Welcome to NerdWallet’s Smart Money podcast, where we usually answer your real-world money questions.
This episode, we kick off our series all about financial dreams, with conversations with Nerds who have accomplished their financial dreams and interviews with outside guests about what they want to do with their money in 2022.
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To buy your dream house, know what you want and how to get it. If you’re in the market for a historic home, for example, research the types of houses you’re interested in and what maintenance they might entail. Enlist the help of professionals like real estate agents and inspectors to help you identify any red flags in a house you’re interested in. Take the time to vet a house and avoid the temptation to jump into the first option.
In parallel, make sure that your finances are in order. Getting your credit score, savings and debt-to-income ratio in good shape can help you move swiftly if you do find your dream house. Whether you’re a first-time home buyer or a seasoned veteran, the steps to buying a house will largely be the same. Mentally prepare yourself for the work involved.
And given the competitiveness of the housing market, your dream house might just be the one that’s available and affordable. Think through whether you want a starter home or a forever home. There’s no “right” decision here — but know how much house you can afford so you don’t end up house poor.
- Don’t rush into the first option: the home, agent, lender, mortgage type. Shop around — the time invested can pay off for years to come.
- Expect obstacles. This is a huge transaction with many moving parts.
- Enlist help. If you’re buying sight unseen, find people to be your eyes, nose and everything else.
Sean Pyles: Welcome to the NerdWallet Smart Money Podcast, where we usually answer your personal finance questions and help you feel a little smarter about what you do with your money. I’m Sean Pyles.
Liz Weston: And I’m Liz Weston. To send the Nerds your money questions, call or text us on the Nerd hotline at 901-730-6373. That’s 901-730-NERD. Or email us at Podcast@nerdwallet.com. Also hit that “subscribe” button to get new episodes delivered to your devices every Monday. If you like what you hear, please leave us a review and tell a friend.
Sean: Over the next few weeks, Liz and I are releasing a special series of episodes all about financial dreams. We’ll talk with a few Nerds who accomplished their financial dreams, and we’ll also have a few outside guests talk with us about what they want to do with their money in 2022.
Liz: And we will also, because we are NerdWallet, discuss the steps that you can take to accomplish your own financial dreams, whatever they are.
Sean: This episode, we’re talking with personal finance Nerd Liz Renter about her unconventional experience buying her dream home. So, hey Liz, welcome back onto the podcast.
Elizabeth Renter: Thank you, Sean. Super excited to be here once again with you and Liz.
Sean: Yes. I can’t wait to talk about your very old house. So can you start by telling us the story of your home buying experience?
Elizabeth: The very abbreviated version is I bought a historic home over the holidays, in a pandemic, sight unseen from about halfway across the country.
Elizabeth: There’s a lot we can unpack there, guys.
Sean: Yeah. I was like, let’s get the long version. All right. I want to start by hearing how old the house is.
Elizabeth: It is 136 years old. It was built in 1885.
Sean: And why were you attracted to such an old house?
Elizabeth: I’ve always really been fascinated by old houses. The house that I sold in North Carolina to move here was about a hundred years old. I just love the character of old houses and I always wanted to have a big old Victorian of my own. All the unique features, the hardware, the floors, all of that stuff.
Sean: Such a unique charm.
Liz: Now, did you have a Victorian dollhouse as a kid or why did you settle on Victorians?
Elizabeth: Honestly, that’s something that I decided as I got older, I think it’s like the maximalism of it.
Liz: War is war.
Elizabeth: I’m fascinated by the aesthetic period, which is characterized by lots of what we now think of as clutter. Every inch of the walls covered in things and really dark, cozy colors, and I just love it.
Sean: Mm-hmm, yeah. And you bought it sight unseen. Can you explain why that is?
Elizabeth: Part of the reason is because we were in a pandemic. I wasn’t comfortable flying. I heard other people were buying houses sight unseen. I wasn’t buying it completely ignorant of what I was getting myself into. I had a realtor give me a video tour. I had some family members help me out with that aspect too. And it was a very big risk. I didn’t meet the house, I guess you could say until the day I closed on it. So it was pretty exciting.
Sean: You can have someone that you trust like a real estate agent or a family member look at a house, but they may not be looking out for exactly what you would want in a house.
