- That your statement to wide number of recipients will likely leak
- The outrage going on was not on whether you were correctly following self-imposed rules and procedures. The outrage was on whether what happened was fundamentally right or wrong
Book reviews are part of the reason why I started this blog. Unfortunately, as I manage to pile myself with bunch of obligations I’m in constant dreaming mode. Mode where I dream about new things over and over never actually getting to DO things I dreamt about. Luckily, reading this book as part of Betterment Book Club on Reddit got me to finally produce detailed overview that I am using now as summary / review of the book.
Note that my writings on this blog regarding books will fall somewhere between reviews and summaries. Like, I will definitely give score at the end so that people can understand whether or not I recommend book. But also, I’ll try to be detailed enough so that you have summary of the book and biggest takeaways. So, let’s dive in right away – my view of “The Subtle Art of Not Giving a Fuck” by Mark Manson. Caveat – I’ll mix both positive and negative… takeaways and just plain interesting bits.
Happiness is a problem
If I was forced to choose only one takeaway from the book – this would be it. Ever since I’ve read the book I’m trying to remind myself every day that “Happiness is a problem”. That sentence is ingenious because it has multiple meanings. As Mark tells in the book: the act of trying to have positive experience is itself a negative experience. On the other hand the act of accepting negative experience is itself a positive experience. In that sense, chasing happiness will cause problems for you. The more you yearn happiness the bigger problem you’ll create.
Also, another meaning of that sentence targets relationship between solving problems and being happy. Like – find something meaningful, solve it, be happy. Of course, after some time happiness will vanish and you’ll need to look for another meaningful problem to solve to be happy. In that sense, people who don’t have meaningful problems in their they feel
The value of suffering
Hiroo Onoda was officer of Japanese army who at the end of 1944 was basically sent on a suicide mission. His orders called to do as much as damage as he could to overwhelming Allied forces and basically fight to the death without surrendering or taking his own life. Well, Onoda did exactly that – for next 30 YEARS. He hid in the jungles of Philippine island he was on, fighting on and on and on… ignoring pamphlets dropped from planes, pleads of locals and probably his own doubts.
I feel tempted to link to YouTube video or various online articles that tell the story… but instead I call you to purchase this book and read about Onoda there. The way Mark presented Hiroo and tied his legacy with “the value of suffering” is alone worth the price of admission. I’ve read lots of book that talk about necessity of suffering for goals you hold dear… but never was that idea better presented than in this book. Crystal clear. Bravo Mark Manson.
Inspiration -> Motivation -> Action misconception
Also a big takeaway from this book is that action should precede everything else. Like, most people harbor idea of being inspired, which in turn will get you motivated and ready to perform. Reality is that this almost never materializes. What Mark recommends is to turn those 3 into a loop that STARTS with action, like: Action -> Inspiration -> Motivation… Every time you will lead with Action, after finishing action you’ll be Inspired, and reflecting back on your action you’ll be Motivated. Then when it’s time to start again, you go with another Action feeding off Inspiration and Motivation of previous cycle. Pro-tip.
Commitment is a NO
Finally, one more misconception that gets shattered in this book is “Commitment is a YES”. What Mark points out is that Commitment requires way more NOs than YESes. If you are committed to something you basically only need to say 1 YES. From there, until you “complete” your commitment you’ll be saying NO over and over.
Title of this book is misleading
Author probably went with it because it sounds cool and is eye catching (let’s boost sales, right?). But then you start reading first chapter and essentially get that title of book should be – “The Subtle Art of Choosing What to Give a F*** About”. Subtitle would be in line of: after you choose what to give f*** about, you then need to go deep and invest 100% of you into it. Mark illustrates this by bragging about how he went all-in-badass with helping his mom recover money from scammer.
Author is obviously a try-hard. And that’s a good thing. However, for some reason he is ashamed of it. Even worse, the way he glorifies Bukowski and his tombstone inscription of “Don’t try” completely misses the mark. Message of Bukowski’s life is more in line with “Don’t try – do it”. Like when you ask someone to do something and he replies with “I’ll try”. Well – don’t try, actually do it.
Because if you look at history and how Bukowski succeeded – you’ll see that guy TRIED for 20+ years to get published. He wrote daily and went through rejection after rejection oblivious of failures until, in the end, he found one person that believed in him and was proficient enough in the publishing business.
Now, Bukowski is definitely person whose “talk the talk” is far removed from “walk the walk”. Thus, book which aims to help people improve should not mystify and feed cult of personality for sake of cool factor. Tell it as it is. Help people find the truth… don’t obscure it. Especially if person you are using as an example is as complex and confusing as Bukowski was:
Writing f*** a lot won’t make you cool
Start of the book is especially bad because you are torn between author’s message of “Don’t try” and his incessant *trying* to sound cool. F*** count in first chapter is over 9000. My theory is that author re-purposed one of his early writings as a filter chapter for a book. Like – let’s put worst chapter at start, so we filter out readers. Because as soon as chapter 2 stars, f*** count drops almost to zero and book quality picks up.
Drama and sounding cool returns at the end
After spending 7 chapters explaining that “you are not special”, “you’re wrong about everything”, “failure is the way forward”… in the last chapter author suddenly goes all soft and fluffy with “don’t try, you are already great”. Then he supports that with following bs paragraph:
You are already great because in the face of endless confusion and certain death, you continue to choose what to give a fuck about and what not to. This mere fact, this simple optioning for your own values in life, already makes you beautiful, already makes you successful, and already makes you loved. Even if you don’t realize it. Even if you’re sleeping in a gutter and starving.
Yeah, right. Kinda fits with whole narrative of the chapter in which he approaches, sits on the edge of The Cape of Good Hope and lives through zen-like “I’m reborn” experience. Of course, there is also someone to witness his brave, awe-inspiring act of sitting on the cliff:
As I step back over some rocks, back to the main path, I look up to see a man staring at me. I stop and make eye contact with him.
“Um. I saw you sitting on the edge over there,” he says.
His accent is Australian. The word “there” rolls out of his mouth awkwardly. He points toward Antarctica.
“Yeah. The view is gorgeous, isn’t it?” I am smiling. He is not. He has a serious look on his face.
I brush my hands off on my shorts, my body still buzzing from my surrender. There’s an awkward silence.
The Aussie stands for a moment, perplexed, still looking at me, clearly thinking of what to say next.
After a moment, he carefully pieces the words together.
“Is everything okay? How are you feeling?”
I pause for a moment, still smiling. “Alive. Very alive.”
Yeah… that’s our unfazed, uber-cool Mark Manson. And the best part is that he doesn’t give a f*** and isn’t even trying. /s
Mark dedicated few paragraphs in his book to bragging about dating “Harvard Law School graduate” who was desperately in love with him. I was curious enough to Google about “Mark Manson girlfriend” and it seems his ex is a prolific blogger. For past 10 minutes I’ve been trying to write few sentences and explain how relationship between Mark Manson and Erika “Awakening” ties into this book. But it seems I’m unable to do so… you’ll need to read whole “It’s Complicated: An Open Letter to My Ex Mark Manson” by Erika Awakening.
This is probably one of the best self-improvement books I’ve ever read. What makes it even better is the fact that Mark Manson is pretty young writer. I honestly can’t wait for him to get older and wiser… considering he is writing killer books now, when he is 50+ and becomes just a bit more mature, material he’ll spew out will probably be godly.
I promised a score, so here it is: 89/100.
