In Escrow: Offer Accepted On House!

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It’s official! We have an signed offer contract on a house, our earnest check is sent, and we are in escrow. Apparently our timing couldn’t be worse as the world is apparently about to implode, but ah well. Here are some quick bits of information:

  • The seller needed a quick sale, and we are buying as-is. We will have to hire a home inspector to make sure everything is acceptable.
  • We believe our offer price to be a good deal. It was below asking, and significantly below comparable houses. We literally bid the 1st day on the market.
  • The home price is more than we originally wanted to pay, but is still such that either one of us could qualify for the loan individually. Mortgage rates are also really low right now.
  • It’s a fixer-upper, but the “bones” are great. It hasn’t been updated much since the late 80s, so it’s pretty ugly to a lot of buyers. We already have lots of remodeling plans.
  • It’s a house that fit all of our criteria and more: good neighborhood, excellent schools, acceptable lot size, great square footage. If anything, the commute will be longer but we expected that.
  • I’m acutely aware that the housing outlook is bleak right now, but that’s how it is – You’ll see how my decisions work out, good or bad. In any case, there is still a long ways to go until closing. Props to my wife for checking the MLS diligently every single day and making this happen!
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  1. I disagree. Timing could not have been better. Although not directly correlated, with the fed cutting rates yesterday, the long term interest rates will probably drop even lower over the next few weeks. That, coupled with overall fear in the housing market, makes it a great time to buy as long as your in it for the long haul.

  2. Thanks for the words of support! I was expecting a lot of criticism ๐Ÿ™‚

    We are definitely in it for the long haul, and although it may be hard to believe we can see ourselves actually living here indefinitely!

  3. Congratulations!

    If you don’t mind sharing, who is your lender and what rate is the loan at?

  4. Congrats! Don’t let the current housing worries get you down. By reading your posts, it’s obvious you have made a clear and thoughtful decision. Your planned your purchase way in advance, which puts you lightyears ahead of the people that have gotten themselves into the pinch that is dragging this economy to a halt.

    Real Estate is a LONG TERM investment, so the worries of today won’t affect you. Just make your payments, pay a little extra, and weather the storm. Sunny days will come again!


  5. ‘Has not been updated since the late 80’s… Prepare to spend some money. Hardwood floors, solid surface countertops, 2000 trips to Home Depot:)

    Glad you are getting a house though, beats an apartment anytime.


  6. There is no such thing as a good deal right now. You are making a huge mistake. Everything you have worked so hard for will be gone. You have helped me out many times in the past and I feel I owe you this important piece of advice. Do not be swayed by the sense that you might be getting a good deal or the seller is giving up something. You are bailing out a distressed seller and are taking on a tremendous amount of downside risk for negative rewards in the future (next 5-10 years). Trust me on this one. Walk away quickly.

  7. I’m with Billy – while this might not be the BEST time to buy (things could still drop further), it looks like a pretty good time, especially given recent history. Buy low and sell high…

    We bought at the height of the previous market around here (just before the first Gulf war), which we could see from the start – by the time the house was finished and we closed, things had already started to drop. We lived through a decade or so of declining or flat prices, but since we didn’t view it as an investment, it didn’t matter – it was actually GOOD in a way, as it kept our property taxes down! Now, if we wanted to move, we could price well below market and still double our initial price.

    So, don’t consider it an investment (or at least consider it a long term one), and you’ll be fine.


  8. My wife and I had the same experience…saw a place – knew it was right and put an offer in the day it hit MLS. Time to consider that light pickup if its a fixer-upper.

    When you are considering the remodeling – double the amount of time (and in some cases money) you think its going to take unless you and your wife are skilled craftsman. if you read the how-to instructions – follow them – trust me there are no shortcuts.

    Good luck!

  9. There will never be a perfect time to buy, and if you plan to stay in your home for decades, I wouldn’t fret about what the housing market is doing. You have enough in savings and investments that you’ll almost certainly never be forced to sell by a lack of funds to pay the mortgage. Enjoy your new home!

    Will we be getting the juicy details on the price and interest rate?

  10. Congrats, this is probably good timing as mortgage rates will most likely fall again after the rate cut yesterday!

  11. Did you use the full $100k as planned for the down payment and closing costs? Also, now that you will shortly have a house, have you decided how you will do your net worth updates to account for this?

