May 15, 2017

On the home(buying) front: SF Bay Area eccentricities

Househunt 2017: buying in the SF Bay AreaWe’ve looked at dozens of homes online and in person. We started working on this in February. By mid-March I was pretty sure that nothing was going to come onto the market that we wanted. We didn’t even see anything worth making an offer on until about April.

Oddly, this made me feel better about the process. Probably because it gives us more time to save!

We’ve done our preliminary budgeting and number crunching, though I did it again for every house that we made an offer on.

Together, on the advice of our broker, we wrote up our list of must haves.

She advised us to write our entire list separately, and then combine them to get our top 3 picks together. We were very Gift of the Magi on this one – PiC prioritized a better microclimate for me, I prioritized a maximum distance/commute time for him. It turns out that I don’t actually want the better microclimate anymore, which is a frugal win, because I’ve gotten used to the year-round fog and appreciate that we don’t need central air! My fibro has actually adapted to the colder weather these past few years, so warmer weather is not longer good for me. Blasphemy from a sunny SoCal gal but there it is.

We’ve now submitted multiple offers and a pattern has emerged.

  1. The $$$$$ option is to pay through the nose for an essentially finished home and live with it for a decade, making no changes because we cannot afford to, no matter how gaudy or stupid their upgrades were. And my goodness some upgrades are stupid. There’s the fully remodeled kitchen that had no oven, sold for $1.1M. There’s the “fully remodeled” house that might maybe have electricity but nothing else, listed for $989,000.  There was the perfectly perfect house with a microwave smaller than a chihuahua and stairs that would kill me inside of a week, sold for $1.2M.
  2. The $$$+$$ option is to buy a fixer upper and live in a construction zone for the next five to ten years as we slowly earn the cash to pay for remodeling or do it ourselves.

Debt averse as I am, the second option was the lesser two of evils. Not by much, but still the lesser. I think.

Our process and discoveries this far:

We got a recommendation for a realtor from our friend, and we love her for her honesty, responsiveness, and willingness to go the extra mile for us. We were traveling recently and she did big video walkthroughs for us so we could view homes even while we were gone.

1. Pre-underwritten loans
Our broker connected us to lender who would approve and underwrite our loan before we even had a property identified. That’s huge so when you make an offer in this market where even fixer uppers that need A TON of work are getting 10-15 offers. It allows us to remove the loan contingency.

2. This leads me to the no-contingency buyer.
We are finding that many prospective buyers are making offers with no contingencies and that’s knocked us out of the running when we have any contingency at all, forget it if you have two contingencies!

The three common ones are the loan contingency which you need if you only have a preapproval and not a fully underwritten loan, an appraisal contingency (which protects you from being committed to the offer until you know that the appraiser is assessing the property to be worth at least as much as you offered, since they will only lend based on the appraised value), and the property condition contingency for you to take a look and be sure that the place is in the shape you expect. I might have gotten that name of the last one wrong.

3. A common thing that’s done here in the SF Bay Area that I haven’t seen elsewhere is the seller often does the property inspection, the buyer doesn’t.

On the one hand, it sucks that you’re locked into the inspection company that the seller chooses but a good broker will tell you if the company is reputable or if you should get another inspection. The upside to this is that I love getting the property inspection reports with the seller’s disclosures so I can make an offer that takes into account the condition of the whole place, not just what I think I saw, and there are fewer surprises.

4. More cash is better.
Well, duh. No, I mean strategically: I found that it was more comfortable to make offers that might be over the appraisal a touch only if we had an extra 20% in case over and above our expected down payment. It’s not great, but when every house has more than 10 offers, it’s helpful to be flexible where you can afford it.

We had intended to buy in 5-7 years, if at all, so our cash reserves are net as hearty as they would be if we’d waited. The benefit of being as diligent with our money as I am, though, is that I’m one of the few people that can be offered a personal loan by a couple friends who can afford to lend it and know that I will, without a doubt, repay them immediately on the sale of our present home. This is something I never would have looked for but they knew of the situation and offered it as a way to help us bridge any temporary gaps in funding. On the one hand, it’s a huge responsibility, but on the other, I know they never would have made the offer if they didn’t have absolute faith in my judgment and discretion and that faith is based on knowing how I’ve managed our money for the past decade. The work really does pay off. 

