Posted on May 15, 2015
Late last year, my husband, Tom, and I almostbought a house that we were not prepared for. Several months later, we found ourselves ready to give the home-buying process another shot—and this time, we felt prepared.
But we were in for some surprises. The inventory in Southern California has not kept up with the demand, and competition is fierce. Bidding wars have become commonplace, which has resulted in buyers submitting all-cash offers, waiving inspections and removing contingencies. That is just to get an offer selected—getting the mortgage has its own set of complications.
When Tom and I found another home we loved, we wrote a strong offer. Ignoring a warning from our real estate agent, we also removed our appraisal contingency. We won the bid, negotiated inspections and got preliminary loan approval. The last step was our appraisal, which, much to our surprise, came in way below our offer. The bank would not lend us what we needed, we didn’t have enough cash to make up the shortfall and the seller wouldn’t negotiate the price. So we lost the house. Even worse, by waiving our appraisal contingency, we nearly lost our good faith deposit of $20,000.
If you are in the market for a home, here are some of the things we learned in our second attempt at home ownership that went beyond the offer price:
- Contingencies: Loan and appraisal contingencies are there to protect a buyer in case things don’t go as planned and you have to back out of an offer. Unless you can buy the house without a loan or are 100% certain that your loan will fund, beware of waiving any loan contingencies.
Appraisal contingencies are just as important. Sure, most appraisals tend to come in at the offer price (appraisers report the lower of either the contract price or the appraised value), but sometimes they don’t. Unless you have the cash to make up the difference between your offer and what the house appraises for, waiving the appraisal contingency could cost you your deposit or worse.
- Employment: Tom switched jobs a year ago, and this caused problems with our mortgage application. Banks like to see continuous employment, so if you are looking for a mortgage, be prepared to jump through hoops to give them every last detail about your last several years of work. They will likely call your old boss too, so don’t burn any bridges.
I thought getting an offer accepted was the hard part. As an efficient-market believer, I figured the appraised value would be whatever I was willing to pay. But this seemingly perfunctory part of the process blew up our entire deal—and nearly cost us $20,000.
So make sure to mind the small print on your contract and mortgage application—your money may depend on it.
When I was first out of college and started paying my own medical bills, going to the doctor terrified me. Not because my doctors weren’t wonderful people, but because of that slow walk to the billing counter after my visit. Not knowing much about my insurance (or health insurance in general), I had no idea what my visit/prescription/etc. would cost or the best way to pay for it.
But as with any system, there are some pretty great tricks that can lessen the sting of medical costs. Here are some of the hacks I have picked up along the way:
- Pay in cash: Many medical providers have a discounted price for services paid for with cash. To get the deal, most often you do not get to use your insurance, so there is no credit to reaching your deductible if you have a PPO plan. But if you are unlikely to hit your deductible anyway, it may be worth it.
- Shop Around: Many people find themselves in health insurance plans that do not make sense for their needs. For example, a higher-priced HMO plan may not make sense for the 35-year-old who visits the doctor once a year. Alternatively, for dual-working couples, one spouse’s medical plan may have better family benefits than the other. Compare your options and costs to see if your plan matches your lifestyle.
- Open an HSA: Health savings accounts are tax-advantaged accounts available to people with high-deductible health insurance plans. HSAs allow you to pay for medical expenses using before-tax dollars, which can net a savings north of 40% for taxpayers in the highest tax bracket. Contributions are limited to $3,350 a year for individuals and $6,650 a year for families, but unlike flexible spending accounts, you don’t have to use all the contributions in the same year. In fact, if you build up a balance over time, the account turns into an IRA at age 65 and distributions can come out for nonmedical purposes.
- Track All Expenses: Most people know to keep records of what they paid to their doctor, but there are many more expenses that should be tracked as potential itemized deductions. Chiropractors, dentists, acupuncturists and any other nontraditional medical practitioner visits count. Prescriptions are also just the start—eyeglasses, parking fees and even transportation costs can also add up to tax savings on your tax return.
- Consider Filing Separately: If you have a year of high medical costs for one spouse, check with your CPA to see if it makes sense to file separate returns. Since medical expenses have to be over a 7.5% or 10% adjusted gross income amount before they are deductible, lowering the income for that spouse can help one reach that floor sooner.
Ultimately, all you need to do is keep good records, ask questions of the billing departments and put a little upfront work into making your health care plan perfect for you. No one wants to have to go to the doctor, but you can at least try to save some money when you do.