The links below will provide you with a detailed 8 step guide to purchasing your first home. The guide is interlaced with stories about our home buying process as well as tips we've picked up along the way.
Showing posts with label lesson. Show all posts
Showing posts with label lesson. Show all posts
Wednesday, October 5, 2011
Friday, September 30, 2011
Update - This is No Fun
It's Friday and we should be cruising into closing. We've got to finish packing and be out of our apartment on Sunday. One night in a hotel, then close on Monday. Not fun, but not terrible.
Things began to fall apart today at around 3pm.
Dealing in Bad Faith
A few weeks ago, the house sustained significant flooding in the basement during Hurricane Irene. The seller described this as a once in a decade type event, and we also confirmed with neighbors that flooding was unusual. We were concerned though that the washer, dryer, water heater, and central air equipment might have been damaged.
We were told through the seller's attorney that the water heater was being replaced due to damage, and that the seller had paid for the basement to be pumped, cleaned, and treated so that mold wouldn't grow.
We inquired about the other equipment - we were afraid that it might be damaged or destroyed. We requested that the seller have all the equipment inspected and pay for repairs if necessary. The seller's attorney stonewalled us saying that it was their duty to deliver the items in "working order". We want back and forth, but in the end, unfortunately that's the wording of the contract.
Flash forward to today - my attorney sends along the detailed final closing costs (more on that later) and it includes a $200 credit for the dryer. He contacted the seller's team, and we find out for the first time that the dryer was destroyed. We had inquired about the equipment and asked for them to be inspected, but we did not specifically ask what condition they were in.
In the contract, the seller had included a rider which said if any of the equipment was no longer in working order, we'd get a $200 credit per item. We included a rider subsequent to theirs, which said all equipment must be delivered in working order and that our rider supersedes theirs in all cases. Therefore, the seller is obligated to deliver the equipment in working order.
So now we are headed to a standoff.
The dryer, new, cost >$1,000 (it really is a high end machine). We think $750 is fair compensation, as it is a few years old and I found several listings on the internet for the machine ranging from $750 to $1,000. The language in the contract is clear that the seller needs to deliver a working machine. Since that is not an option, we're in a bit of a gray area.
The worst part is that we are heading into this standoff with no leverage. The seller and his team know that we are out of our apartment and will be staying in a hotel. The dollar difference is only $550, and it's not worth it for us to refuse to close and burn through the $550 in truck rental and hotel costs in a few days.
I think the seller and his team are clearly acting in bad faith - we inquired about the equipment weeks ago but we first hear about this just before closing. Their $200 offer is ridiculous given the value of the machine and that we are legally in the right.
I can't say I feel that this is going to work out well for us.
Surprises in Closing Costs
We've discussed what closing costs would be for months with our mortgage broker as we knew we'd be tight on cash. We found out today that we need to pony up several thousand dollars more on Monday, and there's nothing we can do about it.
The first increase in closing costs is expected - at closing you have to pay for the interest due on the loan for the remainder of the first month. When we had scheduled closing to be in late September, that total was four or five days worth of interest. Now that we are closing in the very beginning of October, we owe almost a whole months worth. The good news, though, is that our first mortgage payment won't be until December.
The second area where we were surprised was in the property taxes due up front. Property taxes can be collected by a municipality annually, semi-annually, or quarterly. Our broker assumed it would be quarterly. At closing, the buyer has to reimburse the seller for the property taxes paid that cover the days, weeks, and months after closing.
In our case, White Plains collects taxes semi-annually, not quarterly, so the two payments are much larger and cover longer periods of time. We found out today that the seller recently made a payment covering many months ahead, so now we have to reimburse him for that. There wasn't really a way to know this ahead of time, but the end result is a few thousand dollars due Monday that we weren't expecting.
On To Closing
Our attorney and Realtor are contacting the seller's team over the weekend to try and work something out about this dryer. They are in the wrong, but we have zero leverage, so we'll see how this plays out. It will be interesting to see the seller and his attorney face to face on Monday - I'd like to sign the final document then tell them both how I really feel.