  12. Please please please make sure extra sure there are no foundation or roof problems. They will haunt you for years otherwise.

  13. I wouldn’t worry about the timing. If all the fundamentals that you mentioned are true, it sound like a positive step. If there’s one thing that I’ve gotten to know about you over the last couple years, it’s that you don’t just jump in and make rash decisions. The amount of time and effort you put in to buying the house clearly shows that you did your homework. I bet it’s a screaming deal.

    The fact that you focused on the fundamentals (location, good schools etc) is really important. It’s really relatively easy to fix up a house and the equity you’ll gain with that is just another PLUS.

    Congrats Jonathon! I know I’ve never regretted buying a house (or a second home) and I doubt you’ll ever regret it either!

    Once you get settled, you can invite all of us Northwest PF Bloggers over for a painting party! ๐Ÿ™‚

  14. Mark Stanislav says

    Congratulations! Oddly, I just put an offer in Monday on a house. Because it is in short-sale, I don’t know how quickly I will hear back from the seller’s bank. I hope closing goes well for you — best of luck with the investment.

  15. Nice job, guys! Sounds like you got a real good one. Good luck with the rest of the process — it can be annoying, but I’m sure you’ll do fine.

    Time to look up Property Tax Rebates and other stuff you will want to file once you take ownership. When I first moved into my house, my taxes were pretty good — but I didn’t realize I needed to file for the Star program (that’s the tax relief program in my state), because the previous owner already had it in effect (I know, duh!). I only found out when their’s expired that I needed to file it for myself to continue getting the breaks. There’s also sometimes outright rebates (where they mail you checks based on the taxes you’ve paid). And also, if the house is over-assessed (based on similar houses in the neighborhood), you might want to file a tax grievance (which reduces your assessed value) as soon as possible too.

  16. What’s your interest rate? What happens if it drops further, will you refinance?

  17. Can someone explain to me how the Fed dropping short term rates is going to lower long term rates? It seems to me that if it has any effect, it will be to cause inflation, which will drive long term rates higher.

  18. congrats. I think you are in the right time, if not the best time. Housing market as everyone knows has been down 10-20% compare to last couple year’s peak.

    Also, interest rate is low. I hope you look into the Adjustable Rate Mortgage, such as 5/1 or /7/1 ARM. In my opinion, ARM is the better because it is usually 1% lower than fixed rate.

    Good Luck.

  19. I am personally waiting until about 2010 to buy a house. Gives me time to save a significant amount for down payment, furnishing and some remodels. I think that by that point prices will be more stabilized and around the low point. As it will be after the 3/5 ARMs from the peak.

  20. Since it sounds like this is a home you like and will be living in for a long time, don’t even worry about the market. One of my good friends (who currently I rent a room too) a smarmy attitude about the housing market looking better for him than me. Well I already own and have equity so why would I care? I like my home and don’t plan on selling (ever actually).

    80’s decorating rocks! My home’s bathroom mirrors and lighting haven’t been changed since the house was built in the mid 70’s. They are terribly out of date but my roomates don’t mind and I could care less, they work fine and rent keeps coming in every month like clockwork! ๐Ÿ˜€

  21. sfordinarygirl says

    Congrats on your housing purchase! I’m curious along with the others on the interest rate and your lender given the rocky market lately.

  22. I’d love to see pictures someday! While I will eschew homeownership for the near future, it doesn’t hurt to live a little vicariously.

  23. Congratulations! Keep up the good work on the blog

  24. congrats plus good timing for three reasons:
    1) deposit interest rate have already dropped quickly and will continue drop more. your $100,000 cash has no place to go. therefore, the down payment is the best place.
    2) tax advantage. many people bought home late in the year only found out the deduction is not big enough to claim in the same year.
    3) the home ownership is always the one of the most enjoyable event in your life. the timing is always the early the better.

  25. Penfed 15 year fixed today

    Rate Points APR
    4.625 0.000 4.625
    4.500 0.375 4.556
    4.375 0.875 4.506

    It boggles the mind, so does the 5/5 arm (yes not 5/1 a 5/5) if you need to strech it out to 30 years.


  27. Congrats on the new house! As others said, the timing isn’t horrible, and it is sort of irrelevant–this isn’t an investment property. Enjoy your new home!!

