My name is Tim Manni. I’m a 32-year-old first-time homebuyer. While my wife briefly owned a co-op prior to our home purchase, I was a career renter up until last month. Despite immersing myself each workday with the latest mortgage and real estate news and information (I’m the managing editor of HSH.com), I quickly realized there was a lot I still had to learn about the home-buying process.
I am the definition of the millennial first-time homebuyer who everyone in the industry seems so obsessed with these days. Like many other millennials, I got married “later” in life (age 32) and my wife and I have no children. So, what better way to find out what the millennial-home-buying process is like than to hear it from the horse’s mouth?
With that said, here are 12 things I learned when buying my first home:
No. 1: The entire process takes a long time
Looking back, I first contacted my Realtor in mid-May 2014. We needed to sell my wife’s co-op before we could purchase a single-family home, so that obviously stretched out our home-buying timeline. We looked at our first property on December 17, 2014. We eventually closed on our home June 11, 2015.
No. 2: The purchase happens in the blink of an eye
It was April 19, 2015, my mother-in-law’s birthday, and we had several houses to see that Sunday, including one home we were seeing for the second time. We wanted to take my in-laws to see the home we thought had the potential to be “the one.” While seeing that home for the second time, we noticed another couple touring the property. The house had been on the market for just two days. Before I even returned home, my Realtor called and said “there already is an offer in on the house and they want your best and final offer by 6 p.m. It was 5:20 p.m. My wife and I sat down with the proverbial gun to our heads and came up with a number that we were comfortable with. By 7 p.m., our Realtor called to let us know our offer was accepted. Let the agita begin…
No. 3: What ‘multiple offers’ really means
One of the hardest decisions in the world to make is whether you should put an offer on a home, and for how much. You might be thinking that putting in an offer shouldn’t be too difficult: if you like the home, go ahead and put in an offer. But that easy decision becomes far more complicated and pressurized when there is more than one offer on the table. In a multiple-offer situation, you don’t know what the other offers are for; you don’t know whether a below-asking-price offer is actually the highest offer the home has received. Our Realtor gave us this great advice: You need to come up with a number in your head, one you absolutely feel comfortable paying. Start with the asking price then ask yourself, “If I paid full asking, would I be OK with that? If I had to pay $5,000 over asking, is the house still worth that much to me? If I had to pay $10,000 over asking price, is the house still worth it to me?” When you come up with the ceiling, the highest price you’re willing to go, it not only gives you some clarity in the multiple-offer space, but it puts an exact price on how much the home is worth to you.
No. 4: Two out of three ain’t bad
For me, the idea of spending just 30 minutes walking through a home and then having to make a decision on whether or not to put in an offer was difficult to process to comprehend. “It’s just the way it works,” said our Realtor. “You need to pick two out of three things, he said, location, price, amenities. If the home has at least two, you’re in good shape.” The house we ended up buying was priced under what we budgeted, the taxes were “affordable” (at least to homeowners here in North Jersey), it was located in our No. 1 town, and the house itself, while needing a lot of work, was the right size and had plenty of potential to expand and/or upgrade. I think we did better than two out of three.
No. 5: Inspection fees are enormous
As first-time buyers, we really wanted all the information on the condition of the home we could get our hands on; the “seller’s disclosure” was far from enough. Within 48 hours of our offer being accepted, we had a home inspection: $495. While the seller did disclose that there was no oil tank on the property, our Realtor strongly suggested we get a tank sweep of the property: $250. The home inspector spotted some issues with our chimney and suggested we get a chimney inspection: $295. (When our mortgage application was fully submitted, it was time for our home appraisal: $435.)
No. 6: Home inspections are woefully limited
Like the eager beaver, young first-time homebuyer that I was, I followed our home inspector around like a puppy dog, jotting down everything the inspector said on my trusty little note pad. It makes me laugh to look back and think about all the items I thought were of high importance. Now, a lot of the items the inspector noted are so far down our to-do list I will be lucky if I get to them in the next year. Inspectors can’t see through drywall, they can’t move furniture, they can’t disrupt drop ceilings and they don’t remove insulation. The only way to really know whether your new home has old wiring, gets water in the basement, or has signs of infestation, is to live in the home and start peeling back the layers. When the home is getting inspected, it’s still someone else’s property and you have to respect that.
No. 7: If it ain’t broke, don’t expect the seller to fix it
The roof and boiler in the home were both well past their prime, but since they technically still “worked,” the sellers had a legitimate claim not to fix or compensate us for them breaking sometime in the near future.
No. 8: A seller is under no obligation to fix a thing (except termite damage)
After I received the inspection report, I dutifully made a list of all the inspection issues, determining which repairs were of top priority. A lot of air was let out of my balloon when our Realtor told us that a seller is under no obligation to fix much of anything, except termite damage and anything that posed a health risk. Sure, we could walk away from the deal, but the seller was under no obligation to fix any of the items on my list.
No. 9: Budget plenty of money for repairs
My wife and I have always taken pride in being responsible with our finances. This confidence made us think that we could put 10 percent down (about $40,000). As we began to get a realistic picture of what repairs were in store for us, our goal of a 10 percent down payment shrunk to 6 percent since we needed thousands for repairs, fresh paint and perhaps even some furniture to put in this place. Luckily, the smaller down payment had no impact on our mortgage rate.
No. 10: Closing costs are enormous
As your down payment shrinks to make room for the costs of repairs and enhancements, it’s easy to lose sight of that financial albatross known as closing costs. Our lender budgeted $8,000 in closing costs, but it came in over $11,000. Again, to make financial room for the new boiler, refinished floors, fresh paint and more, we decided to finance a portion of the closing costs. While it meant a slightly higher monthly payment because it increased our loan amount, it allowed some additional wiggle room to pay for items that required immediate attention.
No. 11: You can be dropped from your homeowners insurance
We were officially homeowners for about three weeks when we received a jarring letter in the mail from our homeowners insurance: we were going to be dropped from our homeowners insurance policy within a month if we didn’t do the following: replace the roof, pour a new concrete floor in our garage, remove the mold on the siding, and replace our sidewalks, walkways, and deck. We had already paid to have the entire house powerwashed so the moldy siding was no problem, but how did they expect us to replace a roof, a garage floor and all of our sidewalks and walkways (they never specified which portions were problematic – I think they look fine) in a month’s time? We canceled that policy and secured a new one with a different provider, but now we are left waiting to hear what issues the new insurance company will have.
No. 12: You can’t choose your family and you can’t choose your neighbors
There’s a sentiment among renters who are scratching and clawing to become homeowners: once I own a home I won’t have to deal with my annoying neighbors. Apartment living is restricted to a confined space, so it’s easy to hear and even smell your neighbors. But let me tell you, just because you found the house of your dreams doesn’t mean your next-door neighbor isn’t about to star in the next episode of Hoarders or likes to run a chainsaw every Saturday morning at 8 a.m.
Homeownership is no joke!
It has been a little over a month since I became a homeowner. Unfortunately, I’m still living with my in-laws until some repairs are finished. I’d like to say I’m happy as a clam in my new digs, but owning a home is stressful, expensive and extremely time consuming. The good news is that my wife and I see the light at the end of the tunnel and are eagerly awaiting the day when the dust settles (literally) and we can officially call our new house our home.