In the end, if you are still on the fence, I HIGHLY recommend reading chapter breakdowns by TheZenMasterReturns. The guy just killed it with his breakdowns as part of Betterment Book Club, and he was instrumental in getting me to write my own detailed view. Here are the links to detailed analysis of “The subtle art of not giving a f***” by /u/TheZenMasterReturns:
Let’s open with a shocker – taste is impossible to replace. There, I said it. While Coca Cola company proudly advertises that Coke Zero tastes EXACTLY the same like original Coke… we all know it’s a lie. White lie, but lie non the less.
So, for the moment we need to come back to mindset as a building block. We again need to reiterate your decision to stop idolizing certain foods. Taste is acquired. You don’t need to slave to decisions of yesterday. The same way you’ve built up habit of enjoying bad things, you can build up habit of enjoying good things.
Diet plan core
Weight loss is all about calories you take in. Take for example professor of human nutrition who lost 27 pounds (~13 kgs) in 2 months on a Twinkie diet. Yeah, you read that right – someone lost lots of weight while eating junk and sweets. Even more surprising: his bad cholesterol dropped 20 percent, good cholesterol went up 20 percent.
That shows it’s all about defining a diet in which you can maintain caloric intake. The easiest way to reduce caloric intake is to take a look at high-calorie, high-risk foods. Then you can either take those out of your diet or replace them. Let’s take a look at a list of popular items that are bad for you
Coke, Pepsi, Sprite, 7up, Ginger Ale. Or any sugary drink. Apple juice may sound better than Coke, but it’s actually same amount of sugar. Orange juice in the morning has been breakfast favorite in many households. While antioxidants and vitamin C are great, the sugar in orange juice outweighs benefits.
- If you are consuming lots of soft drinks, losing weight should be easy for you. Just stop drinking these. Or, if you can’t completely stop, replace them. Here is how:
The biggest problem is for those who don’t want to give up taste. For this group of people I would recommend trying brand name replacements. So, if you are Coke drinker, try Diet or Coke Zero. If you are Pepsi drinker, try Diet Pepsi. Now, be warned – lots of these drinks have artificial sweeteners that are bad for you. So, 0 calories do come with some downsides.
- If you are willing to compromise on taste, then there are more options available for you. My personal favorite is Zevia, soft drinks that are sweetened with Stevia (natural sweetener). They have bunch of different tastes – Cola, Ginger Ale, Root Beer… you name it. Obviously you’ll need some time to get used to the taste. But once you do, you’ll be able to enjoy 0 calorie Cola with no downsides.
- You are able to completely give up taste. The best drink is pure water. It always was, always will be. If you can, drink just water and don’t think too much about other choices. Because almost all choices come with a twist. For example, sparkling or mineral water is OK choice, but you need to be aware of sodium content and pH levels. Or water flavorings that are flooding market right now. Infusing water with fruits is interesting choice, but requires prep time, cleaning pitcher, etc.
In the end, the more water you can drink – the better off you’ll be. But if you want to spice up your fluid intake, look through options I gave and find 0 calorie option you can enjoy.
As some other dishes, the problem with pizza is how it’s made. Prepare super thin crust pizza with tomato sauce, no-fat cheese and bunch of veggies… and you’ll have a healthy meal. But when we say pizza, we don’t mean that, right? Pizza means solid crust, lots of juicy meat and finally – high fat pull cheese money shot.
As with soft drinks, giving up pizza is the best choice. Especially because you can’t replace pizza the way you replace soft drink taste. Sure: you can go with thin crust, no-fat cheese or healthier toppings. But it’s nowhere near replacing Coke with Diet or Zevia Coke. It ends up being completely different meal. Meaning, if you enjoy eating certain pizza – just eat it less. Don’t eat it once a week, eat it once a month. Try finding another meal you’ll enjoy as much. And the most important thing: avoid temptation of idolizing what you decided to leave.
As with pizza, great burger’s taste is irreplaceable. But, unlike pizza with burger you are in somewhat better position. If you skip buns and don’t drown your burger in condiments, you can actually eat a burger every day. Take McDonalds Big Mac as an illustration: 563 calories, 33g of fat. But, take out buns, cheese and half of the sauce and suddenly you have manageable meal. One patty is 90 calories and 7g of fat, so at most you are now looking at 230-240 calories depending on amount of sauce. Easily something you can consume whenever you want.
Now, again, I know what I am suggesting is not same as original. But you need to find the way to ditch extras. Take out whatever you don’t need. In ideal diet you won’t be eating BigMac. But if you do eat it, for whatever reason – ditch unnecessary stuff.
Another historic meal. Considering wheat production, it’s understandable our ancestors had bread as cornerstone of diet. But today, there is not a single reason to eat bread with every meal. Especially if we are talking about white bread. Well made whole wheat breads can be good for you. But you don’t need that with every meal either. Sure, make a sandwich. Enjoy a slice of whole wheat bread for breakfast. But if you already have 700 calorie meal in front of you, the last thing you need is a slice of bread to clean plate with.
I’ve found that most people don’t even enjoy the taste of bread. They eat it out of habit. So, ditch the habit. Uncover your sandwich or toss away extra bread. And only consume true whole wheat bread. White bread is terrible.
Chocolates and sweets
New products in this category rock. As a kid I adored Snickers, Mars, Milky Way and other bars. Nowadays I don’t even think about them because of Pure Protein bars I consume daily. It because easy to stay in shape when your “desert” is 180 calories with 3g of sugar and 21g of protein. I love the choice Pure Protein offers with their bars considering they have like 8 flavors.
Now, I am not advising Pure Protein only. They may not be your preferred choice for many reasons (taste, artificial sweeteners, etc). What you should do is try different “healthy” bars and find your favorite. In general you are looking for something that has less than 10g of sugar. If it’s protein bar 180 calories is OK; for “regular” bars you should be aiming for 150 calories or less.
Be aware that there are no “free” calories. 150 calories for desert is still a lot. But at least you are getting some micro-nutrients in those 150 calories vs pure sugar in regular bars. Also, one warning about artificial sweeteners used in most of healthy bars. Sugar alcohol tastes great, but beware of laxative effect ;). Here is my personal favorite review of sugar-free gummy bears.
Ultimate replacement – work it out before eating
You can use this method to illustrate how bad certain foods are for you. It also works great in developing rejection of certain foods. I’ve loved mayonnaise until I’ve started trying to work it out before eating. 2 tbsp of mayonnaise (~27 grams) is 188 calories. That approximates to running 1.5 miles in 15 minutes. The problem quickly becomes obvious. Anyone can save 188 calories by not eating 2 tbsp of mayonnaise. But less than 10% of people in the world can actually run 1.5 miles (~2.4 km) in 15 minutes.
Don’t dig a hole for yourself by overeating and then saying – I’ll work it out. You probably won’t, because it’s impossible. Burning 150-200 calories during 30 minute workout is pretty good. If you are at that level, congrats to you. But if you are not, don’t beat yourself. You are not bad, lazy or incompetent. You are simply focusing on the wrong thing. For start focus diet and caloric intake.
In future parts of this guide I’ll present my own nutrition plan and talk more about workouts. Both are important for maintaining ideal weight or losing weight. But – to repeat yet again – mindset is the king. Focusing on your goals and process is what matters. Workouts and nutrition are just tools. Powerful tools, but tools nonetheless. Thus, before proceeding to next chapter in this guide, I invite you to re-read 1st part: Mindset. As I said in that part: Eating right is not about food. It’s all about mindset.
With all the choices available today you would think enjoying healthy diet is easy. But, unfortunately there are too many bad choices from the past present on the dinner tables of today. Entrées of mainstream dining establishments are completely out of touch with nutritional needs. Any fast-food “meal” is a caricature illustrating the point: TONS of carbs and fat with little else.
