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

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
JustGotScammed
Posts: 104
Joined: Fri Jun 09, 2017 10:16 pm

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

Post by JustGotScammed »

Would be curious about the underrated mistakes that can be made when buying a home even for those who do their homework.
User avatar
Lee_WSP
Posts: 10404
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

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

Post by Lee_WSP »

Assuming home prices can only go up in real dollars.
BradJ
Posts: 622
Joined: Sun Jan 21, 2018 5:06 pm

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

Post by BradJ »

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.
Normchad
Posts: 5648
Joined: Thu Mar 03, 2011 6:20 am

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

Post by Normchad »

A lot of people fall in love with “the one house” they must have…….
runner3081
Posts: 5994
Joined: Mon Aug 22, 2016 3:22 pm

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

Post by runner3081 »

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.
User avatar
RickBoglehead
Posts: 7877
Joined: Wed Feb 14, 2018 8:10 am
Location: In a house

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

Post by RickBoglehead »

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.
User avatar
rocket354
Posts: 679
Joined: Mon Dec 14, 2015 11:31 am

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

Post by rocket354 »

Normchad wrote: Sat Jun 19, 2021 10:25 pm A lot of people fall in love with “the one house” they must have…….
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.
runner3081 wrote: Sat Jun 19, 2021 10:34 pm Buying a house that is way too big.
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.
LeftCoastIV
Posts: 1030
Joined: Wed May 01, 2019 7:19 pm

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

Post by LeftCoastIV »

[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
aristotelian
Posts: 12277
Joined: Wed Jan 11, 2017 7:05 pm

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

Post by aristotelian »

Buying a home 😁
jebmke
Posts: 25480
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

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

Post by jebmke »

Normchad wrote: Sat Jun 19, 2021 10:25 pm A lot of people fall in love with “the one house” they must have…….
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
User avatar
Sandtrap
Posts: 19591
Joined: Sat Nov 26, 2016 5:32 pm
Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

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

Post by Sandtrap »

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🌺
Wiki Bogleheads Wiki: Everything You Need to Know
Silverado
Posts: 1651
Joined: Fri Oct 18, 2013 6:07 pm

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

Post by Silverado »

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
drzzzzz
Posts: 1047
Joined: Sat Sep 22, 2012 9:56 pm

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

Post by drzzzzz »

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.
am
Posts: 4233
Joined: Sun Sep 30, 2007 9:55 am

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

Post by 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.
av111
Posts: 717
Joined: Mon Jan 26, 2015 12:27 pm

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

Post by av111 »

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
pshonore
Posts: 8212
Joined: Sun Jun 28, 2009 2:21 pm

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

Post by pshonore »

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
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).
Shallowpockets
Posts: 2533
Joined: Fri Nov 20, 2015 9:26 am

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

Post by Shallowpockets »

Family. Buying for thoughts of extra bedrooms, extra rooms, all predicated on family visiting.
User avatar
Wricha
Posts: 1014
Joined: Sun Mar 25, 2012 10:33 am

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

Post by Wricha »

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.
User avatar
Watty
Posts: 28860
Joined: Wed Oct 10, 2007 3:55 pm

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

Post by Watty »

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.

Lee_WSP wrote: Sat Jun 19, 2021 10:13 pm Assuming home prices can only go up in real dollars.
Or thinking home prices can only go up in nominal dollars.
User avatar
jfn111
Posts: 1377
Joined: Fri Nov 08, 2013 9:42 pm
Location: Minnesota

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

Post by jfn111 »

pshonore wrote: Sun Jun 20, 2021 7:55 am
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
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).
I've never heard of that either. :confused
KlangFool
Posts: 31530
Joined: Sat Oct 11, 2008 12:35 pm

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

Post by KlangFool »

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
Last edited by KlangFool on Sun Jun 20, 2021 9:08 am, edited 1 time in total.
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
WS1
Posts: 497
Joined: Wed Jan 07, 2015 2:45 pm

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

Post by WS1 »

jebmke wrote: Sun Jun 20, 2021 6:40 am
Normchad wrote: Sat Jun 19, 2021 10:25 pm A lot of people fall in love with “the one house” they must have…….
This. Have seen this over and over. Must have and won’t leave.
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.
stoptothink
Posts: 15368
Joined: Fri Dec 31, 2010 8:53 am

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

Post by stoptothink »

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.
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.).
NiceUnparticularMan
Posts: 6103
Joined: Sat Mar 11, 2017 6:51 am

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

Post by NiceUnparticularMan »

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.
User avatar
9-5 Suited
Posts: 1307
Joined: Thu Jun 23, 2016 12:14 pm

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

Post by 9-5 Suited »

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.).
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
Posts: 15368
Joined: Fri Dec 31, 2010 8:53 am

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

Post by stoptothink »