:: Which route would you pick? Are you a DIY expert or a DIY avoider? What remodeling or renovations would you feel comfortable tackling? 

Disease Called Debt

May 8, 2017

On the home(buying) front: making the numbers work

HouseHunt 2017: the budgeting process I’ve been crunching the numbers constantly and noisily. And I do mean constantly. It’s a morning, noon, and night sort of hobby.

Taking on a new mortgage when we were within 5-7 years of paying off this one was not in the list of dreams I held for 2017. Not even close!

Buying in the Bay Area is a stiff proposition. Competition is fierce, people are making all cash or no contingency offers right and left, it’s easy to get caught up in the fervor. But not I!

Even ignoring the desire to retire early, which is quite a bit further away once the new mortgage happens, there are serious constraints on our ability to buy. Which is to say, I refuse to stretch ourselves beyond our means.

Budget considerations

First things first. Ignore what the bank tells you that you can “afford”. We all know that the bank only cares about the money it’s going to earn off your loan.

This is what I did:

  1. Set my top comfort level limit. There’s a number that would just make me run for the corner, gibbering. I absolutely won’t buy a home at that price.
  2. Ran the numbers based on that limit: 20% down payment, loan amount, possible monthly payments and total loan cost.
  3. Looked at how much the new mortgage would cut into our monthly and annual savings, assuming all other costs stay the same: investing, utilities, daycare, food, gas, travel.
  4. Then I looked at how that total number stacks up against the regional comps. This was a bad comparison – our number was not competitive at all. Instead of increasing our number, I adjusted our expectations of what we could get. Adjusted = dropped the bar to the floor.
  5. I had a moment of madness where we checked to see if we could increase our pre-approved loan limit but then I came back to my senses. It wasn’t worth it.
  6. I asked our prospective loan officer 30 questions: what products they offered, the loan terms, and how much they charged to recast the loan, if anything. After deciding which of the lenders was the best fit for our needs, I gathered all our paperwork – oh so much paperwork! – and started the loan process.

We now have a somewhat reasonable range for making offers and I’ve got a fleshed out spreadsheet to work our numbers in for each time we plan to make an offer. I also asked our insurance provider to give me a quote for coverage based on an equivalent property to what we’re hoping to find.

This means I can quickly calculate our monthly, annual and life of loan costs, taxes and insurance, and see right away if we’re making a totally unrealistic commitment. This also means I can see that our “reasonable offers” are laughable in this market. But I do NOT care. We’re going to make this work.

Helpful tip 1: Even when they say you’re fully underwritten and you can proceed with making an offer, you might still want a loan contingency because the early underwriting process isn’t the final process. Things can still change.

Helpful tip 2: Be careful about what you do with cash and your accounts that they’ve already assessed. It’s a huge pain to have to explain pretty much every transaction that you make between the time they approved your loan and when you get to closing.

Helpful tip 3: It should go without saying that you shouldn’t be running out to spend a whole lot of money after an offer is accepted and before closing. Not that you should spent a boatload after closing, unless you’re so flush with cash that there’s literally no use for that money but spending. But before closing, the important thing is that the lender can decline to fund your loan if your assets drop enough before closing.

:: Have I missed anything important in this early stage? 

Disease Called Debt

May 7, 2015

Pigeon poop, terrible neighbors, and a case for renting

People keep saying that renting is throwing money away and I can’t help but snort in derision when I hear it. If you were literally throwing money at a landlord and NOT living in the lodgings you paid for, sure, but I’m quite sure that no one is talking about that.

Personally, while I do like the idea of home ownership for the financial equity-building aspect under the right circumstances, I’ve always had a soft spot for renting and this weekend was a perfect example of why.