And it’s not too hard to figure out why restaurants keep serving same, bad food – people buy it. Fries and Coke sell. What else can you serve that costs less than $1 that people will gladly pay as a “compliment” to main item? Steamed broccoli? Or go with not up-selling customer and tell him to have water with their burger? Yeah, dream on…
But, just because something is convenient for restaurant and their marketing department – it doesn’t mean it should be convenient for you. That’s the biggest problem with most people’s diets. It’s not that 600 calorie pizza slice that’ll kill you. It’s that extra can of Coke you can’t eat pizza without.
As I talked in part 1, mindset is really the biggest thing when it comes to losing weight and eating right. It’s about taking time to finally look into all habits built with help of marketing departments and your sugar enjoying taste buds. Only when you shift mindset can you proceed with planning proper diet.
Figuring out how to eat right is pretty easy. Here is the flow:
- Calculating daily caloric intake. Your body needs certain amount of calories each day to maintain weight. I like Bodybuilding.com Caloric Intake calculator. Visit link, you put height, age and sex and get your value.
- Macronutrients – carbs, proteins and fats. Here you can use different splits for different results. For example, 40/30/30 means that your calories will come be 40% carbs, 30% protein and 30% fats. For losing weight lowering carbs intake is beneficial, and you can go with 25/45/30. Here is great calculator that allows shows you breakdown of carbs, proteins and fats. Just input daily caloric intake we got in step 1 and select split.
- Micronutrients – most of us never spare a single thought on how much DHA, vitamins and minerals we need. Consuming various micronutrients is paramount to your health. It’s easy to overlook this part of diet – it’s daunting task. Preparing and consuming diet that satisfies all micronutritional demands is practically impossible for most of us. Let’s look at an example in which we completely forget vitamins and minerals. Let’s just look at Omega 3 DHA. To meet this micronutrient need, you should be eating fish 3 times a week for the rest of your life. Unless you are living in a culture where fish is standard part of diet (like Japan) there is no way you’ll be able to do this without significant effort. And we are not even talking about costs – being able to buy enough salmon and find time to cook it is another issue.
- Water – now here is one step that never ceases to amaze me. Lots of people can induce significant weight loss just by drinking more water. If you are over 5’3” (160cm) it’s likely you need at least 6 x 500ml bottles of water a day. Whenever I bring this up almost everyone tells me – no way I can drink that much water. Well, your body actually needs that much water. If you are not consuming 3 liters of water every day, it’s no wonder you feel “hungry” or are easy target for soft / hard drinks.
Reading previous list may have left you with impression that iron will is prerequisite for eating right. Well, not really. To lose weight or maintain ideal weight you don’t need much. Considering offers on the market today eating healthy nutritional diet is 5-minute work – IF you don’t mind gulping down meal replacement shakes. Take a look at:
- Vega – my go-to brand. Their flagship product is plant based meal replacement smoothie. 12 oz (350ml) drink contains 170 calories, 20g of protein, 6 servings of greens, 25% of daily fiber, 50% of vitamins&minerals, antioxidants, probiotics… and so on and so forth. This drink is actually TOO nutritious for meager calorie content. If you are to consume 10 of these shakes to get near 2000 daily calories, you would poison yourself. Too much vitamins is as bad as no vitamins. Vega has great presence on Amazon and I order using Subscribe&Save.
- Soylent – startup with interesting concept. Focus on building healthy, convenient, and finally – affordable food. I like how they present cost per calories. Currently they are at around $2 per 500 calories… eating healthy diet for $8 a day sounds great. What’s great is that price is same regardless of whether you order from Amazon or Soylent website. For people who are on Subscribe&Save ordering from Amazon can actually be cheaper.
- Ambronite – another interesting food startup. Their focus is on quality of their meal replacement drink. They are definitely not the cheapest alternative. I’m talking about 4x cost of Soylent. You can order Ambronite from Amazon or their own website.
- True Nutrition – All companies I’ve presented here basically do the same thing: grind certain foods and dehydrate them. True Nutrition is unique in allowing you to customize your powder. You decide composition of your meal replacement – macro and micro nutrient composition. Take a look at their website or order premixed powders they offer from Amazon.
I remember first time I saw these products. I was stunned that something like this is available. The prospect of being able to drink my diet in form of 5 daily shakes was mind blowing. It was like future from movies arrived and I had no idea it’s already here.
Now, don’t get me wrong. I am not suggesting you completely switch to this. I am just saying you can do it – and if you did it you would eat “healthier” than 90% of people. I am still sticking with “standard” meal or two a day; not because of foods, but because I enjoy chewing.
But meal replacement shakes allowed me to simplify my daily eating. They hit all items from the list – calories, macronutrients, micronutrients and water. Add 2 meal replacement shakes to your routine and you have lot less calories to plan and break down.
Final thing I wanted to touch upon before closing this part are supplements. It’s easy to overlook many nutrients because we are not feeling impact. Iron deficiency is probably the best example. Most people never think about iron in their diet until their head starts hurting or their heart starts pounding. The problem is that deficiency of lots of other nutrients are not as easy to diagnose. Your insomnia could be related to magnesium deficiency. Your brain fog may be present because you haven’t consumed Omega 3 DHA in years. And so on…
Labdoor.com is great for identifying supplements to incorporate in your daily routine. So, invest a bit time to look through that website and figure out supplements you may need.
I understand this part covered lots of information and maybe sounded like too big of a shift. But give it a time. Read what I wrote once more and re-analyize products. And most importantly, keep open mind and think about what I suggested. If you read this far, I am pretty sure weight loss won’t be a problem for you. As I said, to lose weight is not hard. As long as you have will, figuring out battle plan is easy.
In next part we will take a detailed look at popular food items and what we can replace them with. Also, I will present my own eating schedule along with supplements and meal-replacement shakes.
Losing weight is one of the easiest things to do. Why do then so many people struggle with excessive pounds (or kilos)? As with any popular question, ask different person and you’ll get different answer. Some will blame their metabolism, others busy schedule, few will complain about sweet tooth for certain types of foods.
Reality is that while all those answers are valid and true, they don’t address the main point. The reason why most people gain weight is quite simple:
They are eating more calories then their body needs.
Now, I am being Mr Obvious for one simple reason. Whenever discussing any topic you always need to keep main cause in the focus. By doing that you allow yourself to filter real from perceived problems.
With proper focus, let’s now revisit original list of reasons that supposedly stand in way of losing weight:
- Metabolism – genetic differences allow some people to eat more than others without gaining weight. But we are talking about minuscule differences here. You can easily negate bad metabolism. Drink green tea, increase muscle mass or walk 10 minutes a day; to name just few ideas.
- Busy schedule – take time to find answers to your problems. In today’s world most of the problems are already solved. There are so many shakes, protein bars and ready-to-eat meals on the market today. Incorporate these in your diet and you’ll see that eating right is effortless.
- Sweet tooth for certain types of foods – now we are getting somewhere. If you know you are craving something that’s bad, you are already ahead. You understand it’s area of subjective choice. Take smoking cigarettes for example. Everybody knows that smoking causes cancer; yet, some people still do it. Sure, tiny percentage will still deny cause-effect relationship, but only most extreme or oblivious will smoke when their child or someone they care about is present. Smoking becomes personal choice they embrace and enjoy living with.
Don’t torture yourself with special diets
Eating right to lose weight and maintain ideal BMR is not much different. Many get lost in sticking to certain diet, fasting and torturing themselves. We all know someone who does this once a year, only to roll back to old eating habits after reaching goal. I personally find this unnecessary. Why reward healthy eating by eating junk? I mean, I get the concept of guilty pleasure; but why focus on it? Guilty pleasure every now and then – sure, if you need it go for it. But every day?