Tips to Avoid Being Stuck in a Bind
Things began to fall apart today at around 3pm.
Dealing in Bad Faith
A few weeks ago, the house sustained significant flooding in the basement during Hurricane Irene. The seller described this as a once in a decade type event, and we also confirmed with neighbors that flooding was unusual. We were concerned though that the washer, dryer, water heater, and central air equipment might have been damaged.
We were told through the seller's attorney that the water heater was being replaced due to damage, and that the seller had paid for the basement to be pumped, cleaned, and treated so that mold wouldn't grow.
We inquired about the other equipment - we were afraid that it might be damaged or destroyed. We requested that the seller have all the equipment inspected and pay for repairs if necessary. The seller's attorney stonewalled us saying that it was their duty to deliver the items in "working order". We want back and forth, but in the end, unfortunately that's the wording of the contract.
Flash forward to today - my attorney sends along the detailed final closing costs (more on that later) and it includes a $200 credit for the dryer. He contacted the seller's team, and we find out for the first time that the dryer was destroyed. We had inquired about the equipment and asked for them to be inspected, but we did not specifically ask what condition they were in.
 |
| Such a headache! |
So now we are headed to a standoff.
The dryer, new, cost >$1,000 (it really is a high end machine). We think $750 is fair compensation, as it is a few years old and I found several listings on the internet for the machine ranging from $750 to $1,000. The language in the contract is clear that the seller needs to deliver a working machine. Since that is not an option, we're in a bit of a gray area.
The worst part is that we are heading into this standoff with no leverage. The seller and his team know that we are out of our apartment and will be staying in a hotel. The dollar difference is only $550, and it's not worth it for us to refuse to close and burn through the $550 in truck rental and hotel costs in a few days.
I think the seller and his team are clearly acting in bad faith - we inquired about the equipment weeks ago but we first hear about this just before closing. Their $200 offer is ridiculous given the value of the machine and that we are legally in the right.
I can't say I feel that this is going to work out well for us.
Surprises in Closing Costs
We've discussed what closing costs would be for months with our mortgage broker as we knew we'd be tight on cash. We found out today that we need to pony up several thousand dollars more on Monday, and there's nothing we can do about it.
The first increase in closing costs is expected - at closing you have to pay for the interest due on the loan for the remainder of the first month. When we had scheduled closing to be in late September, that total was four or five days worth of interest. Now that we are closing in the very beginning of October, we owe almost a whole months worth. The good news, though, is that our first mortgage payment won't be until December.
The second area where we were surprised was in the property taxes due up front. Property taxes can be collected by a municipality annually, semi-annually, or quarterly. Our broker assumed it would be quarterly. At closing, the buyer has to reimburse the seller for the property taxes paid that cover the days, weeks, and months after closing.
In our case, White Plains collects taxes semi-annually, not quarterly, so the two payments are much larger and cover longer periods of time. We found out today that the seller recently made a payment covering many months ahead, so now we have to reimburse him for that. There wasn't really a way to know this ahead of time, but the end result is a few thousand dollars due Monday that we weren't expecting.
On To Closing
Our attorney and Realtor are contacting the seller's team over the weekend to try and work something out about this dryer. They are in the wrong, but we have zero leverage, so we'll see how this plays out. It will be interesting to see the seller and his attorney face to face on Monday - I'd like to sign the final document then tell them both how I really feel.
Tips to Avoid Being Stuck in a Bind
- Communicate frequently with the seller. We should have explicitly asked him if anything was no longer in working condition.
- Avoid being forced to close - if we had our apartment for 15 more days, we could threaten to delay or threaten to walk away if they don't settle
- Every time an important date changes, make sure you know how that affects all the closing costs
- Ask the seller or the municipality about taxation policies and due dates
Thursday, September 29, 2011
Tips to Avoid Real Estate Scams
While we hopefully all know to avoid e-mails asking for money to release funds held in Nigerian, scam artists are trying new routes, both on and offline.