We have a neighbor who insists on scattering seed all over the mutual property, trying to attract the damn pigeons, and he succeeds. He’s now escalated to putting out trays of water and seed for them too, which means there’s seed, shells, and plastic trays littering the neighborhood along with a ridiculous amount of bird poop in a lot of places.

Some of our neighbors have CDs strung down their balconies, others have Fort Knox-like barbed things bristling up from their balcony rails. You can see why, poop streaks down the walls and their rails despite their precautions.

Aside from the poop factor, the litter attracts other vermin and the pigeon feathers are everywhere which is not awesome for allergies and the poop causes long term property damage. All in all, no matter how much I like animals, these critters are not welcomed neighbors.

PiC got into a tiff with the main (and only, I’m sure) culprit this weekend.

He politely asked the man to stop feeding directly on the shared property areas, as it encourages the flock to move closer and closer, they’ve taken to roosting right over our front step now!

The man went off on a frothy-mouthed tirade about how he intends to attract them, that the poor birds are starving with no possible food source, that humans destroy wildlife with their concrete, that we’re horrible selfish destructive people, and on and on.

I’ll note that while he has such contempt for us humans, he’s still living right here amongst us in the reviled concrete based home instead of communing with the nature that he’s advocating for.

I’ll also note that he’s all about having the animals but his plan evidently ends there. I’ve had to stop him feeding my dogs French fries because apparently any food is better than letting a dog go on a walk without five treats.

He doesn’t take good care of his own pets which are adorable but filthy and reek of urine. They urinate and defecate everywhere they go and stink up the joint. I don’t think he should get rid of them, I think he should actually take care of them! Incontinence is treatable and in some cases, leaving it untreated puts them at risk for further medical problems related to that incontinence. He lets them run loose everywhere, one of them was hit by a car because he refused to leash them walking in the dark, right into a driveway where cars pull out.

But no no, let’s lure in every creature you can think of to make up for the depredations of humans, and never mind what shape the poor animals will be in.

Also I’m not cool with the rats and roaches and whatever else that’ll move in with the abundance of extra food bits he keeps tossing out his windows and scattering on the sidewalks.

I stood up for this guy before when other bullying neighbors tried to rally the neighbors against him. I felt bad for him at the time when it was just about his dogs. But now he’s letting in anyone who comes to the locked gate without question, totally disregarding security concerns despite several break-ins made possible by his irresponsible behavior. He was a crank before all this degenerated into him flying into a rage, and he’s just getting worse. Goody.

If we were renters, this wouldn’t bother me quite so much. We could seriously consider moving when the lease was up and the long term property maintenance wouldn’t be my concern. So long as this guy’s living here, he’s going to be a pain.

January 21, 2015

Guest Post: Get Real Quickly

Mrs. Micah briefly returns, like Godzilla from the sea with a rant. She was chatting with Revanche when Revanche ran across an article that pissed Mrs. Micah off so much she needed to respond. The piece was written by Robert Brokamp on Get Rich Slowly, “How to save for a down payment on a house fast.” Now, I’ve been out of the PF blogging “business” for a solid 4 years, but *harumphing sound* back in my day, GRS wouldn’t have published this kind of tripe (just tried tripe in pho, tripe turns out to be delicious, must come up with new metaphor).

This piece is crap from start to finish. First, let’s start with the premise. The couple got married and got pregnant pretty quickly. Either it wasn’t on purpose (accidents happen, even with birth control) or it was a “let’s see what happens.” In the latter case, this shouldn’t have been a “save fast” thing. You decide that after getting married you’ll be opening up the possibility of creating a new human? If you’re being financially responsible, you take into account all the possibilities, like needing to move.

But whether planned or not, the premise here is entirely flawed. A one-bedroom apartment is legally (in many places) too small for parents and a child, though with an infant in the crib and with everything else going smoothly, one may not have to leave instantly. Even if you can’t stay in your current place, that doesn’t mean you should instantly start house shopping.

If you’re going to start this kind of dramatic, unplanned lifestyle inflation once your kid arrives, you’re starting down a really bad financial path. Will you need a bigger car next? A preschool you can’t really afford?

