“Words of wisdom”? Hm. Not really. I have a little money in the bank, so I’m extremely lucky in that I had the downpayment and there is money enough for house payments while I’m unemployed. I also bought the house from a friend. Ironically, when he was first looking at the house a couple of years ago I told him to RUN AWAY!!! I thought it was too much of a “fixer-upper”. He put on a new roof, new electrical, new plumbing, new paint and carpet, a gas heater… And I’d stayed in the house on several occasions. So I knew the place.
I also think I’m fortunate because I can get the house at all. As I said, houses in the hundred kilobuck range are getting rather scarce up there and the house has appreciated considerably in the last two years. I can only see the value going up. Really, it’s all just dumb luck in my case.
Here’s how it transpired. I had been looking for houses since last winter. I made an offer on a cabin (actually two cabins) on two half-acre lots on the Lummi Reservation. I was turned down. I went up to look at the house to see if I wanted to meet the owner’s asking price. (My realtor couldn’t believe they had turned down what he considered a very fair offer.) Turns out I’d dodged a bullet. The house was crap. So if I have any advice to give, it would be this: Don’t buy a house unseen, even if you have a realtor and a trusted friend check it out.
We looked at another property, also on the Lummi Reservation. Two-bedroom bank repo on a large lot for $85,000. The previous owners had trashed it, but it looked pretty good otherwise. When I got back to L.A. I made an offer to the bank, including a bunch of “conditions”. The bank denied most of my requests, but made a few concessions. I made an offer contingent upon a good inspection report. Well… There were some problems. (Incidentally, I got a copy of an inspection from two months prior so I didn’t have to buy a new one.) The roof was “spongy” and its slope was “suspect”. There was an unspecified formal complaint from one of the neighbours that had not been addressed. Signs of vermin activity. Durt and mud in the ductwork. The solarium was erected without a permit. So was the (very nice) garage. I passed. Advice Number Two: Always have an “out”, such as making your offer subject to revocation if you don’t like the inspection report. (It would actually have been a good investment if I lived there and made the repairs, but it was too much trouble since I’m 1,200 miles away.)
So I kept looking, and discovered that inexpensive houses that I had seen before were no longer on the market. Crappy houses were going for $100K, more or less. Good mobile homes were going for about $100K, but I didn’t want a mobile home. The supply had dried up!
Then my friend told me that he wanted to sell his house so that he could move (if he can get a visa from Canada). I told him I was interested. He told me what the appraised value was. Criminy! More than half-again what he had paid for it! The realtor had told him to list it for $98K and that he would probably get $100K for it. Nevertheless, it was still under $100,000 and I could tell that I would not find anything better. (Again, I know the improvements he’d made.) He agreed to sell it to me, and I agreed to the appraised value. Based on the factors I mentioned earlier I predict that the value will not go down, but that it will continue to appreciate.
What advice here? Well… Look at what the housing market is doing in an area. In this case, I knew that Seattlites (who tend to make considerably more money than Whatcom County residents) were moving up. As a Californian, I’ve heard about Oregonians in particular and Washingtonians to a lesser degree complaining about how “those rich Californians are moving up here and driving home prices up”. I guessed that the same thing was happening here; i.e., that “those rich Seattlites” were moving up to Whatcom County and driving up prices. I’d also heard the rumour about the potential studio action, and about the new buildings going up. So I figured I’d better get a house now, while there was still a good one at a decent price.
The paperwork was easy. I worked with the realtor and the bank, and it went smoothly. Until…
An inspector came to the house. She said that the floor had a tremendous slope and that the house needed to be inspected for pests. (My friend got a level when he got the report, and guess what? The floor was level!) The bank needed a “clean pest report” before they would fund the loan. Another inspector, whom my friend specifically did not request because he’s “an asshole”, produced a report that made it sound as if the house was falling down. Now the bank wanted a dry rot report as well as a pest report. The inspector said there was an active beetle infestation. My friend called an exterminator who said there is no evidence of an active infestation!. (But he should spray anyway, since the house is so old.) Aiyiyi.
There was no way that the “needed” work would be done before the lock on the loan expired. Fortunately, I could do a “float down” since interest rates had gone down. Unfortunately, the work would not be done before that lock expired. I reasoned this way: The work will be done no matter when the report was filed. Why not get the report to the bank in time to fund the loan, and do the work post fact? Due to what was happening at the office, I wanted the loan closed before I got laid off. My friend considered that fraud, and wouldn’t hear of it. Technically, he was right; but that single piece of paper spelled the difference between getting the loan and not getting it. And the work was going to be done in any case.
Well, I was laid off. Bugger! A couple of days later the work was done and we got the clean report. Now it was a race to close the loan before someone said, “Hey! He doesn’t have a job!” (As I said, I have enough money in the bank to make payments for a while. It’s not as if there would be any risk of my not paying the loan.) Then my friend said that if I didn’t get the loan, he’d have to put the house back on the market and that it would probably sell in two months. Now I not only didn’t have a job, but I didn’t have anyplace to go either! I was a wreck.
I figured that at least I’d have 20-something thousand (my downpayment) to rent an apartment for a while, but I wanted a house! The realtor said there were other options, although they would have cost more than the 5.375% loan I had.
Would the underwriters call one more time to verify my employment? If they did, I’d have been screwed. I had already signed everything the title company had sent (while I was still employed) and had the required bits notarized. My friend signed his stuff on Monday. I wired the downpayment to the title company on Tuesday. I left a message at the bank and talked to the title company on Wednesday. The title company said the deal was closed, and when I got a return call from the bank they said it was closed. Apparently the underwriters had already re-verified my employment while I was still employed.
Whew!
So advice gained from the last couple of weeks? Don’t get laid off!
I’d also advise not freaking out. But I did, and I don’t know if it’s avoidable.
Now here’s the Big Question: When do I move? Right now I have no idea. If my old company offers to re-hire me, I have to take it. If I don’t, then I don’t get unemployment benefits. If theydon’t re-hire me, then I’m planning to move next month.
Good luck with your condo, murky!