Avoid Anything Overseas
I ran into this one myself and actually followed along for an e-mail or two. We were looking for a new rental; both apartments and houses for rent. A seemingly normal Craigslist posting offered to rent a nice house for a low rate, but not astonishingly low rate.
I thought to myself, "well, this is possible, perhaps someone is downsizing or moving and looking for help with the mortgage payment for a few months". I looked up the address on Zillow and saw that the house was also for sale.
I e-mailed the poster and got a response asking for more information about myself including when I'd like to move in and other basic questions. To this point, the only red flag in my mind was that the asking rental price was low.
The next e-mail I received was a dead give-away. Poorly written, several woe is me stories about the missionary work this person was currently doing overseas in Africa, and then a request to submit a full application. The e-mail also said that upon receipt of my deposit, we'd be sent the keys. I didn't respond.
Flash forward to a few months ago. I mentioned this to our Realtor. He said this was a growing scam. Anyone can see which houses are for sale and possibly vacant. They can copy the pictures from the listing to make it seem like they do live there.
Another Realtor in his office had driven past a home he was selling and saw moving trucks. He stopped the people and asked what was going on. They explained how they were renting the house and so forth. He had the unfortunate task of informing these people they had been scammed and that the house was not for rent. They had to put their belongings back in the moving truck.
Go Straight to the Source
This might not apply to many people, but this was a frustration I ran into when I was renting in NYC. I found a post about an apartment on Craigslist. It sounded nice and the broker said there would be no fees. I actually knew the housing complex.
While it wasn't really a "scam", I met the broker on the street corner and he walked 25 yards with me to the leasing office. The leasing agent for the complex handled the rest of the process. I found out at the end that new renters either got $500 off, or $250 off and $250 to whomever referred them. Apparently this broker (and others) were making $250 a pop for the 25 yard walk.
Avoid Anything Overseas
I ran into this one myself and actually followed along for an e-mail or two. We were looking for a new rental; both apartments and houses for rent. A seemingly normal Craigslist posting offered to rent a nice house for a low rate, but not astonishingly low rate.
I thought to myself, "well, this is possible, perhaps someone is downsizing or moving and looking for help with the mortgage payment for a few months". I looked up the address on Zillow and saw that the house was also for sale.
I e-mailed the poster and got a response asking for more information about myself including when I'd like to move in and other basic questions. To this point, the only red flag in my mind was that the asking rental price was low.
The next e-mail I received was a dead give-away. Poorly written, several woe is me stories about the missionary work this person was currently doing overseas in Africa, and then a request to submit a full application. The e-mail also said that upon receipt of my deposit, we'd be sent the keys. I didn't respond.
Flash forward to a few months ago. I mentioned this to our Realtor. He said this was a growing scam. Anyone can see which houses are for sale and possibly vacant. They can copy the pictures from the listing to make it seem like they do live there.
Another Realtor in his office had driven past a home he was selling and saw moving trucks. He stopped the people and asked what was going on. They explained how they were renting the house and so forth. He had the unfortunate task of informing these people they had been scammed and that the house was not for rent. They had to put their belongings back in the moving truck.
Go Straight to the Source
This might not apply to many people, but this was a frustration I ran into when I was renting in NYC. I found a post about an apartment on Craigslist. It sounded nice and the broker said there would be no fees. I actually knew the housing complex.
While it wasn't really a "scam", I met the broker on the street corner and he walked 25 yards with me to the leasing office. The leasing agent for the complex handled the rest of the process. I found out at the end that new renters either got $500 off, or $250 off and $250 to whomever referred them. Apparently this broker (and others) were making $250 a pop for the 25 yard walk.
Tuesday, September 27, 2011
Will Assaulting the Seller Help Closing?
More than two weeks ago, the seller (through his attorney) asked us if we'd be ready to close on Friday, September 23rd as scheduled. We said "Yes".
We got the "clear to close" on Monday, September 19th, but then the seller said he needs at least 7 days notice to close. So we said, "Fine, let's do Monday, September 26th".
