We bought a house! I’m still stunned that it happened. I’ve really enjoyed reading other people’s house blogs, and so I’ll either use this blog to post house updates in the future, under the house category or maybe put house updates under a separate domain so that my partner can also write some entries.
But this story must begin with the house purchase itself.
I have always wanted to own a home, and I started saving for a house in 2016. I estimated my time horizon then was around 4 - 5 years (turned out I was right!) so I put that money into a moderate-risk index fund.
This is a bit risky, of course, and the safest way to save for a house down payment and closing costs is in a bank account. I decided I was ok with the risk and used the index fund for a few years. In 2019 I sold those investments and moved them to a savings account. This was the limit of my risk tolerance.
2019 was also when my partner and I got very serious about saving for a house. We were both working at our highest-paying jobs to date and did not yet have a kid. We were true DINKs, and so we decided to aggressively save for a down payment and closing costs.
Location and Setting a Savings Goal
We knew we wanted to move (back) to Western Massachusetts/the Pioneer Valley. We both loved the area and had made good friends there and wanted to settle down closer to our families, too. I can write an entire love letter to Western Mass., but, in addition to the community we had already built there, the Pioneer Valley offered a perfect blend of more rural living with amenities and values that are commonly found in larger US cities. The whole area reminds me of Portland, Oregon in some ways, which is probably the city in America I love the most/know the best. It’s also ideally situated, in my opinion, to take advantage of being close to Boston and fairly close to NYC, but still far enough away from those major metropolitan areas that access to nature is also very easy and the pace of life is more my style.
So we started looking at houses that had sold in the towns we were interested in and figured out a rough price point for houses that we liked. Then we used some online mortgage calculators and figured out how much money we would need for a down payment and closing costs that left us with a monthly payment that we felt comfortable making (for…30 years.) We used these calculations plus the 24 months left before we wanted to buy to come up with a monthly savings goal.
Privilege and Generational Wealth
This ability to save for a down payment and eventually buy a home reflects the enormous amount of privilege my partner and I have. We had no debt from college, an increasingly rare story in today’s world. We kept our jobs through the COVID pandemic, and both happened to be working in stable, well-paying fields, fields that we had access to because of our education and cultural capital. We had no emergencies, medical or otherwise, that drained our savings or changed our savings rate. These are privileges that we were often granted just by birth; by being white, educated, Americans born into educated and middle-class American families. I wish the “American dream” of owning a home were easier for more people these days, but it’s increasingly not, and in the not-so-distant past there were large institutional barriers that prevented many people from buying homes.
We also received some monetary support from family for the down payment - about 7% of the money we used for the closing costs/down payment was a gift. To be honest, this wasn’t something we counted on from the start when we began saving, but it was certainly helpful. I think it’s important to talk about this as well, and often the ability for someone to buy a first home comes due to family help, and I wish more people were honest about how generational wealth helped them purchase their home.
Assembling a Team
At the end of summer 2020, we decided we actually wanted to start looking for a house. We had saved enough that we were beginning to be able to theoretically make offers on places then, and the work-from-home situation with the pandemic meant that we didn’t actually need to stay where we were living anymore.
That is, we decided in August of 2020 to assemble a team of people to help us buy a home. First was a realtor. After interviewing multiple people, we found someone who was responsive and detail-oriented in a way that fits with me and my partner’s way of working and had experience in other hot markets as well as deep experience in Western Massachusetts.
We also found a local mortgage broker via our realtor who was able to offer us the best rates we had seen. We had shopped around at local as well as national banks but decided to go with this broker. They gave us a preapproval letter after we filled out some paperwork and consented to credit checks, which was a key piece to making offers.
Finally, we also needed a real estate attorney because Massachusetts state law requires an attorney to represent buyers. We used our realtor’s recommendation for this.