Elizabeth: There’s a funny story to this. I hired an agent here and I really liked her. And the first step was she gave me a video tour. Very helpful, she went into all the corners. We looked at all the closets. She poked around everywhere, but there’s only so much you can get from an iPhone tour. The hardest thing for me to understand was the layout of the house. It’s hard to keep track of. Oh, we turned right down this hallway and here we are in this bedroom. So it’s really hard to envision yourself in a house from a video tour. So the next step I took was I asked my brother and his wife to go look at it and they live about an hour away, but they helped me out by coming out to see the house with the agent.
Elizabeth: And I asked them both to take pictures. And the reason this worked really well for me is because between the two of them, I got like 200 pictures. But the pictures from my sister-in-law were all of the things that she knew I would fall in love with. So the leaded glass windows-
Sean: Oh nice.
Elizabeth: And the hardware and the floors-
Liz: And that staircase.
Elizabeth: Oh yeah, the staircase. And then all the pictures from my brother were like all of the red flags he thought he saw. The filthy windows, the peeling wallpaper, cracks in the plaster. That was super helpful because it got my expectations right where they needed to be. I wasn’t oversold on the charm because I knew there was all these things that I could work on once I got there.
Sean: Yeah, it’s funny you were getting each person’s perspective on the house, through how they showed you what it was.
Elizabeth: Honestly, I didn’t plan it that way, but once they sent their pictures over, I was like, oh my God, if this isn’t such a great illustration of your guys’ personalities.
Sean: Right. It’s like a Rorschach test.
Liz: Now I’m interested in the financial part of this because this is what, your third house?
Elizabeth: Yes, this is the third house I’ve bought.
Liz: So you know, buying a home has a lot of financial moving parts. When you add into that, the age of your house, how did you figure out what to bid on this house? How did you figure out how much it was going to cost you?
Elizabeth: Knowing enough about old houses, because I’ve been so fascinated with them for quite some time, I knew what were the things I didn’t want to have to deal with. I went into this planning on restoring a house. I wanted to work on the house. So torn wallpaper was not going to bother me, but I didn’t want to come out of pocket for updating original wiring. And by original, I don’t mean 1885 because this house wouldn’t have had electricity back then.
Liz: Oh good point. Yeah.
Elizabeth: But the first wiring, which would’ve been knob and tube wiring costing tens of thousands of dollars. The plumbing I didn’t want to have to replace. So these were things that I made sure to have the inspector check out. Also a roof, you don’t want to have to buy a new roof, no matter how old your house is. Those were my deal breakers, but really ugly carpet didn’t bother me. So that’s one way I set it up was just by having the knowledge that old houses often come with old parts.
Sean: Yeah. Did you have to have a maybe more detailed inspection of the house to make sure you were uncovering all of the weird bits that old houses may have?
Elizabeth: I suppose you could. For additional context, this house is in a town in rural Kansas, population roughly 3,500. So there are no historic house inspector specialists here.
Liz: I imagine.
Elizabeth: Right. But it was important for me to a find an inspector that had inspected old houses, that knew enough about the old electric systems and the old pipes to identify those things that were a hundred years old and would need replacing. So I didn’t pay for a more in-depth inspection, but I did look for an inspector that had the background so he would know what he was looking at. Around here there are a ton of old houses in these small Kansas towns. So that wasn’t too hard for me to find.
Sean: Did you come across any surprises in that process?
Elizabeth: Fortunately in this house, there wasn’t a whole lot of big project stuff-
Sean: That’s good.
Elizabeth: That we uncovered. Most of it is aesthetic. So there was a lot of green shag carpet. Fortunately there’s only room that still has green shag carpet one year later.
Sean: Oh man. Thinking about the decades of what’s accumulated in that shag carpet.
Elizabeth: That’s why it was one of the first things I tackled, but I was really fortunate as far as there were no big expenses right off the bat. I did look at one other house before this, that when I got the video tour, I noticed there were jacks under the foundation in the cellar, which isn’t necessarily a deal breaker, but I didn’t feel comfortable outsourcing an inspection from 1,300 miles away to figure out whether or not that was going to be something I wanted to get into. So I didn’t even go any further with that house.
