Otterwize

What You Otter Know About Personal Finance

Housing

The stresses of moving in

Moving ranks among the top life stressors. (This comes from Holmes and Rahe’s Life Change Index Scale (The Stress Test), an index used for the last 50-years, showing that moving—whether renting an apartment or buying a house—has probably always been awful.)


There are down payments and security deposits, not to mention upending your life, leaving your comfort zone, roommates, cost issues, packing, unpacking, etc. However, there are a few resources to help ease the transition, making it probably easier than ever.

Renting

Finding that new spread

  • Before you start to hit the pavement (literally or digitally), you need to do your research on the rental market in the target area. Looking through current listings on some of the zillions of rental sites shows what costs what. There’s no point in looking for a castle if your budget is more suited to a raft on the moat.
  • Joinery: One of the newest kids on the block. Check them out for swift last-minute deals.

So here’s the old-school way (beyond your local paper):

  • OK, we’ll start with Craigslist. You can find some good deals there without any agent’s fee. There also may be scammers with bogus listings and bait-and-switch maneuvers, so keep your BS-meter on (sure, that stands for bait and switch, right?).
  • Other tried and true sources of good listings:
  • You can also use these sites to help you figure out if the person you’re sub-leasing from is taking you for a ride. Just check out how much the rent is on the main lease. Sub-leasing is fine, but some use it for extra income by inflating the apartment’s cost. If the main listing is off the site, try searching on the Internet Archive Wayback Machine.
  • (Eric: I’ve heard that “some people” even use these to see how much their friends paid for their home/apt. Who knew these sites could also help you find your own place!?!)

Check these out as well:

Negotiating

NOTHING IS SET IN STONE.

  • Since you’ve done your research, you know what terms and perks (rental prices, security deposits, parking fees, utilities, etc.) are typical for the city or town you are looking at. You can still try to negotiate a better deal, but at least you know you can’t get an Armani at Old Navy Outlet Store prices.
  • You should also have a sense of the seasonal market and adjust accordingly. Is this a slow time for renting (off-season in some areas may be during the winter or right before the end of year holidays) or a hot rental market (often during the spring or summer when people are trying to get in before or after a school year). You need to know the seasons in the local market so you can know how much bargaining room there might be.
  • If you are looking to minimize your monthly rent, many landlords will offer you a lower rent if you will sign up for a longer term (18-24 months instead of 12). If you are pretty sure you will be staying that long, it would be a good idea to consider a longer-term lease at a lower rent. (They will likely raise your rent when you renew your lease “to adjust for inflation.”)
    • If you’re not sure but still want a lower rent, look into whether the lease allows you to sublet the space (and also how marketable the apartment would be if you needed to sublet).
  • Depending on the city or town, the building, the landlord, the market, and other factors, here’s what you can try to negotiate (can’t hurt to ask, right?):
    • First and last month’s rent plus security deposit? Try to drop last month’s rent if you can. A deposit and first month’s rent would certainly be better (and may be agreed to for those who push back).
    • Your security deposit should be accruing interest (although this may vary according to state and local law).
    • First month FREE: In some markets, you could get lucky and find a deal like this. If the building has a lot of vacancies or the market is slow, the landlord may actually do better by taking a one-time loss to get you to sign on the dotted line.
      • If you get one month free, you can recalculate the real monthly rent just by dividing the 11 months of rent by 12. For instance, if the listed rate is $1,000, and you get a month free, the actual monthly rate is $11,000/12, which is $916.66.
      • Also, be careful if it’s a building that has a lot of vacancies. A total renovation that raised rents and priced people out or a brand-new building are some of the good excuses for empty apartments. The bad reasons could be countless: an infestation (mice, cockroaches, etc.); structural problems (bursting pipes, no hot water); a horrible neighbor; or even just a landlord who’s a jerk. 
    • Utilities: Some leases include them in the rent and some don’t, so read the fine print. You may have more room to negotiate with an individual landlord than with a management company leasing for an entire building. But if the market is slow, it can’t hurt to ask. The most they can say is no.
      • Utilities can really add up, so make sure you figure them into your budget before deciding on a place. Check what you’d be paying for electricity, gas, oil, water, heat, hot water, etc. If you can talk to current tenants, you may get a good sense of the utility costs and also learn the quirks of the building (and if there’s shared/free wifi, etc.).

