It’s been right at four weeks since my last post, which puts me way behind on my once a week average posting schedule. I was increasingly suffering from ennui – my current job and living situation being the primary causes and I just haven’t had the desire to write recently. I have been exploring other avenues to alleviate my boredom, and while I am still somewhat displaced, at least I have some topics for this blog.
B and I have been passively house hunting for over a year. He was raised a country boy and loves the freedom of open spaces and a lack of neighbors. I was raised in the city and can’t stand to be “boring.” I remember my therapist calling me on it after my divorce, and forcing me to explore why I didn’t want to end up like my parents. It was about the fear of an unfulfilled life. This has led me to the decisions I have made on travel, education and reading schedules. Anyways, the compromise B and I discussed included some land with a house that was set apart from neighbors, but still within a short distance to a decent grocery store (my primary definition of city living).
After I got my MBA, I was nervous about buying a house locally due to the loss of flexibility in job opportunities, but we would drive by any house that popped up on our searches. A few months ago, one of those houses happened to be holding an open house, and we went in. Since then, we have been scheduling showings for the houses we have been interested in seeing. About a month ago, we found a very interesting house nestled in 40 acres (for sale separately), that was once part of an extended family’s home (3 homes on the land, each for sale individually). It felt like country in the middle of the city, but that land was selling at development prices, and within 10 years would be a developed neighborhood. We had the opportunity to carve our own piece of that land, though.
As a back-up before we put an offer on this house, we decided to view a house with similar amount of land and sqft for a similar price in the burbs. I didn’t expect the house to do anything other than cement that the house in the city was the best thing we would find. I fell in love with the house in the burbs. I spent twice the amount of time on the viewing as with any other house, and already started moving my things into the space in my mind. It felt clean and happy – I ran around in circles for like half an hour while viewing. I could sketch the layout from memory easily the next day. It doesn’t have some of our wants (neither did the one in the city), but the potential is off the charts.
Our agent – we picked her up as we were looking at houses, as she was the only one that followed up with us after a failed showing – did some comps and convinced me that making a fair upfront offer was better than negotiating a low offer and the counter offer process. Her theory was a fair offer up front makes the seller more likely to work with you if things run amok later in the process. It was wise advice and I took it, but it took the rest of the process for me to really believe it. I asked for the fair value and all my closing costs. The offer was accepted in less than 24 hours with no counter. Only about 25% of me believed that it was a fair offer, and the rest of me thought I could have gotten a better deal.
Our agent scheduled a great inspector and made sure the renovations to the house had the proper permits. The inspector was informed of the renovations and knew we were concerned about the quality of the work. I have a friend that purchased a flipped house and had to basically reflip it due to crappy contractor work. B walked everything with him to both learn the ins and outs of our new home and to see what needed to be done to his home to put it up for sale. At the very end of the inspection, the other shoe dropped. The front shower’s basin had been leaking and damaged both the subflooring and the joist under the bathroom. If it weren’t repaired the floor would eventually cave in. The inspector believed that the sellers didn’t know about the damage, since the rest of the house was in well cared for condition. We sent the report to the sellers and asked for this and a few other minor water related issues to be repaired.
Since the sellers don’t live in state, they needed a week for their contractor to get out and access the repairs. During this week, we got the appraisal back on the house. It was a bit more than 10k under the sales price. I have never seen this before. The first house I purchased appraised at 1k more than the sales price. The thought that appraisals were a scam was cemented in my mind at that time (since the mortgage company chooses the appraiser). The investment property I purchased for my sister to live in appraised for about 5k more than the sales price. I have heard of appraisals for refinancing appraising to low, but not one for a new mortgage for a house that didn’t need to be flipped. The mortgage company won’t finance a home for more than it’s worth, for obvious reasons.
I was told by one agent at the mortgage company that if I was willing to outright pay the difference in the appraisal and sales cost, then it could be done, but that would be bad financial decision. She said some people would make that decision for a house they fell in love with. I started the process of disconnecting my feelings for the house. We sent the appraisal with a price amendment to the sellers. There was some back and forth over the appraisal – it didn’t consider the land as separate lots (the loan can only count it as one purchase, thus one lot) and the renovations to the house. There may have been some truth to this view, as the appraiser considered the construction value at C3, while the rest of the neighborhood was C4, and new construction would be C1. The renovations began in 2008 and were completed in 2013, and the house has been for sale since then so the construction should be C2, the sellers argued.
The sellers countered with the appraised value, no closing costs and making the requested repairs. This would put them out the cost of repairs, but essentially flipped the closing costs from on side of the line to the other (their bottom line would be the same). Even if I weren’t the buyer, the repairs would have to be made, so that was a sunk cost for them in my mind. I did the math, and I could afford all the closing costs, but it would wipe out my savings, and if something else came up in the next few months before we sold B’s house, we would be screwed. I countered with they pay about 1/3 of the closing costs. The sellers said they would accept that offer with no repairs. B talked to those he knew that could fix a house (his sister has owned investment property for 20 years) and determined it would take about 5k on the low-end to fix it, and up to 15k if things went badly.
While considering how to counter, both B and I were already browsing for new houses. It was during this time that B let me know that he was disappointed that he wasn’t actually out in the country, but he’d agreed because the house made me so happy. This wont be our retirement home, for sure, but it makes me happy that he’s willing to live in a place solely because I love it. My baggage brings up fears that he will resent me for this, but nothing he has ever done has proven this to be true. He even bought DIY books on fences in preparation for the new place. Apparently we waited long enough for the sellers to get antsy and they re-countered that they would accept my counter if I let them have a week after closing to move their things for free. We accepted.
Now we are waiting for the closing date. I have had to write a few letters of explanation to the mortgage company – something I find hilarious since I’ve had to do it before. They have their checklists, and if something is out-of-place, they must have a record of why it’s out of place before they can move on. This time, it was why I don’t pay rent (B owns this house). For my sister’s house it was why the escrow check was written by my dad (since I didn’t live in state it was easier for him to write the check – we ended up considering it a gift). For my previous house, I had to pay off medical debt I never knew I had. It wasn’t much, but it chaps to pay a bill you never received. Since I’ve gotten pre approved, I’ve uploaded pay stubs and bank statements each time I get a new one. It saves them asking in bulk and slowing down the process. They like to see that your bank statements don’t change from month to month, and that you get a regular paycheck.
Closing is set for Sept 23rd, so now we wait. We wait for the lender to do their thing and for the seller to complete the repairs. I hope to have an empty house party the Sat after close since a good number of our household will be in for an SCA event that we are all daytripping, and we have a moving party scheduled for the week after that. Now I have to get back to packing… At least I’m not bored, right?
If you are curious about the entire process, there is a fantastic thread on myfico.com that documents the process from start to finish. While I did not buy anything close to a million dollar home (real estate in CA is crazy, y’all!), it’s a great write-up of all the steps and pit falls for the home buying process.