest home.
Dagwood
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Re: What pitfalls do even smart people make when buying a home?

Post by Dagwood »

Getting overcome with emotion/want and not thinking through how they will ever repay the loan within the contours of a plan for retirement. Maybe they simply assume they will sell and move.

Also not appreciating the maintenance and upkeep costs of even a normal home.
vfinx
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Re: What pitfalls do even smart people make when buying a home?

Post by vfinx »

Making it a bigger deal (emotionally) than it should be. For most on this forum, a bad home purchase decision isn't ruinous.
Colorado14
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Re: What pitfalls do even smart people make when buying a home?

Post by Colorado14 »

One pitfall is buying in an area that makes you car dependant and/or leads to a long commute. I live in a very safe suburb and can easily walk and bike to shopping, parks, schools, services, etc. which is fabulous. It saves both money and time to have amenities nearby.

Another pitfall is not understanding the impact of metro district fees on new construction. This may be local to the Denver area, where metro district fees can far exceed property tax expenses.
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tennisplyr
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Re: What pitfalls do even smart people make when buying a home?

Post by tennisplyr »

To name a few:

-Not getting it inspected
-Not checking out the neighborhood at different times
-Buying the nicest house on the block
-Being afraid to negotiate
-Feeling pressured by the broker
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EnjoyIt
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Re: What pitfalls do even smart people make when buying a home?

Post by EnjoyIt »

am wrote: Sun Jun 20, 2021 7:35 am
runner3081 wrote: Sat Jun 19, 2021 10:34 pm Buying a house that is way too big.

We have a family of 3 in a 2-story house at 1,900 square feet.

Wish we had a 1-story, 1,400 square foot house.
I agree. I don’t understand what the appeal of a 5000+ sq foot house is other then maybe showing your wealth to others? No one needs that much space and then it creates a bunch of extra work and expenses. Then it’s tougher to sell as well.
We have a 5000 sqft house that we will be selling in the near future. I agree, it is a total waste of space and waste of my time to maintain. We are fortunate enough that we can afford it. But I hate how much of my time I spend taking care of maintenance items. Even if I hire them out, I still need to be present and waste hours or a day getting someone in and doing the job.

There are 6 things I thing we would prefer in a house.
1) A large enough and functional kitchen to cook and maybe have a few people sit and entertain.
2) A bedroom closet that holds all our clothes
3) A bedroom for each of our kids
4) An office that can easily convert into a bedroom
5) A media room or at least a living room that functions as a media room
6) A large enough garage to fit our cars while also some functional space inside.
7) Storage.

Just recently we rented a 2000 sqft air B&B. It was single story and almost fit our needs perfectly. It lacked enough storage and lacked an office/spare bedroom. I think if it had a second story adding an additional 800 sqft. it would have been perfect.

5000 sqft is overkill while 1400 sqft is just too small for our desires. I have been to 2500-3000 sqft houses that perfectly fit the above needs. When we finally get rid of our 5000 sqft monstrosity, we will be looking in the 2500-3000 sqft range.
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UALflyer
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Re: What pitfalls do even smart people make when buying a home?

Post by UALflyer »

JustGotScammed wrote: Sat Jun 19, 2021 10:11 pm Would be curious about the underrated mistakes that can be made when buying a home even for those who do their homework.
You've obviously asked for a list of mistakes, but as should be evident from most responses, people tend to give you a list of their highly subjective and individualized preferences.

The fact that all these preferences are so subjective and individualized is the reason that it is so important to try to figure out yours, while realizing that some things are incredibly difficult to ascertain without experiencing them. Some people want the smallest possible yard, as they consider the outside area a waste of their time and money. Other people want a nice and private lot, so that they aren't constantly staring at their neighbors, want to give their pets a nice fenced in yard, want room for a swing, want to build a treehouse with and for their kids, or a nice private pool, etc... As long as it all fits in the overall character of the neighborhood, there's no right or wrong answer here, so you just need to know what it is that you are after.

There's a million of these subjective things that significantly affect each person's enjoyment or frustration, so, unfortunately, the usefulness of these types of threads tends to be limited.
softmax
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Re: What pitfalls do even smart people make when buying a home?

Post by softmax »

LilyFleur wrote: Sun Jun 20, 2021 3:56 pm Make sure you have at least two contingencies:

1. That the house appraises at the value of the purchase price (otherwise, you have to come up with the extra cash because the bank won't finance the extra cost).

