What pitfalls do even smart people make when buying a home?
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What pitfalls do even smart people make when buying a home?
Would be curious about the underrated mistakes that can be made when buying a home even for those who do their homework.
Re: What pitfalls do even smart people make when buying a home?
Assuming home prices can only go up in real dollars.
Re: What pitfalls do even smart people make when buying a home?
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.
Also, not understanding the significance of yard drainage.
Re: What pitfalls do even smart people make when buying a home?
A lot of people fall in love with “the one house” they must have…….
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Re: What pitfalls do even smart people make when buying a home?
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.
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.
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Re: What pitfalls do even smart people make when buying a home?
Not hiring a real estate lawyer.
Avid user of forums on variety of interests-financial, home brewing, F-150, EV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
Re: What pitfalls do even smart people make when buying a home?
Seconded. Like buying a car, you have to both 1) always leave yourself in position to walk away, or else you might get taken to the cleaners or rush into a poor choice, and, 2) recognize that another "perfect" house, or even one that's more perfect, will come along if this one doesn't work out.
Seconded, as well. I'll add on to this: viewing their primary residence as an investment. Your home is an expense, there's no way around it. Done correctly, it can be a lower expense than renting would have been, but it's still a big, big loser compared to, say, a total market index fund--and, likely, a big loser compared to even 0, once all expenses are taken into consideration.
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.
Another one: not shopping loans correctly. So many people just find a lender somewhere: the suggestion of a realtor, or of a "friend," or an advertisement. The difference in cost between a good loan and a poor loan can be staggering. When shopping loans I've seen differences of honest-to-goodness offers where one lender wanted an additional $10k to write a loan at a higher interest rate for the same term. It's unbelievable what some of these guys can try to do with a straight face. Also--don't get fooled by a low rate, or a low APR. Understand the mechanics of how the loan works and compare total costs over a reasonable time period (hint: you are very unlikely to be in the loan for 30 full years).
Final one for now: not knowing everything they want in a house before they buy. I've lived many places, and every place I've lived I've probably learned another preference based on something I'd never really thought about before. Where the master is located, how the floorplan is arranged, where in the neighborhood the house is, what it backs up to, what sort of plants/trees and how many do I want in the yard, how big of a yard, how much storage do I need. My current house, I've learned that what I really would like, but don't have, is a wash basin either in the garage or in the laundry room (just inside from the garage) so I can clean up myself or other things without having to tramp through the house and mess up the kitchen. That's just an example, but lots of these little things are much easier to look out for before you buy than try to fix after.
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Re: What pitfalls do even smart people make when buying a home?
[1] Nicest house on the street, or more broadly nice house in a not-as-nice neighborhood.
[2] Paying "full commission" to your agent. A discount agent will provide basically the same service for most homes. Note that even if you are the buyer, ask your agent to share part of their commission. The exception here may be if you are shopping for a home in a new area that you don't know well. If you are paying full commission, ask yourself (our your agent) what you are getting. Professional photos? Staging? Access to unlisted homes before they come on the market?
[3] Waiving title contingency. I know it's a hot market, but don't you want to know that you are actually getting a clean title? Or, if there is some easement that lets your neighbor traverse your property that nobody told you about?, etc... At worst, the seller should provide title docs pre-offer if no contingency.
[4] Don't buy a home that is so expensive that it causes ongoing stress in your marriage
[2] Paying "full commission" to your agent. A discount agent will provide basically the same service for most homes. Note that even if you are the buyer, ask your agent to share part of their commission. The exception here may be if you are shopping for a home in a new area that you don't know well. If you are paying full commission, ask yourself (our your agent) what you are getting. Professional photos? Staging? Access to unlisted homes before they come on the market?
[3] Waiving title contingency. I know it's a hot market, but don't you want to know that you are actually getting a clean title? Or, if there is some easement that lets your neighbor traverse your property that nobody told you about?, etc... At worst, the seller should provide title docs pre-offer if no contingency.
[4] Don't buy a home that is so expensive that it causes ongoing stress in your marriage
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Re: What pitfalls do even smart people make when buying a home?
This. Have seen this over and over. Must have and won’t leave.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: What pitfalls do even smart people make when buying a home?
Mixing emotions with financial and practical concerns when making decisions.
Sometimes…..
“Wanna” + “Gotta” = “Coulda’” + “Shoulda’”
Not buying with resell in mind.
Not having an exit plan. Financially.
Underestimating costs and overestimating income/assets and resources.
Not doing “due diligence”.
Rushing
Overconfidence (especially smart people…as per O.P)
j
Sometimes…..
“Wanna” + “Gotta” = “Coulda’” + “Shoulda’”
Not buying with resell in mind.
