How did this happen?

I suppose I should start at the beginning...

I was not planning to build a house. For some odd reason I took a quick look through realtor.com one day and one house in particular really caught my eye. It was brand new construction in an existing neighborhood, looked very nice and when I ran the numbers I was suprised to see that I could afford it.

Existing Genick House

I sent the link over to Theresa and she liked it just as much as I did. I still didn't think that there was any chance we'd actually consider it, but we decided to go take a look just for fun. A few days later we showed up and toured the house and we both loved it right away and a few days later we were making an offer (which was well below asking price). We were promptly outbid.

Everything happened so fast for us that we weren't confident making a strong offer. We weren't certain about the house's true market value, the idea of living together was a new idea to us, the timing was bad because I'd be forced to break an apartment lease, Theresa already owned a condo that she had no hope of selling and wasn't sure she could rent... so we kind of took that approach that if we could get a great deal on the place that'd be awesome. If not... oh well.

But it did open our eyes. We started looking into property values, thinking about moving in together, Theresa started looking into renting her apartment and we started paying close attention to our financials. Everything pointed to the house being a decent deal at full asking price, and something we could easily afford. The more we thought about it the more we started to think that it was something we maybe should have done. Of course there are always more houses, but interest rates were low, housing prices were depressed, and we had found something we really liked... it seemed like the right time to buy. We were a little bummed.
We did engage a realtor and started looking at the existing house market. We weren't in any hurry but we did want to get a sense of what was out there. Everything we saw reinforced our thoughts that we should have made a stronger offer. The existing houses were not much cheaper, and they all had less desirable layouts, or just generally weren't as nice and for almost every one of them we would have undertaken some level of remodeling, which didn't sound the least bit appealing to me.

But the agent selling the first house had mentioned that there was a possibility of building another house on the lot next door...