Reality is that you don’t need to live like that. In today’s world it’s easy to eat healthy, nutritious diet that you 100% enjoy. It only a matter of taking time to figure things out and building proper mindset. Because it is all about mindset. Try to make someone who enjoys drinking water to gulp down a beer or two. You won’t be able to do it – simply because that person doesn’t enjoy beer. It’s not about calories, carbs, alcohol. It’s about being completely indifferent when it comes to taste of certain beverages.
For example – you can only be a voracious Coke drinker if you invested in that habit. Over time you have developed enjoyment in the act of drinking Coke. You associate taste of Coca Cola with pleasure and happiness. Now, here is something I find extremely funny. Try to give Pepsi to someone who drinks Coke (or the other way around). On the surface, for practical purposes it’s the same drink – same amount of sugar, calories, caffeine, guilty pleasure and all. But for person drinking – it’s nowhere near the same. It’s all about perceived taste.
Choose your healthy eating
So, in a nutshell – eating right is not about food. It’s all about mindset. It’s about not craving a Big Mac that you’ll get on your way back home from work. Dissociate pleasure and bad eating. If you are unable to find meaning and enjoyment in something else, then at least stop idolizing bad food. If you need to idolize food, idolize one that good for you.
In parts that follow I’ll take you on a journey of building your personal, healthy diet that you 100% enjoy. We will talk about exercising, foods you can try and address bunch of topics related to weight loss. But, to start you need to make a small first step:
Decide that you are willing to change your mindset.
You already know which foods in your diet you should be avoiding. For some of them we will find substitutions. Some of them we will ditch all together. But for this to work you need to be willing to stop associating pleasure to foods that are bad for you.
Leave your comments, and read part 2
If you are up for the journey – leave comment below. I will try to help anyone who comments and wants to lose weight regardless of exactly visit this page.
Once your home offer is accepted, you’ll be almost there. Almost meaning about month or two, depending how fast your lender works. But first things first – home inspection.
I know that paying $400 for a guy just to come and look around doesn’t sound too attractive. Especially if you end up having an inspector that’s all suited up, i.e. if when you first meet him he immediately starts talking about things he won’t be vouching for or won’t be inspecting… well, you’ve likely paid $400 for nothing. As with agent, I really suggest that instead on relying on your friend’s recommendation you rely on scores by hundreds of people. Redfin has pretty nice Open Book of Inspection Services for every city (Chicago linked). Also, they have good Interactive Home Inspection guide. But, if you are already set on hiring professional inspector, you should only focus on one thing: get the inspector which promises that after he is done with inspection, he’ll spend time with you SHOWING you the problems and allowing you to take your own notes.
Nowadays many inspectors prefer to skip this part because it can be time consuming. Instead they take stance of – let me send you written report and everything will be in there. The problem with written reports is that they are not interactive. More often than not they are really just predefined checklist through which inspector goes and puts functional, non-functional or some variation. Dryer needs repairs. Awesome, now what exactly does that mean? Should I spend more money just to know how bad it is? Do I need to completely replace dryer? Those are the type of questions you’ll be asking yourself if you settle for just written report.
Another thing inspection wise that I recommend is testing for Radon. This decision is even harder. Radon self test kits cost something like $13. Sure, you need two (to ensure test was valid), but that doesn’t justify price tag of $150 which is how much most inspectors charge nowadays. For that amount you can easily get digital Radon meter that’ll last you for a full year.
The reason why Radon testing price is so high is that inspectors play on the price tag of Radon mitigation system. Standard system can easily cost over $2000 (when you are purchasing house for hundreds of thousands of $$$, what is two thousand more, right?). So, if you do not test and end up having to mitigate Radon anyway, instead of spending $150 you are now spending $2000. As a consequence, most people play safe and pay for Radon testing. The only advice I can offer is that you take a look at EPA’s map of Radon Zones. From my experience state EPA agencies have more accurate maps and you may wish to search for those. But, if you are in Zone 1 or Zone 2 – you should definitely test. Zone 3 – you can take a gamble, but… you know how they say – better safe than sorry.
Closing the loan
As I’ve said previously, in your Home Offer there should be two deadlines – first deadline is date by which you should secure your loan. If you were ever wondering why purchases of houses take few months, this is where you figure out why. Theoretically, closing the loan is not that complicated:
1. It starts with you signing few documents giving loan issuer authority to start the process
2. After you are done signing, you’ll be paying various fees
3. Your loan issuer will order property appraisal
3. Appraisal will need to confirm that purchase price is not too inflated or deflated
4. After appraisal is successfully completed, you’ll be asked to provide various documents for purposes of closing the loan
5. You’ll need to jump through few hoops, send in new documents, move money to that bank account, etc
6. Finally, you should get notification that you are approved
7. After this all that is left is for your lawyers figure out any outstanding issues and date two dates: final inspection and closing date
Time in which you can do all listed steps can vary greatly. I’m pretty sure that with responsive lender you can close this process under 2 weeks. Then again, it’s possible that with your lender it will take more than 2 months. This is something you need to plan in advance. Before signing off Home Offer, reach out to your lender and ask whether or not he is comfortable with date given as financing deadline. If he is not, put contingency that you get your earnest money back or that deadline is automatically pushed if your lender fails to deliver by the date. If lender is confident he’ll get job done by listed date, still put contingency just in case.
Dealing with lenders can be pretty frustrating, because more often than not you’ll start the process with one person and then when paperwork starts, you’ll be assigned to someone else. And you know how switch from sales guy to tech guy goes – suddenly there is no more yes, yes, sure. Instead you’ve get less than polite emails saying: give me this and give me that. Can I give you this? No, I’ve asked for that, go and get it. This can especially be frustrating when it comes to time sensitive material like bank statements. God forbid you send all the required documents right away and be done. If process tags along for month or so, be sure you’ll be asked to send bunch of documents again.
This is by no means complete list, but expect to be asked to send:
1. Scans of your IDs, driver’s license, passport or green card, all depending on your situation
2. Last two pay-stubs and scans of pay checks (yeah, scan those before depositing)
3. Tax returns and W2s for last two years
4. Bank statements for past two months. If you are going for 20% down payment you need to show you have enough money to close the loan
5. Company letter showing that they are aware of your house purchase and that they support it
As I said, documents may vary. Some lenders may not ask for #5. Some may say – without that we can’t proceed. Just be ready for the roller coaster ride and try to get it over as soon as possible.
My loan is approved! Am I done?
Well, almost. Depending on your situation you could be days or months away from moving in. This is where lawyers are pretty active, going over final details and figuring out closing date (before second deadline listed in Home Offer).
Now, if there were any outstanding contingencies, try to figure them out as soon as possible. If seller took upon himself to remedy Radon issue, that needs to be done before closing date. Especially in case where something was being fixed, be sure to schedule final inspection. Property may have completely changed between you giving Home Offer and now. For all you know maybe it was humid summer and mold started growing.
I’ve had really bad experience of skipping final inspection (because I was unaware of it). When I moved into my new home, radon pipe on the bedroom ceiling greeted me. Good luck sleeping in there. I’ve reached out to my lawyer and 2 days later he replies – well, you signed papers, it’s your problem now.
So, learn from my mistake. Agree on closing date, but set final inspection date a day before it. Tour the property and check if everything is as it was when you gave Home Offer, or if it’s been fixed as agreed. Everybody other than you will be gone tomorrow and there is nothing you’ll be able to do. Until you sign the papers, you have the power to change the things and get others to help fix the problems. That power is gone immediately when you get the keys to the property.
