Buying a larger home: "just enough" or "all the way"

[jIMOh]

Factor in moving costs, closing costs, realtor fees and similar- each purchase will cost you in excess of 20k. Realtor fees for a 300k home could run 18k easy.

So my advice is to find out what you need, and price it.

Then look for what 20k or 40k more gets you. I would buy that much more. In your situation consider that the 20-40k more will save you moving costs, assuming the extra cost got you any/all of the following:

a) better neighborhood for same house- house will hold value better.
b) bigger house in same neighborhood- you won't have to move as much
c) maybe owning larger portion of house because you realize the extra 20-40k does not get you much

We chose to move to largest house possible at a young age. We were DINK when we bought 3400 sq ft house. Wife is now pregnant with twins and we are loving the space we have. Plus jobs changed and when both spouses work from home, we need the space.

 

[armor99]

Wow.... great reading all of the responses. It was an interesting adventure for me when I bought the house I currently live in. Not only is it my first house, but the first one I have ever lived in. I am originally from NYC, and I was very used to apt living. I think I drove my real estate agent crazy. I must have looked at 50 homes, before I bought mine.
Some people only view their homes as an investment. They view their homes as a place to sleep, and nothing more. For me it is much more than that. I needed a place that I could feel very comfortable. At the time I bought my place, I went slightly over my initial budget to do it. At the time I spent around 2.5X my annual salary. That was in 2004 just before real estate started to go crazy. It is true that gome prices have fallen here around 15%. But I am still up around 65% or so since I bought it, and I locked in a 5.5% 30 year fixed mortgage at that time.
If you really like the house, go for it. Find another way to help offset that 8% differential between the larger and smaller house.

 

[W2R]

I think I drove my real estate agent crazy. I must have looked at 50 homes, before I bought mine.

You're making me feel lots better about dragging my agent inside about 25 homes before I decided on my present house. (I drove by hundreds.) I read somewhere that the average buyer only looks at between 3-7 houses before buying.

I fell in love with one house and desperately wanted to make an offer on it, but took my agent's advice and didn't when he said was vastly overpriced. Later, I called him about another and told him I wanted to make an offer, but backed out a few hours later when I heard some really bad reports about the neighborhood. Finally I bought a completely different house.

 

[Lusitan]

Yeah, we've seen the inside of about a dozen or so homes already, and driven by many more from the oustide. The internet really has made the process pretty efficient: you can see what's listing, get the report via email to read the details and the address, hit up GoogleMaps to see if it's even an area you would consider, do a drive-by to see how things look from the outside and check out the neighborhood, and then request a showing if you're still interested.

I can imagine 15 years ago it must have more of a hassle to hunt for a house.

 

[jazz4cash]

Regarding home searches on the internet, Realtor.com is falling behind. They are still trying to use thier website to drive buyers to realtors. For folks willing to do more research on thier own, check Redfin: The Market-Leading Online Real Estate Brokerage , zillow and there is a startup company in the DC area called sawbuck realty.com. all except realtor.com show multiple homes in a neighborhood.

 

[W2R]

Regarding home searches on the internet, Realtor.com is falling behind. They are still trying to use thier website to drive buyers to realtors. For folks willing to do more research on thier own, check Redfin: The Market-Leading Online Real Estate Brokerage , zillow and there is a startup company in the DC area called sawbuck realty.com. all except realtor.com show multiple homes in a neighborhood.

Apparently both Redfin and Zillow have limited databases outside of certain areas. Redfin, for example, wants to know whether my zip code is in the Seattle, SF Bay area, Southern California, Boston, or Washington DC so I "can get started". Zillow contains approximately 1/50th of the homes that are actually on the market in my zip code and I have had similar poor results searching certain other locations in Zillow. So in that sense, I suppose realtor.com is doing better than those two sites in my area. I agree with you that it does have its limitations, though, and sometimes homes listed on realtor.com are no longer on the market.

Luckily, a couple of our local realtors' websites do a very nice job of making the most up-to-date, complete information available. These websites are where realtors in this region (even competing realtors) generally direct their clients and they worked very well for me even back in 2002. They have maps and finding the houses seemed trivial.

 

[W2R]

Yeah, we've seen the inside of about a dozen or so homes already, and driven by many more from the oustide. The internet really has made the process pretty efficient: you can see what's listing, get the report via email to read the details and the address, hit up GoogleMaps to see if it's even an area you would consider, do a drive-by to see how things look from the outside and check out the neighborhood, and then request a showing if you're still interested.

I can imagine 15 years ago it must have more of a hassle to hunt for a house.

