YOU COULD SAY I have graduated summa cum laude from the school of hard knocks—for first-time homebuyers.
From a financial standpoint, I did everything by the book. Over two years, my husband and I saved enough to put down 20% and cover closing costs. To ensure we didn’t buy more house than we could comfortably afford, we kept our purchase price to less than half of what some lenders pre-qualified us for. I aggressively analyzed and pursued the best financing options. We established a healthy emergency fund.
It turns out, however, that my analytical nature—I’m a Certified Financial Planner—and expensive business school training only solved half the equation. By solely focusing on the financial side, I neglected to respect, and understand, the art of the purchase: What story was the house telling me with its physical clues? Clues, I now know, can include such things as a sump pump: If there’s one, it means the previous owners experienced water in their crawl space. If a new furnace was recently installed, it’s best to ensure it has the correct capacity.
Beyond the physical clues, there were behavioral clues from the seller and his realtor. Given the hot Portland market, they knew they were in the driver’s seat. What began as an amicable but firm negotiation devolved into something quite different by the time the ink was dry. The seller and his realtor imposed a closing fine—giving us 30 days to close the deal (something that is entirely out of our control, I might add) or face a $100 per day fine. When politely questioned on items that came back from the inspection report, there were days that would pass without a response.
Under normal market conditions, this type of behavior would have sent any buyer running. We, however, were reluctant to start over, especially after six months of devoting nights and weekends to finding a house in one of the most competitive markets in the U.S., including viewing more than 65 homes. The ironic thing is, these were all sunk costs. When evaluating the decision to continue, or start fresh, they should have never entered the equation.
No surprise: Our first home came with a side of humble pie. We thought we were prepared, but experience proved once again to be a formidable teacher. My lesson: Financial planning is more than numbers. But let my loss be your gain: Learning from somebody else’s experience is a lot cheaper than learning it firsthand.
Anika Hedstrom is a financial planner with Vista Capital Partners in Portland, OR. She loves to nerd-out and, when given a dollar, loves to save 96 cents.