Did We Make A Profit Selling Our First House?

Are you kidding? In this market? Of course not. We managed to sell it for around $5k more than we bought it for back in 2006 (in “the bubble”) and it doesn’t take a genius to figure out that we spent more than five grand on improvements (we estimate that we spent around $35K on new bathrooms, a new kitchen, new flooring, new windows, a new roof, a new patio, a paved driveway, and upgraded details like crown molding and wider doorways). This is where a “wop-wop” sound effect would come in handy.

But we’re sleeping like babies and are downright giddy about the sale of our house and the purchase of our new one. Why? We’re 100% convinced that the time was right and everything happened the way it was meant to. Are we crazy? Maybe. But here’s our thought process:

  • Our monthly payment for the new house is $200 less than what we’ve been sending in for our old much smaller house thanks to historically low mortgage rates and a great deal on the new house (which we never could have afforded in a better market). More house in a better neighborhood for less money each month? Yes please.
  • The unimproved houses in our old neighborhood (which look a lot like ours looked back when we purchased it) are selling for 30K, 40K, even 50K less than ours sold for. So not only were our projects fun and fun to enjoy while we lived there, they seemed to help our house retain its value and even improve upon it (even though we bought it when the market was amazing and we sold when the market was, uh, not).
  • We got an offer within just a few days of being on MLS, so that’s a lot to be grateful for in this housing market.

Want more details? Sure. You know we like to talk…

We’re not house flippers, we’re house lovers (hence the blog name). We never moved into our old house intending to flip it or upgrade it for any other reason than to enjoy it and make it the perfect home for ourselves in the time that we spent there. And it was. So the fact that by doing those updates we were also able to keep the house from dropping a lot lower into a price range that actually may have made us cry ourselves to sleep at night really does feel like a blessing. And we can’t forget the inexpensive backyard wedding that we were able to host thanks to diverting our venue rental budget into a new paved driveway and cobblestone patio that were around long after our big day ended. Or the kitchen renovation that spawned a blog that spawned a business that now affords us the opportunity to both work at home with our spawn by our side (sorry for calling you “spawn” Clara- it’s a terribly un-ladylike word).

Plus, it’s easy for us to see the rewards that the new house holds. After all, we’re not just sellers in this buyers’ market – we’re buyers too. And boy is it a sweet time to buy. We’ve scored our new larger house in a nicer neighborhood at a serious discount (we paid over 40K less than it was valued five years ago). Plus since interest rates are awesomely low we’re potentially saving tens of thousands of dollars in interest over the term of the loan. And since we had some nice equity in our old house to roll over into the purchase of the new one (and thanks to that lower interest rate) that’s how we got to that lower monthly mortgage payment that we mentioned above.

Plus we figure that when/if the market recovers in who-knows-how-long, there are greater rewards to be had on our new house than if we had waited around to sell our old one (which might have gone for more money in a few years, but at that point our new house might have been waaaay out of our price range just like it was five years ago when the market was doing gangbusters). And of course we can’t ignore the most important facts: that this new house satisfies our passion for DIY, offers more room for our family to grow, and helps fuel our business. Which is really the day to day stuff that helps with the whole sleeping at night thing.

But let’s revisit that whole 35K spent on improvements, only 5K of which we actually made back in the sale price. The good news is that it’s not like our improvements didn’t serve us at all. Similar houses in our old neighborhood are now selling for muuuuuch less than ours did because they don’t have any of the updates that ours has. In fact a similar ranch on our old street (only about three houses away) that’s notably bigger than ours sold this summer for 50K less (!!!) than our house did. Which makes us feel incredibly good about the improvements that we made to set our former casa apart so that it would not only hold its value but would even creep up 5K since the good ol’ days of the bubble. So although on paper it might look like we lost 30K based on what we paid, how much we put into it, and how much we sold it for- we like to look at it like this: by making the improvements that we did, not only did our old house not drop 50K in value in this bum economy, it also slightly improved by 5K. Call it looking through rose colored glasses if you’d like, but thinking about it that way really helps keep things in perspective.

Oh and here’s another interesting house-for-sale point that our lender made. He has noticed that what homeowners aren’t getting back financially from their improvements, they’re getting back in sale speed. For example, a buyer might not pay much more for your house because it has granite counters, but you’ll get an offer a lot faster than a similar house down the street that’s sporting laminate. And that has certainly been our experience. We were on MLS for 2 days before getting an offer while a similar larger house down the road is going on four months without a bite. And it’s listed for $30k less!

Do we wish the market were better? Sure. But we’ve got zero regrets. Some may accuse us of seeing the glass as half full (and we definitely don’t think everyone would make the choice to sell at this time), but these are just a few reasons why we’re so glad to be in our new house just in time for Clara’s first Christmas. Speaking of which, we’ve got some boxes to unpack…

Comments

  1. says

    Hey Guys,

    I don’t think anyone could have made a profit in the economy, but I think you guys more than made the right decision. I’m already in lurve with your new digs. I can’t wait for the next few years to see it grow and change over time. (By grow I mean your family, thought I should clarify.)

    If you can sleep at night, you made the right choice. And I say knocking off 200 off your payment is a big plus. Over time that will add up, so in a way you made a long term profit.

