A house is usually one the most expensive things a person buys for themselves. This is true for more than 99% of people who have or will buy a house. So it is important to be careful when you buy a house. Recently a couple of my friends asked me what I was looking for when I was house hunting. They also asked how it felt to own a house, and what are the things I did and did not expect that happened.
These questions prompted me to write this blog post hoping that it will provide some good tips to other people on the lookout for a house.
I know quite a few people (a large number actually) who were looking for the perfect person to get married to. None of them got everything they had on their wishlist. In fact, they had to compromise on many of the crucial factors. Buying a house is like getting married. You do it usually only once in a life time. So you have to do your due diligence. You can have a wishlist, but there is no guarantee that you will get everything on it. Think of the joke where a person goes through several doors looking for the perfect mate and ends up looking in the mirror. You only get what you deserve – from a subset of what is available – some of which you may not even deserve.
Foster City Only
So here goes. I was very insistent that I will buy only in Foster City.
- One, because my children were already in school here and had established some friendships.
- Two, because Foster City is centrally located in the Bay Area and commuting to a job anywhere in the Bay Area would be equally easy.
- Three, because of the excellent weather throughout the year.
- Four, because it is only 15 minutes from SFO. I have lived all my life within mere minutes of an International Airport and have experienced the benefits of that which I can never put in words. People tell me it is not important. But to me it is. Just like the weather is.
One Floor Only
I was insistent that I would only buy a single storied house. This was because I was pretty confident that I could not afford a double storied house -which is more desirable. But the weak economy brought a two storied house within my budget. So I lost that battle. Which is one reason I say, be flexible. You cannot always get what you want. Usually you get something close but different. If you are lucky, you get a better deal.
The water bill was easily more than double. Many people living in apartments don’t pay extra for water. You are in for a shock. Fortunately, I was already paying $50 a month approximately. Now It has shot up to $100 approximately. Thanks to the lawn. I was prepared for an expense of $75 to $100 a month for a gardener. But I had not thought that the lawn would take up so much water. I have a small lawn by the way. If you have a larger lawn, you will probably pay more.
Set aside $10,000 for closing costs. You constantly hear ads on the radio which promise zero closing costs. Don’t believe them. If you want to save money, you will pay closing costs.
This can, of course, happen any time. But when you live in an apartment, this is usually taken care of with a simple phone call to maintenance and no additional charge. See my experiences on day 1 here with the garage door.
With more space you will find the need to fill up the space with new furniture. Since this could be a lifetime purchase, it could be expensive.
No Tax Savings
Contrary to popular myths propagated by home owners, any tax savings you get from paying interest, is completely offset by property tax. You will certainly pay more in mortgage than your rent – just because you have more space. And also because you are going to own the place eventually.
Definitely get an agent. A good agent is worth their commission. Yes it is true that the seller pays the agents’ commission of all 6% and you pay nothing. Well technically that is true. But that is not why you should get an agent. The agent is very useful in many ways. The real truth about paying the agent is this. In a house sale/purchase there are quite a few parties involved
- Seller’s agent (officially known as Listing agent)
- Buyer’s agent (officially known as Seller’s agent)
- Banker or Lender
- Mortgage broker
- Escrow and Title Insurance company
And there could be others. The only person shelling out money – all 100% of it is you. Everyone else – no matter how many discounts they give you – is making money in this transaction. So, trust me, you are paying the commission.
Inform your boss that you are looking for a house. In this economy, if he has to make any rash decisions that can impact your job, he can give you hints before you commit yourself.
Make sure you have enough money for the purchase, the inspections, the closing costs, quick repairs, buffer in case you lose your job, etc before taking the plunge.