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 “womp-womp” 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…
Snickrsnack Katie says
Well, despite not making a profit, you didn’t do too badly, and your house was barely on the market. I say, BRAVO!
[email protected]'er All About It says
…another super awesome tidbit you forgot to mention is that all of your updates/renovations were made without additional loans and/or debt! You paid cash for everything and so how can you feel the least bit remorseful when you don’t need the equity in order to pay off your debts!
We picked up that tip from you guys when we moved into our house and I can safely say we’ve not accrued any further debt with our house as a result!
Great job, guys! It’s not about earning it all back! It’s about loving it while you have it and not going completely under in the process!
I think your way of looking at it totally makes sense! My husband and I stretched our pennies to buy a great fixer upper two months ago that we can stay in for the next 20 years while selling our old house for a loss overall. We don’t regret it one bit.
You guys have taught me to think about our home in such a different way. To love it, not just to live in it. Also so much about making decisions that work for you. Who needs a second living room that never gets touched, anyways? Not me!!!!
Great post!! I have been curious about this but I thought it was too uncouth to ask.
Seems to me you come out smelling like roses. Keep the rose colored glasses though, you’ll need them for your bright future!!
You certainly made a profit. Your profits buoyed your sale price above the competition, you are saving money EVERY month and you scored a bigger house. Only in crazy town is that not a profit!
Congrats to your entire family.
Yes, I cried when I read the post with the empty old house photos. No, I don’t know you. Yes, I have my own life. Yes, I do, I swear! I am excited to see your transformations and see how your incredible vision plays out on this new lucky abode.
As a new-ish reader, the new house announcement yesterday has me curious about all the posts concerning the move from house #1 to house #2. Are there links somewhere that I’m not finding?
If you click the “Categories” tab near our picture on the sidebar you’ll see a “Moving, Selling & Buying” link that will take you to all of those posts. Enjoy!
When your house is your hobby, your business and your love, spending money on it is like breathing. No justification, no explanation and no apology required. Look at kids: would any of us have had children if felt we had to recoup every dollar invested in them? Good luck with THAT one!
Tiffany S. says
This is such a great way to look at the process. There are so many people who feel entitled to a profit on a house sale, and that’s not always the case (especially if you’ve woken up in this market). That’s like someone always expecting a return on a stock market investment. It’s not always going to happen, and that’s not even why most of us buy houses in the first place. I think you guys did great, and I can’t wait to see your new projects come to life!
you are two smart cookies, you know that? you have such a great attitude, and this post is really well written and thoughtful.
I think it’s easy to get caught up in the ‘numbers game’ in this housing market. We put a small addition on our old home, but still priced it about the same as houses without the addition. Our old neighbours said we were stupid to price it so low, and that we ‘were giving people an addition for free’. But we had 2 offers in less than two weeks, and sold for above asking. The speed of the sale was worth it, and we bought a nicer house in a better area that we could have never afforded in a booming housing market.
I live in Phoenix AZ where the market is even worse than in Richmond…we had a similar experience. Even though we did not make a profit on our home, we were able to sell within 14 days. That meant a lot to us to not have to carry 2 mortgages! We too have a much larger home in a better neighborhood, with a smaller mortgage. We agree: Win win!
Congratulations on your new home!
This was a really interesting and insightful post, especially for anyone weighing the benefits of selling in a bad market…thanks for tackling the finances on the blog and not leaving us guessing!
You all have the right attitude. When prices are high, they are high for the buyer and seller. When they are low, they are low for everyone. It’s all relative.
You got a bigger house, better neighborhood, lower payment, and less interest over the life of the loan.
Plus, you make renovations for you, not for the potential buyer. You all have your heads screwed on straight, although you already knew that. :)
brandt @ New House on the Blog says
See, that’s the funny thing about finances. Sometimes they tell interesting stories.
If you look at just the sale value of the house you sold, plus the amount of the house you purchased, you would say you made a profit.
If you nickel-and-dime the money you put into the house, plus what you originally purchased it for, minus the sales price…and compare it to the house you just purchased, looking at numbers only, it might seem like a loss.
