You Had Me At Purchase Agreement

The process in which you buy a house is nothing that I had imagined. I thought you picked a few houses you liked, had your realtor take you around in one day, you assess, you make an offer, the owner accepts, and then you move in. Maybe I’m thinking of something from HGTV. 

This is not the reality — nowhere near it. At the time that I write this, the housing market is cutthroat and it has been for years. For instance, if you see a house online, you better believe that 45 other people have seen it as well. Most likely 20 people have already scheduled an appointment to go see it with their realtor, and 8 somehow have already seen the house. Maybe three people have already made an offer. It’s been on the market for four hours. 

I haven’t even quite understood how someone can know they like a house that fast. There’s no time to let the idea of it settle in your mind. The commitment in living in a house is monumental, but the marketplace is causing potential buyers to have knee-jerk reactions. 

For example, early on in our house hunting adventure, I found a house online that had been put on the market that very same day. I contacted our realtor and we were able to see it that evening. I thought to myself, “wow, we’re going to have first dibs on this property. It could actually be ours!” Wrong. Wrong wrong wrong. Not only were we not the first people there, but there were several couples in the house when we got there, as well as dozens of realtor cards scattered across the counter like confetti. 

The reality is that the current trend has those in the Boomer generation staying longer than expected in homes, while developers are focusing on high-end construction. According to the State of the Nation’s Housing Report, only 22 percent of all homes on the market are in the “starter home” category, compared to about 50 percent 30 years ago. That’s a big difference. 

Are We There Yet? 

While my house hunt wasn’t as typical (Many people can see 7-30 homes), we saw four, making an offer on the fourth one. Again, in my naive Millennial mind, I thought we’d make an offer and they’d accept. 

The original offer was made on Oct. 19th. It was until November 2nd that the counteroffer battle finally ceased and we found middle ground. It was a brutal battle and no one wanted to budge. The fact of the matter was, we didn’t want to lose this house, and the owners couldn’t afford to have it on the market much longer. It came down to: how bad do we want this house? Clearly enough to pay $9,000 more than we wanted — even though we had already talked them down by $30,000. 

So on that chilly November evening, while my husband and I were out to dinner with his parents, the house was ours. But really it wasn’t until November 3rd when we had dotted all the i’s and crossed all the t’s on the purchase agreement. Many texts were sent to my friends and family and we told them of our closing date. The feeling of being settled and starting a new project on a fixer upper, mixed with being grounded in a place that I loved, it was something I couldn’t recreate.

That feeling changed all too soon. 

Purchase Agreement - Half the Battle 

Maybe our scenario causes more uneasiness than most. If you are buying a move-in ready or something similar, the appraisal and inspection are considered small bumps in the road — not even worth slowing down for. Just a technicality. But for people that are buying a house that needs more TLC, these can be major hurdles that could make or break the deal. 

Step 1: Inspection 

Many purchase agreements have inspections written in to the contingencies portion. This is because you need an inspector to come in and spend a few hours looking at your future house in detail. From plumbing to electrical to structural integrity. These are things that, at best, you may look at when you’ve visited the house on the initial visit, but usually making a mental note of if it’s in good condition or bad. Usually this needs to happen within the first ten days after everyone has signed the purchase agreement. 

This means you have to work fast. You went from “owning a home” to “how the heck do I find an inspector?” Luckily there are plenty of people that will know someone. Either your realtor will have connections, your mortgage lender, or you can use the power of the internet and search for a quality inspector in your area. They may cost more, but when you’re working on a fixer upper, it’s worth a few extra hundred dollars.

Going in to our inspection process, we knew the water heater was on the verge of collapse and that the the windows probably needed to be replaced sooner than later. But we didn’t know about the electrical (which turned out to be excellent!), the quality of the porch, or if the house had radon in the basement. He gave us an extremely detailed list of what needed to be done. And believe me, it can be overwhelming. I cried. But take it in and move forward. We decided to take the list as a checklist of things we need to do, not a list of things that all needed to be done at the same time. That’s impossible. My husband and I then made a timeline of what needed to happen first and what could wait until the very end. I highly recommend taking this route. 

Once you’ve gotten through the inspection process and decided to move forward with the property, then you’ve got to get through the appraisal. 

Step 2: Appraisal 

Don’t get too excited quite yet. Another hurdle you have to jump is another crucial one. Again, if you’re buying a move-in ready house, this step doesn’t affect you too much. But when you’re making an offer on a fixer upper, the stars have to align. 

The worry about our house was that it was priced too high. The owners may have remortgaged their house a time or two, so even though they lived there for 18 years, they had barely made a dent in their payments. In fact, I believe they owed more than they had originally paid for the house. The previous owners also did not take care of the house, only adding a new roof in the last few years and a few nice sheds in the back. This brought down the value of the house. While we were able to talk them down quite a bit, we were nervous that the appraiser would come back with something much lower. 

Why is this a big deal? Well if the buyer and seller agree on, let’s say, $200,000 for the house, and you tell the mortgage lender that you’re putting 20% down, they will only give you a loan for 80% or $160,000. But if the appraiser comes back and says the house is only worth $180,000, then you have to come up with the difference. In this example, that means the loan will be for $144,000 and you have to come up with the $56,000 instead of just $40,000. That’s an intense amount of money. That’s a game changer. 

No joke, the appraiser called our lender and flat out said: “What’s the deal with this house?” That is a very good question sir. What IS the deal with this house? They talked briefly that it was merely a fixer upper and we knew what we were getting in to. He was able to appraise it where we wanted it — by the grace of God. 

NOW do I own the house? 

After we checked off the boxes of inspection and appraisal, we are finally aligned to purchase this house. We close in about a week and we are chomping at the bit to get in and get our hands dirty. The plans we have for this house are big. So big that I don’t know if the house, at least on the inside, will look anything like it does right now. Or maybe funding will get the better of us and it’ll take a lot longer than predicting. So here’s to us on our journey as homeowners! 

Always,
A