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For those of you not aware, we’re currently looking for a new house. We thought we’d have lots of time to look while our house languished in this buyer’s market, but incredibly our house sold in one day and now we’re scrambling for a new place. So after two trips to the prospective new hometown, we’re inching closer to making an offer on a house. Great, right? Some progress at least.

The problem is we’ve succumbed yet again to what I call ‘Price Creep.’

Price creep is the tendency to slowly but steadily increase your threshold amount you’re willing to spend on a major purchase.

I don’t think we’re alone in having this problem judging by the commonality of heated (and now cooled) seats in cars. (Can’t have our American butts getting chilly now can we?)

We started our search with the hopelessly naive intention of having little or no mortgage. We figured with the net profit from our current (now sold) house and a move to a lower cost of living area, we’d be all set. Wrong. It turns out that while the cost of living (specifically housing) is in fact lower in the new place, it’s not that much lower.

We learned this in stages as we looked at houses. This one’s in an undesirable neighborhood. That one has a not-so-good school. Another one looked a lot better on paper.

So the price goes up.

This house has good school’s and a good neighborhood, but it doesn’t have the rooms we’ll need. That one has the right rooms, but they’re all too small.

So the price goes up.

It’s slow and incremental and in the end it can kill you. Before we knew it, we were looking at places with much higher price tags than what we’d started at.

It’s another perfect example of economic behavior - it’s called ‘anchoring.’ Humans adjust their expectations of what is acceptable based on one piece of information. Often the one piece is what was learned most recently. In other words, we’re ratcheting up our expectations for the new house based on the nicest parts of each of the houses we’ve seen.

Where we are now is that we’re preparing to spend about 50% more than what we initially hoped. Now we’re going back to the budget to see how much torturing it can take before it breaks. We know reaching for a house is against all the rules and we’re trying hard to keep things in check.

But like I said, we suffer from price creep.

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As I’ve mentioned a couple of times in the last few weeks, we’re looking for a new house. We’ve decided to make the move to a lower cost of living area so my wife can stay home for our baby boy just like she did for our daughter.

This past weekend, we traveled to the new location (actually, we went to two different locations, but one was a bust) to look at houses. We encountered something I’d not known about before, but that is apparently quite common. We looked at a couple of new houses being sold straight from the developer. The prices were within our range and the houses looked okay. There was just the small detail that the listings left out.

The only way you can get the advertised price is if you use their lender. If you go with your own financing, the price goes up substantially (think $40-$50K for the houses we are looking at).

How is this possibly legal?

Isn’t there some case law to prevent this kind of bundled pricing? Apparently not, because our agent didn’t seem at all surprised and told us it was typical and accepted.

I’m not a lawyer, but this definitely sounds suspect to me. I can see a class action suit in the making. It seems to me that offering two prices isn’t kosher. Now obviously you don’t have to use their lender, which is in fact one and the same company as the developer at the highest level. But this kind of offer seems to me so anti-competitive that I’m actually shocked by it. But like I said, I’m not a lawyer.

We still haven’t located the right house, by the way.

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We’re in the process of selling and buying a house (well, two houses, but you know what I mean). The selling piece is essentially over, since we sold our house in a day. Now we’re on to the buying a new house phase.

I never thought I’d be writing something like this, but using a full-service realtor has really paid off on both ends of the transaction. Obviously, we’re super pleased that our house sold as quickly as it did. I can’t say that was entirely, or even mostly the realtor’s doing, but she has been very helpful. She guided us in the pricing of our house, which was obviously key to selling it so quickly.

Using a realtor has been great so far on the buy side, as well. Just for some background, the house we’re in right now was our first. We’d lived in the area for a couple of years, though, so we knew which communities were for us and which weren’t. In other words, we had pretty good local knowledge.

Now we’re moving to a new state and don’t have that kind of geographic information. We don’t know which towns are preferable for a family like ours. We’ve relied heavily on the realtor we’re working with to provide that information and she’s been great. She’s asked pertinent questions about our situation, likes and dislikes, and our lifestyle. It really is more than price of the house.

I really underestimated the value of that kind of local information. When we first started the process, I thought maybe we’d try buying on our own and hiring a real estate attorney to assist us. My ever-wise wife, however, thought that wasn’t the way to go. Thankfully, I listened and she was right of course (Hi, Honey!).

There have been a couple of times now when we saw listings for houses that seemed perfect for us. When we mentioned them to our realtor, she let us know gently that maybe those weren’t the areas for us. Were it not for our realtor, we may have made a major mistake.

We travel to the new location this weekend to meet the realtor in person and look at places. It’s not going to be a drawn-out affair, since we need to move in a couple of months. We’re looking to make an offer during this trip. Wish us luck!

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A few days ago, we signed a contract to sell our house.

It had been on the MLS for one day.

The selling price was greater than we listed it for.

I fully realize this story may seem unbelievable and some readers will simply say I’m lying. I am not.

Others will say I live in a special part of the country immune from the current housing fiasco. I do not.