However…this is where your perspective is awesome, John. You realized what the house was able to translate into (your business). The comfort and ease of the nice house you all DIY’ed might not have a monetary number on it, but you can look back and say it was worth it.
And look at the great deal on the new house! That’s the way to go…It’s all about perspective and hindsight. Great way to sum up the whole process.
No matter what, always look at the glass half full and you will be able to sleep at night. So glad everything worked out for you guys! I’m hoping the market kind of stays like this for one more year since my husband and I will be ready to buy our first house come this summer :) You two are so inspirational!
That’s incredible – two days listed and already a bite?! :) Love it! I think the memories of having your wedding at home are also invaluable. :)
Cait @ Hernando House says
Glad you guys have zero regrets! The new house looks like it’s going to be so much fun to make into your own :)
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.
Christina Ethridge 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.
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 :)
Jenn from Much to My Delight 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.
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…)
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. :)
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!
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!!
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
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!
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…
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. ;-)
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!!
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).
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!
“After all, we’re not just sellers in this buyers’ market – we’re buyers too. And boy is it a sweet time to buy.”
Exactly, what a perfect way to look at it. I think you did amazingly well :D
Jen @ The Decor Scene says
I think it was completely a smart move on your part. In the end now you are paying less on the mortgage for a bigger and better house. How awesome is that? When we bought our home we knew this was the house that we would live in for years to come. Yes we had to fix it up and yes we are still fixing it up (3 years into it now) and we have a few more years to go before we finish all the projects we want to finish, but that is ok with us. We have great neighbors and now a great home and we just refi’d our mortgage to a 20 year and we are now paying just a little less then what we were paying for our 30 yr mortgage. Our home is “worth” less then what we paid for it 3 years ago, but I think if we had to sell for some reason, we would get what we paid for it, but not what we put into it. We will continue to do the upgrades that we want to do, because we will live in this house for 20+ years, so it’s ok to spend the money. We only do projects if we have the money to do them. We love our tax return every year. :D
Can’t wait to see all the great projects you guys will have and we will all be right here to see it all happen. Keep on doing what you do Youngsters. :D
Jessica M. says
Wow!! As a real estate agent, this is the message I try to get my sellers to understand daily!! You guys are spot on with your approach and thought process and will be in a much better position down the road!
Just curious, you didn’t have any appraisal issues? That’s the biggest challenge for most when selling the most renovated house in the hood.
Yup, our buyers actually offered a little more than we sold it for (the appraisal didn’t support it, even after they appealed it so it went back down to what we sold it for). But for some reason we never really counted our chickens when they put in that high offer (we had a feeling it might not appraise for that price) so it didn’t bum us out.
We felt the same way selling and buying. Could we have gotten more for our house had we waited? Sure, maybe 30-40k. COuld we have afforded our new house? No way because that spread was like $200k. But our house went to contract in 56 days and we closed on both in 45 days (after some delays and additional costs for rent-backs and new lenders and ugh, never a smooth process!)
I’d say we made out more than alright on that deal, and we’ll be sticking around for a long time to come. We still can’t believe what we got our house and property for … in Central Maryland!
I agree that the timing was right. You guys definitely made the right move, and I can’t wait to see what you do with the place, esp that sink in the bedroom. We have one of those and I’m looking for some inspiration!
Sara @ House Bella says
I love money talk (seriously, I do. I could talk about it all day). And thank you for expressing your glass-half-full approach. I don’t think it’s wrong to see things this way – it’s more realistic. You got into an situation that you now love, while you technically didn’t “make” a killing on your old house. But you’ve made something that you’re comfortable with and are ready to make your new house a home. Congratulations again!
Emily @ Merrypad says
Really interesting insight (on your personal experience and the Richmond market). Thanks for sharing.
Consider the 35k a business expense and it’s completely removed from the equation! But that does extend the timeline for your business to be profitable. Six of one, half dozen of another …. either way sounds like ya’ll are loving life! And that is all that matters.
