By Casey Snyder
In 2012, my wife Rhea and I were fortunate enough to purchase what we then considered our dream home in Eliot, Maine. It was perfect—it fulfilled all of our wants and needs at the time, and also provided room for us to expand in the future should life take that course. And for eight great years it lived up to our every expectation, providing all of this and more. But eventually, as we all know, wants and needs evolve. In 2019, and with two young children now in the mix, Rhea and I began to discuss whether it made more sense to renovate or sell based on what our life now looked like. That decision was quickly made for us as the COVID-19 pandemic unraveled, and it became apparent that our best option was to sell given the frenzied demand in the housing market (caveat: this was if, and only if, we found the right home–knowing we’d be participants in the frenzy on the other side of this transaction!) Sure enough, on December 21st, we said goodbye to our wonderful home in Eliot and moved to Greenland, NH, to a home that better suited our evolving family and needs in a post-Covid world.
Because so much of what we do here at The Sedoric Group is helping our clients prepare for major life events such as housing transitions, I wanted to take a critical look at my own move and provide some context into the variables that go into a decision of this magnitude. I thought it would be helpful to identify the areas where we excelled, and more importantly, the areas where we didn’t do so hot. After careful consideration (and some brutal feedback from my team), I’d give myself a B+/A-. I think there were a lot of things Rhea and I did well, but there is always room for improvement.
Start Early
Planning 101 says the success of any housing transition lies in its preparation. You’ll want to start early (and often) so you’re ready to act when it’s time. Rhea and I started the “purge and prepare” process nearly a year before we purchased our new home—read: the unpleasant grunt work that must be done, such as going through forgotten closets and corners of the basement to get rid of stuff that wouldn’t make the cut for our move. We attacked one room at a time on a monthly basis to space it out into more manageable chunks, which we found worked for us (side note: it is absolutely astounding how much ‘stuff’ can be accumulated in such a seemingly short period).
Early in the purging process, we started creating some rough spreadsheets to determine an affordable price range, and based on our preliminary analysis applied for a Home Equity Line of Credit (HELOC), so that we would have the means to close on our new house before we sold. This gave us a lot more flexibility and provided a competitive advantage when it came to the bidding process, which we knew was getting out of hand.
Spreadsheets, Spreadsheets, Spreadsheets
I know no one will be shocked to hear me say this, but spreadsheets are your best friend when it comes to housing transitions (often a FAR more emotional experience than we give them credit for). They literally suck the emotion right out of the equation, and can prevent bad decisions from being made based on said emotion. For that reason, spreadsheets were my security blanket. Just because I plan for a living doesn’t mean I don’t succumb to emotional biases like the rest of us.
First, we modeled and quantified our lifestyle. This may sound complicated, but it’s really not. We included all of our current expenses—from groceries, to subscriptions, to bills—as well as future expenditures, like camp for the kids, vacations, maintenance/repair, and even furniture replacement. As the spreadsheet evolved, I would ask my parents and the members of my team (aka my personal fiduciaries) to review my projections and scrutinize them, and when in doubt, would add an ‘other’ category to create a margin for error. As we looked at different properties, we would amend projected expenses in alignment with each property so we could compare it to our current lifestyle (i.e. landscaping/plowing, oil, gas, maintenance, etc.). In the end, I can’t over-emphasize the importance of this step. It sounds tedious, but once we laid the groundwork it became an easy way to assess whether or not a particular property would be right for us—both emotionally AND financially. Most importantly, every time I would ask for help, I felt like we were that much closer to being confident in our projections.
Important spreadsheet #2: cash flow modeling. At the age of 40 and with many more earnings years ahead, Rhea and I created a spreadsheet to model the rise and fall of our incomes to better understand our margin for error. Within the context of our own financial plan, we then modeled static and variable savings rates in alignment with our goals. We then took it one step further and modeled a combination of fluctuating incomes, various savings rates, and rising tax rates (real estate and income taxes). A 5-7% increase in income tax forces a recalibration of spending or savings, and given the likelihood that tax rates will continue to rise over time, we wanted to build this into our modeling. By accounting for ‘what if’ scenarios from the get-go, we tried to assess how variables beyond our control may impact our circumstances and minimize the likelihood that we’d be caught off guard.
If you would like a copy of the spreadsheet we created please click here to send me an email.
Plan For The Unexpected
When it comes to buying a home, everything is more expensive than you initially anticipate. On top of this, we have no idea what could go wrong, sideways, or break. Despite our well-intentioned optimism, we accepted this hard truth and built into our projections a few known and unexpected events.
In our case, we knew that we were going to overpay on the sales price due to the competitive market. In addition to this, we added in two unknown, unexpected events, each worth about 1% of the sales price (the ‘Surprise! Your chimney just crumbled to the ground’ bill). We thought we were in great shape since all of our big-ticket items such as roof, boiler, etc. were relatively new, but sure enough, we had two unexpected events involving our heating system and the chimney (really) within the first month of living in our new home.
Side note: Many friends have curiously inquired about our feelings on having ‘overpaid’ during the pandemic. As one wise person once said to me, “Nobody I ever came across was bothered by overpaying for the right home, but the wrong home, no matter the discount, will be regretted forever.” I truly believe in this statement, as long as the ‘right’ home is within your range of affordability and fits well within your unique plan.
The Dirt: Where We Went Wrong
So far, I have identified one major oversight in our planning—a flaw in the system, so to speak. Albeit, an emotional flaw, but a flaw no less. Within our spreadsheets, we modeled the gradual refurnishing of our new home over time. After all, this is meant to be the forever home, so what’s the rush?! In the end, we grossly underestimated the emotional pull of wanting to make our new home feel like, well, home. After eight years of renovating, upgrading, planting, and pruning gardens, and making our old home ours in every little way, as it turned out starting over was more emotionally challenging than anticipated. As a result, we opted to dip into our savings and make our house feel like a home on a more condensed timeframe. Because we did the legwork ahead of time we knew we could afford the expenditure (see section above), we’d just need to make up for the dip into savings in other ways.
Also, with all the commotion and excitement about the new home, we neglected to account for the fact that the cabinets, closets, and bathroom sinks were designed for tall people. Let’s just say we invested in a number of small stools shortly after we moved in.
The Bottom Line
I’ll be the first to say it’s nearly impossible to have a perfect housing transition. There just are too many variables to fully account for, and the long-term outcome is never known without the benefit of hindsight. Having said that, few life events are as emotionally and financially impactful, and we can dramatically improve our odds for success by putting effort into the less-fun parts of the process, as outlined above. Defined needs and wants, a plan for proper context, good spreadsheets, and a trusted team are great place to start. Whatever your desired home looks like, we’re here to help you get there.
If this is your first time buying a home, we recommend giving our post, The First-Time Home Buyer's Guide to Smart Decision Making, a read to better understand what kind of preparation you’ll want to do before the big move.
If this is your first time buying a home, we recommend giving our post, The First-Time Home Buyer's Guide to Smart Decision Making, a read to better understand what kind of preparation you’ll want to do before the big move.
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
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