Moving to a new house!
Jun
25
So this is it. We are moving into a new house in a few weeks, now the question is what we should fix, and to what degree …
Dan Ariely
My Irrational Life9 Comments to “Moving to a new house!”
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Not just you. For that much money, I don’t want to fix what other people break….bad enough to have to fix up after myself. Also, I want things to last for a long time…I don’t want to have to hunt and replace things every 10 years (especially expensive things like AC and appliances) and I don’t want to leave junk for the next owner to have to deal with. Too bad that it seems you can’t buy longevity on these big ticket items for the home. Our last AC ran for 37 years without a problem. We had to replace the heat in our home so got a heat pump. Bad decision. 8 years old, the compressor has been replaced 3 times and the life expectancy, based on the manufactureres’ guarantee, is only 10 years. The manufacturer of the original AC is out of business…guess there weren’t many repeat customers the units worked so well.
On the other hand…cars are lasting longer
As a property manager I learned that cheap equals cheap. It was fun to save a few bucks on paint or linoleum or plumbing fixtures, but they generally didn’t last an entire tenancy, so they ended up being more expensive due to replacement costs.
However, expensive doesn’t equal good. And neither does long-lasting equal good. I think you sort of have to be in the home renovation business long enough to see the lifespan of things, and to really experience the materials. Case in point: Granite countertops. Laughably expensive, but need continual care, sealing, etc. Silly expense.
Things to spend money on (but not crazy amounts), because the money returns at resale:
Weatherproofing and energy efficiency (dual-paned windows are an especially smart buy)
Structural integrity items (cheap decks on stilts? No)
Bathroom and kitchen upgrades (excellent return on investment, unless you go nuts)
Landscaping upgrades (but don’t go crazy unless you already are)
Flooring and countertops (this is where lasting actually means something)
Roofing
Heating and AC
Garage or carport
Things not to spend money on, because buyers will not be impressed, and might even underbid because you’re silly:
Expensive carpets, wall coverings, and designer paints.
This year’s color scheme and fashionable countertop option (when does fashion not equal victim?)
Overly expensive “green building” stuff. “Green” is not regulated, so it doesn’t really mean anything.
Indoor affectations like fountains and statuary
Really specific things like dog runs or putting greens
Pools and hot tubs, unless they are de rigeur in your area
Oh – I forgot to say:
Home buying is one of the few areas where an extended warranty is a good idea.
Something (or many things) breaks in the year after you move in. The warranties usually cost about $300, and most charge a $35 service fee to come out, but everything after that is covered. So it’s good to save up problems if you can – like a slew of electrical or plumbing problems.
In the houses I’ve had warranties on, they’ve paid for new toilets, sinks, water heaters, air conditioners, whole house heaters, water pressure regulators, dishwashers, stove heating elements, exhaust fans, thermostats, faucets, electrical outlets and light switches.
A home warranty is an especially good deal if you can get the seller to pay for it as a condition of the sale!
Your observation is spot-on from my anecdotal observations. When we buy a used/existing home we have unrealistic expectations and demands of perfection. It’s probably related to the relatively large price tag associated with this purchase. It’s difficult to make what is probably the largest-ever purchase most of us ever make and accept many imperfections.
I have another related observation for you to consider. People way too often view their home as an investment much like a stock or bond or CD. In the long haul however, when you truly consider the massive costs of ownership, repairs, and maintenance it’s not so good. In fact it goes beyond being an under-performing asset in most cases I suspect. When you consider your sweat/toil and all the above mentioned costs I suspect many home purchases are financial liabilities. That’s not to say we shouldn’t buy homes–I love being a homeowner. Just don’t expect to get rich with your purchase. I’ve conveyed these thoughts to many friends/family members when they are purchasing and they aren’t very rational in criticizing my analysis
D
Karla – great advice!
Derek – spot on. Homeowner’s are by nature, irrational because buying a house mixes social and economic behaviors. We may (or may not) count the hard costs that we inject into a house (improvements) but we lose sight of the soft costs (sweat equity).
On the other hand, with some sweat equity, we most assuredly can impact the value of a house whereas there’s not much we can do to influence stocks/bonds, et al.
Pam, I think one thing to remember regarding warranties and product life is that little devil called ‘planned obsolescence’. There’s a reason appliances aren’t made the way they used to be – it’s bad for residual sales. The key is to rationalize (sorry for using that term here!) the opportunity costs and break costs into a common denominator for comparison and evaluation, which of course is the last thing manufacturers want. They know that we are predictably irrational!
The auto industry is a great example with their 100,000 mile warranties. Who drives a single car 100,000 miles anymore and exercises the full value of that warranty?? (Which is why they offer it.)
The biggest mistake homeowners make however is refinancing. I cringe every time a friend comes to tell me what a great guy/gal their banker is because they just re-finance and saved hundreds per month, and, and they didn’t even have to pay closing costs!! Party time. Until I show them that their 30-year mortgage is now 37-years and how much those 7 extra years add up to. Ouch. Pricing is all relative, right? And people actualy BELIEVE that the bank on the other side of that contract had their best interests in mind. Predictably irrational.
Liked the observation. I am 55 and a year ago we purchased a new sofa which we were confidently told “would last 20 years”. We saw this as a benefit, but the reality of life in that it is most unlikely that we will need a sofa that size when I am 75. I also look around and see little to no furniture from 20 years ago.
I am amused by how often I make my decisions based upon my predictions of the future. To test your predictions (all irrational of course) look back five years and try to remember what the next five years were to look like. This and mind reading seems to be two preoccupations that experience shows to be impossible and yet I continually engage in them.
I realized that the professor and I share the same first name. I am the Dan S who cannot predict the future, however appear to be equally irrational.
HA! Great insights, Dan S, and relates to my initial thoughts based on Prof. Dan’s comments- early onset ‘perfectionism’ eventually seems to yield to ‘blind familiarity’- the opposite of the old phantom limb phenomenon where we no longer see what needs repairing/fixing/upgrading (be it in our house, in relationships or in our business model). It’s not even as malicious as the proverbial contempt…rather, we just relatavize, or adapt until too uncomfortable, then adjust.
I note that as a fairly new card carrying AARP member, I now make many more decisions based on a strategy that includes short-term options…NEVER part of my earlier (younger) make-up. But it still takes conscious effort to think that way- even seems ‘UnAmerican’, whatever that means these days!
As to what to fix in your house- why not balance value creation (L-T) with what tickles your fancy and suits the needs of your family over the next stage (S-T & M-T) of your tenure there? (ouch- yes, double edged meaning!)
I grew up in a home that had been in the family since it was built in the early 1900s.
For my entire childhood, we were in a constant state of remodel. I was knocking out plaster with a sledgehammer at age 7, painted ceilings when I grew taller than my mother and stepped on more nails than I care to remember.
We were slowly piecing it together to one day make it complete and “perfect”.
Problem was, after a few years, the rooms we had remodeled were starting to show signs of wear — broken in from 3 kids and the clutter/dust from the work in other sections of the house.
It will never be as complete as dreamed. But the quest for it and the pride from each improvement made the house more “alive” than if we had been hands-off.