Not having an exit plan. Financially.
Underestimating costs and overestimating income/assets and resources.
Not doing “due diligence”.
Rushing
Overconfidence (especially smart people…as per O.P)
j
Re: What pitfalls do even smart people make when buying a home?
Not thinking about the depth of the garage
As mentioned already, drainage
What may change in the surrounding area such as the nice woods behind you being houses (or worse)
Traffic or ease of getting places
As mentioned already, drainage
What may change in the surrounding area such as the nice woods behind you being houses (or worse)
Traffic or ease of getting places
Re: What pitfalls do even smart people make when buying a home?
Seeing the place during different times of the day (to assess noise and the surrounding environment). Checking out the place when it is raining. And appreciating that layouts can really be different from house to house and how you utilize them. Lastly, as we have gotten older, one floor living beats stairs.
Re: What pitfalls do even smart people make when buying a home?
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.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.
Re: What pitfalls do even smart people make when buying a home?
Trying to time the market Delaying buying the house thinking prices won't appreciate or will fall. Housing price escalation over the past few years in several markets has been intense. Not sure what the next few years bring but loan quality has been super high
AV111
Re: What pitfalls do even smart people make when buying a home?
Its one thing to waive contingencies such as financing and inspection. I've never heard of waiving a title contingency and I doubt the mortgage company would allow it. (which might put you in a bind).LeftCoastIV wrote: ↑Sun Jun 20, 2021 2:37 am [1] Nicest house on the street, or more broadly nice house in a not-as-nice neighborhood.
[2] Paying "full commission" to your agent. A discount agent will provide basically the same service for most homes. Note that even if you are the buyer, ask your agent to share part of their commission. The exception here may be if you are shopping for a home in a new area that you don't know well. If you are paying full commission, ask yourself (our your agent) what you are getting. Professional photos? Staging? Access to unlisted homes before they come on the market?
[3] Waiving title contingency. I know it's a hot market, but don't you want to know that you are actually getting a clean title? Or, if there is some easement that lets your neighbor traverse your property that nobody told you about?, etc... At worst, the seller should provide title docs pre-offer if no contingency.
[4] Don't buy a home that is so expensive that it causes ongoing stress in your marriage
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Re: What pitfalls do even smart people make when buying a home?
Family. Buying for thoughts of extra bedrooms, extra rooms, all predicated on family visiting.
Re: What pitfalls do even smart people make when buying a home?
If building, find the nicest lot available (spent your extra money here) and not on a sub zero refrigerator. Spend money on landscaping and on outdoor space, this you will enjoy and will sell the house faster than that sub zero refrigerator. Just for the record, I do have a sub zero refrigerator and it freezes water and keeps things cool wonderfully.
Re: What pitfalls do even smart people make when buying a home?
Thinking they will stay in the same house for 30+ years. It happens but your needs will change and "life happens".
Buying a house next to unprotected undeveloped land. The land will be developed some day and it may be rezoned and developed in unexpected ways.
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.
Assuming that a new house will not have problems or assuming that the builder will actually fix the problems. Not getting a new home inspected during several different phases of construction when problems may be visible.
Buying a house next to unprotected undeveloped land. The land will be developed some day and it may be rezoned and developed in unexpected ways.
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.
Assuming that a new house will not have problems or assuming that the builder will actually fix the problems. Not getting a new home inspected during several different phases of construction when problems may be visible.
Or thinking home prices can only go up in nominal dollars.
Re: What pitfalls do even smart people make when buying a home?
I've never heard of that either.pshonore wrote: ↑Sun Jun 20, 2021 7:55 amIts one thing to waive contingencies such as financing and inspection. I've never heard of waiving a title contingency and I doubt the mortgage company would allow it. (which might put you in a bind).LeftCoastIV wrote: ↑Sun Jun 20, 2021 2:37 am [1] Nicest house on the street, or more broadly nice house in a not-as-nice neighborhood.
[2] Paying "full commission" to your agent. A discount agent will provide basically the same service for most homes. Note that even if you are the buyer, ask your agent to share part of their commission. The exception here may be if you are shopping for a home in a new area that you don't know well. If you are paying full commission, ask yourself (our your agent) what you are getting. Professional photos? Staging? Access to unlisted homes before they come on the market?
[3] Waiving title contingency. I know it's a hot market, but don't you want to know that you are actually getting a clean title? Or, if there is some easement that lets your neighbor traverse your property that nobody told you about?, etc... At worst, the seller should provide title docs pre-offer if no contingency.
[4] Don't buy a home that is so expensive that it causes ongoing stress in your marriage
Re: What pitfalls do even smart people make when buying a home?
