How a CFP® Prepares for a Home Purchase
They say to write what you know. What I know is my family has been on a home search for a year and a half. We narrowed down our desired home first by location, then by features. We identified a specific neighborhood early last year. Our priorities are not particularly unique: a backyard for the kids, a designated guest bedroom, a garage that can support the 15-foot retractable golf simulator that my husband built…Don’t even get me started. I was given some terrible advice about marriage and compromise 😉
In preparation of our move, we met with our real estate agent and chatted about pricing and comps in the area (both where we live and where we’re looking to buy). We made ourselves a variety of to-do lists and began to place our ducks in a row. But there are a few actions that we took to put us in the best possible position for this move:
- Spending: I did a deep dive into our spending to get a real handle of how much house we can afford, and what other lifestyle expenses are likely to change. I started by analyzing a few housing ratios by comparing our income vs. total housing expenses. Then I went through each spending category and made note of which non-mortgage expenses are also likely to rise (ex. utilities, membership fees, gas, etc.) and which expenses would be reduced. I gathered the data I have from our last three years’ worth of cashflow to identify how this move would shift our current savings/investing allocations. In other words, an increase in housing expense means something’s got to give – so let’s decide here and now where that money is coming from. And commit to it, as a couple. Lastly, I entered the data into my financial planning software to identify how this impacts our long-term financial plan.
- Daycare: I contacted the local daycares to find out if they had any openings in my kids’ classrooms. Any parent of young children knows those waiting lists can be incredibly long and I wanted to avoid driving the kids 25 mins out of the way because we couldn’t get a new spot secured in time. I also wanted (read: bigger priority) to avoid paying for two daycares at the same time just to secure a spot since our move-in date is unknown. I’d choose a double mortgage payment over a double daycare payment because that’s just the reality of daycare expenses these days.
- Identify potential homes: There is a very low inventory of homes on the market now and has been for months and months – for obvious reasons. Additionally, this neighborhood has very low turnover. Most people only move after the kids are out of the house. So, we designated some time to walk around the neighborhood to identify the homes that seemed most appealing (and most likely in our price range). Swing set in the backyard? They may be less likely to move. Dumpster in the driveway? They may be renovating to prepare for sale, add them to the list!
Side note: at one point both kids were crying in the stroller as we were trying to log addresses on our phone while also looking like a happy family that you should sell your home to 😀. It wasn’t pretty.
After we pinpointed our favorite homes from the walking tour, we dug into Zillow/Redfin to see if there were any previous photos or data on the home that would help us make our decision. Home sold just two years ago? Unlikely to sell now. House has relisted every year for five years with no buyer? Move them to lower priority. We also used photos to get a general idea of the home layout and blueprint but kept in mind that the homeowner could have undergone a series of renovations since then.
This narrowed our search to about 40 homes. So, our last stop was the Maryland property tax records. I looked into the data to see the purchase dates and prices for the property, how many bedrooms and baths it has, size of the lot, etc. You’ll notice that up until this point I was saying “we”. This is the level of detail where my husband Brandon surrendered, and I took the term “planner” to the next level. This data was incredibly helpful and also gave us the last name of the homeowners so we could personalize the letters. What letters?
- Make lemonade: The final step was to handwrite letters to each of the homeowners and beg them to sell us their house. That’s not exactly what the letters said, but it’s not terribly far off either. At the advice of a few colleagues, I added a cute family photo and dropped them in the mail.
The responses started pouring in and when all was said and done, we received 8 responses to the 29 letters we sent! A few were kind enough to respond to say they weren’t looking to move soon but wanted to give us insights into the wonderful community. We initiated conversations with five of the homeowners and on Wednesday we signed a contract on a beautiful home we’re very excited about! It’s a short sale so we’ll see if this plays out in our favor, but it feels great to be this far in the process and to have generated movement where we saw none.
Here’s the timeline:
- Letters sent: November 28th
- Tour #1 choice home: December 27th
- Sign contract: January 13th
We’re certainly not the first people to try this approach – reaching out to individual homeowners. I’m sharing our story because you may see a detail in my recap that helps you in your home purchase journey!
Lastly, I have to say I loved getting the opportunity to hear about a home firsthand from the people who made memories there, rather than judging a home based off a listing online. I like to think we’ll carry on the legacy of joy and laughter and adventure that has existed for many years inside those walls.