We are First Time Homebuyers – Part II – The Process

It was just one of those days. 

One of those days in which the golden sun winked down at me through my car window like the sparkle in a woman’s eye. 

You know the kind, when you wake up and you know that something good is just waiting to happen, or you can feel the presence of benevolent forces conspiring to tilt the scales in your favor as the ground shifts beneath your feet, or the stars align and everything that you have ever wanted is just going to click into place like long lost puzzle pieces found underneath the couch. 

I stared out from the car window at the house across the street, my mind gloatingly playing with the possibilities as I played at world building inside my own head – future accomplishments, career changes, house remodeling – one brick carefully stacked upon another. 

My wife quietly sat next to me while we waited for our realtor to arrive and see the house showing. 

The sun was beaming, the sky a crystalized halo of Crater Lake blue. 

The craggy mountains towering over us felt almost too pristine, as if they had been photo-shopped from some giftshop postcard. 

Birds chirped in the overhanging oak trees along the street.  I could hear the far-off blare of a leaf blower. 

I caught myself grinning as I took all the sights in, envisioning my new life at our future house across the street.  Well, it wasn’t my future house yet, but I knew it would be. 

If I were a betting man, which I am, I’d be pushing my chips all-in on this one. 

Everyone had said what a crazy housing market it was.  Seller’s market baby.  If you’re a buyer, you might as well go hide under a rock and cry.  Well, fuck that.  I had a plan.  These fuckers didn’t know who they were up against, and I was about to show them. 

This is how Napoleon must have felt on the battlefield – that invincibility when you knew it was impossible for you to lose.  You were just smarter, better, one step farther ahead of your competition. 

We were one week into our home search and the house we were parked across from had just popped on the market.  It was perfect, checked every single box we wanted, and was absolutely turnkey.  And the real kicker.  It was listed at $100K under our budget. 

I was licking my chops and salivating with glee. 

I had been watching the bidding wars playing out on Redfin.  Tracking the listing prices versus closing sales so I had my ranges narrowed down to a “T”.  I felt more confident than ever, I felt fucking invincible… bulletproof. 

I hate those pricks that swoop in and overbid houses up to a ridiculous level – I hate those disconnected assholes with a fucking passion.  Because it doesn’t just fuck people over, it fucks up the entire market.  Just one of those stupid sales skews all the comps. 

But when it came to me and my own, sometimes you have to be a cold-blooded killer.  And that’s what I was willing to be. 

Why did I work so hard?  Why did I put in such long hours at the office?  Why did I practice financial discipline?  Why did I save so much? 

It was for moments like this.  To own the options to be able to crush my competition when I needed to.  I had earned this right, and I was willing to do what needed to be done.  It was time to cash in on having a superior financial position and make the other guy sweat. 

I was going to come in strong with a power move – offer about $30K over asking.  Come out swinging with a knockout punch so those other buyers wouldn’t even know what hit them.  I had a pile of powder sitting at my side, just earmarked for an occasion such as this, and it was time to use it. 

Was the house worth that much?  No.  Probably in another year or so it would be.  But not based on the comps.  Yet to me it was.  This was the kingdom that I had set my sights on – and conquer it I would.  Shit, a few months ago, it wasn’t even in this price range.  But I needed to put an end to this saga.  I needed to strike while the iron was hot. 

Was I going to be one of those dicks driving up prices?  Probably.  It just goes to show you what a two-faced hypocrite I can be when my ass is on the line. 

But I could afford it.  I wanted it.  This was our house. 

Who said homebuying was hard?  I was going to swoop in, with less than a week of searching, and buy my dream home for probably way under budget.  Even if I go $50K over asking I’m coming out way ahead.  People have no clue what they’re talking about and I can’t wait to tell this success story and how smart I am to everyone. 

Finally, my realtor arrived.  We stepped out of our car, donned our masks and walked into our future home without a care or concern in the world. 

— 

It would have been cool if that was how it played out, but you already know dear reader, even the mighty have to be cut back down to size once in a while. 

When we were preparing our offer that same night, the seller’s realtor informed us that other offers were already at $60K over asking and more were pouring in by the minute. 

It hadn’t even been a day. 

I couldn’t believe it. 

My dry powder had gone up in smoke. 

While I had been planning my own knockout punch; the market had already countered with one of its own.  The facts left me a little woozy, but I wasn’t down for the count.  We still had some reserves on our side. 

I re-evaluated everything and worked with my realtor to put in a great offer, this would be near the top of my self-imposed upper limit.  Then, after a few more days and the dust had settled, we were one of only three offers left that had been countered. 

It was decision time. 

We were still in the game. 

So, this is what it felt like, to be so close yet so far away.  Staring into the unknown wondering how the scales would shift under your weight. 

I was already near the max I wanted to go, so I sweetened the deal a little and hoped for the best.  There were definitely limits in how far I would push it.  There was still a bigger picture here at play… and no asset would ever trump my freedom. 

The next day we got the news. 

The seller was going with another offer. 

That was our wake-up call.  Someone else had wanted the house more or was willing to open their pocketbook a little… or a lot wider.  Either way, it didn’t matter.  Buying a house is a zero-sum game. 

We had lost. 

So be it. 

But after being so close, the truth was a bitter pill to swallow.  After building an imaginary life in that house, watching future kids grow up, memories sown, lives lived, you then have to tear it all down and move on in the blink of an eye. 

I was not prepared for the emotional roller coaster this would be. 

There would have to be precise boundaries set.  This wasn’t going to be as easy as I thought. 