Moving and how it fits into the picture
I plan on writing separate blog post regarding moving as it is complex topic. In the context of closing house purchase, just be aware how it’ll influence you. Especially if you are moving to a new city or state, there are tons of things that need to be done. Those things can keep you occupied and shift your attention from important house purchase decisions. Do not let that happen. Especially if you are moving to new city plan to arrive there at least a day or two before closing date. Do that final inspection and work on any issues that have popped up in the meantime.
Closing house purchase process, closing date
Closing date is an interesting combination of exciting and boring. You lawyer should guide you through signing more than hundred papers. You’ll probably be amazed at how majority of those 2 page documents can be explained in a sentence.
Again, the most important thing – everyone will be gone after the meeting is over. Your agent and your lawyer are not there to help you. Unlike you, everyone else is there to collect their share of money you are providing; so they’ll try to get things over as soon as possible. If you are satisfied with terms and conditions, by all means, do not waste people’s time and let them proceed. But if you are not comfortable with ANYTHING, speak up. If there were problems during your final inspection, postpone closing date. Do not give in to any promises that are not on written down and signed.
Once closing is over – it’ll be you and keys to your new home. Your bank account will probably be quite lighter. You’ll be in for a few decades of mortgage payments.
You better be happy with what you’ve got now.
You’ve visited several properties, debated whether or not something is good with your significant other, and you are finally at the point of thinking to give offer for certain house. How to know whether or not house is really good? How much should you offer? What comes after that? Let’s continue with our journey and find answers to those questions.
In first part of this series, I’ve urged you to go through your list of reasons why want to be a home owner. This is a good place to remind you of that consideration. If you are not truly excited about a property – do NOT buy it! Decision to own a real estate is a big one. When you are renting you are in so much better position on number of fronts. Problems with local economy? Property is due for big maintenance – AC, water heater, kitchen needs replacement? Ratings of local schools are going down? Your new neighbors seem like they’ve came straight from hell? If you are renting, all these and many other problems are, ultimately, resolvable by simply moving away.
But, for sake of continuing this article let’s say you’ve decided – yes, you want to own that particular property. And yes, you’ll learn how maintain stuff around the house, figure out a way to live peacefully with your neighbors and even take that seat on board of local school if need be. How to get from giving an offer for property to moving in?
How to give a good Home Offer?
This is where your agent should shine. Really good real estate agents are sharks when it comes to price negotiation – they’ll latch onto whatever is weakness of other side and try to magnify significance just to get better deal. However, one thing is important here – realtors work on commission, so regardless on whether they are representing seller or buyer, they both benefit on higher prices. Meaning, don’t expect your agent to be fully on your side. If he sees that you like the property and won’t mind moving in, even if the thinks it’s a bad purchase, more often than not your agent won’t raise additional doubts. Why induce doubt with saying that crime rate in area is rising? Or that local schools are getting worse? It could be temporary blip long term… and why bring that up when $10000 commission is waiting?
Another constraint is time. Whether acting as seller’s or buyer’s agent, realtor tries to minimize time spent on client. You’ll rarely see your agent object too much on house purchase because if you think about buying a property and he talks you out of it – he is losing both money and time. Now he needs to find you another property you’ll like. In case you buy, worst case scenario is that you are completely unsatisfied with how he lead you through the process. Considering that average person doesn’t buy house every 5 years, it’s easy to understand why in 80% of cases your agent will go with the flow.
I’ve said all this so that you understand how time is probably the biggest leverage you have over both your (buyer’s) and seller’s agent. I mean, you can see it yourself on real estate market all the time – after failing to sell certain property, what is it that seller’s agents do? They work harder to find prospective buyers? Advertise more? Figure out why property is not selling and target the problem? Of course not, in 80% of cases, all they do is just talk owner into lowering the price. Job done, right?
So, when deciding to give the offer, first thing I would look at is how long property is on the market. Rule of thumb, for every month on the market you should aim at taking down 2% of the initial price off. Obviously this is not applicable on foreclosures. New constructions are also somewhat resistant to such aggressive price degradation.
Another thing related to time that influences the price is the season. Is it winter? If it is, you’ll most likely get better deal, since market is way slower than in summer. Most families simply can’t afford the luxury of moving in winter when kids are in school. If you are without kids or are not constrained by it, you may save quite some money by making home purchase in winter. Again, rule of thumb – you are probably looking at 3% discount if you are making your purchase in winter outside of hectic, spring/summer break cycle.
Another showcase of how Internet and free data destroy competitive advantage is ability of anyone to see price history for any property on the market. I mean, good luck trying to buy low, do few simple renovations and sell high to anyone who knows how to type in www.redfin.com in their browser. I can’t vouch for correctness of data on Trulia and Zillow, but after my experience with house purchase, I think that data on Redfin is pretty spot on. I had some doubts during purchase process since my agent came with different values. But in the end I found that agent’s data was incorrect.
Finally, last, but not least important are results of home inspection. We’ll talk more about it in section that follows, but regardless of price you agreed, keep in mind that you’ll probably need to sink in at least $5000-$10000 on small repairs once you move into house. You know those houses that are advertised as “in top condition, you just need to move in”? They would be better off advertised as “you’ll probably need to spend just $1000-$2000”. I am yet to see a house in which you don’t need to do anything.
Whether or not you want to pay that price out of your pocket, or get seller to pay it – it’s up to you. The issue is that home inspections are not that cheap nowadays, you are probably looking at paying $400 per property. Will seller be willing to give you $300 to paint a wall that’s not perfect? Probably not. And you also don’t want to get to nitpicking. It’s bad for your karma and you don’t to be haggling before your offer is accepted, especially if by then you’ve already lowered the price by using advice I’ve gave previously.
Regarding price in Home Offer, again, be confident that what you are giving is fair. If in doubt and you have nowhere to turn, feel free to leave comments, I’m obviously not real estate professional, but am willing to help and give you unbiased opinion.
Preparing Home Offer
Giving Home Offer is the place where tricky lawyery stuff starts. Also known as “here are some documents, they are all good, you only need to sign them” point. As I’ve said in previous parts, don’t allow to be intimidated by your lack of knowledge and coerced into signing stuff. Chances are that after reading all 20 pages of documents you still don’t know whether you are protected in case things go south or not. That’s completely normal. As a matter of fact majority of legal documents are purposely so long and written in terrible fashion in order to demotivate people from reading them. This is why I recommend that you hire a lawyer before signing anything. Then focus on things that matter and leave form and formalities to lawyer, hoping he’ll do his job.
Regarding Home Offer, you want to be protected against two things:
1. Home Inspection discovering non functional parts of house
2. Failure to come to terms with your lender, i.e. being unable to close the loan
As long as those things are in offer and you are allowed to withdraw your offer without any consequence – you are good. From standpoint of buyer the important parts of Home Offer are:
1. Home Offer will contain the price your agent and seller’s agent have reached through informal negotiation
2. By giving formal Home Offer, if accepted you are required to post certain deposit (earnest money)
3. Deadline by which you need to close the loan, and deadline by which you need to close house purchase
We’ve already discussed price in detail. Once price is in the Home Offer it’s harder to change, but not impossible. Especially if Home Inspection uncovers potential problems with the home. For example, you probably won’t get buyer to lower the price if inspector figures out that dryer in the unit is old. But, if inspection uncovers high levels of Radon, you can be pretty sure that price of home will need to go down to accommodate cost of Radon System installation. I’ll talk more specifically about Radon mitigation systems in separate post, but if you do get high levels of Radon ask that you are given a minimum of $2500 credit. Take charge of Radon system installation since if you leave it to seller, he’ll go with cheapest, easiest solution. This means that you can end up with Radon pipes in places you don’t want them (going through closets or bedroom ceilings).