The Lease

  • Always read your lease in full before you sign it. If you don’t understand something, ask the landlord or managing agent (and make sure the explanation jives with the wording in the lease).
  • Make sure you keep a copy of the signed lease (signed by both parties, not just by you).
  • Keep good records of the payments you made upfront (such as security deposit, first and last month’s rent, etc.) so that you’ll know what you’re owed when you leave and you won’t double-pay rent (especially the last month’s rent).
  • Do a careful inspection of the actual apartment you will be renting (not just a sample apartment or “one just like it on a different floor”—the classic bait-and-switch). If there is any material damage (like a cracked window, dented appliances, split or damaged floor, missing window treatments, etc.), ask them to fix this before you move in. When they stop laughing . . . and if you still want to rent this apartment, ask that these items of damage be specifically noted on the lease (and separately initialed by the landlord or managing agent) to minimize the chance that you will be held responsible for these items (and have money taken out of your security deposit at the end of the lease when you are ready to leave).
  • Make note of any renewal deadlines, so that you’ll know when you have to give notice that you are renewing or that you are not renewing. Put a reminder in your phone or favorite cal so that you don’t miss this deadline.

Moving

  • This is your chance to clean up. Something you haven’t used in ages? OUT! Find out where you can donate, keep the receipts, and see if it makes sense to itemize your taxes (harder to do under the new tax law though). Plus, less clutter means you have more space. This is your chance.
  • As for movers, if you’re moving into your first apartment after college and have just a few suitcases, do it yourself. If you got rid of enough stuff that you’re traveling light, do it yourself. For this, your friends can be bribed for pizza and beer (it’s cliché, but true)..otherwise:
    • If you have boxes of books and large furniture, GET A MOVER. Your friends can help you pack, but trust me (yup, Eric again), there’s not enough pizza and beer in the world to convince your friends to act as makeshift movers. Rule of thumb: anything that can’t fit in a few car/taxi rides means you’ve got to pay up for the big guys.
    • Many buildings require your mover to show proof of insurance, so keep that in mind before moving day. For elevator buildings, they probably will also need advance notification to put up protective sheets in the lift (or you’re liable to pay for those damages too).

Setting Up

  • This is your home, so don’t leave things in boxes. Dedicate a day or two to moving in. Doing it in pieces just prolongs the agony and prevents you from getting on with your life.
  • Ask your neighbors about utility perks. In some apartments, the building may upgrade the thermometer, which can result in better temperature control and $$$ saved. Each building is unique, and new neighbors are happy to share their superior knowledge.

Finally:

  • Enjoy! You’re adulting (or giving a fair impression thereof).

“Buy land, they’re not making it anymore.”   – Mark Twain

Buying a House or an Apartment

The topic of mortgages is covered in detail under our Mortgages page. This page addresses the practical and procedural considerations in buying a home.

Reasons why you should use a real estate agent/broker/realtor

  • In most areas, the agent’s commission is paid by the seller. (But check your local area, because this could vary.)
  • If you don’t have a real estate agent and the seller does have an agent, you are not negotiating on an equal footing. The seller will have the advantage.
  • Real estate agents are very knowledgeable about their industry (prices in the area, home valuation, competition, length of time properties have been on the market, structural or layout features to look for or to look out for, negotiation strategies, financing options, market conditions, other properties to look at, etc.), and their information will be of great value to you in making your decision.
    • You need to do your homework and get familiar with the local market and what prices are reasonable in the area for the type of property you are looking for. Your realtor is the best person to help you do this because it’s pretty much his/her job to know this.
    • Your realtor has access to all the comps (recent sales of comparable properties) and can help you get a good sense of what you can buy in your price range.
    • Your realtor may have industry tools that aren’t available for consumers (such as advanced filtering tools, access to data, etc.).
    • Your realtor can be an invaluable resource to you in your search and may have exclusive listings that you cannot access on your own.
    • Some buyers think that FSBO (For Sale By Owner) properties will be less expensive in the end because the seller doesn’t have to pay the agent. This is not necessarily the case. Market value is what it is, and there’s no guarantee that the seller will be passing any commission savings along to you. Real estate professionals can also help the buyer and the seller to arrive at a fair price as well as avoid common problems and issues that might otherwise derail a deal.
    • Just FYI, nobody has asked us or paid us to say all these nice things about realtors. These comments are just based on our own experience of buying and selling properties.Your realtor will look at different properties with you, within the price range that you select.