Liz: When you mentioned the roof, I was thinking foundation, that’s the other-
Elizabeth: Yeah, oh yeah.
Liz: Big thing you do not want to have to fix.
Elizabeth: For sure.
Sean: It was interesting when my partner and I were looking for his house in Portland, we looked at a number that were from the 1920s, and our real estate agent happens to know the houses really well in Portland. And she told us that there were a lot of them built in the twenties that had bad foundations for whatever reason. She had that knowledge and she would show us, OK, this one is crumbling, but we were able to avoid all of the houses that did have big problems like that because it can get very expensive.
Elizabeth: That raises a good point, Sean. I think not only having an inspector on your side that knows about old houses, but if your agent does, that’s another bonus because HGTV and this whole DIY culture is very big, but this is a huge expense, and your desire to flip a house or do some really great HGTV type of thing, you really need people on your team if you are not heavily educated in what you’re looking at, you need other people to help you out that are.
Sean: And that way you can make an informed decision, whether you are OK taking on what could be a big expense. And here I’m thinking about one of my close friends who bought a house from the 1700s. She and her fiance bought it knowing that it would need a new well on the property sooner than later. A year in, they have to replace it and it’s costing them several thousand dollars. And so now they have a giant truck outside of their house that holds all of the water they need for everything from drinking water to flushing the toilet and they weren’t expecting that to happen so quickly.
Liz: Well, speaking of nasty surprises, was there anything that really blindsided you?
Elizabeth: There really wasn’t. And I think because I worked with the inspector to know none of those big things were outstanding and fortunately we didn’t miss anything in that regard so far that I know of. Now there are things that I knew might be a possibility that I am now dealing with. For example, there were popcorn ceilings. I knew that they probably had asbestos in them. I got them tested, they do. So just because there were no major things that caught me off guard doesn’t mean there aren’t inconveniences that I’m facing.
Liz: Yeah. We just had some asbestos abated from under our house, and it was shockingly expensive for the small amount that they took out. Yeah. Old houses, they have their issues. One of the other things that always comes up, and Victorian houses are often used as the example is insurance. If you try to insure an old house to replace it exactly as it is, it’s either phenomenally expensive or you can’t do it. So how did you resolve that?
Elizabeth: Honestly, it’s something that I’m still working on. And I plan to continue working on like every year when my policy renews. Because you’re right, insurance companies want to insure the home at replacement value. So heaven forbid it goes up in flames and there’s nothing left. How much would it cost to rebuild your house? In my case, the replacement value is about five times what I paid for the house, which is insane. Number one, I got a great deal on the house because it was so dated, but also they’re taking into consideration this huge square footage, all of the artisan work in it and how much it would take to replace all of that.
Elizabeth: Number one, got quotes from several insurance companies. And then I spent, I want to say a good hour on the phone with the one that I went with going through the list of things that they’re insuring and doing everything I can to get that cost down. Putting fire extinguishers on each floor. Every little thing helps. It’s a hassle, but taking those steps really pay off in the end. And then I’m hitting the one year mark now, so my policy is up for renewal and I actually just a couple days ago put in a request for some new quotes from other companies to just try and keep ahead of it.
Sean: That’s really smart to do because we’ve heard from talking with folks on the insurance team at NerdWallet that people who stick with the same insurance company year after year may end up paying more because they aren’t shopping around.
Elizabeth: And it is easier to just set it and forget it. But if it’s going to save you $500, $1,000 a year, then it’s definitely worth the half hour, hour that you spent on it.
Sean: Oh yeah. I’m wondering about other aspects of your home buying experience, like what was shopping for a mortgage like for you?
Elizabeth: One of the things that was important to me was finding a lender that made scanning stuff and uploading stuff and going through that entire process really easy. So I did first look at various lenders and see what their platforms were like. I looked for a really modern lending platform. And then the other side of that is once I had settled with my lender, running the numbers through the NerdWallet mortgage calculator. I swear I did it so many times with so many different scenarios. I ultimately opted to go with a 15-year mortgage, which felt really good.
Sean: Why is that?
Elizabeth: This house was so affordable, and I was able to make a good down payment on it because of how I sold my home in North Carolina, that I was able to get a shorter-term mortgage and ultimately save thousands over the life of the loan.
