What percent of net worth is ideal for home?

[pacergal]

Good luck in your search for a home.

Regarding a Multigen home--my sister recently moved with her daughter into a multigen home, both BIL and nieces hubby have been fighting cancer, so support for each family helps. They went in rather quickly, and now, about 3 months out, are having some rough patches. They did not think things through, even down to who fixes meals and what is the menu.
Their house is beautiful, with two masters and 5 bedrooms to accommodate all.
But it is a work in progress.
So, if you go that route with your daughter, hopefully you have discussed how bills get paid, who does what chore, etc.

Multigenerational living can be wonderful. My grandparents lived with us for several years when I was younger. Our son and grandson have lived with us for a few years, now have their own place, closer DS work.
Memories that last a lifetime and such a special time with all. But it does take coordination and very open discussions along the way!

 

[Koolau]

To provide an update -
We are selling our home and moving to TX from IL and plan to buy a home. So we will be in an all-cash & investment position. This is year 3 of retirement, at 53 - no pensions, etc.

We were looking at what people would consider ideal % of NW for home.

We’re looking at areas that is strong seller market due to absurdly low home inventory. Homes that are turn key, move-in ready sell within a couple days with multiple offers.

We will not overpay, and will not pay the spike in price.

We’ve made offers on 2 homes that we’re not even in turn key condition, needing significant work. Both of these had multiple offers (after our bid - agent told others who had viewed, and turned it into bidding.). We were out bid on 1, and other had significantly more issues that were seen in inspection process that sellers would not compensate. These would have been around 25% of NW.

We’re on attempt #3. This one is closer to 12%. Sellers Agent is trying to get earlier showing clients to bid to bring up price. Ugh.

It is very frustrating that agents can do that. There is not an acceptable “expiring” offer or other situation to disallow this process. You can not legally put an expiration on the offer - against the contract language - sellers have a week. Asked multiple agents, etc. It is the norm in this extremely tight home inventory sellers market. You can, technically, formally withdraw an offer - but it is greatly frowned upon and generally unacceptable practice.

So….we’re waiting on #3. Expect a suddenly “multiple offer” again with bidding process, yet, again…

I was surprised to hear about the bidding war situation. I suppose that must vary depending upon location.

Thanks for keeping us updated and good luck with your move.

Sounds like Texas is the new California! Limited houses and accelerating prices.


Good luck with your search.

 

[retire48in2018]

From #3 - a relocation company on sellers end is involved - and making things complicated.

They demand a contract with 1% earnest money - with no out for buyers to get earnest money back for any reason after seller accepts offer at beginning.

On contingency- for inspection - sellers can accept or reject buyer request; and buyer is required to supply ALL inspections in entirety.

Not standard practice anywhere I’ve been - (1) after inspection is a negotiation from findings. Buyer pays inspection and only supplies whatever pages or descriptions the buyer determines. Seller does not pay for inspection and not entitled to any full reports and (2) if negotiation does not end satisfactory to buyer, buyer can leave with earnest

On contingency for financing - n/a for us as we’re cash - buyer must submit full bank commitment letter for financing at offer. If that bank does not follow through, etc - then ALL documentation from that bank/broker is required to be supplied to seller (relocation company) - and they can arrange what relocation company considers equivalent financing to original commitment letter.

This relocation company “addendum” is written to supersede standard relocation contract and is heavily in sellers favor across board. There are other items - like buyer must pay for full survey and supply all info to seller. As a cash buyer, if I am ok with info that I can glean - I still must pay for survey that seller gets full copy. seller can “exclude” items from sell of home at any time until final walk through with no recourse - from appliances, to curtains/rods, etc. if buyer does not like that - they can terminate contract - but no refund of earnest money.

 

[retire48in2018]

We are having realtors get legal involved to either change this to more standard contract, reduce earnest money to pittance, or move towards a purchase price like an “as is”/foreclosure/buyer beware.

 

[Sanstar]

This is a very timely thread for my family. We moved into our current house 2 years ago. Just the right size for us, little daschund and occasional family guest. Alas, DS and his wife separated and filed for divorce. DS and DGS (5 years old) have living been with us for more than a year, along with their bigger rescue dog. I NEED a bigger house. We will be a three generation home for at least the next 2-3 years. DH and I provide primary child care for both working parents. I don’t expect this to change anytime soon.

Divorce is final this week so we are comfortable pulling the trigger on a bigger house closer to DGS’ private K-12 grade school noted in the final court order.

Our combined pensions and SS covers 155% of monthly expenses. Mortgage free for last 20 years or so with $3.3M in savings/equity/CD’s and short term annuity. We’ll sell current house (~$240K) and kick in additional cash to stay mortgage free.

DH wants to spend less than $400K, I’m very comfortable going closer to $500K. I’ll have to show him this thread and point out that the $500K will be only 15% of $3.3M and isn’t just a spend but a way to diversify our assets. We’ll downsize again when we can.