Rule of thumb – anything that seller is legally obliged to disclose, and was not disclosed before giving Home Offer can easily bring the offering price down. Radon levels are good example, if seller truly never tested for Radon and he didn’t knew the levels, he doesn’t need to disclose it. Once he is informed by potential buyer, and purchase falls through, for every future potential buyer he legally obliged to either fix the problem or disclose it. Same goes for ceiling leaks, basement flooding, toxic materials, and so on. Take a look at this article that gives pretty good overview of the subject – what defects need to be disclosed when selling a home.
Now, onto earnest money. Basically, if your offer is accepted you need to deposit certain amount of money showing good faith – i.e. that you are serious about offer and will work toward closing the purchase by the time specified in the offer. Traditionally, following rules apply when there is earnest money:
1. If deal falls through because of a condition present in the offer, buyer gets back his deposit, seller gets nothing
2. If deal falls through because of buyer, for example he simply drops the purchase or refuses to proceed, seller keeps the money
3. If deal falls through because of seller, for example he got better offer, seller is obliged to give the buyer twice the money he deposited
Now, again, these are traditional rules. Your Home Offer could be completely different – all depends on the wording of the contract. But, if you are a buyer and are confident that you are getting a great price on the property, do this:
1. Make sure that twice the money back condition is enforced in the Home Offer that’s accepted
2. Double check that you are comfortable with conditions under which you can withdraw the offer
2. Agree on deposit amount which’ll prevent seller from looking elsewhere
So, with those conditions present, if you as a buyer deposit $5000, someone needs to outbid your price by at least $5000 for seller to even consider going with the alternative offer. Increase deposit to $15000, and it’s that less likely you’ll lose the property in price bidding war in month or so it’ll take you to close the loan and other details.
Of course, if you are seller, you’ll try to nudge things into your favor. You’ll try to keep conditions under which offer can be withdrawn to a minimum. If you are confident you are getting good deal of course that you’ll ask for bigger deposit. On the other hand if you are not satisfied with price, you’ll try to keep deposit to the minimum and explore the market in the meantime while buyer is dealing with financing.
Your real estate agent (realtor) is basically person that should be telling you all this that I am telling now through series of these blog posts. In a perfect world, buyer’s real estate agent would start by hearing your wishes (I want house this big, in this type of neighborhood, I want to pay this much, etc), work toward compiling list of suggestions for you, communicate with you on your schedule so that he knows when he can take you on a tour. While we are at it, he should be your best friend during whole process – giving you informed choices on whether or not price for certain house is too low / too high and also picking up tab whenever you take a stop for a lunch / coffee to take a break. To top it off, it would be great if he has law background so that he can make sure all the contracts (like Home Offer) that you are signing leave you well protected in case things go south.
Quite unrealistic, right?
Realtors in reality
In reality, (most) real estate agents nowadays see their role as someone who shows houses, helps you with making Home Offer, and gives you a hand with small things like scheduling with home inspector or communication with buyer’s agent during closing process. Now, I am not saying that there are no awesome real estate agents out there. Just, like most things in life, there is variance – how experienced certain agent is, how much time does she/he has, how well agent performs in frustrating situations, etc.
To be fair, when you look at things from agent’s perspective – it’s not like their situation is all rosy. If they don’t have representation contract signed with you, most often than not they’ll end up with $0 – i.e. all the time they’ve spent on you will be for nothing. In today’s world of Internet where everyone has the ability to browse listings and where sites like Redfin beat the hell out of most restricted “real estate agent only” databases, they don’t have any competitive edge.
Everything taken into account, paradoxically, I think that those agents that are being assholes are probably the ones getting the best deals. I.e. give prospective buyer a day worth of your time, try to get him to sign a representation contract, and if he doesn’t give in to your sweet talk, blow him off. Your loses as agent are minimized, your time is freed up so you can look elsewhere for easy money. I mean, only after truly getting informed can I understand what kind of home run I was for my agent – since I’ve done all the homework and research, got pre approved on my own, had my wife search for houses she liked, he effectively pocketed $9K for about 8 hours of work.
Can I buy house without realtor?
Now, all that said, most of you reading this are probably asking – OK, I don’t want to pay $9K for few house showings and small communication help. Can I say to prospective seller, instead of giving 2.5%-3% of purchase price to my agent – lower the price of the house that much for me?
Well, actually – YES, you can. Redfin has a great subsection in their Home Buying Guide titled Working Without Agent. I would especially emphasize the section in which they talk about seller’s agent doubling his commission by posing as your agent too. This is extremely easy to happen in case you are yet to hire attorney, and you are coerced into signing something without truly understanding what’s written there (which will be 90% of the time when you are dealing with real estate documents).
If you decide to buy real estate without agent, be prepared for a bit of negotiation. For example, licensed real estate agent needs to be present during inspection and appraisal. In most cases you can persuade sellers agent to do that free of charge in interest of selling property. It’s possible that seller’s agent just won’t budge, i.e. he can start asking for $$$ in exchange for his cooperation. As I’ve said in introduction, if you are well qualified buyer, in 99% of cases you don’t need to settle for anything – especially if you are well informed and know options that you have. In this case you have pretty good options:
1. If you are able to directly contact seller, do so and explain what agent is doing. I’m sure you can guess seller’s response. I mean, how would you react if you found out that agent hired to sell your property is risking a sale for minor fee in his pocket?
2. Find licensed agent that’s willing to be there for whatever fee your are willing to pay.
3. If this is appraisal (not inspection) we are talking about – since it’s your lender that’s ordering appraisal you can get him to help.
One thing that is not covered in Buying Property without Real Estate Agent article I’ve linked is part when you give an offer. In most cases, you can always get seller to lower the price by at least 5%. I will talk more about how give a good offer and what things you can use to your advantage in negotiation in sections that follow; what is truly important now and related to working without Real Estate Agent – try to get that extra 2.5%-3% AFTER you agree on price and before giving formal offer. This can be tricky to pull off if seller is represented by a good agent. Unless you have a friend that’s licensed real estate agent who is willing to tag along for free, you need seller’s agent to open doors of house for you. In that situation first thing seller’s agent will try is to wiggle his way in as your formal representative (and collect both buyers and sellers commission – 5%-6%). Once he discovers that you are not budging he’ll understand that you are already in for 2.5%-3% discount and will try to use that against you during price negotiation.
Simply, good seller agent will understand that for you it’s not as easy to schedule viewings as it is to someone who is working with agent – instead of scheduling with one person, you are scheduling with all these different seller’s agents. If you are already thinking about giving offer, he’ll know that you like the property and will more easily settle for listing price than somebody who is unaware of details / inexperienced – i.e. you are already getting 2.5%-3% discount, inexperienced person will try to get that trough negotiation.
Now, I started writing this article to help first time buyers – those who are inexperienced and are just looking not to be swindled. Now that you have more knowledge about process, it’ll actually be quite easy for you as a buyer to swindle things to your advantage. For example, nothing prevents you from finding a real estate agent and getting him to open doors to all the houses you want to see. After using the agent for a day, you can just say – thanks I’ll proceed on my own and either get another agent to work with you, or give offer on your own if you found house you liked.
I warn you – DO NOT BE AN A..HOLE. Risking to sound too Yoda-like, let me say: knowledge is not to be abused. Plus, karma is a … interesting concept. If real estate agent found out that you knowingly wasted his time, it’s quite likely you will be sued for commissions. And in that legal fight, oddly enough, I would cheer for real estate agent.