2. House inspection.

#2 saved me a few years ago. I had waived #1, and I felt uncomfortable with putting more cash in.

Have the ability to walk away if the deal falls apart.
Contingencies unfortunately don’t work in expensive markets.
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Re: What pitfalls do even smart people make when buying a home?

Post by DSBH »

A bad house inspector.
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Re: What pitfalls do even smart people make when buying a home?

Post by LilyFleur »

softmax wrote: Mon Jun 21, 2021 11:37 am
LilyFleur wrote: Sun Jun 20, 2021 3:56 pm Make sure you have at least two contingencies:

1. That the house appraises at the value of the purchase price (otherwise, you have to come up with the extra cash because the bank won't finance the extra cost).

2. House inspection.

#2 saved me a few years ago. I had waived #1, and I felt uncomfortable with putting more cash in.

Have the ability to walk away if the deal falls apart.
Contingencies unfortunately don’t work in expensive markets.
3. Don't buy in a frenzied, expensive market.
QBoy
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Re: What pitfalls do even smart people make when buying a home?

Post by QBoy »

The mistake DW and I made when young:

Underestimating the cost of fixing up a fixer-upper.
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Re: What pitfalls do even smart people make when buying a home?

Post by EddyB »

I have to say, notwithstanding what I’m sure are good intentions in a lot of those posts, ultimately, if the purchase is affordable and informed, the rest of it seems largely like distractions. We bought a house we “loved,” and it was the nicest, biggest house (and lot) in the neighborhood. We probably spent 1/3 more than we would have had to spend for a very acceptable, but more modest house, but the purchase was only about 1.5x income for us at the time. We were pretty sure the neighborhood’s housing stock would improve, and it did. We were able to spend a decade in a house we really enjoyed, and its percentage increase in value far exceeded the norm in our town and neighborhood over that time (there are more people who can compete for the top end of houses here now then there when we bought). There were some headaches with yard care during that time, but we’ve been well compensated for them now. We were never stressed out about it, because it was affordable, and there were times when the “extras” (space, yard, landscaping, etc.) delivered real comfort and joy beyond what we would have had in the more typical places we could have lived in over that decade.
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Re: What pitfalls do even smart people make when buying a home?

Post by stoptothink »

EnjoyIt wrote: Mon Jun 21, 2021 11:27 am
am wrote: Sun Jun 20, 2021 7:35 am
runner3081 wrote: Sat Jun 19, 2021 10:34 pm Buying a house that is way too big.

We have a family of 3 in a 2-story house at 1,900 square feet.

Wish we had a 1-story, 1,400 square foot house.
I agree. I don’t understand what the appeal of a 5000+ sq foot house is other then maybe showing your wealth to others? No one needs that much space and then it creates a bunch of extra work and expenses. Then it’s tougher to sell as well.
We have a 5000 sqft house that we will be selling in the near future. I agree, it is a total waste of space and waste of my time to maintain. We are fortunate enough that we can afford it. But I hate how much of my time I spend taking care of maintenance items. Even if I hire them out, I still need to be present and waste hours or a day getting someone in and doing the job.

There are 6 things I thing we would prefer in a house.
1) A large enough and functional kitchen to cook and maybe have a few people sit and entertain.
2) A bedroom closet that holds all our clothes
3) A bedroom for each of our kids
4) An office that can easily convert into a bedroom
5) A media room or at least a living room that functions as a media room
6) A large enough garage to fit our cars while also some functional space inside.
7) Storage.

Just recently we rented a 2000 sqft air B&B. It was single story and almost fit our needs perfectly. It lacked enough storage and lacked an office/spare bedroom. I think if it had a second story adding an additional 800 sqft. it would have been perfect.

5000 sqft is overkill while 1400 sqft is just too small for our desires. I have been to 2500-3000 sqft houses that perfectly fit the above needs. When we finally get rid of our 5000 sqft monstrosity, we will be looking in the 2500-3000 sqft range.
We got back yesterday from 8 days renting a <3k sq. ft.(with no yard) AirBnB in Moab with a bunch of family: us 4, my parents, my sister and her daughter, and my 2 other younger sisters. My parents mentioned several times how the rental was just perfect (for 10). We've been trying to get my parents to downsize for years from their nearly 4k sq. ft. on half an acre (for 3, soon to be 2 people). Not only does it push the boundaries of affordability for them, but because of their health problems my wife and I get stuck helping them A LOT; we spend every other Saturday doing all of their yardwork, we did all of the low-skilled work for a recent kitchen remodel and fixing of ~50' of fence...We are happy to do it, but we'd prefer not to. They always talk about how they need the extra room (the basement has 3 bedrooms and a media room that basically nobody ever goes into) for when we stay over and that they like having a big yard for the grandkids to play in (they don't, we go to a park). Maybe this is the impetus for them realize that they don't "need" so much home and that they could even move in with us when my youngest sister moves out in a year (which would allow them to someday retire - home equity is the entirety of their assets).