Cost considerations

  • Don’t let yourself become “House-Poor” (when you spend so much money on your home that you have very little left over for other things that would improve your overall happiness).
  • Lenders will use different formulas and methods to come up with the maximum mortgage amount that you qualify for. That doesn’t mean that number will work for your budget. Give yourself some breathing room.
  • Figure out how much you really can afford to spend on housing without being forced to live on a shoestring budget.
  • Closing costs and fees can vary by location, type of property, and other factors, but can include:
    • Mortgage application fee/credit report
    • Appraisal fee
    • Inspection fee
    • Points (unless you go with a no-points option—which will result in a higher interest rate. See the “Points” section on our Mortgages page.)
    • Origination fee
    • Property tax and homeowner’s insurance escrow, if included in your mortgage payments
    • First month’s PMI (private mortgage insurance) if required by lender (some lenders require PMI if you put down less than a 20% down payment)
    • Attorney’s fees
    • Local recording fee
    • Any prorated amounts for utility and property tax bills if the seller paid in advance for these. (This can really add up, so make sure that you budget for them.)
  • Don’t forget to account for any funds that you’ll need for your down payment as well as the cost of a mover (and any moving materials you will need, such as boxes, packing tape, bubble wrap, etc. Newspaper works great in place of bubble wrap, but if you’ve gone all digital, you’re out of luck.).
  • There are many other costs involved in owning and affording a house or apartment beside just your mortgage payment, taxes, and insurance. Don’t forget to leave room in your budget for other practical items, which can include things like:
    • In an apartment:
      • Homeowner’s Association fees (in a condo)
      • Maintenance fees (in a co-op)
      • Parking fees (if not included in other fees)
      • Saving money for routine maintenance needs such as plumbing, electric, appliance repair or replacement as well as other items that may unexpectedly pop up
    • In a house:
      • Outdoor maintenance costs such as lawn care, snow removal, leaf removal
      • Trash removal
      • Washer/dryer or other appliances (if not included with the house)
      • Saving money for routine maintenance needs such as plumbing, electric, appliance repair, or other work that may come up from time to time
  • Saving money for big-ticket necessary repair projects such as roof replacement, a new furnace or hot water heater, burst pipes, or broken appliances needing replacement.
  • In both a house or an apartment:
    • Furniture to fit the new space, window treatments, etc.
    • Higher energy bills if you are moving to a larger space
    • Painting and other cosmetic improvements (as opposed to large home-improvement projects). Will you need to pull down that leopard-print fuzzy wallpaper or rip out the red shag carpeting? All of these items can really add up.

Location, Location, Location

That’s the answer to the question: What are the three things you should look for in a home?

  • Consider the physical location of the property, not just the features of the actual house or apartment unit. Is the house right near a busy highway or a train station? Is the apartment unit right near a noisy elevator or near the trash room? These and other factors need to be considered, and they will certainly figure into the price.
  • Walk or drive around the neighborhood to get a feel for the lay of the land (including at least once at night).
    • Where are the nearest supermarkets?
    • Take a look at the local area to check out things like restaurants, cultural offerings, parks, etc.
    • Where is the nearest medical center, hospital, and pharmacy?
    • If you have school-aged children (or plan to), where are the local schools?
    • Search out things that are important to you and see if this new location offers you what you are looking for in a community.
  • Consider the commuting distance to your workplace. Will you be walking, driving, or taking public transportation? Test out the route during commuting hours (not on a weekend when there will be less traffic). Is the commuting time acceptable to you?
  • If this is an apartment, do you want or need a doorman building? Do you need an elevator vs. stairs? Do you have a preference for what floor you are on? Ground floor apartments will usually be louder, due to street noises, and may be less secure.

Other things to look for when you are shopping for a house or apartment

  • Kitchens and bathrooms
    • Realtors know that the condition of kitchens and bathrooms is very important to buyers and can often make or break a deal.
    • Have these rooms been updated recently or are they in need of renovation and improvement? (Renovating kitchens and bathrooms can be very expensive, so check these rooms out carefully.)
    • Stall showers or bathtubs? Do you have a preference?
  • Natural light and exposures
    • Take note of the presence or absence of natural lighting in the rooms. Depending on the location of the house or apartment, the rooms during the daytime can range from having very little natural light to having lots of it.
      • Are there many large shade trees right outside the windows? Does the apartment face a tall building that is blocking the light?
      • Do the main windows have a southern exposure—which usually offers more light—or other exposures, which may provide less light at different times of day?
      • Are there skylights or large windows which let in lots of light or are the windows small or poorly placed, letting in less light?
    • Some sellers may keep the lights on all day in certain rooms so that the rooms appear to have more light than they really do. Don’t be fooled by this trick. Turn off the lights to see what the rooms really look like during the daytime.
    • Make sure you visit the property during the daytime, not just at night after work, so that you can see how bright it is (or is not).
  • Other features to consider:
    • Take a look at things like heating (forced air vents? radiators?) and air conditioning (central air? individual window air conditioners?).
    • Is the home energy efficient?
    • Take note of the condition of things like flooring, ceilings, paint, and windows. (Your home inspector will check over large structural things like the roof, plumbing, and electrical systems in addition to the smaller items that you can visually inspect yourself.)
    • Move-in condition or a fixer-upper? Is the house or apartment in true move-in condition, is it a real fixer-upper (needs a LOT of work), or is it somewhere in between?
    • Be realistic about the condition of the home you want to buy and make sure you have the necessary funds to do the work.
    • If the home is a fixer-upper, make sure the price you will pay for it reflects its real condition.