  28. Congratulations. Does this mean the mid-term goals are on hold? ๐Ÿ™‚

  29. Congratulations Jonathan!!!! Actually, I just signed an offer contract today too! I’m excited about closing in February!!!! It will be my first home (although its actually a townhouse) and I felt like it was a great time to buy. I got it for below the tax value of the home and well below what others were paying in the neighborhood. I couldn’t be more excited about getting the home inspection done, closing, & movin in!

  30. Interest rates are not set yet. Will have to lock the rate soon, though. Will definitely share about the process. I think I can get a 30-year Fixed loan for a bit over 5% (with points paid), which is nearly 1% lower than in mid-2007!!

    I wish PenFed had better 30-year fixed rates like they did before, I’m think the 5/5 product is interesting but I don’t think it’s a good fit for me right now.

    Dad has a truck, lots of knowledge, and a bit of free time ๐Ÿ˜€

    The mid-term goals might have to change, yes!

  31. How SWEET it is!

    Life rolls on, regardless what the economy is doing. Glad you found a place that works!

  32. Congrats to all the other new homeowners as well! Let’s all get in all these incredibly low interest rates. Let’s go sub-5%!

  33. Congratulations ! Forget about timing – it’s has much more to do with how you and your family will feel about owning instead of renting. Knowing that you are now secure in your own home, free to hang a picture wherever you want and free of all the worries that go along with renting. I’m curious to know how the price you paid stacks up to Zillo’s ‘Zestimate’ and if you think that this estimate should be a good starting point for potential home buyers to know if they’re getting a fair market price. Sub 5% on a 30 year fixed mortgage sounds sweeeet !

  34. Zillow’s Zestimate is way higher than our offer price.

    My advice on Zillow is to use it to scope out the neighborhood, but only pay attention to the sold prices and to help find comparables. The estimates themselves can range from very accurate to very far off.

  35. Congratulations! Sounds like a good decision to me. You mention that you are thinking of paying points– I did that myself when I got my fixed rate mortgage. I’ve occasionally had second thoughts about it, as if the economy is really heading into trouble, it seems like rates could keep being lowered as they were several years ago. I was sure it would never be worthwhile for me to refinance anyway, but perhaps I was wrong!
    If I remember my calculations correctly, paying points amounted to something like a 3-4% return on investment, which is what you really want to think about just as much as how many years it takes for the points to pay for themselves. (Good calculators here: and here:

    So if you want to make a very conservative investment it may be ok, but if you think you may want to refinance in a couple of years, you might not want to pay the points. Either way, can’t wait to read about the rest of the process and I know you’ll love being a homeowner, even if all the fixing-up feels like a pain at times!

  36. 40k in debt says

    Funny.. I’m about to place an offer on a condo, which I will use as an investment while I live at home. I’m offering 15 percent less than what a comparable condo in the area sold and seeing if it sticks. In speaking with the mortgage broker today I was told 5.125 on 30 year fixed and supposedly dropping next tuesday as well..I hope I’m making the right decision here.. All in all I will end up ponying up 200 per month in addition to the rent I’m receiving to cover mortgage, tax, and maintenance. The tax break alone I think will break me even but I hope value of the condo will increase in the next 5-10 years when I will sell. But again location location, it’s in a blue ribbon district and a two bedroom.. So lots of value there that I am hoping to cash on.

  37. Congratulations on purchasing a home! Like some other commenters, I am curious how you plan to value the house for purposes of your net worth.

    I bought a condo in Oct. 2006 and started tracking my own personal balance sheet a few months later. Up until now I have included the principal portion of each payment towards my asset column, but I haven’t made any other adjustments based on market value (or my perception of market value).

    Since I live in a condo, there are several good comps right next door. But yet I don’t feel comfortable adjusting the value of the condo based on these comps, perhaps because the amount (tens of thousands) is so much greater than anything else on my balance sheet. My balance sheet would basically be tracking my condo from that point on.

    But on the other hand, it would be nice to have an accurate picture of my net worth.

    I’d be curious to see what approach you plan to use.

  38. Congratulations, Jonathan. I hope you will find time to share your buying strategy and helpful tips.

  39. Congrats to all. I think this is a great time to buy. Check out the mtgprofessor’s website (have to search for it) which has the wholesale rates. 30-yr fixed are below 5% (wholesale).