Our Story

We bought our first house about eight years ago. It was a routine transaction in that the house wasn’t a fixer-upper, we used a conventional loan, and all the rest. We paid somewhat less than the listing price without incentives. Interestingly, we bought the house after it had been listed only two days.

Since buying the house, we’ve not done any major remodeling save the finishing of the basement to add some extra space. It’s a new-ish house (less than 15 years old) and about average for our neighborhood.

I recently decided to take a new job where I had some flexibility in where we could live. Taking a page from Free Money Finance’s book, we’ve decided to move to a lower cost of living locale. That meant we needed to sell our house. It goes without saying that this is about the absolute worse time to be selling a house. It’s the dead of winter. The market is in the toilet. The economy looks like it’s headed into recession. We’d have to be out of our minds. Yet we did it.

How We Sold In One Day

Since we bought our house, we’ve roughly doubled our money.  As a result, we weren’t looking to squeeze every last hundred dollars out of the place.  We also are not one of the many families who refuse to accept that the sales price of your house a year ago isn’t the sales price today.  Had we sold then, we likely would have been able to increase the price 10%.  But we’re not selling a year ago, we’re selling today.

I think that’s the mistake many people trying to sell houses are making, by the way.  It sucks to lose 10% on anything especially something as emotional as a house.  But wishing for something won’t make it happen.  You have to accept current market conditions.  I think the failure to do so is why there is a 10 month supply of houses on the market.

So going into this, we had two key things in mind:

1. We were selling at a bad time.  The market is down, ergo the value of our house is down.  We’re ok with that.  We have to be.
2. We’re not trying to get the absolute maximum price for the house.

With those two things in mind, we, with guidance from our realtor, priced the house at what the market would bear.  It’s that simple.  We thought like buyers and priced in such a way that the house was attractive to them.  As our realtor pointed out, what’s selling houses right now is price.  Not goofy gimmicks like throwing in a big-screen TV or trip to Paris.  Not putting the MLS listing in ALL CAPS.  Just price the house so it will sell.

Did we leave money on the table?  Possibly.  Who knows.  But who cares?  We’ve doubled our money on the place and we’re moving to a lower cost of living city.   Oh, and by the way, we’re now going to be buyers in this crappy market.

I don’t want this to be a ‘I’m so smart’ read.  I’m not so smart.  This is the first house we’ve ever sold, so maybe we left money on the table, like I said.  But you know what a good transaction looks like?  The sellers think they got a good deal and the buyers think they got a good deal.  And we think we got a good deal.

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Our family is going to be in the market for a new house soon. We’re also selling our current one; that can mean only one thing. Well, two things, really: a real estate agent and lots of fees. The thought process for why we’re using a realtor is for another post, but suffice it to say that’s the direction we’ve chosen.

Since we’re going to be giving the person who sells our house a great deal of money (in the form of commission), we want to be absolutely sure this is the right person to sell our house. Thus, we need to interview agents.

Our search for a good agent was greatly aided by a program offered through our bank, USAA. It’s called Mover’s Advantage (once again, I’m not being compensated by USAA - I just really like them). We used it to buy this house (our first).

Mover’s Advantage does three things, in practice:

1. Provides a USAA coordination person as kind of a project manager to smooth any difficulties
2. Provides a lead on a good realtor, both in your current geographic area (if selling) and your new area (if buying)
3. Gives you money back. They kick back a flat rate based on the sale/buy price of the houses

The Interview Questions

Once USAA got us hooked up with a local realtor, we (ok, my wife) set up an appointment for her to come over. In the meantime, I called her with some preliminary interview questions. Here’s what I asked.

1. How long have you been in the business? You don’t want someone who’s just starting out and has listed two houses so far.
2. Where are you ranked in your office or firm? How large is the office or firm? Obviously, you want someone who is at the top of the sellers list.
3. What’s your list to sales price ratio? The realtor should know this immediately.  It’s a measure of how accurately he or she prices houses, among other things.
4. When was the last house you sold? Again, goes to experience, especially in the current market.
5. How quickly did your last house sell in this (or similar) market? The longest? Gives you a feel for how aggressive the realtor is in moving the house.
6. What’s the commission/fee schedule? No matter what a realtor says, this is negotiable.  However, lower is not always better.  Consider that a home listed for full (7%) commission will attract more attention from buying agents.
7. How will you advertise the house? Especially important are online portals.  Also, will the ads have pictures or other graphic walk-throughs?  If so, who will do the photography?
8. Will you be at closing? The only acceptable answer is ‘yes.’
9. How do we contact each other? You need access to the realtor immediately, not through an answering service.
10. Can you show me local reporting data (especially schools data)? This should be readily available.
11. Give me two examples of a listing of yours that did not sell.
    
12. Can I have the names and numbers of the last three people who listed with you? If the realtor balks at this, keep looking.  You want to talk to people who have sold houses with this person to find out the bad and good.

We’ve used this list to interview just one realtor so far.  She passed the ‘phone interview,’ so an in-person meeting is next.  I’ll let you know what comes out of that.

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