Last year, I decided to take the plunge into real estate for the first time in my life. At 41, it's about time, right? Well, until I turned 40, I actually wasn't a fan of purchased real estate and thought it to be a waste of time and money. I didn't want to be tied down. I wanted money available to travel. Equity? For what? To be able to borrow more money? Yeah, that sounds like a GREAT idea. :/ Maintenance? Expensive and time-consuming. The ability to plant flowers, trees, and paint the walls the colors you want? Phht. Who cares? I have original art and photos on my walls and I live in a nicely landscaped apartment complex that someone else mows, plants, and maintains.
So went my thinking for 23 years. I moved out of my parents' house at 18 and never looked back. But something started to change when I landed my faculty position...and then made a few friends...and then met my boyfriend. Suddenly, my impulse is not to wander and move, but to settle down (perish the thought! shudders my younger self). Further, the lack of a contract, any raise in salary, and increasing expenses caused me to seriously consider buying a property that could do double-duty - my first home AND an investment property with a tenant. So last summer, I started looking.
Just looking at first. In the fall, I visited a few places for educational purposes - just to see what was out there, how much things cost, and what it would take to make this move. Then I started crunching numbers, watching my mutual fund slowly leak money as the free market free-fell, and slowly the picture cleared and one stark reality came into focus: If I could find the right place, I may be able to increase my income by a modest amount while also becoming a homeowner with all of the attendant tax advantages, thus saving money on two fronts. By December of 2011, I had done my research, decided to liquidate almost all of my remaining meager investment accounts (including most of my paltry IRA) in order to make the ultimate financial leap. My goal was to buy a property with a positive cash flow (if fully rented) AND a mortgage payment equivalent to my current rent payment so that I would firmly be living within my financial means (and better, with a decent rental payment coming to me each month).
During the second week of January this year, my real estate agent sent me a listing that I initially ignored because it was listed $18,500 higher than my anticipated high price point. And then, Jim (my boyfriend) and I met up with my agent to look at properties one weekend and I decided on the spur of the moment to add this particular property into the mix. Just because. My mortgage guy had just announced that I was pre-approved for $50k more than I wanted to spend, which gave me room to increase my high price point just a bit, but still be within range of my target monthly mortgage payment. The duplex was in a nice neighborhood, looked good in the photos, and seemed to be mechanically solid.
The first walkthrough sold me. Jim and I scoured this place with our eyes - his much more expert view allowing me to see value where before I'd seen a wall or a wire or a pipe - the seller attended our walkthrough and answered questions about history, work that had been done, changes that had been made on his watch. Two days later, I bid at my high price point ($15k less than asking price, but well within the acceptable low end range of offers that today's market expects).
Within two hours of making my offer, my agent called to advise that two more bids were coming in to the listing agent. I upped my price $15k to within $3,500 of the asking price. Much trepidation and negotiation ensued, but the seller accepted my bid and we started hammering out the details. The seller signed the agreement of sale and cashed my earnest money check the first week of February.
And then the seller died the second week of February.
Having a deceased seller in the middle of a real estate deal is highly unusual and from that moment on, this deal has gotten more complicated and difficult at every turn. I might drop over in a faint if my real estate agent or mortgage guy ever calls me with good news before this is all over and settled.
Fast forward to today. My real estate agent just called to say of the listing agent and seller's estate, "They're working on it." "It" being the final two pieces of paperwork that must be signed by the one tenant in the unit that I will occupy guaranteeing her move-out by May 30 and the other an FHA Addendum that confirms I've completed the necessary FHA-requested work (that was finished two weeks ago). I am set to close at 11 a.m. on March 30. All they have to do is sign and get the tenant to sign the move-out agreement. They've known this since last Thursday. And have done jack-squat. I have been hearing "they're working on it" since last Thursday and I've lost faith that anyone involved in this deal is actually "working" on anything other than obstruction.
For the life of me, I can't fathom why the deceased seller's sisters are stalling - with a signed agreement of sale and cashed deposit, they are legally obligated to fulfill this deal. I've gotten screwed with the tenant, but I'll squeeze my finances and possibly borrow some money in order to financially make it until July. I also now have a call into the real estate attorney who gave me very good advice after the seller died. My mortgage guy tells me that this paperwork must be completed by week's end or my mortgage might not clear and close in time to settle on March 30. I've told my agent that we must finish this by Friday or we're waiting another 30 days to close*.
* Why close on the 30th of the month, you may ask? What's the big deal? Well, it IS a big deal. Once I close on this property, I will be paying my rent until July because I can't get out of my lease. I will also be paying the mortgage. Both of these payments are about the same amount. The rent from my second floor tenant (in my new property) covers 2/3 of the mortgage, but I have to come up with an extra $300 a month out of thin air just for the mortgage payment. Fun. Here's why closing on the 30th of a month will help - when you close on the 30th of the month, you don't pay that immediate month's mortgage - you get a 30 day grace period. So, if I close on March 30, I don't start paying the mortgage until May 1. See the benefit?
Now, had the first floor tenant (the one occupying the unit I will move into) not demanded a free month's rent in exchange for moving out early (ironic, because she told me she WANTED to move out early...until she suddenly sensed she could screw someone over...), then I would have TWO months of rent from BOTH places in the bank, creating a much more comfortable cushion to pay the mortgage, water bill, pest control, etc. But as she DID extort this from me so that my underwriter would be happy, I will now be skittering on the edge for the next several months.
People keep reassuring me that it will all be worth it. I keep hearing that buying property isn't usually this ugly/messy/ridiculous/frustrating. Forgive my doubt. I have likened this experience to a chess game, poker, and a horror movie. If things work out, perhaps I will look back on this and laugh (as Jim predicts). But right now, I can tell you two things for certain:
1. I'm sick of hearing "they're working on it" and may well shove a pen into the eye of the next person who utters this toothless phrase
and
2. Real estate is NOT, I repeat NOT, for the faint of heart.
What phrase have you heard once too often to the point of irritation/annoyance? And what experience have you had with real estate?
No comments:
Post a Comment