5 Financial Mistakes On House Hunters That Drive Me Insane

House Hunters Money Mistakes

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I think everyone who has cable has seen House Hunters at least once in their life. The basic premise of the show is someone is looking to buy a new home.

The real estate agent shows the buyer three potential homes. The buyer puts an offer in on one of the homes and ends up buying a house!

I’ve always enjoyed watching the show to see how much real estate goes for in various areas of the country and world, but there are 5 financial mistakes that I see people on House Hunters making often and it drives me crazy!

1. The Buyer’s Budget Is The Maximum Amount The Bank Will Lend

Classic rookie house buying mistake. The bank doesn’t care anything about your budget or what you can truly afford. Banks simply tell you the maximum amount you can borrow based on metrics that don’t consider your individual situation.

Instead of listening to the bank about what your maximum budget is, you should make your own budget independent of what they bank says. Take a look at your income and expenses and see what would be a comfortable monthly payment for your situation.

Keep in mind, the less you spend on housing, the more you can save for retirement or another goal.

2. Buyers End Up Buying Homes Above Their Budget

Due to the way budgets are determined on House Hunters (according to the bank) this mistake drives me even crazier! Once you set a budget, don’t exceed it with out a ton of thought.

People get emotional about houses and think they’ll never find another one they love. Don’t be that person. Instead, keep looking for another house that meets your criteria that is in your budget.

If your perfect home doesn’t exist in your price range, you either need to adjust your expectations or your criteria. Adjusting your budget without a ton of hard thought can make you house poor.

3. Get A Fixer Upper? You Can Use The Rest Of Your Budget For Renovations!

This one drives my up the wall and probably the same one they’re planning on knocking out. People get a maximum budget they can borrow from the bank and then they decide that if they buy a house under the budget, they miraculously can spend the rest of the money up to the max budget on renovations.

For example, a buyer has $40,000 cash for a down payment and the bank will lend then $160,000 for a total budget of $200,000. The buyer decides to buy a $180,000 house, so now they think that they have $20,000 to spend on renovations. Wrong! They might have saved $4,000 on a 20% down payment, but they definitely don’t have another $20,000 of cash out of a mortgage from the bank.

This would be accurate if you were buying a house for cash but I’d be willing to gamble most people on the regular House Hunters show will be taking out mortgages. In most cases, banks won’t lend you extra money above the value of the home to do renovations that won’t increase the value of the home.

4. Buyers Get Into Emotional Bidding Wars

Emotions and large purchases are two things that should never be combined. Unfortunately, many people get emotionally attached to homes they look at and end up spending much more than they should on a home.

If there are two bidders who both love a home, things can get out of control quickly. House buying shows like House Hunters often features these situations when people go above their budgets to buy a home in a bidding war. Don’t do it.

Instead, set a maximum amount you’ll pay for a house before you make your first offer. Try to negotiate and get a better deal, but never go above your maximum price you’re willing to pay for the house simply because you’ve become emotionally attached.

5. Not Having A Decent Sized Down Payment

Not having any down payment at all when you’re buying a house is just financially irresponsible, but I’ve seen it on these shows multiple times. The show reports the buyer has $3,000 in total savings (yes, total) and they’re ready to buy a house for the pre-approved mortgage amount of $150,000. Insane!

There are rare cases where buying a home with no down payment may work, but 99.99% of the time the person is setting themselves up for financial hardship. Don’t do it.

In addition to at least a 10 to 20% down payment, home buyers should have an emergency fund to cover any unexpected expenses including potential job loss. It’d suck to buy a home and then get foreclosed on in a year or two because you lost your job.

To me, it is crazy that people don’t do more research about how the home buying process works before they buy a house. You need to understand the whole process, including the process of figuring out how much house you can afford. Remember, it isn’t what the bank says, it is what works best for you!

What financial mistakes do you see people making on shows like House Hunters? Have you ever made any of these house buying mistakes yourself? I’d love to hear your thoughts in the comments below!

Image courtesy of ChicagoGeek, Edited by Tori.

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.

Comments

  1. I remember before one of my relatives was planning to buy a house and lot. But she didn’t even plan to take a final walk-through which is very important when you are planning to purchase a property.