What's interesting is that my mom raised 5 kids in a 2bdr/1bath ~1k sq. ft. home.
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Re: What pitfalls do even smart people make when buying a home?

Post by HootingSloth »

stoptothink wrote: Mon Jun 21, 2021 8:04 am
UALflyer wrote: Mon Jun 21, 2021 7:55 am
am wrote: Sun Jun 20, 2021 7:35 am
runner3081 wrote: Sat Jun 19, 2021 10:34 pm Buying a house that is way too big.

We have a family of 3 in a 2-story house at 1,900 square feet.

Wish we had a 1-story, 1,400 square foot house.
I agree. I don’t understand what the appeal of a 5000+ sq foot house is other then maybe showing your wealth to others? No one needs that much space and then it creates a bunch of extra work and expenses. Then it’s tougher to sell as well.
What someone "needs" has always been and will always continue to be very subjective and will depend a ton on the area, your financial situation, your family situation, etc... People also don't need granite countertops, power windows in their cars, etc...

In many areas in California, a 1,500 sq. ft. house may go for $1M, while in many areas in Texas a 5,500 sq. ft. house (with a 2,000 sq. ft. finished basement) may go for $450K.

Just like everything else in life where every decision that you make comes with both pro's and con's, the same applies to house size. Underbuying can be as big of a problem as overbuying, as those who have underbought will frequently be forced to sell and buy something different that much faster, which will require them to pay substantial transaction costs, etc... Covid has greatly exacerbated this trend, as people suddenly found themselves stuck at home and, for a lot of people, the work from home trends are here to stay. Hence, there's this giant remodeling boom now and prices are up significantly, as people are being forced to pay a substantial premium to create more usable square footage, set up home offices, etc... Those who had purchased larger houses typically had significantly more flexibility, so many of them are able to avoid the current huge remodeling premiums.
You do have a point, but I really don't like the use of the word "forced". In this country and day and age, nobody is "forced" to sell because they underbought; almost all of us are living in residences that would be massive (per person) to most of the rest of the world. We're 4 in <1500sq. ft., both of us WFH, and we have more space than we need (we still have an entirely empty bedroom). Even when my in-laws were living with us (in that currently empty bedroom), space was never an issue. Wife and I both grew up with larger families, in smaller homes than we currently live in - how come our parents were never "forced" to move? It's a want.
This seems to be something that fits in the "personal" part of personal finance. Different people have different perceptions about how much living space is comfortable, will live in different real estate markets, etc. My family of 3 enjoys living in a <1000sqft. downtown condo that gives us the ability to walk to work (and all of the other downtown amenities and attractions) and means our mortgage is about 4% of gross. For other people this might be "underbought." But if we wanted a single family home without adding in a 30-45 minute driving commute, we would need to pay five times as much (and still need to pay for private school). That is not appealing to me, and adding the commute is probably even more unappealing.

The transaction costs of sizing up to a larger condo if we want to as the kid grows also don't seem to be very high because we would be selling an inexpensive home. Maybe I will be surprised on that front, but it seems clear that our savings by reducing our mortgage payments for even a handful of years will be more than 10% of the selling price.
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hand
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Re: What pitfalls do even smart people make when buying a home?

Post by hand »

1) Believing that anyone in the housing transaction is 100% aligned with your interests
a) Realtors only get paid if you buy, and are motivated to push you to close as quickly as possible
b) Inspectors get more business by finding fewer issues, and their liability is typically limited to nothingness
c) Lenders may get paid more for

2) Failing to understand key data about the house
a) Relationship to flood zones
b) Zoning and risk of future nearby development
c) Evening and weekend traffic and noise
d) (For rural buyers) Availability of internet
e) (For new construction buyers) Believing that glossy brochures and a "warranty" mean high construction values
f) (For new construction buyers) Assuming that things like garages and closets are fit for purpose - these features are added to sell homes - even if a standard sized car or a hanger won't fit.
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Re: What pitfalls do even smart people make when buying a home?

Post by Carol88888 »

Not understanding the true costs of homeownership which includes maintenance and landscaping and pool supplies etc.

