ep.005 – another learning curve…

Welcome to episode 5, so it has been a while since the last podcast and that is because I am still getting used to this podcast malarkey. My original plan was to create the first four podcasts and then bank them releasing them one by one, week by week starting from going on a trip to the UK with my family. And that is exactly what I did, but I had a technology fail, which resulted in? boom? all episodes being officially uploaded at once to mainstream podcast outlets, with the old dates of when they were first published on Anchor? soooo not the best official launch ? but a learning curve none-the-less, and this is a nice segway into the learning curve of financial independence I am currently on. So back to the juicy stuff you really want to hear ? so in the last episode I gave you some insight into my family?s mortgage dilemma and the possibility of buying another house, and as it has been a while, I guess you would like to the know the outcome, right?

Well, without further ado, I will finally get around to telling you, so it was a roller coaster of a journey full of emotion and financial lessons. So the emotional side first, as I mentioned my wife Leish had fallen in love with a house, and it ticked a lot of the right boxes for me as well, the catch was it was up for auction (I hate the auction process) and the auction was going to happen whilst we were away ? so really not ideal. So the first dilemma was should we put in a pre-auction offer, and to decide on that we had to really get to understand what a pre-auction offer really is. So based on our research, we worked out that in New Zealand, all estate agencies have didn?t pre-defined rules and protocols for how a pre-auction offer works. Unfortunately, we went in with our first pre-auction offer believing that we could put in an offer on the condition that it is withdrawn from the market if accepted.

This wasn?t part of the rules for the agency listing this particular house, which meant that we went in with a lower offer than originally planned at the last minute as what would happen is that if the offer was accepted the auction would be brought forward to only 2 working days after submitting the offer- so the thinking was that we would need some wiggle room as we had heard that another party had also had a building inspection carried out. So looking at the local market, and the CV and a core logic valuation we decided $735k would be a good lowish offer ? but was rejected the day after ? the agent did explain that the offer would need to be a show stopper and to be fair this was the same advice we had seen from groups on Facebook.
So we slept on it and the next day whilst walking our dog, we decided that if we want the house really don?t want to go to the auction, we should put in a show stopper. Leish and I originally agreed on an offer of $770k ($10k above CV in this Auckland market is very good), and then after picking up a KFC drive-through I asked Leish how she would feel if the offer was $780k ? we both agreed we would feel more comfortable knowing that we would have put our best foot forward, so went back home an contact the agent, requesting to meet up to put in another offer. When we arrived this time, we were offered free coffees at the local coffee shop ? so there is a little FI tip right there ? if you want free coffees put in a second offer! We explained that we understood a showstopper was required, and that is what we are willing to present, and after mixing up my words and saying 580 instead of 780 he was blown away and said that not only was this a good offer but it should put anyone off at the brought forward auction, if accepted.

So we left the office on our merry way to the coffee shop for a free coffee, very optimistic about the outcome of the offer that was about to be presented to the vendor. After a short while went for a walk, and then the agent called Leish back, I could tell from Leish?s reaction that something strange was going on. Despite the agent confirming the vendor that we would not be at the auction and this would be our best and final offer to bring the auction forward, the vendor was motivated to only sell after seeing out the full marketing process and would only sell on the original date set for the auction. It wasn?t about the price for the vendor it was about emotions, and to protect the vendor?s privacy without giving away all the details on why the vendor wanted this to happen, they simply had it in their head that this was the way their house was going to be sold. So now we were obviously gutted and told the agent that we would keep our offer open for two days in case the vendor changed their mind ? which we did, and they didn?t ? which led us not to a mortgage dilemma but an integrity dilemma ? should we attend the auction by phone, use a proxy bidder or honour what we said and not place a bid at the auction. The principles of the sunk cost fallacy I had learned on my MBA were also playing out as we had invested time and money into building inspections and a legal review ? from an MBA perspective but taking the emotions out of decision making; investment decisions should never consider costs that have already occurred. I am pleased to say that we didn?t fall foul of the sunk cost fallacy and integrity did win the day ? Leish and I both agreed that for peace of mind and to be truly present on the other side of the world we should draw a line, knowing that there would be a second chance if it didn?t sell on auction day and if it did it was not meant to be.

Well the day of the auction came, and it did sell, for less than we had offered! I have to admit that it was at first a bit hard to take, but we were philosophical about it and were able to use it as a learning curve. You see on our trip we stayed at two beautifully presented places and it got us thinking about our home. If we had bought this place, we would have had to rent out our current home, and this was another reason for wanting to get the house bought before we went away so we could properly organise the preparation and marketing of our house for rent before we got on the plane. Obviously that didn?t eventuate, but seeing this beautiful places in the UK got us thinking that given how things played out with the auction, we now have the time and a bit more money that would have invested into costs associated with taking on another property to really get our house in order quite literally so when the next house we fall in love with comes on the market we are ready to make a move knowing that our current house will have no problems to be rented out or even sell ? it will give us plenty of options plus we will get more enjoyment from living at our current home in the meantime ? and this could be a long time.

You see, one of the biggest learnings from this short roller coaster journey is that no matter what decision making you have to take there are always pros and cons, yes I understand we went into the decision to buy a second property weighing up the pros and the cons with the net result being that we should purchase that particular property, but a great life skills to understand that once all the cards have been dealt, and the outcome is what it is, and there is nothing that can be done about it ? and it has not gone you way ? there is little point focussing on what could have been ? it is far more practical and healthy to focus on what the cons may have been and what are the pros now that we cannot follow through on our plan. The biggest pros for us are that little Stella, can walk to her new college and we have the time and serenity to get our place up to standard for us to really enjoy it and rent or sell it when the time is right. The potential con of the place we missed out on was that the section was potentially still too small for our animals and it was adjacent to two roads ? something for us to truly consider again when we next contemplate moving.

I have to say our time in the UK couldn?t have come at a better time. It was so good for reflection on all aspects of our lives, and we have now arrived back in New Zealand with a refreshed outlook on how we would like things to play out at work and at home on our continued journey top financial independence. Regarding the costs of the home, there are some investment decisions we need to make regarding furniture, as our current furniture is was oversized and it would market much better with more practically sized furniture. So we want to get as much value out of these purchase decisions as possible, and a big part of the value formula is that we know our cats will scratching the living hell out of the furniture so value as to include low cost ? which means we should go second hand for items that would cost large amounts brand new, for example, stiff like couches and chairs – even repurposing items. At the same time, we decided we should change the way we do our weekly shop to get this cost down further and ? I will keep you updated on such decision making as we go forward with these weekly episodes.

Finally, I know it has to be said, that my prediction in episode 1 about Wales winning the Rugby World Cup didn?t exactly come to fruition, but they did do every Welsh person proud and I look forward to our third-place playoff with the All Blacks and the divided loyalties within in my family for one night ? which may produce yet another learning curve ? until next time Happy Fiday!

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