Oh, the agony (tongue in cheek)! Most folks that take the path of building a new house envision it becoming their forever home, but here we were ready to cut the ties and build a better, more prosperous future, one that got us out of debt and eventually off that stupid financial treadmill of working to pay the bills to spend more money and make more bills! We had come around to seeing our beautiful new house for what it was, a huge drain on wealth, and one that might never pay dividends on the price of admission.

As we delved into the planning to sell our house, we soon learned how much it was going to cost us. After speaking with a few Realtors, we became frustrated learning we needed to pony up 6% of the sales price for agent fees. Not only were we expected to pay 3% to our agent, but we were also expected to pay 3% for the buyer’s agent? What kind of crap is that? I have to pay for their representation?! On top of that, Pennsylvania would bend us over for another percent to cover half of a 2% transfer tax… that’s okay, I’m sure that money is needed for something important (like bullshit bureaucracy). Plus, we could estimate another 1% for miscellaneous closing fees. All told we could expect to lose about 8% of the sales price, and of course the higher the sales price, the more it would cost us! How did this make any sense? We were relatively new to house buying and selling, but we figured the same work goes into selling a house whether it sells for $200k, $300k, or $900k; why do we have to pay more if the house sells for more?

We couldn’t have been the only ones that thought this because as we started researching agents, we noticed a number of ‘sell your own house’ agencies. These typically help to sell your house, offering less than a full-service Realtor, at a reduced fee. After doing a lot of research on these options, we decided to list with “Assist 2 Sell”. While they listed the home on the Multiple Listing Service (MLS, listing service where all the homes on realtor.com come from) and take care of closing if/when we sold, we were responsible for determining the listing price and buyer’s agent commission offered, writing the listing description, listing photographs, and providing yard signs. The listing fee was about $3000, and only due at closing if you sell. We thought this would be a great deal… we sell our house at an estimated $299k, we’d save about $6000 on the seller’s agent commission.

Of course it isn’t this simple and turned out to be mistake #1. In hindsight, we thought we could do the job of a listing agent, but since we had a steep emotional investment in our “home”, we couldn’t do the job of a good agent. Although we may have been willing to sell, we were only ready to sell at the right price and if we would profit at a level we thought reasonable (I bet a lot of folks have been here!). A good Realtor would have advised us that the eventual sales price would depend on the ‘market’, that is, what a qualified buyer with the means to purchase our house was willing to pay. They also would have advised that the price we chose was at the very top of the market, and other than adding a stone facade and fireplace, we only had a bare-bones builder grade house, not one that demanded top of the market pricing. Also considering new homes were still being built in our neighborhood, we should have undercut the price of our model home if we were serious to sell, but we didn’t have a good, unbiased Realtor to guide us; we chose ourselves.

So our house sat on the market, as other homes in our development, new and slightly used, continued to move. We couldn’t figure out why our house hadn’t sold. We loved it. It was beautifully maintained and cared for. I eventually convinced myself that it had to be something with the Assist 2 Sell agency that was preventing the sale. Maybe other agents didn’t want to deal direct with the owner? Yeah, that had to be it! Except that wasn’t it! It was the price, stupid!

We saw a sign in another yard and decided to bring that agent and a couple others in to discuss selling our house. We eventually went with the agent that had the sign in the other yard in our neighborhood for a few reasons: we liked her, we figured she already had a listing here so had to know the neighborhood, and she told us our price was good! That’s what we needed to hear!

We relisted, but again, the house sat. We seemed to have more interest, but no offers. After a couple months, our agent convinced us with all the sales in the neighborhood, a price drop was appropriate. Again, it sat, so another price drop, and another, and another. Of course, I haven’t mentioned that due to our stubbornness, the price drops were only a few hundred dollars, and at most, a few thousand dollars at a time. By the end of 2007, we were burnt out and pulled it off the market for the holidays, planning to relist after the holiday / Superbowl season. By this time, our house had been on and off the market for a year. We now know this is way too long because it tells potential buyers “There’s something wrong with this property, don’t waste your time!”

Also by the end of 2007, there was a lot of chatter about issues with sub-prime mortgages, most often adjustable rate mortgages that started with low teaser rates, but then ramped up much higher after the introductory 3 or 5-year period. As buyers began defaulting on these mortgages when they increased sharply, nervousness crept into the housing market. This problem would get much worse in 2008; maybe you’ve heard of the housing market crash?

We relisted in the Spring of 2008, but it was too late. Again, our house sat with minimal interest while other homes continued selling but at a slower rate. Following a couple small price drops, by early summer, we had a meeting with our Realtor to reprice at a level that she thought would get us an offer quickly. We hesitantly agreed to the suggestion, knowing that IF we got a full price offer, we would barely walk away with any money after paying off the mortgage, commissions, and closing costs. Then an offer finally came in… at about $20,000 under our new asking price! WTF??!! To say I blew a gasket would be an understatement! We knew our price was already at the bottom of the market for what newer homes were selling for, and they were trying to undercut us by another $20k? I told my agent to please tell them, in exactly these words, to shove their offer straight up their asses, and hell no, they can’t have it at any price!

As our anger subsided over the next couple of hours, it finally hit us; why have we been trying to sell a house in a crashing market? After seeing friends effected by the stock market crash in the early 2000s following 9-11, I should have remembered to never sell low! In our discussion following that insulting offer and the realization that we shouldn’t be selling, we realized the right thing to do financially is the same thing you should do in a stock market crash; hold for a rebound!

In order to do this while allowing us to move forward, we decided to rent the house out. That same day and in the midst of these discussions, a counter-offer at $5,000 under asking came in and I kindly asked our Realtor to remind them where they could put their offer. Had they come in with that offer initially, we would have begrudgingly written the check and walked away, but now we had a better plan. There was only one minor problem; we had a mortgage that was over $2000 and after looking at rentals similar to ours and in our area, we figured we could get about $1800 a month. Negative cashflow… BAD!

This is where my newly acquired financial education helped. Props to Mr. Rich Dad, Poor Dad himself, Robert Kiyosaki with considering creative ways to get to a positive cashflow. I had learned that a refinance into a home equity line of credit (HELOC) was possible for the entire mortgage balance, and I would only be responsible for interest payments while I paid against the HELOC balance. During the 10 year HELOC period, we planned to rent the property, and by the end of the HELOC period, sell and payoff, expecting the market would rebound by the end of that 10 years. I also looked at historical Prime interest rates (https://www.investopedia.com/terms/p/primerate.asp), and figured the Prime rate would have to balloon to early 1980s levels for our monthly payment to get back to the $2000 monthly payments we currently had. That was a risk we were willing to take. Assuming we could get $1800 per month rent, after subtracting out our new estimated HELOC payment of $600, homeowners’ insurance, Homeowner’s Association fee, sewer bill, and property taxes, we estimated about $600-$700 projected monthly income as a rental! Talk about turning a liability into an asset!

Now we needed a new home.