    • We took one in our first purchase and they turned the water off to the sprinklers and killed the lawn. It was a short sale though, so we just went ahead. The lot was super tiny and we just sodded it.

  2. Oh, it drives me crazy when their “budget” is just whatever the bank will lend! That is never a good sign.

  3. I love this post because as an avid viewer of HH, I have screamed the same things at the TV while viewing. (The TV doesn’t respond.) I particularly like your #3. I go crazy when the buyers think that they have money available for renovations because they buy under budget. Just as you said, they can make a smaller down payment but the bank isn’t going to give them all $200,000 if the purchase price is $180,000. And the buyers start out with so little equity that they can’t get a HELOC for the budgets.

    The buyers are always very insulting of the decorating style of the owners whose house they are considering. If they are so much more sophisticated, why don’t they build a custom home?

    And the other thing that drives me crazy are the divas who couldn’t possibly live without hardwood floors, granite counters and stainless appliances. It’s their first house and they think they should have something it took their parents 30 years to afford. Do they think that stainless steel range cooks better? It is all about keeping up with the Jonses. I’d love for the show to do a follow-up to see how many of these buyers ended up in foreclosure a couple of years later.

    • The Joneses are a powerful force. If you can avoid them you’ll be much better off. It is even worse when they have no down payment and think they’ll be able to do renovations if they come in under budget… ugh!

  4. I freaking love that show, and HHI. Now that have one for buying islands!!! Anyway, yes, I roll my eyes when they say stuff like they are draining their savings to buy a house. ugh! That show does make me want to move to a cheaper area to live though. When I see what I can get for 200k sometimes I weep in my $1450 LA apartment.

  5. I love this post because House Hunters is my absolute favorite show– and I can’t stand it when they go over budget! The biggest financial mistakes are on “My First Place.” I once saw an episode in which a newly-engaged couple bought a 5-bedroom new construction at $100,000 over their budget. It’s safe to say they’re going to be struggling to save for retirement.

  6. Ok, so I did #3 but after buying my house with a 20% down payment I had $96k in equity. So, I took out a Home Equity Loan at an excellent fixed rate with my credit union to do the renovations. I love HH and HHI but I wish they spoke more about the details on how to finance renovations or vacation homes.

  7. It drives me nuts when the realtors show the buyers something out of their price range!

  8. Although this is presented as a reality show, it isn’t! It is scripted or staged for entertainment. There is not desire to generate a positive personal finance message!

  9. Oh my goodness I couldn’t agree more, this drives me crazy. Also there will be times where the narrator will say something like “So and So has been a good saver, they’ve been able to save 10% for their down payment.” I find myself saying “what are you talking about, that is only half of what you should have saved!” Excellent rant for a financial post, well done.

  10. as a previous poster mentioned, this show is staged. It requires folks on the show to already be in escrow if I’m not mistaken and the other two houses are just houses they pick in the area. but you’re right, the poor financial mistakes on this show are tragic.

    • Either way, a ton of people think the show is real and has realistic financial situations. The situations are unfortunately realistic with the money, but I wish people didn’t make these mistakes in real life.

  11. The sad thing is that these mistakes do get a lot of people int some very deep financial problems and it takes MANY years to recover from them. If you’re making similar mistakes when buying a laptop it’s not such an issue, but not being really careful with buying a house can get you in a world of pain.

  12. Ahh I don’t know how I missed this post!! Great minds!!! 100% agree with everything you said. The reno budgets are especially popular and I sit there wondering where the heck they’re going to get the money from!!!

  13. I just bought my first home, and because my husband is self-employed, we chose to have only me apply for the mortgage. I couldn’t believe how much money the bank was willing to give me! It was reasonable because we have my husband’s income, but without his income, the mortgage they were willing to give me would be overwhelming!

  14. I love House Hunters, but I’d never really paid any attention to any of those mistakes – other than noticing that they are always shopping for homes at the top of their budget or slightly over. That always bugged me a little. I had no idea they couldn’t use their “mortgage money” on renovations. Then again, I’ve never even been close to buying a home myself.

    Cool post. I’m totally going to watch this show with a new mindset now.

  15. I agree that you shouldn’t go above your budget without serious thought. Just like in dating, there are plenty of fish in the sea and there are plenty of houses on the market.

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