Wednesday, May 23, 2012

Variables

New experience #2: House buying.

Sort of.        As in, sort of buying a house.


We're looking at the bottom of our price range right now instead of the top for lots of different reasons.

  • We can. When you can buy 50 - 80,000 homes, why go for 120 or 130?
  • Rental prices are rising and it sounds really attractive to pay only a portion of what we are currently paying for rent each month. And earn equity at the same time. And be the kind of independent that comes from owning your own home.
  • We aren't planning to stay in this house more than a few years and we don't want to trust the "rising" house market completely. If we have to leave Arizona and can't get rid of the house, we don't want to worry about stressful mortgage payments. We can handle paying a few hundred dollars each month while we wait for the house to sell.
  • We haven't decided yet what my work situation will be after the baby comes. We want to maintain the flexibility for me to stay home if I want to. 
  • David has the opportunity to start a master's degree at ASU for basically nothing. Probably silly to pass that one up, but it would mean a cut in hours while he takes classes. We want to be able to pay our mortgage comfortably even if I'm not working and Dave is working reduced hours.
It's true that a few of the cheaper homes in the area are pretty scary. But it's also true that there are some very nice homes that are selling for cheaper than my parents' first home purchased 20 years ago. We had started considering houses in that price range over a year ago and found some very promising prospects

The market is a little different now, though. Banks are starting to hold onto empty houses while they wait for prices to start rising, as they currently seem likely to do. The rising rental prices all over the valley mean that: 
  1. Lots of investors are swooping in to sweep up properties that are for sale. They can rent them now for a hefty price each month then sell when the market has corrected itself. Most of these investors are coming with full-cash offers. 
  2. Renters (like David and me) are hoping to buy and thereby save money each month (see bullet number two above). 
For the first time in a long time down here in AZ, the house demand is greater than the house supply. This means that we're fighting against other offers and that we have to move fast, unlike last year when we had plenty of time to ponder and make careful decisions.

So, knowing all of this going in, we actually found a house that we both felt good about. It isn't particularly nice to look at from the outside or the inside. The walls are filthy and dinged up and desperately need paint, and the carpets definitely needed replacing. The previous owners of the house had taken their foreclosure frustrations out on the doors and the toilets, though thankfully they hadn't punched serious holes in the walls. We figured that doors were easy enough to replace. The house also needs all new appliances. 




But we thought, "those are surface repairs. We can do all that." And our current loan plan allows us to pay a small down-payment, leaving plenty of savings leftover for repairs. 

There were several things that attracted us to the house. The first is that compared to all the other houses we had seen, this one just feels good. We can envision what it can look like after a good scrubbing and after we paint and lay down new carpet. We can envision ourselves living there and being comfortable. We also really like the floor plan of the house. It isn't a modern floor plan with a big great room, but the bedrooms are grouped together in a way that feels close (but not too close), there is no living room (ie, no useless space that I wouldn't know what to do with), there is a good-sized family room with a vaulted ceiling that feels spacious and comfortable. It can also be seen from the kitchen. There is a covered patio out back and the backyard feels clean. There are no neighbors directly across from the back fence. There is also a mountain view, which was unexpected, but definitely a plus! 

One of the things that really attracted us to the house was the interviews with the neighbors. We talked to people on some of the streets around the home, and they seemed friendly and were enthusiastic about the neighborhood. We also talked to the next-door neighbor, a 70-ish-year-old widow who teared up when she told us she had just passed the year mark from the day her husband had died. As the longest-remaining resident on the street (33 years), she called herself the "Mayor of [Street Name Road]." She could point to each house and tell us who lived in each one. She could also tell us the history of our house and informed us that every morning since the house has gone vacant she has watered the roses in the front yard (that one stumped the inspector - he couldn't figure out where the water was coming from!). I really love the idea that the neighbors on the street know each other and talk to each other. I love the idea that when I am at home during the day with the baby, there can be others nearby who are home too (the Mayor is not the only widow on the street, and there are several other families around with children). By the time I left the house for the first time, I surprised Dave by being even more enthusiastic than he had been when he had first seen the house. 

Not that it's perfect. The washer and dryer are in a closet on the back patio. The streets immediately surrounding the house are clean and well-kept, but the wider neighborhood is not nearly so well-cared for. I had to decide if the wall graffiti on some of the roads leading to the house meant that a few people had little deference for public property but meant no real harm or if it meant that there were gangs, for example, marking their territory. Kind of a nerve-wracking thought! 

But each visit to the house felt good to both of us, so we put down our offer. So did two other buyers. 

We gave the bank the best price we could have - higher than asking price but still within our comfort zone - and we won the bid. The closing date is July 6, which gives us a month and a half to fix the place up and move in before our lease expires. The timing couldn't be more perfect, since the closing date lands a week past my essay due date and gets us settled into the home a month before the baby is set to arrive. All engines go. 

Unfortunately, as of this morning we have all the variables. We were SO pleased with our inspector. He was professional, genuine, thorough and very, very knowledgeable. His thoroughness and knowledge helped him find everything wrong with the house. As Dave put it later: "Our house is going to flood, burn down and get eaten away by termites all at the same time." I had been bracing myself for a less-than-positive inspection. After all, this is a house that was built in the 70s and has been sitting empty for a while. We knew there would be termite damage. We didn't know there would be that much termite damage. And we didn't know that the grade of the lot slopes into the house instead of away from it, meaning that moisture continually eats away at the foundations. We also didn't know that no one has ever bothered to replace the aluminum wires in the house, which means that the chance the old, faulty wires will suddenly catch fire is actually quite high. The repair would require ALL of the wires in the house to be completely torn out and replaced. The inspector estimated that that fix alone would cost us $4000 - $6000. With everything that would need fairly immediate attention, Dave and I are suddenly looking at about $20,000 of repairs right from the outset. We have money saved, but not THAT kind of money. (Note: the bank is selling as is, so it would be useless to ask them to contribute to those kinds of costs - we wish!  We really, really wish!)

Needless to say, we're a bit disappointed. We have both been cautious and haven't let ourselves get so attached to this house that we can't back out now. But it is daunting to consider starting over again from scratch, especially when there were so many "intangibles" (like the neighbors, like the perfect timing) that felt so good and might be very difficult to find again. We haven't told the bank no yet, but it would certainly be foolish for us to try to go ahead and do one repair at a time. See all the bullet points above. If we wanted to spend that kind of money, we might as well be looking for a nice, newer 130,000 home. At least then the money would be part of a mortgage!

1 comment:

Scott said...

From watching a lot of HGTV/DIY network, you want an inspector that is through and tells your everything. So now you know what you need to do and you can take your time in the repairs.

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