In what one real estate agent calls "this changing financial world," houses in need of even minor repairs might not qualify for financing.
1. The undersigned1
In the fall of 2007, about four months after we’d moved to Missoula and signed a one-year lease on a condo, I sat up in bed and announced to Amy that I thought we should look for a house to buy.
“I’m tired of throwing away money on rent,” I said. Everyone knows that paying rent is just an elaborate method of throwing money away, and our rent was almost $1,000 per month, which felt like a lot to be throwing away.
By the spring, we were living in our newly purchased two-bedroom house in Missoula’s Westside neighborhood.
A house is a big commitment—to staying in one place for a while, if nothing else. We knew that when we bought. We bought anyway, not sure how long we planned to stay in Missoula but definitely open to staying for a while.
Looking back now, there is a way of seeing that very house purchase as one of the factors that would later cause us to leave Missoula.
2. Party of the first part
We had moved to Missoula so that Amy could take a job that involved traveling to Arizona each summer, living in a tent and managing a songbird research project at 8,000 feet in the Coconino National Forest.
Last fall, we had a baby. Amy found herself on the always-tight Missoula job market, two years into the Great Recession and in a time of record unemployment. It would be nice if she could find something in her field, but she was willing to waitress if she had to, she decided.
Then, we made a relatively sudden decision to move to West Virginia. There were several reasons why this decision appealed, especially the prospect of getting our baby son closer to his grandparents and many other East Coast-based relatives.
But it seems worth mentioning that our mortgage payments were almost $1,200 per month, because I can’t help wondering how much more feasible staying in Missoula would have seemed with an extra $200 per month. Meanwhile, we learned that, in West Virginia, we could buy twice as much space for less than half the price of our Missoula house.
We put the house on the market in February and started saying goodbye to Missoula.
3. Time is of the essence
The real estate market was showing signs of trouble back when we first bought the Missoula house, but things hadn’t reached crisis pitch yet. My parents’ house in the D.C. suburbs had recently spent almost a year on the market before selling, but the Missoula market still seemed “healthy.”
That’s another way of saying that sellers still had the advantage, to some extent.
There was a severe shortage of what realtors call “inventory,” especially in our price range. As it turned out, the only appealing house in our price range wasn’t really in our price range.
We bumped our price range up a little.
4. Waiver of buyer's right to terminate contract
When we were getting preapproved for the loan we would use to buy our Missoula house, there was some question about whether the lender would accept my freelance income. I’d barely been freelancing for half a year, just since we’d moved to Missoula.
We were on the phone with the underwriter when he seemed to change his mind on this point. Suddenly, what was really only my projected annual income was accepted as fact.
The loan was ours.
Our home inspector found flaws, but he presented them as things we might one day want to fix. The house was built in 1911. There are always going to be flaws in a hundred-year-old house, he seemed to be saying.
5. This offer has been modified
If you’ve never sold a house, or if it’s been a while, you may not know that the seller pays both real estate agents’ commissions, in addition to various fees and taxes. At the listing price recommended by our agent, we learned, it would cost us about $10,000 to sell our Missoula house.
But the listing price our agent recommended was actually $20,000 more than we still owed. At that price, even after paying all of the commissions and fees, we would leave the settlement table with a $10,000 check.
Our first prospective buyer lowballed us. We negotiated him up to $9,000 below our listing price, but he wouldn’t go any higher.
Because we had already begun planning how to spend that $10,000 check, we turned him down. After all, the house had only been on the market a few weeks.
“It’s a good sign,” people told us. “To get an offer that soon, that close to your asking price—someone else will come along soon.”
Two months later, when we took the house back off the market so that we could pack up and move without having to worry about showing it, we had lowered our asking price twice.
There had been no further offers.
6. Property inspections addendum
We relisted the house the week we moved to West Virginia. It was exciting when someone made us a new offer just a couple of weeks later.
We were only able to negotiate the price to $2,500 less than the offer we’d finally turned down back in March, of course, but it was still exciting. We had started to wonder if we’d ever even see another offer, much less one high enough to still cover our closing costs.
The offer was terminated a week later, after the house inspection. Our agent forwarded us a copy of the inspection report. It read like the one we’d received after our inspection in 2007.
The only difference? What had been presented to us as items we might want to tinker with one day were now seen as obstacles to getting a loan in what the buyer’s agent called “this changing financial world we are dealing with.”
I called a friend who does some contracting and asked him to give me an estimate on the most pressing work.
7. Payment terms
Is a house a home or an investment?
We bought our house for $160,000 in March 2008. As mentioned, our mortgage is approximately $200 more per month than our old rent used to be. Therefore, 28 months later, we’ve paid:
- an additional $5,600 for housing than we would have paid if we’d stayed at the first place.
In turn, that additional $5,600 bought us the opportunity to spend roughly:
- another $4,000 in maintenance costs, including a new roof.
If we can sell the house for about $167,000, we’ll cover our closing costs and a couple thousand dollars’ worth of improvements to make lit easier for a buyer to get financing.
In that optimistic scenario, in other words, our decision to “stop throwing money away on rent” will have cost us:
- almost $10,000 we wouldn’t have spent otherwise.
In that optimistic scenario, we'll leave the settlement fully paid up, but without a dime in profits.
A house isn’t an investment, it’s a vote of confidence in a particular vision of the future. It’s a toehold, an expression of something about what you want for your family. The question is whether—as that—it's worth the cost.
Maybe if we hadn’t bought the Missoula house, we could have afforded to stay in Missoula, but if we hadn’t bought it and moved to such a great location, maybe we wouldn’t have fallen in love with Missoula enough to regret leaving. Now, with great memories of a jewel of a town in the Rocky Mountain West, our new vision of the future includes having Coen’s grandparents a few blocks away, with a big park full of playground equipment halfway between.
Maybe that $10,000 was just the cost of figuring out what vision of the future is really worth investing in.
1. The paragraph headings of this Contract are for convenience and reference only, and in no way define or limit the intent, rights, or obligations of the parties.
Photo by Flickr user Brett L.
Now based in Missoula, MontanaElkins, West Virginia after three decades on the coasts, Sutton is a freelance business writer and journalist. He writes the Missoula Notebook for the nationally-award-winning online news source New West, keeps a blog, and can be found on Twitter and Facebook. Click here for an overview of what Went West is all about.
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