Particularly awful suggestions from the list include:

1. Get help from family. This only works if you have wealthy and financially secure family. You know what I’ll inherit? I have no idea. If my dad lives another couple years max (at 70), maybe a tidy sum. If he lives another couple decades, I may have to support him. And my dad is comfortably upper-middle class…but not wealthy. Only the truly wealthy have that kind of money to safely throw around. I could ask my dad for money for a down payment, but that might well bite us all in the butt in a decade’s time.

4. Use IRAs. What. …you even admit, Brokamp, that this “almost hurts” to type. Yes, you’re absolutely allowed to take money out of various IRAs w/o penalties if you’re a first-time homebuyer. You can withdraw the money you put into a Roth because it’s post-tax. But are you going to let your lifestyle inflation choice take away from your future financial security?

5. Sell your body. Really out of left field. Unless you plan to sell your eggs (not an option if pregnant), this isn’t the kind of thing to get you big money fast. Medical testing carries inherent risks, it’s almost impossible to participate in the more lucrative tests if you’re also holding down a job (I looked into some at NIH), and…really? This is advice for someone who’s holding down two part-time jobs and finding other sources of income, not for someone getting a mortgage. Yay you got your wisdoms pulled for free, but that’s not really helping the goal here.

6. Get help from your boss. ahahahhahahahahahahahah you must be male. Heck, maybe it’s a good time to milk that male privilege for all it’s worth and take advantage of the biases men receive when starting a family. But be aware that your female colleagues are taking negative hits when they have children–in perception, in pay, in everything. This isn’t just the dozens I’ve stories I’ve heard from friends, this is study upon study backing up the stories. Start with “The Motherhood Penalty,” thanks Nicole and Maggie for that link.

Relevant reading: Have I lost my fire?

Negotiating a raise because of life decisions you made, however, strikes me as being the opposite of being a good asset to the company (although some companies will play along with it, at least for “family men”). You don’t deserve more money from your work because you chose to get married/have a baby/buy a house/etc. You deserve it because of the quality of your work.

Relevant reading: Terrible workplaces: A blast from the past

How someone could type any of these without stopping and saying “wait, do we really need to buy a house right now?” is beyond me.

What you can do:

A. Get a bigger apartment. Even if you want to buy a house, you don’t have to do it the instant the baby comes. A 2-bedroom apartment is plenty big enough for most kids. Maybe when you have a second kid or when your kid is getting older, you’ll want a bigger space, but for the first 5 years, minimum, your kid doesn’t need a big space.

(Yards are really nice as options, but a public park will do.)

B. Rent a house. If you really, really have to have a house, look into your rental market. Voila, now you have more space and a yard.

Now that you’re in a place where you’re no longer rushed? Start saving for that down-payment. Put time into planning where you want to buy.

The one decent piece of advice in the list, IMO, was:

2. Buy a fixer-upper that doesn’t need immediate fixing. When my dad downsized after my mom’s death, he sold our family house as a “fixer-upper” because he didn’t want to put in the time and money to make it good-as-new. The house had a good 25 years of family living put into it. Everything worked, but the paint was old, the linoleum scratched, and it needed maybe $30k of work to make it pristine according to realtor standards.

Once you do have the money to buy a house, that kind may be a great starter house for you and your family. If you let some of the more dramatic stuff go until the kid is older, then it’s not as much of a crisis when they draw on the walls behind your back or take safety-scissors to the carpet. But unless you get a great deal on that house, you can still hold off on buying it until you are ready.

You have at least a couple years of your child not having a clue that they’re not living in a house. Where you are, where they live, will be home. Be smart. Don’t mortgage their future buying into the habits of a society that’s drowning in debt.

June 14, 2013

First forays into homebuying

“We have to get this guy a house.”

Back from our various vacationtimes, we immediately saw that, while Doggle was thrilled to see us, he was also happier, peppier and more engaged than ever before. He’d been hanging his shingle in a house with a yard, kids and other pets for a week and amid the shameless spoiling, it was clear that he’d been taking dog lessons from someone.