Also, property taxes can go up.

But for me it would be the realization that I really don't like the hassle of dealing with all the things that can need to be fixed. So much easier to ring up the super.
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Re: What pitfalls do even smart people make when buying a home?

Post by EnjoyIt »

Carol88888 wrote: Mon Jun 21, 2021 1:31 pm Not understanding the true costs of homeownership which includes maintenance and landscaping and pool supplies etc.

Also, property taxes can go up.

But for me it would be the realization that I really don't like the hassle of dealing with all the things that can need to be fixed. So much easier to ring up the super.
One of my colleagues who her and her husband have a very good career and income (don't know their net worth.) Sold their very large house that they raised their kids in and moved into an upscale high-rise. They love it. They have a doorman, and valet for their car. Just call down, and the car will be waiting for them as they get out of the elevator. There is no maintenance. There is no yard work. Plenty of storage in the storage unit inside the building. They state that they can't believe how much easier their life has been and how much happier they are taking away all that busy home ownership related busy work.
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EnjoyIt
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Re: What pitfalls do even smart people make when buying a home?

Post by EnjoyIt »

stoptothink wrote: Mon Jun 21, 2021 12:04 pm
EnjoyIt wrote: Mon Jun 21, 2021 11:27 am
am wrote: Sun Jun 20, 2021 7:35 am
runner3081 wrote: Sat Jun 19, 2021 10:34 pm Buying a house that is way too big.

We have a family of 3 in a 2-story house at 1,900 square feet.

Wish we had a 1-story, 1,400 square foot house.
I agree. I don’t understand what the appeal of a 5000+ sq foot house is other then maybe showing your wealth to others? No one needs that much space and then it creates a bunch of extra work and expenses. Then it’s tougher to sell as well.
We have a 5000 sqft house that we will be selling in the near future. I agree, it is a total waste of space and waste of my time to maintain. We are fortunate enough that we can afford it. But I hate how much of my time I spend taking care of maintenance items. Even if I hire them out, I still need to be present and waste hours or a day getting someone in and doing the job.

There are 6 things I thing we would prefer in a house.
1) A large enough and functional kitchen to cook and maybe have a few people sit and entertain.
2) A bedroom closet that holds all our clothes
3) A bedroom for each of our kids
4) An office that can easily convert into a bedroom
5) A media room or at least a living room that functions as a media room
6) A large enough garage to fit our cars while also some functional space inside.
7) Storage.

Just recently we rented a 2000 sqft air B&B. It was single story and almost fit our needs perfectly. It lacked enough storage and lacked an office/spare bedroom. I think if it had a second story adding an additional 800 sqft. it would have been perfect.

5000 sqft is overkill while 1400 sqft is just too small for our desires. I have been to 2500-3000 sqft houses that perfectly fit the above needs. When we finally get rid of our 5000 sqft monstrosity, we will be looking in the 2500-3000 sqft range.
We got back yesterday from 8 days renting a <3k sq. ft.(with no yard) AirBnB in Moab with a bunch of family: us 4, my parents, my sister and her daughter, and my 2 other younger sisters. My parents mentioned several times how the rental was just perfect (for 10). We've been trying to get my parents to downsize for years from their nearly 4k sq. ft. on half an acre (for 3, soon to be 2 people). Not only does it push the boundaries of affordability for them, but because of their health problems my wife and I get stuck helping them A LOT; we spend every other Saturday doing all of their yardwork, we did all of the low-skilled work for a recent kitchen remodel and fixing of ~50' of fence...We are happy to do it, but we'd prefer not to. They always talk about how they need the extra room (the basement has 3 bedrooms and a media room that basically nobody ever goes into) for when we stay over and that they like having a big yard for the grandkids to play in (they don't, we go to a park). Maybe this is the impetus for them realize that they don't "need" so much home and that they could even move in with us when my youngest sister moves out in a year (which would allow them to someday retire - home equity is the entirety of their assets).

What's interesting is that my mom raised 5 kids in a 2bdr/1bath ~1k sq. ft. home.
Good luck. My parents lived with us for about 6 months. It wasn't too big of a deal in our monstrosity of a house. Plenty of room for separation and doing your own thing. About 2 years later we spent about 1 month in my parents smaller house. There is no separation and we were much more on top of each other. Although it wasn't that big of a deal for me, my spouse started to feel a bit cooped up. Also, when I was a teenager, my grandmother lived with us, but she had her own little den where she can go and watch TV so again, plenty of separation possibilities. My point being is to share my experiences for your own evaluation and consider the ability to have your own space if you are a multigenerational household.
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Re: What pitfalls do even smart people make when buying a home?

