Lessons to Learn from a Home Purchase Fallout

June 23, 2011

Those of you who read my blogs know that my wife and I have been fervently house hunting so we can have a place of our own.  Well, about three weeks ago, we placed an offer and had it accepted in a perfect location!  Finally, we were going to be settling in and be able to resume some sense of normalcy!  Well, almost.

As part of the buying process, as everybody knows, there are the inevitable conditions that need to be met: financing, inspections and closing costs.  The following is a brief overview of what my wife and I went through on our offer.  From that, there are reinforcing tips that a homebuyer should be aware of.

Pre-approval. Get it!  We were pre-approved prior to our offer, so that made the seller feel better knowing that wasn’t going to be an issue.

Inspection. Pay attention to the inspector!  It should go without saying to really look at what the inspector notes.  When we got our report back, it stated that a new roof (major repair) was in order.  In addition, the building was in need of sealing (tuck pointing,  which is another major repair).  This definitely impacted what we said we would pay, and it caused the seller to provide a credit at closing for their portion of the roof repair.  Oh, and if the roof wasn’t repaired, the lender would not finance the loan!

Underlying issues. In our situation, due to the added costs, the seller inevitably backed out of the deal.  Our feelings are that they were already going to be taking a big loss, but throw in the fact that the roof needed to be finished before financing could begin, and unless the other condo owners were willing to pony up for the special assessment, they would  have to pay for the entire repairs themselves if they were going to sell!

So what were the underlying issues here?  First, the possibility that the other owners weren’t going to be cooperative in funding a “needed” repair.  This could be due to, (a) not having the availability of funds (which is another issue), or (b) not willing to part with money.  Second, the low association fees when there are inevitable maintenance issues that need to occur.  By not factoring in the cost of those issues at the onset, this association sets itself up for ongoing special assessments.  In my mind, not a good way to run a budget.

What is the biggest lesson we can convey?  Don’t get too enamored with your pending home purchase.  This could have been very easy to do in our case, as the property was pretty much everything we wanted (well my wife said it could have had a bit more storage!).  Great location, nice outdoor space, garage, updated kitchen, etc.  However, despite all of that, there was NO WAY we were going to buy that house with the aforementioned repairs needed, and the possible underlying issues.  After all, while a home is very much an emotional decision, it is at the end of the day, an investment.  And, one thing about investments, don’t let emotions dictate your decisions.

With that, back to house hunting.