Be aware of certain seller strategies

  • “Days On Market” or DOM is a common statistic that realtors use to indicate how long a property has been on the market. (Longer numbers are not helpful for sellers.) Some sellers might switch brokers or take their properties off the market for enough time (and then re-list) in order to reset the DOM figure. If you are looking at DOM numbers, ask your realtor whether that is truly a new listing or an older listing trying to game the MLS (Multiple Listing Service) system. There may be perfectly legitimate reasons why a property has sat for a longer time—such as time of year it was first listed—but it’s good to have accurate information.
  • As noted above, some sellers keep the lights on all day (sometimes just in rooms that have a darker exposure) so that the rooms appear to have more daylight than they really do. Be on the lookout for this tactic. If you enter a room during the day and there are lights on (whether table lamps, floor lamps, or ceiling lighting), turn off the lights and take note of what the room looks like in natural light.
  • Some sellers leave out scented candles or fresh-baked cookies to give the kitchen or other rooms a homey feel or scent. This is an old trick: be strong.
  • Similarly, some sellers put out fresh flowers, bowls of candy, plates of cookies, or other items in kitchen or dining areas to make the rooms look better (and maybe to distract your attention from that old crack in the ceiling). Be a detective. Keep your eyes open.
  • Realtors tell sellers to clean up every room by removing all clutter, piles of things like magazines or mail, and literally every morsel or item that can’t be put away in a drawer or neatly placed in a closet, so that the rooms look large, open, and spacious. This is all fine, but try to picture your own belongings in the space. This isn’t a hotel room you’re buying; it’s a home. Make sure there’s space for your stuff.
  • Some home staging experts tell sellers to roll up plush white towels in the bathroom shelving or closets to look more like a hotel room. Don’t be impressed by these small, superficial (impractical?) tactics.

Before you make an offer

  • Have a good real estate lawyer lined up for when you are ready to move forward.
  • Make sure you have looked at enough other properties for comparison purposes. You need to have done your homework and educated yourself about the local market so that you don’t end up overpaying.
  • Don’t be rushed or pressured into a decision. Buying a house or apartment is not like renting. It’s a longer-term proposition with larger transaction costs. If you’re not sure you want the house or apartment, then perhaps you don’t really want it.
  • If you are buying something jointly with a spouse or significant other, you both should agree on the property before you move forward with any offers (and you’ve hopefully already had a larger discussion about what you’re each looking for and what each person’s deal breakers are).

Negotiating

  • Real estate deals are negotiable. Don’t present your best offer first. This is a game of back and forth, give and take. Very few sellers are truly non-negotiable.
  • Take advice from your realtor, but use your own mind and your gut as well. Your realtor will guide you on price and bids, but the decision is ultimately yours. By this point in the process, you have done your homework, looked at other places, and checked out comps (sales on comparable properties) so you know what price point is fair and reasonable.
  • There are buyer’s markets and seller’s markets. There are hot markets and cold markets.
    • Usually (but not always), the best time for sellers (not for buyers) is in the spring, because many families want to close and move in before the new school year. But many seasonal, economic, and other factors come into play, and every location and time period is different.
    • Your realtor will be able to tell you what kind of market you are buying in. The reason this is important is that it affects the posture you can take in negotiations.
      • If it’s a buyer’s market, you may be able to hold out for a better price. If it’s a seller’s market, you may have less room to negotiate.
      • If it’s a hot market, you’ll have more competition from other buyers and the price will be less negotiable. In some hot markets, there can even be “bidding wars,” and some sellers may be able to get more than their asking price.
      • It’s important to know the market conditions before you enter the negotiation phase.
  • Don’t go beyond a price you are comfortable with (even if your lender will go that high). At this point in the process, you’ve already considered all your financial and budgeting needs, and you’ve come up with an upper limit that you can live with. If the seller won’t take that price and wants a lot more, resist the temptation to go into a higher zone. Don’t let yourself get caught up in the emotion of wanting a particular home. If you can’t afford it, it’s not the right home for you. There will be other homes out there.
  • Don’t be pressured by these kinds of comments from sellers or their agents: “We have lots of other people looking at this”; “We have a very interested buyer coming tonight, so if you want it, you should make an offer now”; or “This house is going to move fast so you should decide quickly.” Don’t let them pressure you or rush you. At the end of the day, this will either work out or it won’t. And if it doesn’t, there will be other good choices out there.
  • If you do agree on a price for the sale, congratulations! But make sure you consult with your real estate lawyer before you sign anything or give any deposit. There are A LOT of big questions, including:
    • Is the deposit refundable?
    • Under what conditions?
    • What contingencies may apply?
    • There are large sums at stake here, and you should not be making these decisions yourself. This is what you are paying your lawyer the big bucks for.