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
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
Last edited by KlangFool on Sun Jun 20, 2021 9:08 am, edited 1 time in total.
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Re: What pitfalls do even smart people make when buying a home?
This cracks me up. I’m in contract for my 1st house in a big city metro where the number of listings are a fraction of a typical year.
House hunting consisted of 10 minutes at an open house
and concluding “I guess this one will work. write up the offer” wash rinse repeat 4 times.
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Re: What pitfalls do even smart people make when buying a home?
Family of 4 in <1500sq. ft., both of us are primarily WFH, and we still have a bedroom that is almost never used and plenty of other unused space. We also had my in-laws live with us for several long stretches (once ~6 months) and never felt cramped. Constant comments about how me must be practically sleeping on top of each other. Buying a home that just met our needs was a significant step in our financial security. Unfortunately we will some day buy more home because my in-laws retirement plan is being dependent on us and they essentially have demanded their own space (a "MIL apartment" with a separate kitchen, etc.).am wrote: ↑Sun Jun 20, 2021 7:35 amI 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.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.
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Re: What pitfalls do even smart people make when buying a home?
Lots of good suggestions. I will emphasize two (not necessarily the most important, but I think very common):
Undervaluing a shorter commute (and shorter time to other amenities).
Overvaluing a large yard.
Undervaluing a shorter commute (and shorter time to other amenities).
Overvaluing a large yard.
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Re: What pitfalls do even smart people make when buying a home?
Wow, how are they in a position to “demand” that of your family? That sounds like an unhealthy amount of entitlement on their part.stoptothink wrote: ↑Sun Jun 20, 2021 9:21 am Unfortunately we will some day buy more home because my in-laws retirement plan is being dependent on us and they essentially have demanded their own space (a "MIL apartment" with a separate kitchen, etc.).
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Re: What pitfalls do even smart people make when buying a home?
Don't get me started.9-5 Suited wrote: ↑Sun Jun 20, 2021 10:06 amWow, how are they in a position to “demand” that of your family? That sounds like an unhealthy amount of entitlement on their part.stoptothink wrote: ↑Sun Jun 20, 2021 9:21 am Unfortunately we will some day buy more home because my in-laws retirement plan is being dependent on us and they essentially have demanded their own space (a "MIL apartment" with a separate kitchen, etc.).
Re: What pitfalls do even smart people make when buying a home?
Buying houses when climbing the corporate ladder and when you have to move lot to advance.
I owned 7 houses over 20 years while moving multiple times. If I had rented houses the entire time and invested all the down payments, property taxes, maintenance, insurance in a total market index fund, I'd be far richer today. This is even after companies paid all my moving expenses and transaction costs and often bought my house. Houses are a money pit that create tons of stress. Much better to rent and be flexible.
I owned 7 houses over 20 years while moving multiple times. If I had rented houses the entire time and invested all the down payments, property taxes, maintenance, insurance in a total market index fund, I'd be far richer today. This is even after companies paid all my moving expenses and transaction costs and often bought my house. Houses are a money pit that create tons of stress. Much better to rent and be flexible.
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Re: What pitfalls do even smart people make when buying a home?
If you waive all contingencies, I assume that means you waive *all* contingencies. Perhaps there is an exception for clean title. According to realtor.com, "You may not be able to waive a clear title search in your area—in some parts of the country, it isn’t even legal"jfn111 wrote: ↑Sun Jun 20, 2021 8:42 amI've never heard of that either.pshonore wrote: ↑Sun Jun 20, 2021 7:55 amIts one thing to waive contingencies such as financing and inspection. I've never heard of waiving a title contingency and I doubt the mortgage company would allow it. (which might put you in a bind).LeftCoastIV wrote: ↑Sun Jun 20, 2021 2:37 am [1] Nicest house on the street, or more broadly nice house in a not-as-nice neighborhood.
[2] Paying "full commission" to your agent. A discount agent will provide basically the same service for most homes. Note that even if you are the buyer, ask your agent to share part of their commission. The exception here may be if you are shopping for a home in a new area that you don't know well. If you are paying full commission, ask yourself (our your agent) what you are getting. Professional photos? Staging? Access to unlisted homes before they come on the market?
[3] Waiving title contingency. I know it's a hot market, but don't you want to know that you are actually getting a clean title? Or, if there is some easement that lets your neighbor traverse your property that nobody told you about?, etc... At worst, the seller should provide title docs pre-offer if no contingency.
[4] Don't buy a home that is so expensive that it causes ongoing stress in your marriage
https://www.realtor.com/advice/buy/what ... ingencies/
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Re: What pitfalls do even smart people make when buying a home?
