Here is the truth about buying a home in this here economy.
First, forget about anything represented in the glossy home-flipping/buying/renovating shows on HGTV, et al. I’m just about convinced the couples on them are made-up people. Avatars. Meet Mr/s. and Mr/s. Dewy-Faced & Well Dressed. S/he sharpens pencils for a living and s/he catches butterflies. The reno specialist smiles into the camera on a picture-perfect day with bright sunshine and cotton candy clouds in the sky, and asks them, So what’s your all-in budget? The happy twenty-something couple smile right back and quip, without missing a beat, One-point-five-million, but not a penny more. Or maybe they say $250,000 and not a penny more, and the small-town specialist smiles and says, I have the perfect options to show you in this area, where home prices are never higher than $350,000, all the schools are great, and everybody’s dogs get along with each other on walks in the fantastic neighborhood park, where there is never any crime.
This is not any kind of reality I have ever known.
Next, let me explain the meaning of ‘hot housing market’ on the North Carolina coastline. It was hot before Coronavirus, before the entire country decided to relocate, before the economy turned south and the supply chain was disrupted, and all that. So now it’s hotter than heck, which is to say, there are more people shopping than there are houses for sale. This lopsided situation makes home buying a decidedly more hellish than happy event. Exhibit A: Meet Young Professional who lives and works in Congested Urban Center, USA and earns a healthy salary working from home in the corporate world, and who’s used to paying $3000 in monthly rent for a 450-square-foot studio apartment in a high rise. Hey, I can live anywhere and still do my job, he realizes. How about…Wilmington? It’s got a fantastic up-and-coming vibe to it, a vibrant downtown, lots of Southern charm, and…<wait for it>…it’s on the ocean. You want $750,000 for that house assessed at $250,000 five years ago? Sounds like a great bargain—sold!
I’m only slightly exaggerating.
And consider this vexing little real estate kernel. In the state of North Carolina, you pay the home seller something called due diligence. Our realtor described it a “bitter pill to swallow,” our banker agreed, and here is why. Let’s say you think you’ve found The One, and you want to make the seller an offer. You’ll write ‘em a check for earnest money, but you’ll also write them a check for due diligence when you make a bid on their house. Could be $500 or $10,000. Whatever you think is reasonable. Keep in mind that other buyers also want the house, and they’ll be making competitive offers for it, and writing competitive checks for due diligence. So your particular due diligence check could be the thing that catches the seller’s eye and finally convinces them to accept your offer. Now let’s say they ultimately decide yours is the most attractive, and they accept. But let’s also suppose the home inspection reveals a horrible termite infestation, or black mold growing inside the walls, and mitigation will cost something in the tens of thousands. You rethink this house and decide to back out. Here’s the rub: Your due diligence money is gone—yes, you read that right. Did you make out that check for $10,000? Aw, snap. Now it’s their $10,000. In short order, The Chef pronounced this bullsh*t. But what’re you gonna do if you want to buy a home in North Carolina? Your due diligence, evidently.
Here is some brighter news. Chef David and I have been aggressively saving and carefully budgeting our resources for roughly ten years this September, and our hard work and belt tightening have paid off. In a meeting on Friday, our mortgage banker pronounced us in good shape. We’re in better shape still than we were when we bought our first house together in Vermont five years ago, but the difference now is how far our dollars might need to stretch in this desirable area, hurricanes notwithstanding. It’ll be a bit of a stretch to be sure, but we think we’ll prevail ultimately. People with a middling budget, said our banker with a straight face, are simply out of luck, adding again, The two of you are in a good spot.
Sometimes just for kicks the two of us reminisce about our childhood homes, how much our parents paid for them, and how much space there was to run around inside and out; prices were in the five-digit zone. I’m no economist; maths make my head explode, as they did on a couple of noteworthy occasions this past week. But I’m smart enough to know what the world is asking us to pay right now for just the basics—forget the extras—is insane. Dollars in, dollars out—this situation must ultimately equalize, right? Right? (Please say yes.) Oh, and a word to all you good people working in the financial sector: Please speak slowly and clearly, assume nothing, and for dog’s sake, enough with the acronyms. I have no idea what those three letters + <percentage> mean.
Meanwhile, our search is now begun in earnest, the wheels are turning, and the clock is ticking.
The truth, and our new house, are out there somewhere. Stay tuned.
One thought on “Sunday Almanac: House Shopping Begins”
My son is in the same boat. He is trying to get pre-approval for a mortgage loan and is being disappointed daily. A house goes on the market on a Thursday, open house on Saturday, and final offers must be submitted on Tuesday!! He wants a home inspection before he commits more than earnest money and most houses are sold in a bidding war! It is madness!
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