Post by marti038 »

Not saying I'm smart, but if I had to do it over again DW and I would have bought a smaller, fixer-upper type for our first home. We bought a 3bd/2.5ba 2600 square foot house for 2 people just because it was the most house we could afford.

Most of the square footage went unused for years and we're big DIY'ers. In hindsight, I still would have bought a house, but would have bought one appropriately sized for a young couple without kids and enough time and cashflow to build equity by polishing up an uglier home.

We could have saved more money in retirement/investment savings instead of building net worth in a house that was bigger than needed.
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stoptothink
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Re: What pitfalls do even smart people make when buying a home?

Post by stoptothink »

EnjoyIt wrote: Mon Jun 21, 2021 2:26 pm
stoptothink wrote: Mon Jun 21, 2021 12:04 pm
EnjoyIt wrote: Mon Jun 21, 2021 11:27 am
am wrote: Sun Jun 20, 2021 7:35 am
runner3081 wrote: Sat Jun 19, 2021 10:34 pm Buying a house that is way too big.

We have a family of 3 in a 2-story house at 1,900 square feet.

Wish we had a 1-story, 1,400 square foot house.
I agree. I don’t understand what the appeal of a 5000+ sq foot house is other then maybe showing your wealth to others? No one needs that much space and then it creates a bunch of extra work and expenses. Then it’s tougher to sell as well.
We have a 5000 sqft house that we will be selling in the near future. I agree, it is a total waste of space and waste of my time to maintain. We are fortunate enough that we can afford it. But I hate how much of my time I spend taking care of maintenance items. Even if I hire them out, I still need to be present and waste hours or a day getting someone in and doing the job.

There are 6 things I thing we would prefer in a house.
1) A large enough and functional kitchen to cook and maybe have a few people sit and entertain.
2) A bedroom closet that holds all our clothes
3) A bedroom for each of our kids
4) An office that can easily convert into a bedroom
5) A media room or at least a living room that functions as a media room
6) A large enough garage to fit our cars while also some functional space inside.
7) Storage.

Just recently we rented a 2000 sqft air B&B. It was single story and almost fit our needs perfectly. It lacked enough storage and lacked an office/spare bedroom. I think if it had a second story adding an additional 800 sqft. it would have been perfect.

5000 sqft is overkill while 1400 sqft is just too small for our desires. I have been to 2500-3000 sqft houses that perfectly fit the above needs. When we finally get rid of our 5000 sqft monstrosity, we will be looking in the 2500-3000 sqft range.
We got back yesterday from 8 days renting a <3k sq. ft.(with no yard) AirBnB in Moab with a bunch of family: us 4, my parents, my sister and her daughter, and my 2 other younger sisters. My parents mentioned several times how the rental was just perfect (for 10). We've been trying to get my parents to downsize for years from their nearly 4k sq. ft. on half an acre (for 3, soon to be 2 people). Not only does it push the boundaries of affordability for them, but because of their health problems my wife and I get stuck helping them A LOT; we spend every other Saturday doing all of their yardwork, we did all of the low-skilled work for a recent kitchen remodel and fixing of ~50' of fence...We are happy to do it, but we'd prefer not to. They always talk about how they need the extra room (the basement has 3 bedrooms and a media room that basically nobody ever goes into) for when we stay over and that they like having a big yard for the grandkids to play in (they don't, we go to a park). Maybe this is the impetus for them realize that they don't "need" so much home and that they could even move in with us when my youngest sister moves out in a year (which would allow them to someday retire - home equity is the entirety of their assets).

What's interesting is that my mom raised 5 kids in a 2bdr/1bath ~1k sq. ft. home.
Good luck. My parents lived with us for about 6 months. It wasn't too big of a deal in our monstrosity of a house. Plenty of room for separation and doing your own thing. About 2 years later we spent about 1 month in my parents smaller house. There is no separation and we were much more on top of each other. Although it wasn't that big of a deal for me, my spouse started to feel a bit cooped up. Also, when I was a teenager, my grandmother lived with us, but she had her own little den where she can go and watch TV so again, plenty of separation possibilities. My point being is to share my experiences for your own evaluation and consider the ability to have your own space if you are a multigenerational household.
My in-laws lived with us off-and-on multiple times over a 4yr period, with the longest stretch being ~6 months. This is in a 1500sq. ft. 3bdr home, with 4 people already living in it. My in-laws apparently weren't comfortable, but it was fine for us. Wife and I agreed we'd have no problem with it permanently, and we get along with my parents much better than hers'. Either way, my parents will never do it and we're still battling in-laws because they are essentially demanding their "own space" (which we'll pay for) when they inevitably move back in with us permanently.

