Reckless purchasing of a house – Part I

This occurred between April 16, 2022 and May 20, 2022. In a span of one month and 4 days, we went from seeing the house on Zillow to signing the closing documents. The following is an account of what transpired between those two dates. It goes without saying that the experience is anecdotal and has no statistical relevance. This was a week after my lab got furnished.

Day 0

We were on a FaceTime call, and causally browsing through real estate properties currently available on the market. This being the digital age, she was looking at Houston properties on Zillow while being physically in London. We were sending links to places we liked back and forth. These properties ranged from shacks that cost next to nothing, to mansions that we cannot afford in a million years. We were just spitballing on a lazy Saturday afternoon as people do. There was no firm budget in mind (somewhere south of $600,000 would have been acceptable, we thought), and we had no idea how much mortgage we were able to get. We didn’t even think we wanted to buy a place. Even worse, we didn’t even know if Houston was the city we should be buying a property. I was just as much eying properties on rightmove.co.uk for 1 bedroom apartments in London that cost as much as a whole Houstonian house.

This went on for several rounds before we somehow converged on a red house. It was a detached house built with a townhouse style. Located in north midtown with 3 floors and a terrace facing the cityscape of Houston. For whatever reason, the stucco façade of the place was painted a burgundy color. In a sea of gently colored palette of the neighborhood, this house stood out from a mile away. The interior seemed lovely and spacious to a fault. The ceiling of the second floor was so high it looked as if someone did non-uniform scaling to the place only in the z-direction. So we thought, okay, let’s go see the place. I entered the little bits of information on Zillow, and sure enough, I got a call minutes later by a buyer’s agent asking if I wanted a tour. “Sure! How’s Monday?” I replied thinking, what’s the worst that can happen?

Day 2

I drove to the place during work for a tour. After parking the car, I walked up to the property and immediately realized how massive of a building it was. This will make me sound like an awful engineer, but I never thought to visualize the height of a building until I stood at its foundation. I had to strain my neck to look up at its terrace, which seemed like it was 5 storeys up. It was physically imposing! I had to collect my emotions of “who am I to entertain owning a place like this?!” and pretend I am a smart guy who has been viewing houses for a while. Armed with my non-existing knowledge, and no pre-approval of mortgage of any kind, I shook hands with the agent and walked through the front door. He was a pleasant enough guy who seemed very laid back and chill. He let me walk up and down, and answered any questions I had. It was a beautiful place, and very cutely decorated. Then again, I have literally zero reference points to compare with. This was the only house I viewed.

Day 3

We talked, and talked, and seriously considered putting in an offer. At the same time, a mortgage lender contacted me through Zillow and offered to calculate a mortgage pre-approval for us. Since we had no idea what our financial status was, and my credit score was close to abysmal, we said yes to a 20% downpayment, to roughly a 5% fixed interest rate over a 30 year term. This took no time, and we received the pre-approval the same day. At this point, I felt like I was on auto-pilot, watching the process play out like a disinterested party. The numbers seemed abstract, and the house seemed like a problem set that I had to do.

In retrospect, this pre-approval was almost entirely artificial. The numbers on it meant next to nothing and could (and did) change drastically. Just like the mass-mailed pre-approvals to credit cards, this mortgage pre-approval was little more than an advertisement.

At the urging of the agent, we put an offer down. According to the seller’s agent, there were multiple offers on the table (2 to be exact, one being a cash offer). He was pressuring my agent, whom in turn pressured me to put in an offer that evening. We added $15,000 to the listing price in the offer. In addition, we wrote a personal letter to the sellers, trying to appeal to their humanity. We increased our earnest money to $24,100 (from $0), and the options fee to $500 (from $100). Lastly, we reduced the options period to 7 days (from 10). The earnest money was to show that we were serious about this offer, and we would lose this amount if we cancelled our offer without cause between 7 days and closing. The options fee was the fee to have the option of cancelling the offer within the first 7 days.

In retrospect, this urgency was likely artificial. While it may be true that they may have gone for the other offers, from a dispassionate perspective, there are other fishes in the sea. The chance that any particular house is significantly undervalued is next to none.

I note that increasing the earnest money was easy (and doesn’t change anything) if everything goes smoothly, and if we have that money. The options fee should have been kept lower if we were putting multiple offers simultaneously. The options period of 7 days was not too big of an issue.

Day 4

While the seller’s agent promised to make a decision by the morning, they were radio silent until late night. From our end, we re-toured the place, partly over FaceTime. Late evening of that day, the seller’s agent asked my agent a cryptic question. My agent sent me a screenshot of the conversation, which said “Are you all resubmitting”.

Now, I understand that the seller’s agent’s only job was to get the sellers as much money as possible, but this was just pure evil. Given that there was no reason why they would not have accepted a higher bid already, logically there were two possibilities,

The other offers were lower, but the sellers want to squeeze more money out of us.
The other offers were comparable and they asked the same questions to all parties.

This was then that having a precise budget in mind would have helped. But since we didn’t, we added $2,000 based on pure heuristics. In retrospect, I believe the other offers were lower.

Day 5

My agent called me up asking “do you have a backup house you want to look at?” to which I answer “no”. Being a cheeky guy he was, he said “great, you got the house.” This was when I thought all hell would break loose. We had a 7 day window to either back out of the offer or the house was ours.

I contacted a title company, which as far as I can tell, does two things. One, they provide the title insurance and two they act as an escrow. In the capacity as an escrow, they hold all the money until everything is settled, then distribute that money. Following the acceptance of our offer, we transferred the options fee + the earnest money to the title company. Yes, we needed to gather about $25,000 dollars on the spot.

I contacted a home inspector to evaluate the house and to note down any deficiencies. This guy cost around 550 dollars for about 3 to 4 hours of work.

Day 6

My partner came to Houston, I practically broke down. One never realize the amount of stress that had been accumulating until there’s an outlet.

Day 7

We met with the inspector at the property, and patiently walked with him throughout the house. It took 3 to 4 hours in total. I trailed his steps and noted down as much as I could. He started in the kitchen and did it floor by floor. He even had a drone to inspect the metal roof. Later that day I received a long and detailed report that noted all the things that may or may not be wrong with the house. Because there was no destructive testing, we can’t really ever know. So what it amounted to were two things,

He was reasonably sure that nothing was majorly wrong with the house. As in, nothing was so bad that we should back out of the offer.
He gave us enough ammunition to demand money for things that may or may not need fixing. These items were buried under veils of code violations.