    If you think you are going to be in the house more than 5 years, I would look at either a 30-yr mortgage, a 7yr i/o ir a 10 yr i/o, if they are still available. My advice is plan to be there longer than you initially think. I am a firm believer in the 30-yr over a 15-yr. The extra cost of the higher interest provides more cash flow flexibiilty if needed, and you can always double pay principal. BTW, are you going to escrow taxes and insurance?

    Not like I need to tell you this, but read your loan docs. Ask for them to provided to you a day or two before closing so you have time to read them without the pressure to sign all the docs at the title company (or wherever you close). That way if you have any questions you can discuss them prior to close.

  40. SavingEverything says

    How would you feel if housing prices in your area drop another 2-5% in your area, with interest rates dropping another 25 basis points? I’ll feel indifferent. Hmm. A fixer upper. How long was the house listed as its current MLS? Was it listed before? Is it from a foreclosure? A price where either you or your wife can take a loan individually without a problem. How many bedrooms? Square footage? Garage included? Type of heat and stove? Hardwood floors or carpeted or both? A decent attic and basement? Any grass and yard space for your parties and future kids to play? Remodeling plans? Have you worked out the details and the costs? Definitely go with your inspector and ask lots of questions!!!! No central ac? No open space kitchen? Is it antiqued house? Remember, to have inspector check pipes, insulation, Radon (especially if you have a usable basement). A 30year fixed rate of 5.0 or 5.25% mortgage sounds wonderful. Waiting to hear the process and due diligence on your part.

  41. Congratulations Jonathan! Don’t worry about the timing. You are in it for the long haul anyway.

  42. Re: Zillow

    Just had our home appraised for a re-fi and the appraisal matched Zillow exactly, hmmmm…lazy appraiser or maybe they are tweaking their algorithms.

    It was helpful but since I’m not going anywhere for a while

  43. I think now is a great time to buy a home. Low mortgage rates, sellers needing to get out of their house will unload if you stumble upon the right opportunity, and your home value will probably never drop below what it is today since you are buying during the slump.

  44. Congrats Jonathan…welcome to the moneypit that is owning your own house…but I wouldn’t swap homeownership for the world!

  45. Congrats man, you have another two years of blog posts just waiting in the wings now ๐Ÿ™‚

    BTW, “timing the market?”. I’ve always said the problem with the whole “time in” vs “timing” the market is that you’ll need to “time” the market at some point. So you had to make a call.

    Obviously, the timing on the interest rates are good. Your pricing is going to be low b/c of mortgage crisi. I get the feeling that we’re moving into an inflationary recession, so this is as good a time as any to be throwing money at a house.

    Congrats again and best wishes.

  46. PinayInTheUS says

    Congratulations!!! ๐Ÿ™‚ i am in the process of buying a house myself…will close next month!

  47. Picture of “Dogs Playing Poker” purchase right around the corner.


  48. congrats!!!!

  49. Congrats, Janathan!
    I am going to purchase my 1st home this year, so I definitely keep reading your blog, esp. this topic.

  50. I don’t really know too much about all this, but I would think this is the best time to buy a home if you are planning on staying there long enough to build some significant equity. I imagine by the time you are ready to move on, the housing market will be on the rebound.

  51. Super congratulations. You should know a lot of your readers are following your details to come up with the same courage to buy for a first time. Thanks for sharing so much!

  52. If your loan is non-conforming one way to possibly reduce payments is to put $417K into a 30 year fixed and then take out a line of credit for the remainder. With the drop in rates the HELOC’s are starting to look better.

  53. wow that picture looks like an a house in my hometown in mtb, CA.

  54. This comment is late, but I would be curious how you are going to track your equity. I know you had a post on this before, but have you decided? If you put 100K down, it will look like you fell off the wagon for your long-term 1M goal! Ive read some pf blogs where people count only the downpayment part of their equity and not the appreciation component. Best of luck!

  55. Congrats…..I just bought in 3 months ago myself. You are buying in a pretty good time. Especially since it sounds like you bought in a good location. Here in the Los Angeles area, the good locations are not selling at reduced prices. Location is key, and I think you were wise in looking into those factors, good neighborhood ,schools, etc.

  56. hooray! happy for you. just got my first place last year. things have stumbled since then, but i still feel like i got a good deal.

  57. I’m also looking to buy my 1st house, any sites/books out there good to learn the whole process?

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