July 17, 2017

On the home(buying) front: rolling up our sleeves

Rolling up our sleeves, rehabbing an old, neglected house We’re officially the mostly apprehensive owners of a new-to-us home.

Without even taking a breath to let that sink in, we don’t have time!, we’re nose-deep in demolition and renovation work. Our final walkthrough revealed even more work that needs doing, if you can even believe that there’s yet more to do, and it’s been nothing but stress.

My credit card is melting from all the swiping, American Express’s emails about Large Purchases are tinged with a sense of alarm, and let me tell you, Mint.com is JUDGY. Yes, I know our household spending is above average!

The contractors are hard at work tearing out walls, digging out dry rot and black mold, and filtering the air with air scrubbers until it’s habitable.

Our job is collecting all the materials that we need ready for installation once the demolition dust settles. We’ve bought: kitchen appliances, kitchen cabinetry, bath tubs, plumbing fixtures, lighting – soooo much lighting, doors throughout the house, and vinyl windows. We still have to buy kitchen countertops, bath cabinetry, flooring, paints, more lighting there is no end to the lighting purchasing this will be the most well lit home in the universe, tiling, closet doors, and about 23 million other bits and bobs and joes and marks and michaels.

Everyone who isn’t paying the bills says “oh it’s great, you can get the home you wanted, just the way you wanted it!”

I think “When will this horror show be over???”

The money is flowing out so fast, even though I have the ready cash to pay the credit card bill, it’s like watching a tornado slowly rip apart my home. It’s fascinating, and terrifying, and impossible to look away. We came within $900 of my generous credit limit which has never happened before.

Our styles are clashing

For me, and partly for PiC, the worst part of the process (even worse than the spending so you know it’s bad): having to research every single thing we’re going to buy – did you know that there were so many toilets you can buy? Did you know that toilets have lids that opened automatically? Did you know how creepy it was to walk down an aisle of toilets and have them all open their lidded maws as you pass through?

And LIGHTING. Holy mackeral, lighting. PiC spent one Sunday looking at 1000 chandeliers and lamps. That’s not hyperbole. Literally, 1000 lighting options. And that’s only one of 17 research sessions.

The sheer volume is one problem. Our approaches are another.

I research a thing, find out the quality parameters, and armed with a fair amount of information, choose the three I like best and ask PiC to pick his favorite.

PiC researches a thing, researches its history, the history of its history, the entire range of possibilities that exist, he researches down to a molecular level and then presents me with a dozen choices. His way drives me crazy. My way drives him crazy.

Shockingly, we have managed to negotiate our differences with only one tiff so far.

I don’t want him to feel rushed and like he’s compromising on pieces that we both have to live with – I would hear the grumbling for the rest of our natural lives. I also don’t want to feel inundated with information, bombarded in fact, and short circuit every time someone asks me a question because it’s one question too many – some unlucky soul would eventually lose a limb, or a face to my severely compromised temper.

Solution! He is now the man in charge of all the initial research, I only have to give occasional input to steer his selections and then we finalize our choices together. I am the woman in charge of all the money: paying the bills, approving budget for each item, finding discounts and promo codes, tracking all receipts, returns, exchanges, deliveries, and arm-twisting when something goes awry.

On that note… savings!

Or at least savings on spending we had to do – not to be confused with money that we keep safe in the savings account, there to stay, grow, and flourish.

We have ordered a handful of our materials from Build.com and Houzz.com. I was skeptical at first but a friend confirmed that he’d ordered furnishings from Houzz and while it was imperfect, their customer service was good, so I was willing to give them a shot.

How I saved at Build.com: At the time of this writing, you can get 2% off at ebates or 3% cashback at MrRebates. Check both to choose the higher rebate, of course.  That was stacked with a summer sale coupon code, and I asked their chat associate to give me the 5% discount from signing up for the email list which never arrived. They did me one better, assigning a discount that was equivalent to another 7% off the total.

The key here is to create your account and fill up your cart first, stay signed into your account, then hit up the sales associate. If they dig up a good discount for you, ask them to send you the link to the saved cart with the discount instead of letting them complete the order. Close the tab with your own cart, load the link and make sure it’s showing the right items and discount. Close that link, and then go to ebates/MrRebates to reopen Build.com. You should then be able to load the cart from the newly reopened Build.com to show both the discount and proceed with your purchase.

Reminder: Gratitude

Even while the money flows out like heart’s blood, here’s perspective for you: We could be in Make Smarter Decision’s boat – budgeted but without anyone to hire! We have acquaintances who have been paying double mortgages for months and still don’t have a good contractor on board. We know people who chose to manage the whole project themselves and hire the subcontractors themselves, they’re all in a world of hurt. Demand is so high that it’s not uncommon for subcontractors to walk off a job for a better paying one without a word, and they just don’t care!

Yes, we are paying big bucks for this work to be done, but at least it’s getting done. Those folks carrying double expenses have spent nearly half our budget on just owning two properties and that’s before a lick of work has been done.

:: Have you had good or bad experiences with contractors? Are you into Do-It-Yourself for home repairs and renovations? Would you splurge on the best fixtures and appliances and doo-dads if you were outfitting your forever home?

 

May 30, 2017

On the home(buying) front: the commitment and numbers

Househunt2017: Under contract! We’re under contract!

We submitted what felt like our millionth (it wasn’t) offer. As usual, once that was in, I filed away all our emails on that address and moved on with life: checking any new MLS listings, checking our financials, taking the kids for a walk.