Say again, how do I find real estate agent / realtor
Now that we have all that under our belt, the easiest part – actually finding a real estate agent. In today’s world, this is truly a piece of cake. Redfin offers great directory of real estate agents. Zillow has real estate agent directory too. Surprised that Trulia is also doing it? Didn’t think so.
Also, when building my list of houses I saw that Redfin has pretty neat option of scheduling. You just select date and time when you want to visit properties and they try to assign you an agent that will take you on tour. Another reason why I’m recommending and putting Redfin first (can’t vouch that Zillow or Trulia offer similar option – but knowing the market, they probably do).
You may be tempted to go with somebody that your family or friends recommend as your real estate agent. My advice – don’t do it. If you hire your realtor through Redfin, you get a chance to pick from thousands real estate agents that have been reviewed hundreds of times. Worst case scenario – you start with someone you don’t like, it’s walk in the park to change him. And on top of that working with Redfin agent you’ll most likely get thousands of dollars worth of refund.
If you decided to do everything yourself and pocket 2.5%-3% you have both my admiration and envy. Support too – if you are unsure about anything, post a comment here, I’ll be glad to help if I can.
After deciding that it’s time to purchase a house you basically need to do two things:
1. Get pre-approved for home loan so that you know which houses are within your reach
2. Start browsing popular sites like Redfin, Zillow and Trulia and building up your list of properties you want to look in person
Most people start with #2 because it’s easier. Also, first time home buyers obviously have no idea how the whole home loan preapproval process goes, so in most cases they are thinking “let me first find a house I like, then I’ll figure out financials”. This thinking can actually work in your favor in case you are not 100% sure you’ll be buying house. We’ll explore that, along with other scenarios in section that follows.
Home loan pre approval process
The benefits of home loan pre-qualification boil down to two things: real estate agents taking you more seriously and getting insight into financials of house purchase.
Before you are pre-approved, your or seller’s agent don’t have any firm guarantee that you’ll be able to purchase house they are showing you. So, if you are already pre qualify they’ll be bound to take you more seriously.
Also, pre-approval helps you kickstart longest part of home purchase – closing loan. Instead of finding your dream house and then figuring out financials, you’ll be bound to figure out financials right away. When you truly understand how the process goes, financials are not that hard. We can break them down into:
1. Credit score – this influences loan APR you’ll be offered. Say ranges are 760-850+ for 4%, 700-759 for 5%, 670-699 for 6%, etc… If you credit score is 710 you’ll obviously get base APR of 5%. Take a look at How credit scores affect mortgage rates article that gives more detailed example.
2. Ratios tied to your income – the simplest check I can offer is: your mortgage payment (including taxes and HOA) should not exceed 25% of your monthly paycheck. Keep in mind that you should subtract all fixed credit payments you currently carry… like car loan payment for example. Zillow has great Affordability calculator. Simplest version just requires that you provide your annual income, monthly debs and down payment in order to get maximum house price that you can afford. Even better, calculator has advanced mode in which you can add property taxes, HOA dues, etc… so definitely check the given link to home loan calculator.
Finding loan issuer that can pre approve you is not hard in today’s market. Both Zillow and Trulia offer great mortgage marketplaces in which you can see all the lenders available, plus customer reviews for each of them:
Zillow even offers step-by-step home loan preapproval wizard that can guide you through the whole process. I found it too cumbersome – during my search for pre-approval, I just emailed agents that had best combination of offered APR and customer reviews on Zillow Mortgage Marketplace.
Before closing this section, a word of warning on something we talked about. In case you haven’t firmly decided that you will be buying a house, it’s actually better NOT to get pre-approved. First off, process is not exactly trivial. You’ll need to fill detailed application that includes giving away your Social Security Number (SSN). On top of that, each pre-approval process includes credit score check, which brings down your score by at least 5 points (each time).
In my case, I reached out to 3 lenders, and after talking with them I’ve filled full application only with 1. In ideal scenario, I advise you to do the same.
Besides, now that you know that basic ratio (mortgage payment not exceeding 25% of your monthly paycheck), have link to affordability calculator and know where to get preapproved, you already better positioned then I was. Since I didn’t knew that basic ratio, I needed to get pre-approval just to get solid idea on home loan I can afford. You already enjoy knowledge of what comes next and what is it that you can afford. So inverting steps – visiting a few houses and getting pre approved only before you want to give formal offer – is something you can easily do.
Tips and tricks of house hunting over Internet
Nowadays, there are numerous sites that can help you find houses worth visiting in person. I would recommend using following three, in order in which I’m giving them:
1. Redfin – the best site in my book because of two things: they have most accurate data and they allow you to easily schedule tours with their agents. Other positives of Redfin that I would emphasize include advanced search, nice integration with school reviews and finally recently launched 3D Walkthough that allows you virtually walk through some of the houses.
2. Trulia – out of three Trulia is probably the sexiest looking, true HTML5 website. The biggest selling point of Trulia are easy to use map overlays – so when searching you can easily see the crime rate of an area, schools, amenities nearby, whether or not property is in a flood zone, and so on.
3. Zillow – third place doesn’t mean that Zillow is a bad site. On the contrary, as you saw in pre-approval section, Zillow offers lots of great tools for prospective home owner. Just, everything search-wise, Redfin and Trulia do slightly better. Finally, data on Zillow is noticeably worse, especially when compared to Redfin.
Chances are that you’ll be finding all available houses for purchase by just sticking with these three websites. But of course, your options don’t end there – just Googling for “find house to purchase” gives you tons of real estate websites – like Realtor and HomeFinder . Use whatever is easiest for you.
Somewhat different are sites like ForSaleByOwner and Owners.com. Remember how in previous article I’ve talked about hefty real estate agent commissions? Well, these sites may contain listings not found on Redfin/Trulia/Zillow since owner decided to list property on their own and not give in to extra real estate agent fees.
Other than strictly real estate, there are some other useful websites. First that comes to mind is Walkscore which shows you how walk-able certain neighborhoods are. For most people, driving is not a problem… but some of us want to have a grocery store, park or coffee shop nearby – one that we can walk to in under 5 minutes. For example, area in which I live now has a sports bar with 1/2 off burgers and $2 draft beer during every Monday or Thursday Night Football… it’s truly nice perk in winter when you just want to get out of house, but don’t want to deal with traffic.
Also, review sites like Yelp can be quite helpful. They can show you whether or not property is in popular area. I mean, if houses cost approximately the same and one is in area with 10 great food joints, while the other is 5 minute drive away from closest store, you’ll obviously go with the first one.
One thing that I couldn’t find is definite forum on which you can get answers to questions you have and interact with other buyers/sellers. Don’t get me wrong, it’s not like there are not options. Redfin has pretty good forums. Zillow has nice Q&A website. Just I can’t truly recommend either – so if you are stuck with questions, the best thing I can recommend is leaving comment here.
Now that you are armed with knowledge on home loan pre approval process and websites for home search, start building your list. Again, do not start home loan preapproval process until you are 100% sure you’ll be buying a house. Ideally, you should be aiming to give formal Home Offer within 30 days of getting pre-approved. Once they start house searching process most people overwhelm themselves. To repeat myself, for now just FOCUS on two things:
1. Building a list of at least 5 houses you want to see in person
2. Making sure that monthly payment for each house (mortgage+taxes+hoa) on the list is below 25% of your monthly income (paycheck – existing credits you carry, like monthly payment for car loan for example). If in doubt, use Zillow Affordability calculator.
