Saturday, June 08, 2013

Real Estate: The Agony and the Ecstasy

I am currently looking to become a property owner again.  I guess technically a homeowner, although the property that I'm trying to buy is a condominium.  HOPEFULLY, this will be happening soon, like within a week or so.  As I will describe, though, with all that's happened so far in the process, I am not counting on anything until the closing takes place.

I have owned real estate just once before in my life.  That was in Nevada, in the early 2000s.  In that case, I decided to buy a single-family home, even though I didn't need all the space, since I thought it would be a better investment.  While I was waiting to buy the house, the airline that I was working for there went into Chapter 11.  I ended up deciding to buy the house anyway, even though I liked my apartment that I was living in at the time, and closed on it in April of 2001.  Great timing!  As I'm sure everyone reading this is aware, 9/11 happened later that year and the airline I was working for, already struggling, never did emerge from Chapter 11 bankruptcy.  Still, they did keep flying until late 2002.  

My first job that I found after that airline went under was in Wisconsin.  My new employer did include a paid move but I still kind of hoped to keep living in Nevada, so I decided to rent out my house there initially.  I had fairly good renters but my goal of getting a job with another Nevada-based airline never panned out, so I ended up selling the house after I had rented it out for about a year.  Fortunately during that year the property values went up a lot, and I ended up making money on it - not a fortune or anything but it was better than the alternative.  However, the whole experience of being forced to move, rent, etc. left me a little gun-shy with regards to owning property, and I had no desire to buy any sort of real estate in Wisconsin -  because I had no big desire to keep living there.  As long-term readers know, I ended up getting a job in Texas after about three years of living in Wisconsin.

I did look at some properties when I was living in Texas after I'd been living there for a while.  One in particular I did really like, but I also felt like I couldn't afford, so I never pursued financing or anything.  Shortly after we got a new contact at my workplace, thus enabling me to afford to buy something, they announced our merger and pending move to the Midwest, the kaboshing any interest I had in buying a place once again for a couple more years.

I decided I would like to buy a place where I am living now, and I don't expect to be moving again until I retire, but I didn't want to buy right away either.  In my experience, it's always best to live somewhere for a while first to get to know the good and bad areas.  Plus, I don't like being rushed when working with a realtor, especially if I decide I want to switch realtors.  Anyhow, several months into living here, I did find a realtor I liked and started looking at places - townhomes and condominiums.  I couldn't find any townhomes here that I liked but we did finally locate a condo that I am pretty fond of.    After several rounds of negotiating with the buyer, we agreed on a purchase price.  

Now comes the rub - the whole financing process.  As I am a veteran, I wanted to buy the property with a VA loan.  Banks usually like this, you have to put less money down, and you don't have to pay any mortgage insurance because it's insured by the government.  Closing costs can be a bit higher but overall it's usually a good way to go.  When I got my house in Nevada, the process was pretty easy, and I don't remember having to put much money down beyond my initial earnest money on the house and a little bit more at closing.  So, I wanted to get the same kind of loan for my condominium.

The VA has certain requirements for condominium buildings, and while my potential property easily met all of them, this particular condominium association also has a requirement that all the units be either owner-occupied, or only rented to a relative.  That requirement doomed my chances with the VA.  I was informed that they require renting the unit to be an option in case the veteran who buys the unit is forced to deploy with the military.  Even though there is zero chance of that happening in my case, as I have long since left the inactive reserves, the VA does not make exceptions to this rule.  So, I was stuck with conventional financing, or finding a new place.

I decided to go for conventional financing even though it was quite a bit more money down (5% of the purchase price required) since that is the only path I saw towards getting this particular unit.  I went over things with the banker my realtor had recommended, and he told me how much money I'd need.  I am doing a 401K loan for that money, so in essence I'm financing the whole purchase, but from two different sources.  The banker assured me this would not be a problem based on my current income and expenses.  

I had to do a LOT of paperwork for this loan - far more than I remember doing in 2001 for my old house - but after a few weeks, I finally got a letter from the bank saying my loan was approved.  There were some other hiccups - we had to extend the closing date a couple of times, which  at one point we thought the seller was not agreeing to, but ultimately everything seemed to be on schedule.  I had the money for the down payment deposited in my bank account, and things were looking good.

Earlier this week while getting ready for work, the bank called.  "Well, I have some good news and some not so good news," said my banker.  "The good news is, you're all approved, but the bad news is that you're going to need $4000 more than I said you would when we started the process.  I don't know if you need to get more money from your 401K, or what you want to do there."  As I was in the middle of walking out the door I told him I'd call back.  I did initially consider a couple different ways to get the extra money, but the more I thought about it, the angrier I became.  I was especially annoyed with the casual way that the banker had referred to me getting more money, like it was no big deal and whoops, well, these things happen, you know?

I called my realtor after I got to work and left him a message.  I let him know that I was tired of all the paperwork and running around, and that I was not interested in putting down any more money than what I had already been told I'd need, and that if I couldn't close with that amount then I felt like I probably shouldn't close on the property.  This got a fast response, as he called the banker (the guy he had recommended to me) and I guess read him the riot act.  The banker suddenly was able to find a way so that I could close with the amount I'd been planning on, although it will raise my APR slightly.  So for now, everything is on track (again.)  

I hope it works out since my apartment lease is ending at the end of the month (although I could extend it if I have to) and I really would like to get this deal done so I can get moved.  In the meantime, if anyone is looking to buy a house, I wish you the best of luck but be prepared for lots of paperwork and negotiations!   Hopefully I will be able to update soon with good news. 


Annabel said...

I think anyone purchasing real estate feels the same pain at some point. I just bought a house last year and at the 11th hour, the title company said I needed an additional $300. I was beyond irritated by that point. That money was going to my realtor's company and she decided to eat the cost of it because they wouldn't back down. I had to extend the closing date and move a week later than planned. Of course this was the one weekend it decided to pour down rain. But in the end, I'm happy with the purchase and am enjoying my house. I hope everything goes well. My best advice is to pay for moving help. It was the best $150 I spent for 2 guys to load and unload everything for me.

Chuck said...

Annabel - Thanks, and yes, I think real estate deals are always stress magnets. I'm definitely paying for movers.