First Time Home Buying: The Ups and Downs
Ian and I started looking to buy our first home back in August of this year. To say it's been a trying, exhausting and stressful endeavor would be a gross understatement. In reality, it's been hell.
Between the current status of the housing market, the opinions of other people in our lives and sellers who know they have the upper hand, it's been difficult. I want to get into it so that you can hopefully learn from our mistakes and maybe to help at least one person feel a little less alone if they're going through something similar.
The Downsides of the 2021 Housing Market
The 2021 Housing Market is a sellers market and houses are selling within days of being put on the market. This is great if you are selling a house and it's likely you'll make a lot of money, but as a buyer, it can get rough and competitive.
Houses are selling for 5-15% over asking, in most cases and that increase from asking doesn't even take into account how much higher they're being priced. Basically, housing prices have skyrocketed and they're still going for way over asking. For example, we saw a house in Mission Viejo, CA priced at $950k close for over $1M. There was a lake house in Wisconsin priced just under $400k that ended up closing over $600k.
With these crazy costs, the straight forward question seems to be, why even try? If houses are going for so much more over their value, why buy now? The interest rates. Interest rates are incredibly low and in most cases, your mortgage ends up being less at a 2.7% interest rate than it would be if you paid the true value of the house at last year's interest rates.
That's why people are still willing to buy. At least, that's part of the reason. And with all of these people willing to buy, there is a lot of competition. Some realtors are finding themselves saddled with over 10 offers on listing. I've even heard of instances into the upper-20's and lower-30's. That said, buyers need to set themselves apart and make themselves competitive, which can be a challenge for first-time home buyers.
The Downsides of Quick Decisions
The other pitfall to the increased competition is that home buyers are forced into making quick decisions. Most of the time, a house is put on the market and an offer is accepted in under a week. That means, within a week, those buyers have seen the home, decided they like it, made an offer, countered the offer and then waited for it to be accepted.
The downside here is that it's more difficult to find time to do due diligence before putting in a final offer. What happens then is that buyers have to back out if they find something later down the road that they don't like. The amount of paperwork involved is insane and these poor realtors are doing it all.
Our Experience with our First Accepted Offer
We actually had to back out of our first accepted offer. We were about 20 days into escrow when we learned the seller had never gotten permits on a bunch of plumbing and electric renovations. We asked if they'd be willing to get them and they not only said no, but they also weren't willing to fix any of the issues related to the plumbing that wasn't permitted.
In my opinion, this is a huge red flag. Because if you're not even willing to come to a compromise, maybe you're hiding something. The seller also refused to get mold testing done after admitting that they'd previously had a mold issue. Yikes!
Sadly, we had to back out despite loving the home. Ultimately, it was the only choice we felt that was right for us because we didn't want to end up in a money pit. All I can think about now is how unfortunate it could be for the next buyers that don't check into these items.
There seem to be a lot of downsides to the 2021 housing market and first-time home buying, but there were some upsides also. Namely, we learned a lot about ourselves and what not to do.
Since our first accepted offer snafu, I've created a list of questions that need to be answered before we put an offer in on any house. Questions like, HOA restrictions, permits and the history of the roof. Moving forward, I feel like we're going into the home buying process very prepared.
We also learned a lot about what we need, want and are just fun added bonuses. Ian and I discussed where we should live at length and what we are versus are not willing to settle for. Overall, they've been great conversations that will make home buying easier in the future because it's allowed us to weed out options before even seeing them. Quite the time-saver in this market.
Where we are Now
Are we continuing our search? Not really, to be honest. Losing the house we loved was really difficult and we're taking a bit of a step back for our own emotional and mental well-being. We are still open to finding something if an option comes up that seems great for us, but I'm not going to open houses every weekend anymore.