Welcome to COVID and the ape-shit-gone-mad real estate boom in Southern California poor buyer. 

— 

At some point, after losing out on multiple homes, your mood shifts from an excited confidence to this hesitant uncertainty.  You kind of become numb to it all and start expecting each offer you put in won’t be accepted. 

It’s a bizarre mental state to be in. 

I had felt like with that first offer as if I was staring across the battlefield at a lone civil war soldier frantically trying to load his Springfield rifle with a ramrod while I stood on my side, next to a cannon aimed at his head.  Then suddenly the tide shifted, and this lone soldier was now staring at me across the battlefield, with his gun loaded, sights set on me, while I stood there empty-handed without a single weapon wondering what the fuck had happened. 

The tables had turned. 

I am no longer the hunter.  I had become the hunted. 

And then, even though you are coming from such a position of immense privilege, you start to second guess yourself and play the poor me game. 

Who can you blame you wonder?  Who the fuck are all these buyers flooding the market?  How am I losing out on all these bids? 

And the answer isn’t a fun one to break down.  Because it’s right there staring you in the mirror. 

They were me. 

White collar, work from home folks that had actually benefited from the virus.  They were locked down, had saved more money than probably any other year, and were looking for additional space assuming some sort of hybrid WFH model would be employed in the future.  

Nothing sucks.  Nothing is as bad as it seems. 

This is reality. 

Deal with it and keep playing the game. 

— 

Flashback… 

For the past five years I’ve been telling my wife, “this is the year we buy a house.”  Hahaha.  To say she had become jaded with my repeated assertions is an understatement.  Those words had fallen on deaf ears. 

But I had been strategically moving assets over those years, selling stocks to optimize taxes and finally had a big chunk of cash sitting just ready to be deployed as my arsenal of dry powder for the down payment. 

During 2019, prices had been rising steadily, but not alarmingly.  Then in March 2020, the bottom fell out, well, with inventory that is.  The market seemed to freeze overnight.  One part of the problem was people didn’t know what to do, and the other problem was figuring out COVID and how the fuck realtors showed houses. 

As the year crept on, sales picked up, but inventory didn’t.  There might have been a slight dip in prices for the first few months of COVID, but then by late summer, buyer demand was way up again. 

By entire luck, I had put my future down payment in bonds during mid-Q4 of 2019.  COVID had given me a nice little 10% gain with all the uncertainty and I was waiting until November 2020 to hit the long-term capital gains rate, put it in cash, and go for a house.  My logic was all this summer buying insanity would die down in the fall/winter and I’d make my move.  Sure, there would be less inventory, but also less demand was my thinking. 

In retrospect, holy fucking shit was I wrong. 

Watching home prices start to tick up more than usual in October was a little alarming, but I thought things would even out.  So I stuck to my plan, sold my bonds in November, and began my home search then. 

Big mistake. 

And it just goes to show you, you never know what the market is going to do… any market for that matter, whether it be stocks, housing, or other assets. 

As I detailed above, I lost out on that first house in a close bidding war after giving it my all. 

In a three-month span, from Nov to Dec, housing prices had increased $100K. 

I had never seen anything like it before. 

There’s no need to go into the rest of the drama, relive all those highs and lows.  I’m burying those heartbreaks in the past and moving on. 

You get the picture. 

It would take us four months and six more properties before we finally had an offer accepted.  It felt like a long time when we were in the process, but maybe that’s actually quick for how things are still playing out across the US. 

Maybe we were actually lucky? 

I honestly don’t know. 

But what I do know, is that in the end, we got what we wanted.  We have a new house (that’s new as in newly owned, not a newly built property) and are happy.  Patience and persistence proved to eventually win the day. 

— 

So, you want to buy a house right now? 

Good… fucking… luck. 

That shit is insane.  Well, not that shit, people are fucking insane.  The worst kind of assets to value in the world are – emotionally attached assets.  People will pay ad infinitum for these pearls of nostalgia. 

Why?  …because it puts their identity on display. 

Who doesn’t like their ego stroked?  Who doesn’t like a little celebrity treatment – first name basis, best table at the restaurant, comped goodies?  You can say that’s not your values all you want, but I don’t believe you.  When no one’s looking, you can admit somewhere nestled deep down under your skin, that it feels good to be recognized, it feels good to have a little respect, it feels good signaling to the world that I belong and am accepted. 

And that’s what a house is on the outside.  It is my conquered kingdom on display.  This is my stake on real land, an asset I can consume, I can touch.  I can sift the dirt through my fingertips, smell the blossoms of the flowers and sit in the comforting shade of walls built by the labor and invention of mankind. 

“This is who I am,” your house says. 

Now, we all know in the FI world this is a bunch of bullshit. 

But a house does signal to some extent, what type of person you are.  Let me see your property and I bet I can gleam a few tidbits of who you are.  Maybe someday post-pandemic we can play out this exercise together in person with you dear reader. 

But not today. 

Today you get to live vicariously through me. 

-Q-FI 

— 

I know.  This has been a lot of home buying shit the past several weeks.  I usually like to spread out my topics, but I think a Part III will be coming.  Hahaha.  Well, the question for today is… where do you think the housing market is headed for the rest of 2021… 2022?  Anyone can make a guess at this, owner or renter, so don’t be shy!  And has anyone out there also recently bought a property?  If so, I’d love to hear what your experience was like.  Plus, what does the residential real estate market look like in your neck of the woods?  Just as hot as mine?  And if you live outside of the US, even better!

In case you missed it, Part I can be found here.