9-5 Suited wrote: Sun Jun 20, 2021 10:06 am
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.).
Wow, how are they in a position to “demand” that of your family? That sounds like an unhealthy amount of entitlement on their part.
Don't get me started.
BGeste
Posts: 237
Joined: Wed Jul 24, 2019 11:55 am

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

Post by BGeste »

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.
LeftCoastIV
Posts: 1030
Joined: Wed May 01, 2019 7:19 pm

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

Post by LeftCoastIV »

jfn111 wrote: Sun Jun 20, 2021 8:42 am
pshonore wrote: Sun Jun 20, 2021 7:55 am
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
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).
I've never heard of that either. :confused
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"
https://www.realtor.com/advice/buy/what ... ingencies/
User avatar
quantAndHold
Posts: 10141
Joined: Thu Sep 17, 2015 10:39 pm
Location: West Coast

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

Post by quantAndHold »

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.
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.
av111
Posts: 717
Joined: Mon Jan 26, 2015 12:27 pm

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

Post by av111 »

BGeste wrote: Sun Jun 20, 2021 10:23 am If I had xxxxxxxx. I'd be xxxx today.
Story of my life
AV111
stoptothink
Posts: 15368
Joined: Fri Dec 31, 2010 8:53 am

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

Post by stoptothink »

quantAndHold wrote: Sun Jun 20, 2021 10:30 am
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.
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.
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?
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

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

Post by Grt2bOutdoors »

Lee_WSP wrote: Sat Jun 19, 2021 10:13 pm Assuming home prices can only go up in real dollars.
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
Pu239
Posts: 593
Joined: Mon Dec 17, 2018 5:24 pm

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

Post by Pu239 »

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
mr_brightside
Posts: 897
Joined: Sat Oct 17, 2020 3:23 pm

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

Post by mr_brightside »

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.

--------------------------------------
DB2
Posts: 1396
Joined: Thu Jan 17, 2019 9:07 pm

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

Post by DB2 »

Lee_WSP wrote: Sat Jun 19, 2021 10:13 pm Assuming home prices can only go up in real dollars.
Yup!
User avatar
Nate79
Posts: 9373
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

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

Post by Nate79 »

That just because you live in a VHCOL area that you get a pass on math and budgets leading to overspending on a house.
ElJefeDelQueso
Posts: 171
Joined: Wed Mar 06, 2019 4:54 pm

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

Post by ElJefeDelQueso »

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.
Designing a custom home that's too custom and/or ignoring builder's recommendations.
Normchad
Posts: 5648
Joined: Thu Mar 03, 2011 6:20 am

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

Post by Normchad »

Nate79 wrote: Sun Jun 20, 2021 12:49 pm That just because you live in a VHCOL area that you get a pass on math and budgets leading to overspending on a house.
We have a winner!
invest2bfree
Posts: 1279
Joined: Sun Jan 12, 2020 8:44 am

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

Post by invest2bfree »

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.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
marcopolo
Posts: 8446
Joined: Sat Dec 03, 2016 9:22 am

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

Post by marcopolo »

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.
Once in a while you get shown the light, in the strangest of places if you look at it right.
runner3081
Posts: 5994
Joined: Mon Aug 22, 2016 3:22 pm

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

Post by runner3081 »

Shallowpockets wrote: Sun Jun 20, 2021 8:10 am Family. Buying for thoughts of extra bedrooms, extra rooms, all predicated on family visiting.
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.
Goal33
Posts: 2004
Joined: Sun Apr 12, 2015 12:30 pm

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

Post by Goal33 »

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
+1. My story. However, the house is livable and is still going up in value even though it’s a fixer upper.
invest2bfree
Posts: 1279
Joined: Sun Jan 12, 2020 8:44 am

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

Post by invest2bfree »

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.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
stoptothink
Posts: 15368
Joined: Fri Dec 31, 2010 8:53 am

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

Post by stoptothink »

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.
"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?

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.
lazynovice
Posts: 3370
Joined: Mon Apr 16, 2012 10:48 pm
Location: Denver area. Former Texan.

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

Post by lazynovice »

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:
User avatar
LilyFleur
Posts: 3499
Joined: Fri Mar 02, 2018 9:36 pm

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

Post by LilyFleur »

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.
aj44
Posts: 309
Joined: Sat May 10, 2014 11:22 am

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

Post by aj44 »

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.
mathwhiz
Posts: 897
Joined: Tue Jul 01, 2008 7:58 pm

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

Post by mathwhiz »

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.
Zillions
Posts: 391
Joined: Sun May 24, 2020 12:58 am

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

Post by Zillions »

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!
Last edited by Zillions on Sun Jun 20, 2021 5:40 pm, edited 1 time in total.
chazas
Posts: 853
Joined: Wed Nov 01, 2017 1:22 pm
Location: NoVa

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

Post by chazas »

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.
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.
Post Reply