I just find it odd that both our parents raised larger families in smaller homes, but now have issues with space. Granted, neither situation was a multi-generational household. Wanting more space is fine if you can afford it, but my in-laws absolutely can't and my parents barely can and it burdens us because we have to do a lot of the maintenance.
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Re: What pitfalls do even smart people make when buying a home?

Post by TomatoTomahto »

EnjoyIt wrote: Mon Jun 21, 2021 2:11 pm One of my colleagues who her and her husband have a very good career and income (don't know their net worth.) Sold their very large house that they raised their kids in and moved into an upscale high-rise. They love it. They have a doorman, and valet for their car. Just call down, and the car will be waiting for them as they get out of the elevator. There is no maintenance. There is no yard work. Plenty of storage in the storage unit inside the building. They state that they can't believe how much easier their life has been and how much happier they are taking away all that busy home ownership related busy work.
I alternate between wanting this and being happy with our large rural-ish home. DW prefers the rural-ish home. Oh well.
I get the FI part but not the RE part of FIRE.
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Re: What pitfalls do even smart people make when buying a home?

Post by dogagility »

Price creep.

Going into the process thinking they'll spend N and ending up spending N x 1.2
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Re: What pitfalls do even smart people make when buying a home?

Post by Spinola »

Buying too much house.
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Re: What pitfalls do even smart people make when buying a home?

Post by likegarden »

Think many years ahead when buying a house. We bought our 2-story house (all bed rooms upstairs) in 1987, but now at age 81 I have severe arthritis and climbing stairs is difficult.
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Re: What pitfalls do even smart people make when buying a home?

Post by Matahari »

Failing to take into account the fact that owning a home which provides plenty of space typically requires concomitant stuff.

Not I, but many of our friends and acquaintances have houses that have been decorated to the nines. And now that they are in the empty-nest, pre-retirement stage of their lives, and none of their kids want their stuff, they are facing having to unload much of their carefully curated furniture and decorative items. And having gotten their houses "perfect," they don't want to leave! Three older couples have houses that are too large and too full of stuff. They are in their late 60s and may end up staying at their houses beyond when it makes financial sense to do so.
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Re: What pitfalls do even smart people make when buying a home?

Post by quantAndHold »

Matahari wrote: Mon Jun 21, 2021 4:52 pm Failing to take into account the fact that owning a home which provides plenty of space typically requires concomitant stuff.

Not I, but many of our friends and acquaintances have houses that have been decorated to the nines. And now that they are in the empty-nest, pre-retirement stage of their lives, and none of their kids want their stuff, they are facing having to unload much of their carefully curated furniture and decorative items. And having gotten their houses "perfect," they don't want to leave! Three older couples have houses that are too large and too full of stuff. They are in their late 60s and may end up staying at their houses beyond when it makes financial sense to do so.
Corollary: thinking your kids are going to want your stuff. They have their own stuff now. They don’t want yours any more than you wanted your parents’ old junk.
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Re: What pitfalls do even smart people make when buying a home?

Post by Normchad »

quantAndHold wrote: Mon Jun 21, 2021 5:14 pm
Matahari wrote: Mon Jun 21, 2021 4:52 pm Failing to take into account the fact that owning a home which provides plenty of space typically requires concomitant stuff.

Not I, but many of our friends and acquaintances have houses that have been decorated to the nines. And now that they are in the empty-nest, pre-retirement stage of their lives, and none of their kids want their stuff, they are facing having to unload much of their carefully curated furniture and decorative items. And having gotten their houses "perfect," they don't want to leave! Three older couples have houses that are too large and too full of stuff. They are in their late 60s and may end up staying at their houses beyond when it makes financial sense to do so.
Corollary: thinking your kids are going to want your stuff. They have their own stuff now. They don’t want yours any more than you wanted your parents’ old junk.
So true!
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Re: What pitfalls do even smart people make when buying a home?

Post by fyre4ce »

I think it's a mistake to pay full commission to a real estate agent. I've used a full-price agent, discount agent, and a flat-fee MLS listing service. I was very happy with the cheaper options.
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