Things to Look For When Browsing for a New House

It’s been a while since Mrs. C8j and I purchased the Big Cajun Estate (actually about 13 years ago now), but I noticed that many folks are talking about what to look for in a house when you are out buying a house, so I’d like to pass on a few of the things that I (or friends of mine) learned while looking for the “house of their dreams“, or maybe just the “house of their reality“.

Being On the Level is Important

One of My Favorite Albums - Status Quo - On The Level


Mrs. C8j and I were looking at a very nice house one time, and the visit was going well until I walked into one of the bedrooms. I had been having a few late nights, so I suddenly felt off kilter, like I was about to fall over, so I sat down on the bed. Mrs. C8j wandered in and had this odd look on her face and said, “What is with the floor?”.

I stood up and realize that the floor actually sloped into one of the corners and that “off kilter” sensation I had, was the floor itself not being level.

Bring a level with you to a house viewing and start checking if walls are actually vertical and if the floors are level, you may be surprised what you find.

Look for a Flush of Success

Plumbing is really important in your house (anyone who says otherwise hasn’t had to snake out a backed up toilet) so the old trick of flushing toilets and seeing if the water pressure drops is a great tip, but I find if you simply wander around the house constantly turning on and off taps and flushing toilets you will annoy the vendors to no end (or at least their sales rep). Also look for water stains behind toilets and if you are in the basement see if you can see under bathroom floors to see if there have been any “floods” in the house.

Model Home Sounds Nice Doesn’t It?

Never buy the Model Home, I have written about this before, but seriously, this house was slapped up quickly and may not even be to code.

Bluffing Works in Poker and House Buying As Well

Definately NOT the Big Cajun Estate

More than once, I have made off-handed comments to my wife while looking at a house, which I thought were innocuous, but which has caused an outpouring of information from the vendor.  This won’t work with real professionals who know how to sell, but if you are dealing with folks who are “doing it themselves”, sometimes an innocent sounding comment can give you a lot of information.

An example might be a comment like “What is that smell?”, when you walk into the basement, if the vendor replies quickly with “What smell, I don’t smell anything, there are no smells here, not an odor to be smelled!”, and get very nervous, you should pursue this a lot more. If the vendor sniffs with you and shrugs their shoulders, then maybe there isn’t anything to worry about, but who knows?

Notice What is On the Walls

Mrs. C8j and I looked at a house once, and in the master bedroom, was a large framed photo, of a buxom woman, topless in the middle of a tropical lagoon setting, smiling at the camera. Mrs. C8j didn’t really notice, but let me tell you, I didn’t miss it. I smiled knowingly, and as we were finishing our viewing, the home owners came home and I was surprised to see that the buxom model in the picture was in fact one of the homeowners.

As we left Mrs. C8j asked me why I had that goofy grin on my face, so I explained what I had seen. To this day she claims I am making this story up. Yes, this story has nothing to do with buying a house, just a funny story I like to tell, but we also didn’t buy that house.

 Photographic Memory

I don’t remember details much (even less as I grow older), but if you can convince the vendor, bring a video camera and tape your visit, so you can go back over the house later. We still have the video from when we had the house inspection done on the Big Cajun Estate, and noticed lots of things that were different, nothing big, so no point in calling the lawyers, however, good to know in case something bigger had happened. You may not be able to convince your vendor to allow you to videotape, but the vendor may also have a video they will give you of the house, either way, good to have a video of a possible future home.

Which House Did I Buy?

If you buy a house, or a town house, make sure you bought the house you want (and not another house accidentally). A dear friend bought his first town home, after seeing 3 different homes in the same housing complex, but it was only on the day he moved in that he realized that he hadn’t bought the house he thought he had. Saying on move in day, “I don’t think this is the house I bought” is a little late to notice your error. Before you sign anything make sure you are buying the house you want.

Who do You Work For?