At 2 pm the next day, our realtor called. Our offer was accepted with no more than a minor change to the closing date! Holy crap.

I explored my feelings like I was checking for a hole in a tooth – is that regret? Panic? Buyer’s remorse? A little of everything? It’s still a bit unclear but it’s not excitement that’s for darn sure. That has a place later in the timeline when we actually get to move in but that’s months away. Many months. And many dollars.

We debated the new date – a change from Wednesday to Friday. Our agent doesn’t like closing on a Friday but it was also only a two day difference which would make a rent back a total pain in the pertuckus. I prefer fewer complications in an already thoroughly complex transaction, please. We agreed, and braced ourselves for the appraisal.

We’d taken the chance with the appraisal – we’d chosen not to take the contingency. No offers with any contingencies had even been considered even when our offer price was competitive. On this one, we accepted that if the property assessed at a lower value than our offer, we’d be both highly annoyed and have to pony up the extra cash because our lender would only cover 20% of the appraised value.

I did the calculations to confirm that we could bear that extra cost if we had to. It’s a good thing we did, too, because it did appraise lower than the sale price. Curses. It wasn’t by a heartbreaking amount, we had discussed the possibility and accepted it, and we had budgeted for it, but it still bothers me to think about it. You know what bothers me most? Having to input a lower value on the appraisal line than the total paid value when I adjust our monthly numbers! Nerd.

It’s not the house of our dreams

That doesn’t matter because that house doesn’t exist for anything less than $3M! Which means it might as well not exist at all. We have champagne tastes, sometimes.

We live in humdrum reality! What we get is a major fixer-upper that we can (hahaha …. have to) renovate to suit our needs, of modest size, in a quiet neighborhood. It’s near conveniences like groceries and banks, it’s a single story, with a smallish backyard where I can do some gardening and Seamus can do some serious sunbathing.

It also comes with fungal infestations, termites, appliances that haven’t worked since 1976, windows that haven’t opened since the Reagan administration, and bathtubs that have been leaking since Timberlake was a Mouseketeer. That’s just what we can see on visual inspection. I can’t wait to see what happens when we rip up carpets designed expressly for the psychedelic age.

What I’m getting at is that what we saved upfront on loan costs, we’re spending on repairs and then some. At least we’ll be living with things that we picked, but I could have lived with a strangers’ bad taste for a while to save money, y’know?

I’m already slowly losing my mind

Aside from the money part ….

Supplying 16 more rounds of paperwork to the lender, seriously, didn’t we already go through this at the beginning? Why are we going through all of the statements again?
Getting recommendations, vetting vendors, scheduling walk-throughs with the general contractor, with the architect, with the inspector, with the other contractor, taking time away from work but still getting all my work done on time.
Updating the Spreadsheet to End All Spreadsheets with our projected income, expenses, down payment, closing costs, estimated labor & materials costs;
Mapping out all expenditures against the calendar to see when we’ll run out of money, and set the upper limit for our remodeling budget!

PiC knows I want nothing to do with picking colors for tiles or handles for cabinets. I don’t care about appliance finishes so long as they work well, quietly, and don’t create extra work for me. He cares so he’s on that mission, as well as making all the phone calls because I hate talking to people during my workday.

I head up all the financials ferreting out every possible saving and promotion I can find for things we already have to do. There’s a new checking account bonus at Chase that we’ll snag, plus they’re running a promotion for $595 cash back if you set up automatic mortgage payments with them. I’ll have to keep the account open for 6 months, which is fine and worth the nearly $800 we’ll reap for going out of our way with a new account for half a year.

We discuss our decisions and process together, but mostly leave the other to their set of jobs. It’s a good sign that our partnership hasn’t frayed under the strain of another full time job demanding our attentions while still trying to do full justice to our day jobs and parenting.

Squirrel!

I keep getting distracted! I’m supposed to be answering emails from the lender, and leaving our money the hell alone until we close.

Our dividends portfolio needs beefing up so I hop into researching the stocks that I wanted. It doesn’t help that TradeKing has become part of Ally. Every time I go to stare obsessively at our savings, I stare at our portfolio. But no: none of that cash can buy stocks, it’s already earmarked for renovations.

Then that reminds me I researched a new real estate investment: Fundrise. This was a really interesting prospect and we should put … oh. STOP, I can’t invest in an eREIT right now, renovations!

I need to book cheap travel for important family and friend life events for the year so obviously that means I should maximize the travel booking rewards by grabbing a new credit card for … oh. No, I can’t open a new credit card right now, we haven’t closed yet.

It’s not that I don’t have plenty to do, it’s that having the clock ticking down til escrow makes me feel like I’m in limbo and I hate limbo. I need to be doing things.

Except right now, doing money things is exactly what I can’t do because it’ll disturb the Escrow Equilibrium. I hate  being told I can’t do whatever I want with my money.

FOCUS!

45 days until I can Gollum all over our money again. FINE.

What I am allowed to do is earn money and watch over our budget really carefully. We’re making decisions on what renovations to hire out ($$$) and what we can DIY (not that much for health and sanity reasons).

We’ll need every extra penny in case renovations go long, go over budget, or we need to carry our current mortgage a little longer than projected. PiC has had a nice streak of cash earning from his Craigslist sales, and I keep tucking every little (and big) bit away. Reimbursements from the FSA account, sales, blog income, it’s all being stashed.

That’s plenty to do along with keeping the day job ticking along.

:: How do you occupy yourself when you’re not allowed to mess with your money?

Disease Called Debt

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.

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