Sean: And were there any special requirements because it is such an old home in terms of things you had to show you could afford or paperwork on your end?
Elizabeth: There wasn’t. And it honestly, I was frightened because we’ve heard a lot over the past year and a half or so about appraisals that aren’t going through because homes are priced so high. And then the lender sends out an appraiser and the appraisal comes in lower than the amount they’re borrowing. So my fear was that the house wouldn’t appraise for what I was purchasing it for, but it did. And the insurance company came out and did their little inspection after I chose the company. They didn’t come back with anything negative for me or things I had to do to get it up to par. So I was really fortunate there, but I was losing sleep over that.
Elizabeth: Because I was sure something was going to come out of it.
Liz: Liz, one of the reasons this house was so affordable you said is because it is in a small town. Have you lived in a small town before? Have there been any culture shocks in moving to a smaller town?
Elizabeth: I haven’t lived in a town this small. I grew up in a smallish town in Nebraska, but I did spend a lot of time in small town Kansas where my dad lived as we were growing up. Culture shocks, yeah, there’s just one grocery store. And if I want to go to Target, I have to drive an hour away.
Elizabeth: The flip side of that is I’m very introverted. I work from home. I have my gym in the basement here. Really the only thing that changed is the house. I’m not like somebody that goes out a bunch or anything like that. So adjusting to a small town hasn’t been too bad. I went into the pharmacy for the first time, and the woman working the desk was like, “Oh, you’re the lady that bought the Hannah house with the little white dog.” And I’m like, “OK.”
Liz: You’re famous. That’s so cool.
Elizabeth: So yeah. It’s pretty funny.
Sean: People know you before you know them.
Sean: Yeah. Do you have any advice for folks that are looking to buy their dream house this year?
Elizabeth: This year, especially, I would say expect obstacles. Any year you’re buying a house is a tough year because as Liz pointed out, this is the third house that I’ve purchased in my adult life. You’d think it would get easier. It really doesn’t. It’s stressful and it’s hard, and there’s a lot of moving parts. It’s especially hard. There aren’t a lot of homes on the market, they’re priced very high. I think setting your expectations to just know it’s not going to be an easy time is a big deal. You’re going to get stressed out. It’s going to be tough. And I think being prepared for that is important.
Sean: Recognizing that can help alleviate a lot of stress as well.
Sean: Well, Liz, Liz Weston and I typically read the takeaway tips during these conversations, but because this is your dream that you achieved, I would like to hear your takeaway tips for folks looking to buy a dream house.
Elizabeth: So I have three. Number one, don’t rush into the first option. And this is applicable to several things. That’s the home, the agent you choose, the lender you go with, the mortgage type, even the insurance company. Shop around. In all of these situations, you’re the customer and you’re the reason why these companies and people are getting paid. So you have the power. Take time and make sure you’re making sound choices there. The second thing I would say is expect obstacles. I went over that before. Just really know this is going to be a tough time. And I think preparing for that will set your mind at ease as you move along.
Elizabeth: And then the third one is very specific to folks who are kind of doing something crazy like I did, which is if you’re buying sight unseen, do what you can to find people to be your eyes and your nose and your ears. Does the house smell OK? Or is there a school across the street? And maybe you don’t have family that can go look at it, but enlist the help of an agent. Maybe the buyer’s agent can put you in touch with a neighbor. See what you can do. Go on Google Street View and take a “walk” around the neighborhood, but really do everything you can to put yourself there as much as you can.
Sean: All right. Well thank you so much for talking with us.
Elizabeth: Yeah, thanks for having me. It’s always fun.
Sean: And that is all we have for this episode. If you want your money questions answered on a future episode, turn to the Nerds and call or text us on the Nerd hotline at 901-730-6373. That’s 901-730-NERD. You can also email us at Podcast@nerdwallet.com and visit Nerdwallet.com/podcast for more info on this episode. And remember to subscribe, rate and review us wherever you’re getting this by podcast.
Liz: Here’s our brief disclaimer, thoughtfully crafted by NerdWallet’s legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This Nerdy info is provided for general educational and entertainment purposes, and may not apply to your specific circumstances.
Sean: And with that said, until next time, turn to the Nerds.