I always have an issue if you end up using the same agent as the vendor for your purchase. Who is your agent really working for? I am sure most agents would “poo poo” my concerns, but I am a naturally untrusting person, this just seems wrong to me.

Hopefully your purchase will go smoothly, but remember to be thorough in your due diligence before buying.

 

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Replace Old Windows?

This week I continued replacing the old wood windows that came originally with my house and as I found out last year, none of the windows in my house (Model Home Version 0.1 for our area) were very well insulated (if at all), which in itself suggests the “investment” in new windows will be a good choice, however, if we ignore the shoddy workmanship of the builders of my house, the question arises, does it make sense to replace old windows in a house?

In my case, I think it is an easy yes:

Lousy Windows

If your windows look like this, replace them!

  • Aesthetically the old windows were not very pretty, and would be a sticking point should we want to sell this house. Many house buyers would see the old windows as they walked into the house and would dismiss the house off-hand, without even looking closely at the rest of the house (which isn’t in great shape in other ways, but that is for another story).
  • The continued up keep of old wooden windows is an investment in time and labour I was not willing to continue with (well Mrs. C8j did the painting and upkeep, but I am pretty sure she agrees with my evaluation).
  • The fact that the new windows are an upgrade in performance ( for keeping out sunlight, and heat) will help with cooling the house in the summer (the lack of insulation in the old windows make this point even higher in importance), and keep in the house in the winter.

I am not going to do the math on when the windows will “pay for themselves”, because I view those claims as a bit trite, the windows needed replacing, and I don’t think, in this case, it is a frivolous home expenditure. Still have more money to drop into the remaining windows, but for now, this needed to be done as well.

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Crunchy Grass and Lack of Rain

In Ottawa currently we are in the midst of drought-like conditions, where we have not had rain for many weeks, and haven’t had a lot really since March (in general). I have talked about the joys of no water with Living Without Water (a few years back we had a water main break and our section of town had to ration our water), and this year our lawn looks even crunchier than back then. There is hope that we might get rain today (but one day will not break this drought).

Our house has a water barrel left over from our water rationing time, so I have used that to water our plants, however that is now bone dry as well. If we are lucky we might get a cloud burst and that might help refill the barrel, but we haven’t even had a cloudburst lately.

Sprinkler

Big No No! Don’t sprinkle!

What is interesting is that Ontario Hydro went to a “smart meter” to have variable rates to try to regulate peak hour usage, which made me wonder if the City of Ottawa ever thought of going in that direction for water usage?

Simply raising water taxes over and over to improve the system, seems unfair, why not get the big users, at the worst time pay more? Then you could raise rates during droughts too (to try to regulate usage).

Some of my neighbours are joyfully oblivious to the drought that we are in, and gladly water their lawns , pressure wash their driveways and wash their cars, with no consequences for these actions.

Should I care about my neighbours and their odd water usage ideas during a time of limited water? I suppose I should not, but it really does seem to get under my skin. I do want to ask the chap who pressure washes his driveway, “Why do you do this ?”

Can anyone enlighten me as to why someone might pressure wash their driveway? I understand if you are about to seal it, but washing it every week does seem quite odd to me.

There you go City of Ottawa, you want to make some big bucks ? Smart water meters and variable water usage rates! You are welcome!

 

 

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Financial Psychology: Buying and Selling Houses

Happy Seller Story

When I bought my first house, it was near the top of a housing cycle (not a bubble), so it was fairly expensive (but interest rates were still high as well). I got help getting a good down payment, I bought the house and then kind of forgot about its value for a year or two.

As time passed I started hearing about how little houses around us were selling for, and I became concerned, worried and a little depressed that I had effectively lost money by buying this house (we were already talking about needing to buy a bigger house).

We tried selling our house, but for 6 months there were no real offers (plenty of low ball 25% below asking price offers, which were ignored). We took the house off the market, but the next year the market started to pick up, so we actually were asking for what we had paid for the house (let’s called that value $N). After a lot of work, we finally did sell our house for pretty much exactly what we bought it for.