That’s it. Do not worry too much about anything else. To give you a peek of what follows, and how easy it is overwhelm yourself, here are the steps that stand between having a list and moving into house that you’ve just purchased:
1. Getting home loan pre approval
2. Finding an agent to take you on a house tour
3. Signing contract with agent to represent you during house purchase
4. Hiring building inspector and giving formal Home Offer for property you want to buy
5. Hiring attorney to guide you through closing process and help you with contingencies on the purchase contract
6. Closing loan with issuer that pre-approved you
7. Final inspection
8. Closing date, scheduling date when you and seller will be signing 100+ papers and exchanging money and house keys
Keep in mind that steps I gave are for conventional house purchase. Meaning, if you are looking to purchase foreclosure or a short sale – there may be extra steps – like both you and seller waiting few extra months on whoever is holding the deed (loan issuer / bank) to approve the purchase.
Also, ordering of steps is not set in stone. You can hire an attorney before giving formal offer – so that he goes through offer you are signing and make sure that it doesn’t bind you to purchase house in case inspector discovers something quite problematic. Also, you can reject signing contract with an agent or getting home loan pre approval all the way until you give formal offer. There are lots of intrinsic details that I’ll be covering and that can save you quite some time / money… for now just follow what I’ve said in this and previous article, revisit your reasons for becoming a home owner and make sure that properties you are looking at align with those reasons.
I’ve recently went through the painful process of buying a home. Being a first time home buyer I’ve obviously made quite few mistakes so I’m writing this post as a future reference for myself, while also hoping that it may help somebody out there who is in the same situation as I was.
To begin, let me focus on few things that I, subjectively, view as completely false now that I am a homeowner. I really believe that before making final decision you should revisit your list of reasons to buy house. There are quite few myths floating around, and before proceeding any further we need those debunked.
House as an investment
This is probably one of the biggest myths fueled by real estate industry and government. When you take into account closing costs, yearly maintenance costs, association fees, taxes and bunch of other costs you never needed to worry about when you were renting, it’ll be obvious to you that in BEST case scenario you are looking at 1% yearly return. To emphasize again, I am talking about BEST case scenario. Would you ever buy a stock that will probably lose value, but could MAYBE give you 1% yearly return? Of course not.
And it’s not housing market, but never-ending string of fees that will bury you. For example, on my closing statement, for $345K house purchase, between me and seller we’ve paid about $40K in closing fees (me about $13K, him about $27K). To even better illustrate the point – seller’s agent, who did nothing to sell the house for about 6 months, and my agent who just showed me 3 properties before I decided to purchase (I’ve done extensive research before purchasing) have split about $17K in commissions.
The only way the make whole “House as an investment” / “Buy house to make money” idea work is to flip houses. Purchase, quickly remodel, sell. However, this is obviously not for you as you don’t have your own full time lawyer, agent and contractors. But even if you did, time is of the essence – you don’t want to end up owning a house, paying all the taxes (which go up because of improvements), insurance, association fees – you want to sell as soon as remodeling is done.
To conclude – house as an investment is a fairy tale fueled by real estate industry and government – they both profit immensely in real estate market. Real estate agents obviously make hefty commissions while government pockets taxes. Speaking of taxes…
Buying house is good for your tax return
Another huge myth. The ONLY real tax benefit that comes from home purchase is that you are able to deduct INTEREST generated by your mortgage payments. To quote my case – I am to have about $10K in interest during first few years. But I am also to have about $6K in property taxes. So, me and my wife will get to deduct about $16K rather than $12.4K (standard deduction in 2014). But, while previously we didn’t need to spend a dime to get standard deduction, we now need to spend money. Also, since house was purchased in August, obviously for the first year standard deduction will be bigger then itemized deduction we are talking about. And few years down the road I’ll obviously need to add more itemized deductions if I am to see any tax benefit from owning a house.
You need to settle for X
X can be a house you have found and is OK, agent that you started working with, lawyer, process, fees. Reality is that you do not need to settle for anything. As a matter a fact, if your agent tells you this – change your agent.
Believe me, if you are bothered by anything in the house the first time you see it – once you own it – it’ll bother you even more. Especially if you have a good credit and can afford to pay for a good house – until you sign closing statement – you are in control. As soon you sign closing statement and get the keys, you are on your own and anything that was left unsolved is burden you’ll be carrying solo.
Don’t be fooled thinking that your agent and your lawyer are looking out for your best interest. They work on commission, which means that they are extremely interested in closing house purchase as quickly as possible so that they can move onto next client. Do not give in and do not settle. If the house that you have found doesn’t WOW you – do NOT buy it. If your agent is not responsive or is rolling his/hers eyes when you request to see yet another property – change your agent.
Often people you deal with during house purchase will try to use your inexperience to shun you and make you give in to their interests. Again – do NOT give in and do NOT settle. You are the one that’ll end up with bill worth hundreds of thousands of dollars, so you better be extremely happy with what you are getting, rather than just satisfied.
Valid reasons to buy house / home
So, now that we’ve gone over few things and understand that house is generally a terrible investment, which will substantially increase your yearly expanses (taxes / maintenance / fees) and that you acquire through intimidating, complicated multi-month process, you may end up saying – OK, why would I even consider buying a house? Well, here are few reasons:
You like the neighborhood
Simply put it’s a good neighborhood, good location, you like it there and you know that you’ll be staying for a while. I STRONGLY recommend that before buying a house you do quite bit of traveling. I won’t get into market out of USA, but before purchasing a house, it would be ideal if you’ve lived and worked in different neighborhoods in at least 3 or 4 cities in the USA. Of course, this is not something many people can do … but also don’t be complete opposite – born & raised in certain neighborhood and you end up buying house there. With so many great places to live, use the advantage of being young to try out what’s out there. In 99% cases you’ll end up in much better area.
To confirm your reasoning on this topic, be sure to look into Rent vs Buy calculator. If the one I’m linking is too intimidating for you, Google for Rent vs Buy calculator – there are quite few options and you are bound to find one that you can use.
As soon as you have kids, lots of priorities shift. That downtown condo that’s close to clubbing scene now doesn’t seem like a good idea. Simply put, if your family is growing, it’s quite benefitial to buy a house in a good area. Most of your property taxes go toward things like schools and parks, so you need to make use of what you are paying for. If you take schools into account, you are well off paying huge chunk of extra money just to be in good school area. With private schools currently running at about $9K/year per child on average, you are looking at $108K for 12 years of education at minimum. I won’t even get into increasing education costs, frustrations of having your child in a bad school, potential college bills for those without scholarships and other things. Just be aware that if you have 2 kids, paying $50K more for a property in a great school area is a bargain.
Tired of moving
Simply put, at certain point of time, it’s no longer economical to rent bigger places just to be able to keep all the stuff you’ve aquired. Maybe you finally want to be able to improve few things in place you live – like unlocking front door with your phone. Or maybe you are just tired of moving whenever it’s convenient for landlord.
Sure, we all love our neighbors (right?), but as we grow older it is quite beneficial not to influenced by whoever is living left/right or, god forbid, above you. Living in a condo and densely populated areas has it charms and it’s advantageous when you are young, but believe me, by the time you hit 30, you are best off if you have a home that’s sufficiently isolated and not influenced by anyone. If you or your significant other simply don’t like houses (or can’t afford the one you like), look into purchasing townhouse – they often have somewhat more modern architecture, are more affordable and come with few neighbors.
Through the series of blog posts that follow I’ll try to explain the process of home purchase from the perspective of first time buyer. I’ll try to share everything I’ve learned and give practical advice whenever possible. If you have any questions or you advice to share, feel free to leave comments – anything that can help prospective home buyers is welcomed.