I looked for my present house in 2002. My realtor let me do the drive-bys on my own based on what I found on the internet and in e-mails he sent me occasionally with listings not yet on the MLS. Then I would e-mail him lists of those that I liked after I did the drive-bys, checked out the neighborhoods, and so on. Since most were on lockboxes, he could show me several in one evening after I got off work. It seemed pretty easy to me, and although I dragged him to a lot of houses, at least he didn't have to show me the neighborhoods at the same time.

 

[donheff]

Better get back out and make an offer - just in case. Three years ago it would be gone for 10% over the asking price while we were yaking.

 

[Milton]

We’ll also be moving to a new town, not far from where we are, but a town that’s we think is a better fit for us. There are two ways we could go with a new home:

(1) buy “just enough” home to suit us now (e.g. with 1 or maybe 2 small kids) and expect that we would likely move again within 7 years or so, or

(2) buy a house that will fit all of our projected future needs now, even though it’s more than we currently need.

I suspect the first option is largely illusory.

I don't know anything about your existing home, but unless it is very tiny I imagine that you could well continue to live there if you really had to; yes, even with additions to your family. You may well want another house, but I doubt that you need one.

So, if it comes down to a 'want' rather than a true 'need', you may as well get the large house that you really want, rather than settling for a slightly-larger one that won't satisfy you for long. The additional expenses (real estate commission, legal fees, moving costs, etc.) of the interim step would likely match or exceed the increased operating costs of the larger residence (higher property taxes, higher maintenance needs, higher heating bills, etc.) that you could defer by putting off that purchase for a few years.

Right now we save a significant portion of our income, and while we’d still be able to fully fund our retirement accounts, we’d definitely have to cut back on our savings rate if we went for the bigger house, at least for the first few years. Buying any house will slow my plans toward FIRE, but it's a not unexpected event. I guess the question just comes down to how much it will affect my FIRE plans.

No necessarily. Paying a mortgage can be thought of as a sort of 'forced savings' plan. You can always downsize to a smaller house when you are ready to retire (by which time your child[ren] will presumably be independent). Money invested in the market would probably grow faster than money invested in a house, but that's far from a foregone conclusion.

P.S. Before you decide that the perceived extra benefits of a big house are worth the additional costs, review Chapter 6 of Robert Franks' book Luxury Fever: Why Money Fails to Satisfy in an Era of Excess (1999).

 

[lucija]

Lusitan... reading this tread I was reminded of Metuchen, NJ; I always liked that place.

It sounds like you're searching for a place to settle down. If so, I would be inclined not to get a "temporary" place. Our desire to "move around" has essentially vanished with coming of our second child - if you like the area/neighborhood you may find yourself getting more and more entrenched.

Also, keep in mind elementary schools cover very limited area (it's likely there's more than one in your town) -- you may want to consider whether school change will be needed as a result of the potential move some 7 years down the road.

The "big" house you're describing does not sound very big for today's standards. However, only the 2 of you can decide whether this is a financially good move for you (with respect to job loss/security - I really doubt NYC metro area will ever turn into a dry spot when it comes to jobs). I also do not believe at FIRE at all costs, one has to enjoy the journey as well. Yes, one can raise 3 kids in a studio apartment (I have witnessed that myself), but why would one opt for that?

 

[Lusitan]

I suspect the first option is largely illusory.

I don't know anything about your existing home, but unless it is very tiny I imagine that you could well continue to live there if you really had to; yes, even with additions to your family. You may well want another house, but I doubt that you need one.

Actually, if I used the term "house" to describe my current living quarters, I was throwing the term around loosely; "home" would be a better word for it.

We live in a one bedroom condo that we converted into a two (small) bedroom condo before the arrival of our first child. We really can't squeeze another bedroom outta this place, and I just don't think it would work to have a baby and a toddler (who is finally sleeping pretty well) in the same room, even if I would be cool with them sharing a room down the road. And we're hoping to go for three so ... in this case, we actually do "need" a larger home.

I'd say 9 time out of 10, when someone says they "need" a larger house, I agree with you that it's more like they just "want" another house. But at least in this case I can comfort myself with the knowledge that this is really a "need" and not just a "want".


Lucija - yeah, I have only been to Metuchen a few times, but I agree it is a great town. Did you live there at one point?

My gut is telling me the same thing - as much as I already don't want to move now, I'll probably want to move even less after a second child and after settling into another home.

 

[lucija]

...<snip> Lucija - yeah, I have only been to Metuchen a few times, but I agree it is a great town. Did you live there at one point?...<snip>

Well...almost. As we were starting a family, we were trying to decide where we want our kids to grow up (in the end, NJ turned out not to be a place for us). Anyway, have we decided to stay locally and raise our kids in NJ, Metuchen is would have been the place for us...