The following graph outlines the value of the house over time, but the fact that we bought and sold the house for the same amount (yes, we lost money on the deal due to closing costs and moving, let’s leave that out of the discussion for now).

House Price Over Time with a Happy Vendor

I would say at point in time “Y“, I would say I was the most depressed about the price of my house, but from that point as I saw the house “increase in value“, I became much happier and thus when I sold I was very happy to get the price we got.

Unhappy Seller

The house we bought when we sold our house seemed to have a much different story in terms of selling.

This house had been held for a long time, and had “appreciated” in value a great deal over time, but however, the owners weren’t looking to sell, so they felt very comfortable that their investment was appreciating in value.

Finally the owners decided to sell, because they were retiring, and they wanted to sell their house, however, at that time they were told that larger houses were not selling very well and they would have to lower their asking price (this depressed them greatly), and finally they sold the house (to my wife and I), for much less than they were asking, and about the same as what it cost them initially.

The following graph outlines their price odyssey:

Sad Vendor Price Graph

At point in time “Y”, this vendor was the happiest because their “investment” had gone up, but after that point they became more depressed because they were “losing” value in their house. I would say it would be safe to say that these vendors were unhappy about the price they received from the sale of this house.

Conclusions

Here we have two house vendors, both received back what they put into their house, but because of the perceived value of their house, their relative happiness in the sale price was diametrically opposite, due to the perceived “gain” or “loss” of money (which they never had in the first place).

This is true with all “investments” what the relative value of something really doesn’t matter until you either (1) BUY or (2) SELL the investment. If you buy or sell your house because you perceive it is worth more and you want to “get my money now”, then that is fine but until you sell, the value of your house is unknown until it is sold.

My conclusions are simple: the only time the price of your house matters is when you sell it .

Am I incorrect?

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Loveless Sexless Marriages and Money

I borrow the title from a phrase used by our friend Preet, during a discussion panel on the National a few weeks ago. Preet was pointing out that the “alleged housing bubble” and high housing prices can be a major friction point in relationships, and can end up destroying those relationships, however, given the price of houses some couples are staying together because they can’t afford to move, thus creating a “Loveless and Sexless Marriage“.

I was impressed that Peter Mansbridge didn’t comment further on this, but be that as it may, the point is well taken, money problems can destroy any and all relationships (no matter how much in love folks think they are).

The equation is pretty simple, Stress is what really destroys relationships, and the biggest stresser for young couples (and older ones as well) is Money.

Right now folks may be living “hand to mouth” or “pay cheque to pay cheque”, but all we need now is for the following perfect storm:

  • Interest rate increases which return back to the “norms” of the late 90′s, of 5 or 6%
  • Housing market cogitations thanks to the Interest Rates killing (or at least badly maiming) the housing market
  • Folks who already owe a great deal in discretionary debt (i.e. Credit Cards and Unsecured Lines of Credit), now having to make much higher monthly payments (or maybe just a little bit more but that might be their “tipping point” (to sound more hack-kneed than I normally do)).
  • Add a dash of folks owing more on their house, than it is currently worth (which if you view your house as a “long-term” investment, you should not be worrying about, but that is for another post). Remember if you only put 5% down to buy your house (or if you went “off off broadway” and put even less down, it is much more likely for this to happen)

You will see a jump in Divorce rates (yes, I have no numbers to back this one up, and I am sure the C.D. Howe Institute and the Banks would argue that this hasn’t happened before), and most certainly a much higher stress in many families.

I put this “Big Cajun Man Wild Ass Theory” forward for disproof by those who view me as a “… doom and gloom profit …”, and yes, I am calling this one. The joy of this is, I can neither be proven correct nor proven to be a charlatan, pretender, sham or a fraud for a few years, but feel free to disagree with my statement.

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