handoflixue comments on Rational Home Buying - Less Wrong

99 Post author: Yvain 27 August 2011 12:15AM

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Comment author: handoflixue 26 August 2011 11:19:06PM 6 points [-]

I find purchasing decisions easier when I think about them like this: which would you rather have, the second house, or the first house plus a two-week luxury vacation

House is probably a poor example here, since it's generally paid over the length of a mortgage. $35,000 overall, divided by 12 payments per month, divided by say 20 years = $145/month. So would I rather $145/month, or the small amount of joy that the slightly nicer house will bring me in that same time frame? I could see that joy being the best deal for one's dollar. I've spent $200/month to increase the quality of my apartment before, to great benefit.

(All that said, I still agree that most people don't actually do the math, and may well be better off spending that $145 on other things :))

Comment author: PhilGoetz 28 August 2011 04:38:30AM 0 points [-]

I find purchasing decisions easier when I think about them like this: which would you rather have, the second house, or the first house plus a two-week luxury vacation

Easy: The second house plus a two-week non-luxury vacation.

Comment author: esmero 27 August 2011 02:22:54PM *  4 points [-]

Luxury vacations and cars can also be paid over a lengthy period of time, so it seemed appropriate.

If you actually do have a strong preference for the more expensive house, then I agree you should get it if it's not gonna be too hard to pay. But I got the sense that he was talking about cases when you can't really decide between one deal or the other.

In these cases, if you simply chose the cheapest because it's cheapest, rosy retrospection would kick in and you'd most likely have a good case of buyer's remorse. "Yes, this place is cheaper but the other one was so nice... surely I could have had afforded to pay 200 bucks a month for it..."

However, if you think of your decision to buy the cheaper one as an opportunity to also buy something else you'd really like, it becomes easier to counter this tendency. "Sure, the other house was nicer but with the money I saved I could afford an amazing redecoration in this one."

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