Then…we waited. We saw some houses we liked, but nothing that we loved. Fall turned to winter and the inventory went way down, as is expected. We upped our budget because we had saved more money. We got another preapproval, and then another because a letter is only valid for 90 days. We began to worry whether we were being too picky, just as the spring market started heating up, and we started to realize that the real estate market was heading into uncharted seller’s market territory.
This Wild Market
If you’ve been paying attention to real estate, you’ll know that 2021 is a wild time to try to buy a home. There are lots of guesses about why this is a historic seller’s market, but all I can tell you that the reality of buying a house now, at least in Western Massachusetts, is that the list prices for houses you see now are starting points, and offers have to be aggressive to win out.
We had been aiming to buy in 2021 for at least two years, so we were bummed to find out that this was the market we were facing. We decided to keep looking at houses we were genuinely interested in, though we were beginning to come to terms with waiting and renting another year if needed.
One of the issues we faced is inventory. I didn’t fully internalize that looking in a more rural area meant that we would truly need to wait months for houses to show up that we were interested in. Looking back at houses sold in 2020, for example, there were maybe 3 or 4 that we considered “dream houses” that were also in our price range. So it stands to reason that over a few months in 2021, there were only a few houses we considered, let alone decided to tour.
Ultimately our realtor, based on the local market, advised us that offers were sometimes going as high as 20% over list price. This changed our calculus a bit, and we went and adjusted our expectations as well as our Zillow and MLS alerts to reflect this reality.
Our Dream Home
What were we even looking for? Honestly, until this particular house came on the market, I was increasingly convinced we wouldn’t find it for our budget.
We wanted a 3 bedroom (or larger) house with some type of yard. My non-negotiable was it had to be on a quiet street. My partner’s non-negotiable was that it had to have curb appeal. Ideally, it would have some type of bonus space for us to set up an office and would be within walking distance to some type of commercial district (so, a house that was in town rather than in the countryside.) It would be nice to have a garage, but not essential.
From the moment I saw the first picture from the email Zillow sent me when this house was listed, I knew it would be an immediate contender for both me and my partner. It was a beautiful, older house with a front porch and a big yard, enough bedrooms, and even had a (rather ramshackle, but still functional) garage. It was on a quiet, residential street and within walking distance to a little commercial district. We immediately contacted our realtor and drove up the next weekend to see it, and fell in love even more.
Our winning offer was ~15% above the list price, and we went through a bidding war to get the house (meaning, we won based on escalations in our offer.) Another point in our realtor’s favor was that our winning offer ended up being within $10,000 of what she thought the house would sell for. We both thought the list price was a bit undervalued, and so it’s hard to say how much the house was actually “worth,” but even priced differently, I suspect we “overpaid” a bit.
I find it hard to determine what “overpaying” means, though. We both viewed this home purchase as the house we would stay in until, ideally, retirement. In other words, this house wasn’t an investment, it was a home, a place to raise a family, and a place to build community. It was within our budget, and it was everything and more from what we wanted in a house. Life can change at any moment, of course, but I think looking back we would have regretted waiting rather than buying what we considered a dream house at the current top of the market.
In addition to an aggressive offer with escalations, we did all the “standard” seller’s market things: inspection for informational purposes only (so, no ability to negotiate the price after doing an inspection), a larger earnest money deposit than is perhaps normal, a flexible closing date, and offering to pay the appraisal gap in cash.
That last point about the appraisal gap was one of the most stressful things about this entire process. Our offer ultimately needed to account for this gap. We needed to have enough cash for the down payment, but also for an appraisal gap that was hard to estimate.
In the end, this meant we needed to lean on our realtor to give us comp data to get an estimate for what the house might be appraised for on the low end. This combined with our top escalation gave us the worst-case appraisal gap scenario. Then we could balance putting less down on the mortgage but paying for that large appraisal gap with the cash we had on hand.
The End…or the Beginning
Now we have a house! It’s a little overwhelming. I am excited to learn about how to care for it, to settle in a place we love, and to put down roots in a way I have not been able to do in my adult life yet. I’ll be sure to write occasionally about what I learn on here.