Last October, I mentioned that I had finally hit a net worth of zero, celebrating the occasion of being officially worthless. At that point I mentioned that my next step was to buy a house. I can now say that I finally did get down and buy a house, closing a few months ago on June 13th. I started looking in November just to see what was out there but didn’t seriously crack down and take it seriously until about April. I plan on writing a four-part series about my experience with the mortgage process and some of the hilarious and depressing encounters with the various people along the way.
Part 2: Realtors Bite
Part 3: The Long and Winding Road
Part 4: Thank You for Selling
Zillow believes my house shot up in price ~25% in the 2 months after I purchased it. Obviously I can’t and shouldn’t 100% trust these indicators but it still seems that my house was severely undervalued. I’ve seen some of the comps in the recent three months coming out of my neighborhood and the $/sqft for my house was very generous. Ever the watchdog of human interest, even my appraisal came about 10% higher than the purchase price. Why or how did this happen?
Do you have this light in red?
I plan on posting a few pictures describing my malaise but there are a lot of superficial cosmetic issues that are concerning about my house. First and foremost: the master bathroom. It is carpeted, oddly shaped and the shower is, to put it lightly, different. It is deeper in the ground than the rest of the house so you take a few steps down into it. It has a few glass “stones” for cover. There is also a red light that you can turn on to shine down on the shower itself. To say it is ‘unique’ would be a polite way to say ‘WTF were the builders thinking?’
I liked overgrown lawns much better, anyway
Secondly: the backyard. I am a little disappointed in myself for not taking some ‘before’ pictures but the difference was stark. There were shrubs that were unwieldy with branches sticking out all around. The lawn in the back had not been mowed in at least four to five months. The previous owners had already moved out and were clearly not living there or attending to the needs of selling the house. When I later met the selling agent, he gave me his card and said to let him know when I am interested in selling my house. I almost laughed in his face. “Would you give me the same care, concern and loving service as the person selling this house is receiving from you? In fact, if you were really doing your job properly and selling this for as high as you could, then I wouldn’t be here buying it.”
Cedaring a Wall is Difficult
Thirdly: the master bathroom’s closet. One of the previous owners got a wild whim one day and decided that they wanted to ‘cedar’ the wall of the closet. For many, this sounds like a wonderful idea for a DIY-project. Unfortunately, it looks more like a Jackson Pollack painting (I will insert a picture a little later). I think the project was started and abandoned in the same afternoon when he realized what an awful job he was doing. And, instead of removing the cedar and filling the nail holes, it was just left up: unattended, lonely, hollow. Also, the top shelf in the closet is 11 feet in the air. I am not 11 feet tall, unfortunately.
Negative traits are often opportunities
So, why am I excited about all of this? Perhaps it is an indication of how I view value but I look at all of these superficial cosmetic traits as value. None of this changes the curb appeal or the number of bedrooms or the square footage. None of this removes the school system where the house is located as well as its easy access to major thoroughfares and shopping centers. In this sense, all it would take is a little elbow grease to turn this house around. I plan on holding the house for 10+ years (doesn’t everybody say that?) so a long-term plan for renovation and improvement fits extremely well with my wealth strategy.
Lastly, I am going to speak about negotiating leverage. PF Bloggers recognize the power of negotiating leverage but very few are able to attain it. My strategy was to not get emotionally tied to a house. I could cast a wide net, make offers on a lot of houses and see what sticks. This gave me the freedom to walk away at the bargaining table as well as the ability to undercut a lot of houses out there. When the sellers on this house bit, they bit hard. It was clear that they were in transition and were needing to rid themselves of the house as much as possible. How did I find this out?
(Numbers changed for illustrative purposes)
Initial Offer: $100,000, 45 day closing, 3 day option
Counteroffer: $100,000, 30 day closing, 3 day option
My Counteroffer: $92,000, 40 day closing, 3 day option
They negotiated downward because of their insistence on the closing date (read my previous article called The Long and Winding Road). The date they needed it closed by? June 15th. That suspiciously links very closely with when a mortgage payment would be due (June 1st) plus its 14 day grace period? Hmmmmm. The sellers clearly put themselves in a tough cash flow position by moving before they were able to sell the house. All of this to me screams opportunity. Despite my gripes listed above with weird cosmetic touches, I am extremely glad that I was able to find this opportunity. But, if the sellers hadn’t been willing to negotiate or did not like my offer? Well, there are plenty of fish in the sea.