Agreed. One of the knock on effects of a big yard is it puts you in a location where the only practical way to get around is to drive. Lots of people buy more house than they really need, on a bigger lot than they need, then spend all of their time sitting in a big car, commuting, shopping, chauffeuring the kids to soccer and band practice. The big house is expensive to insure and maintain, the big car is expensive, and nobody gets to spend any time in the big, beautiful house, because they’re all stuck in traffic somewhere.NiceUnparticularMan wrote: ↑Sun Jun 20, 2021 9:24 am Lots of good suggestions. I will emphasize two (not necessarily the most important, but I think very common):
Undervaluing a shorter commute (and shorter time to other amenities).
Overvaluing a large yard.
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Re: What pitfalls do even smart people make when buying a home?
Wife and I completely agree that we never want a yard. When we made the decision to buy a home with grassy patches front and back about the size of a postage stamp (just enough for a garden box), we got all kinds of comments from my mom and stepfather (who have a home 2.5x the size of ours, on 1/2 acre) about how we were doing a disservice to our kids. Our kids have 2 parks and a community pool within 1/4 mile of their front door, my parents have massive front and back yards that my wife and I spend every other weekend tending to (my parents are late 50's, mom just had back surgery and stepfather is blind). Not to mention the massive added costs of lawn care equipment, the fence they just had to replace, the sprinkler system they recently had to fix, etc...And yes, they are dependent on cars while we walk or bike almost everywhere. Other than resale value, why should I want a large yard?quantAndHold wrote: ↑Sun Jun 20, 2021 10:30 amAgreed. One of the knock on effects of a big yard is it puts you in a location where the only practical way to get around is to drive. Lots of people buy more house than they really need, on a bigger lot than they need, then spend all of their time sitting in a big car, commuting, shopping, chauffeuring the kids to soccer and band practice. The big house is expensive to insure and maintain, the big car is expensive, and nobody gets to spend any time in the big, beautiful house, because they’re all stuck in traffic somewhere.NiceUnparticularMan wrote: ↑Sun Jun 20, 2021 9:24 am Lots of good suggestions. I will emphasize two (not necessarily the most important, but I think very common):
Undervaluing a shorter commute (and shorter time to other amenities).
Overvaluing a large yard.
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Re: What pitfalls do even smart people make when buying a home?
Assuming house prices will rise in nominal dollars.
Assuming that a “good” neighborhood will not decline into a less desirable neighborhood.
Assuming that a reasonable government in place at the time of purchase will not do a 180 and foster mayhem.
Assuming that the home is actually in “good condition” - home inspectors don’t catch everything nor are some of them competent.
Big yard = big maintenance (ask me how I know!).
Trees are a lot of work if you are doing the fall cleanup.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Re: What pitfalls do even smart people make when buying a home?
Depending on where the house is, forgetting about geological hazards. Though rare, floods, landslides, avalanches, earthquakes, forest fires, etc. do happen.
Between the idea And the reality...Between the motion And the act...Falls the Shadow - T. S. Eliot
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Re: What pitfalls do even smart people make when buying a home?
Total Cost of Ownership
property taxes, insurance, maintenance (appliances, yard, plumbing, HVAC, roof, etc...), HOA issues, commute time (possibly higher), pest control, etc etc
its a potentially high cost affair. could be well worth it. or not.
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property taxes, insurance, maintenance (appliances, yard, plumbing, HVAC, roof, etc...), HOA issues, commute time (possibly higher), pest control, etc etc
its a potentially high cost affair. could be well worth it. or not.
--------------------------------------
Re: What pitfalls do even smart people make when buying a home?
That just because you live in a VHCOL area that you get a pass on math and budgets leading to overspending on a house.
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Re: What pitfalls do even smart people make when buying a home?
Designing a custom home that's too custom and/or ignoring builder's recommendations.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.
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Re: What pitfalls do even smart people make when buying a home?
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.
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Re: What pitfalls do even smart people make when buying a home?
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.invest2bfree wrote: ↑Sun Jun 20, 2021 1:09 pmKlangFool 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.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: What pitfalls do even smart people make when buying a home?
I know. Back when I used to watch TV, a lot of it was HGTV. I was astonished at how many people make big decisions on their OWN house based on entertainment flexibility and guests.Shallowpockets wrote: ↑Sun Jun 20, 2021 8:10 am Family. Buying for thoughts of extra bedrooms, extra rooms, all predicated on family visiting.
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Re: What pitfalls do even smart people make when buying a home?