Thanks for showing your logical line of thinking and clear intelligent decision making process. Too many folks are listening to the negative-obsessed media talk about what an awful time it is to sell. Very few point out that it all evens out (or in your case, comes out better) on the buying end when you get a super great deal.
Sending virtual congratulatory hugs on your new nest! xox
Thanks for sharing the info guys. I admit I was curious but agree with your thought process 100%. We are going to have to sell a house sooner than we thought and came to the conclusion a while back that making improvements (that help your house stand apart) and paying down the mortgage as quickly as you can are two of the best options if you need to sell in the very near future. I also agree with other folks that some people expect too much of a return from their investment and that just isn’t realistic most of the time.
Lindsey R says
CHEERS! Love the post and the new HOME too!
I would swear that either me or my husband just wrote that. We went through the same decision making process earlier this year, closing the door to our first home in June and moving into our new home in July. Like you, we also put in time, effort, and money into our first home, making it shine in comparison to the others that were on the market at the same time. We sold for about 8K more than we bought it for (yeah for us in this market!) and then used the equity that we had in the old home to purchase our new home (for a purchase price that was $40K lower than their initial listing price and about $70K less than it was estimated at at the height of the market!). We think we won and do not regret anything.
Congrats on the new place – I have no doubts that you will make it amazing.
Your “big picture” advice is so smart. My hubby and I have also not gone into debt fixing up our place, but sometimes I feel a twinge of regret buying new bedding and not boosting a mortgage payment, especially when I login to our account and see how slooooowly our mortgage is decreasing. But, that’s the way these things work and I rationalize it this way: its an issue of quality of life. Sure, we could spend zip on making the place pretty and hate being here. Or, we can spend a little and love being at home, which, looking at the big picture, saves money on entertainment because we aren’t itching to leave the second we walk in the door. On the contrary, we love spending time at home and that’s worth a lot. So thanks for the sound words of wisdom and sharing your financial details.
I swear once on your blog, I read that you spend 5-10% of your annual income on projects in your home. I’m guessing that doesn’t include the big projects that you save up for (kitchen, bath, etc)? Just curious?
Oh yeah! That’s just monthly Home Depot runs for things like paint and wood and stuff! For the big projects we save up in our high yeild savings account for months (sometimes years).
Congrats and it’s super helpful. . we’re about to buy and sell and hope to be as smart/fortunate as you!
I think you’ve done well – the main point being you sold in a similar deflated market to what you bought, the rest is icing. We built a house in 2000 and it’s worth at least 2.5 times what we paid … but so is everything else, it’s a false sense of gain as we have no plans to cave dwell anytime soon!
Thanks so much for sharing this valuable insight. I couldn’t agree more with your perspective! Again…congratulations! And yay for us…a new YHL home is a boon for us readers!
Erin @ Where Beauty Meets Function says
I think you guys came out great with all the considerations!
Not to mention…fixing up your house provides your income…lucky ducks!! :)
We just had much the same thing happen to us. We were lucky to sell, and I know it was becuase of our updates that it did sell over other similar homes in the area. We barely broke even. But we really didn’t break even when you consider the money we put into the renovations. But we loved living there, and we learned so much about ourselves and how to do things we never knew we could. I really relate with your blog, so thanks for being so cool, and keep it comin!
thank you John. that was fascinating and i’ve learnt loads about home financing from it. you’ve completely convinced me that you ought to be sleeping well at night, you have done a great deal with your house sale and house purchase. well done.
Not totally unrelated is the happiness you’re bringing to someone else, too. We spend SO much time during our lives focusing on dollars and cents that sometimes we forget about the smiles that our efforts bring to other people.
I’m so glad you guys did well enough on the sale of your house as well as the purchase of your new one to be so excited about the change.
I hope the new owners of your old house really appreciate all of the work you put into making that house what it was.
If we buy another house (as opposed to building one), I hope that we find one that is as well loved. You just can’t beat buying a house that someone else loved so much…it really means you have way less worries while you’re occupying that space.