  2. says

    Thank you so much for sharing this. I love your blog and you are inspiring me to take on more DIY projects.

    On a professional note, I am a REALTOR and brokerage owner and your post above is exactly what I try to explain to sellers when they realize what it will actually take to sell their home in today’s market. They have a hard time making the connection between retaining value (with improvements) and buying at a bargain.

    Those are the 2 key elements that get missed in the emotion of “I bought at the wrong time and I’ve lost all of this money”. Thank you so much for sharing your perspective.

  3. katie says

    Good for you guys! And hey, 35k on ALL those improvements is a pretty awesome price! You two are thrifty… and you got to enjoy those things while you lived in the house. I wouldn’t call it a loss at all. You’re movin’ on up now because of all the factors. Can’t wait to see what you do to the new house! Have fun :)

  4. says

    You guys are very savvy when it comes to managing finances and understanding the ins and outs of home ownership. The whole process really overwhelms (and frightens!) me, but the way you explain the process of buying and selling makes me want to get in on the game. Your blog is really, really well done.

  5. Leslie Ann says

    (By the way, I’m a local Richmonder/Chesterfield County-er, and my father recently bought a place for my sister & I to stay in near VCU, so I’m interested in the real estate nearby…)

  6. KimB says

    Great post, John! I think people sometimes forget that a house is not an investment, it’s a home. And the value you get out of living in it and all the memories you have would be more than enough to say it’s “worth it.” Can’t wait to see the Christmas tree in your new home. :)

  7. says

    Love your thought process. House flipping was certainly one factor (of many) in creating the bubble to begin with. Kudos to both of you for having a smart and reasonable approach to homeownership and debt! You are such an inspiration!!

    Congrats on the beautiful new house – it’s gonna be a great ride for the Petersik family. And special thanks for sharing your journey with us readers!

  8. Roshni says

    I don’t know from whom you’ve been hearing criticism about your move, but I actually thought that you guys were, as always, made an extremely well-planned and economically sound move! With the demands of your family, you definitely needed a bigger house and this was just the right time to buy!!

  9. john says

    certainly a great time to buy. and certainly a rough time to sell….you guys were fortunate that (i assume) you had a lot of equity in the home, where it was an option to sell, taking the fairly sizable loss….lots of people cannot do that, especially those who bought from 2005-2008

    but since you were able to do that, you made a great decision to move….get the bigger home in the nicer area, and with low rates, and actually pay less….and since you have the bigger home in the nicer neighborhood, you will get to actually realize a gain in the future on your new home…whether you sell or not, take out equity, etc….you will see appreciation in this house..

    this is not to be nit-picky, but i see alot of people say this right now (i am involved in the RIC real estate market at a few levels)….although you bought your home for 40k less than it was valued at 5 years ago, you are still likely paying market price for your home…meaning what you paid is today’s value….which doesn’t have much to do with the value 5 years ago…you can assume your house will get back to that value, especially with all the upgrades to come….but it may be 3 years, 5 years, 10 years, etc.

    look forward to the renovations

  10. Kaitlyn says

    Something else to consider: by spending more time in your home doing renovations, you spent less time out, thereby spending less money on other activities and forms of entertainment!

  11. Alicia says

    I totally agree. It’s not all about making a profit. My husband and I sold a house at the top of the comp range in our area because it was one of the nicest houses in the area with improvements made to it. We had some equity in it too, so it afforded us the opportunity to buy a larger home in a different neighborhood. But, for some reason, people are always concerend with whether you made a profit. Gone are those days…

  12. says

    You forgot the most important part– you got to enjoy the home improvements in the time you lived there. Flippers make all those improvements and sell at a profit. You made those improvements to your home AND life, which upped your “happiness profit margin”. That’s sorta priceless, you know what I mean?

    In other words– my philosophy is to improve your house AND enjoy it for awhile, instead of improve and try to turn a monetary profit which may or may not happen, especially in this market. We won’t make much money from our home improvements, but we are LOVING them in the meantime. ;-)

  13. Andrea says

    Hubs and I are house shopping and pretty discouraged. So I’m wondering if you’ll reveal how much less your offer was on the place than the asking price? Sometimes I just want to offer $50k less on a place to pay for updates, and the hubs is mortified at the idea of underpricing like that. So, are you willing to elaborate on that, and how the 2 of you went about coming up with your offer? Thanks!!

    • says

      Hey Andrea,

      We just talked candidly with our buyers agent about what we wanted to spend and asked if she thought it was insulting. Experts will usually tell you if an offer is too crazy and try to keep things in perspective for you. It also depends on your price point as to how much you can lowball (in DC where things are 800K you can offer 50K under and get away with it, but that most likely won’t fly if you’re buying a 200K house (since it’s 25% of the whole cost).

      xo,
      s

  14. KB says

    The other piece of it, is how much you would have paid if you were renting for those years. Similarly, we bought our house in 2004 at the height of the market, put $50k of renovations into it (we’re not nearly as good at DIY as you guys), and will likely sell for what we bought it for when we put it on the market in the next year. So, theoretically we lost $50k. However… to rent a place like our house in our city we’d be paying at least $1200 a month. So, $1200/month x 7 years = $100,800 in rent saved!