Yeh may be was little harsh. I see them saving only 20% of their income.marcopolo wrote: ↑Sun Jun 20, 2021 1:23 pmIf 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.invest2bfree wrote: ↑Sun Jun 20, 2021 1:09 pmKlangFool 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.
Also I dont see them retiring any time soon and they are my age around 46.
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Re: What pitfalls do even smart people make when buying a home?
"Only saving 20% of their income" is way more than the average family and quite a bit of money on that income. They are about 15yrs from "average" retirement age and probably in peak earning years, maybe they aren't concerned about really early retirement like you are? Should they feel responsible to fund son's possible medical school?invest2bfree wrote: ↑Sun Jun 20, 2021 1:39 pmYeh may be was little harsh. I see them saving only 20% of their income.marcopolo wrote: ↑Sun Jun 20, 2021 1:23 pmIf 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.invest2bfree wrote: ↑Sun Jun 20, 2021 1:09 pmKlangFool 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.
Also I dont see them retiring any time soon and they are my age around 46.
We save ~60% of gross income and could probably comfortably retire tomorrow in our mid-late 30's, but sounds to me like your relatives are probably doing great despite living a lifestyle that you or I would consider very lavish.
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Re: What pitfalls do even smart people make when buying a home?
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!invest2bfree wrote: ↑Sun Jun 20, 2021 1:39 pmYeh may be was little harsh. I see them saving only 20% of their income.marcopolo wrote: ↑Sun Jun 20, 2021 1:23 pmIf 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.invest2bfree wrote: ↑Sun Jun 20, 2021 1:09 pmKlangFool 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.
Also I dont see them retiring any time soon and they are my age around 46.
Re: What pitfalls do even smart people make when buying a home?
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.
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.
Re: What pitfalls do even smart people make when buying a home?
I bought a townhome where each room is used daily and there isn't any excess space for the 3 of us. If someone wants to spend the night they can crash on a mattress in the basement where I have my workout room.
When I was house shopping in 2018 I looked for close by amenities and we have the following:
1. Limited space for staying here, we have a hotel across the street
2. No lawn that is mine, there is a community playground a minute walk from my front door
3. Limited capacity for large dinners or get togethers at my place, we have a community center where you can rent rooms and a kitchen very cheap down the road.
4. Community pool is a 5 min drive.
For me a home is for living comfortably with the things we utilize daily, not paying for a bunch of amenities that I can get close by. I don't want to have to fully pay for or maintain it.
When I was house shopping in 2018 I looked for close by amenities and we have the following:
1. Limited space for staying here, we have a hotel across the street
2. No lawn that is mine, there is a community playground a minute walk from my front door
3. Limited capacity for large dinners or get togethers at my place, we have a community center where you can rent rooms and a kitchen very cheap down the road.
4. Community pool is a 5 min drive.
For me a home is for living comfortably with the things we utilize daily, not paying for a bunch of amenities that I can get close by. I don't want to have to fully pay for or maintain it.
Re: What pitfalls do even smart people make when buying a home?
Wow, this is causing me pain just thinking about it. One simple rule is unless you are pretty sure you are going to be in the house 7-10 years don't buy it. I couldn't imagine buying if a short stint of a 2-3 years was a good possibility.
BGeste wrote: ↑Sun Jun 20, 2021 10:23 am Buying houses when climbing the corporate ladder and when you have to move lot to advance.
I owned 7 houses over 20 years while moving multiple times. If I had rented houses the entire time and invested all the down payments, property taxes, maintenance, insurance in a total market index fund, I'd be far richer today. This is even after companies paid all my moving expenses and transaction costs and often bought my house. Houses are a money pit that create tons of stress. Much better to rent and be flexible.
Re: What pitfalls do even smart people make when buying a home?
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?
We've never owned a house and would appreciate more info on yard drainage and where to learn more? Thanks!
Last edited by Zillions on Sun Jun 20, 2021 5:40 pm, edited 1 time in total.
Re: What pitfalls do even smart people make when buying a home?
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.mathwhiz wrote: ↑Sun Jun 20, 2021 4:44 pm Wow, this is causing me pain just thinking about it. One simple rule is unless you are pretty sure you are going to be in the house 7-10 years don't buy it. I couldn't imagine buying if a short stint of a 2-3 years was a good possibility.
BGeste wrote: ↑Sun Jun 20, 2021 10:23 am Buying houses when climbing the corporate ladder and when you have to move lot to advance.
I owned 7 houses over 20 years while moving multiple times. If I had rented houses the entire time and invested all the down payments, property taxes, maintenance, insurance in a total market index fund, I'd be far richer today. This is even after companies paid all my moving expenses and transaction costs and often bought my house. Houses are a money pit that create tons of stress. Much better to rent and be flexible.
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.