Apparently the quiet life in a small apartment with DINKs doesn’t quite inspire the still-reticent Zendog to come out from his shell and do a doggy dance, or dash around happily pouncing on his toys four times a day nearly so much as the chaos of a full house does.  It’s probably too much to hope that he’d picked up the notion of catch, but we actually have hope now that he might try.

So are we serious about getting a house for the dog?

Well, we’d been kicking around the idea of buying a house for some time now, and we designed our budget this year with a specific goal to save for a new down payment.  It does feel like providing a yard is the next best thing we can do for our beloved Doggle.  And yes, we want it for ourselves too, but let’s be honest, we’re doting parents and the dog is our happy excuse for a lot of things.

But  … real estate around here is absurd.

Early explorations of Zillow and Trulia revealed real estate listings that are literally jawdropping.

We’re planning to stay outside the city.  Many 20 and 30-somethings may find it appalling that people would actually prefer suburbs to the bustling city, but it’s true of us. We love visiting the city but it doesn’t feel like home to either of us. Between the traffic, the lack of (free) parking, the tight quarters, we’re just not city people.  And with the tech industry out here, and the salaries they pay, we couldn’t afford the city if we wanted!  So, y’know…

We’d like to be within fifteen or twenty miles of the city for reasonable commutes, which also suits my need for a warmer microclimate, so that was our first search parameter. We’d definitely be paying more for the luxury of better weather and saving time on a daily basis. If we were willing to be in say, Hayward, where I know the weather is as hot as even I would like, prices would be far closer to reasonable. But the compromise is better weather for me, not great for me and utterly crappy weather for him. For this, we shall pay.

We’re looking for at least two bedrooms, we’d really like two bathrooms and a two car garage, and a decently large kitchen is important to me. If there was a room I could start converting into my own private library (The Dream), that’d be the best but I will settle for a good amount of wall space and storage. We have no storage where we are now.

Last, PiC is reminding me to keep searching in specific areas where the schools are better. Which is sensible, this may be where we stay for a really long time. It needs to be a pretty safe neighborhood with some staying power. Which also means we probably should look at more than 2 bedrooms if we’re going to have any spawn. I grew up in a small 2 bedroom apartment but as an adult, I don’t really want to do that again, albeit from the other side, if I don’t have to. It might be character building but I’ll find another way to impart that.

Search results: moderately horrifying

We’re finding one and two bedroom, one bathroom, one car garage single family homes in moderately close/decent neighborhoods are starting at A. Million. Dollars. Seriously.

This shouldn’t be any surprise when in some neighborhoods, $800k hardly gets you more than a two bedroom, x bathroom(s) condo or apartment.

And three bedroom, two bathroom with garage SFHs run more like 700K-3M.


The estimated monthly payments on those homes that are 3k-7k (in more extreme cases) are almost beside the point.  I’d only feel comfortable to committing to a new loan if we had 200K in cash with a healthy uncommitted cash flow. We do not have 200K in cash.

We could make a pretty good run at it but it’s not going to happen overnight and as much as I fantasize about taking another job, that’s not going to happen either. Freelancing, maybe. A whole other job would be crazy and crazy-making.

Making it happen

We still hold hope this can work and maybe even in the next year or so. Not that I expect the market to get much friendlier over the next year, but we have steps to take to increase our buying power, and reduce our stress.

1. Reduce our current fixed expenses, including the current mortgage to make a significant dent in the down payment goal. We’re refinancing and going over all the other expenses to trim back.

2. Keep those fixed expenses low – I don’t want to commit ourselves to either too much house (payment) or too strict a budget. After nine+ years of living on a shoestring income to debt ratio, I refuse to find ourselves coming up empty on cash for the sake of a house.

3. When we get a decent cash cushion in place, I’ll focus on foreclosures to see if we can’t stretch our buying power.

4. Hope hope hope that mortgage rates aren’t abominable twelve to twenty four months from now.

It’s time to dig deep and turn on the saving engines again. It’s not worth cutting off our allowances, I don’t think, since it’s not much per month anyway, but I’d love to pull back a little bit everywhere.

::What else should we be doing? 

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