 

[jollystomper]

From 1997 to present, the home value portion of our net worth went from 70% to 13%.

 

[53anddone]

Mine, fully paid for, is around 8%.

 

[Cat-parents]

We live in a city with very high home prices and we moved home (after 12 years as expats) at a time when house prices were high and escalating. Our home (still with a mortgage but that will be down to about 7% of market value when I retire next year) probably represents about 22% of our net worth.

Do I wish less of our net worth was tied up in this house? Yes. But DH really wanted at least a 3BR, free-standing home with a parking space or garage in the city and frankly I'm happy that we had this much space - individual offices! a backyard! - in the pandemic. (But I do fantasize about tiny homes.)

Do I love our house and is it our forever home? No. Too many stairs and too big. But it's well-located and has some really nice features.

Do we have enough financial assets to afford our expected retirement expenses? Yes, with at least 25% of our budget easy to cut if necessary. Plus, we live in Canada so we're not facing the uncertainty of catastrophic medical costs.

 

[Katsmeow]

We are under contract to buy a house. We thought of many things in choosing a house and budget and percentage of net worth was not one of them. We thought about how big a down payment we wanted to make and thought about the overall cost of owning the house (mortgage payments, taxes, insurance, etc) and how that matched our budget.

 

[Love This Community]

I think the answer depends on what stage one is in. Like others have mentioned, when we we’re starting out, our first house was probably 90% of our NW. we moved to a bigger house and that house was probably 40 - 50% of our NW. If we don’t move, after 20 years, our house probably will be 10-20% of NW. I don’t see this as a useful metric. What’s more important is how much one needs to maintain desired lifestyle including expenses on the home.

 

[Koolau]

I think the answer depends on what stage one is in. Like others have mentioned, when we we’re starting out, our first house was probably 90% of our NW. we moved to a bigger house and that house was probably 40 - 50% of our NW. If we don’t move, after 20 years, our house probably will be 10-20% of NW. I don’t see this as a useful metric. What’s more important is how much one needs to maintain desired lifestyle including expenses on the home.

Yeah, it's kinda interesting to know what is our various % of NW in our houses. But as long as our "stash" (non-personal residence) services our "4%" withdrawals (or whatever) we should sorta ignore personal residence (in my opinion.)

Having said that, it's certainly possible to have too much invested in a house (and its upkeep.) Such a move could damage FIRE plans significantly.

 

[retire48in2018]

During inspection, a lot of undisclosed issues appeared. From 24 windows leaking/seal broken, to a failed HVAC, etc - adding up to about $50k of deferred maintenance.

Some of the issues were not visible until curtains and blinds were pushed aside and reasonable light was let into home. The curtains were practically light blocking, and all light bulbs/sources were very dim. They had at least 1 dog that gouged a lot of the engineered flooring, chomped on almost all the window blinds (and broke the open/close), major stains on carpeted floors, etc.

Maybe sellers did not know some of these issues, but there were a lot.

In retrospect, some of the issues would have been visible if we pushed to have better lighting on virtual showing - but 24 windows, failed HVAC (very small temp difference during cooling), etc..,

We requested a reasonable concession, and sellers through relocation company took 4 days to respond and said $2.5k. So, we terminated contract.

Looking for home again….

 

[Koolau]

During inspection, a lot of undisclosed issues appeared. From 24 windows leaking/seal broken, to a failed HVAC, etc - adding up to about $50k of deferred maintenance.

Some of the issues were not visible until curtains and blinds were pushed aside and reasonable light was let into home. The curtains were practically light blocking, and all light bulbs/sources were very dim. They had at least 1 dog that gouged a lot of the engineered flooring, chomped on almost all the window blinds (and broke the open/close), major stains on carpeted floors, etc.

Maybe sellers did not know some of these issues, but there were a lot.

In retrospect, some of the issues would have been visible if we pushed to have better lighting on virtual showing - but 24 windows, failed HVAC (very small temp difference during cooling), etc..,

We requested a reasonable concession, and sellers through relocation company took 4 days to respond and said $2.5k. So, we terminated contract.

Looking for home again….

Sorry for your disappointment, but thankfully you found the flaws that tanked the deal. Good luck and good hunting.

 

[MarieIG]

Sorry to hear about the issues - but glad that they were found during inspection vs. after your purchase.

 

[REWahoo]

We are selling our home and moving to TX...

...

We’re looking at areas that is strong seller market due to absurdly low home inventory. Homes that are turn key, move-in ready sell within a couple days with multiple offers.

Sounds like you are trying to buy in the Austin area. I feel for ya...

 

[NW-Bound]

^^^^ Does the Austin area have problems with clay soil?

 

[REWahoo]

^^^^ Does the Austin area have problems with clay soil?

I've never lived there myself, but a Google search brings up a significant number of foundation repair companies in Austin, so I'm sure the answer to your question is "yes".