We next were told the earliest the seller could close would be Monday, October 3rd. Our rental lease ends on Sept 30th, so this is a problem. Could we move our belongings into the garage ahead of close, we asked.
Well, we've waited five days and finally were told by the seller's attorney "Well, there might be space in the house for your belongings, but I will advise my client against allowing you to do so because of the liability".
Should we physically assault the seller and his attorney? (Just a joke! I bet a lawyer could make a big deal out of this).
Because the seller apparently doesn't care about screwing us over (by the way, he is moving in with his mother 15 miles away, so it isn't like he's waiting on his next home to be ready) we will be moving our belongings into a U-Haul truck on Friday night. We'll then need to find a place to park it. Pamela, Akina, and I will then find a dog friendly hotel or stay with a friend until Monday. We'll go to closing on Monday, and depending on when we get the keys, move in Monday night or Tuesday morning.
Lessons Learned
I have a sneaking suspicion that the seller's attorney is behind all of this. We'll get to closing and the seller will have no idea how much trouble he has caused us. "Oh, I thought you wanted to close on October 4th. I was ready to go a week ago!". That's my hypothesis at the moment at least.
We got the "clear to close" on Monday, September 19th, but then the seller said he needs at least 7 days notice to close. So we said, "Fine, let's do Monday, September 26th".
We next were told the earliest the seller could close would be Monday, October 3rd. Our rental lease ends on Sept 30th, so this is a problem. Could we move our belongings into the garage ahead of close, we asked.
Well, we've waited five days and finally were told by the seller's attorney "Well, there might be space in the house for your belongings, but I will advise my client against allowing you to do so because of the liability".
Should we physically assault the seller and his attorney? (Just a joke! I bet a lawyer could make a big deal out of this).
Because the seller apparently doesn't care about screwing us over (by the way, he is moving in with his mother 15 miles away, so it isn't like he's waiting on his next home to be ready) we will be moving our belongings into a U-Haul truck on Friday night. We'll then need to find a place to park it. Pamela, Akina, and I will then find a dog friendly hotel or stay with a friend until Monday. We'll go to closing on Monday, and depending on when we get the keys, move in Monday night or Tuesday morning.
Lessons Learned
- If you are up against a deadline (lease ending) leave yourself PLENTY of time. Besides delays in getting the "clear to close" you could run into a slow moving seller. Or, perhaps the seller is waiting on their own new house to be ready.
- Put strong penalties into your contract if closing gets delayed due to laziness. Once you have received "clear to close' make sure there are monetary penalties in place if either side fails to move at a reasonable pace.
- Communicate often. I would've thought when the seller asked if we'd be ready to close in 2 weeks, that'd be the signal to start the clean up and move out process. Apparently not.
I have a sneaking suspicion that the seller's attorney is behind all of this. We'll get to closing and the seller will have no idea how much trouble he has caused us. "Oh, I thought you wanted to close on October 4th. I was ready to go a week ago!". That's my hypothesis at the moment at least.
Thursday, September 22, 2011
Disaster Strikes
My first blog post noted that by starting a blog I was jinxing our process.
Today it hit - even though we have been talking about late September as a closing date for some time, today the seller informed us that he wouldn't be ready to move out / close until Monday, October 3rd.
As renters, this creates quite a problem. Our options at this point:
Today it hit - even though we have been talking about late September as a closing date for some time, today the seller informed us that he wouldn't be ready to move out / close until Monday, October 3rd.
As renters, this creates quite a problem. Our options at this point:
- Asked our current landlord if we could stay longer - while they have rented our apartment out, that person isn't planning to occupy the apartment until October 10th
- Move our furniture into "our" garage - this may be possible with the seller's permission, although we'll have to then move it out of the garage after we close. 2 moves < 1 move. We'd also have to find a place to stay for Friday night through Tuesday
- Move our furniture into a moving truck and rent it out until we can move in. We'd also need to find a place to stay.
Since we can't stay in our apartment, there isn't much point in renting out another unit in our building for a month and pushing back closing.
Lessons learned:
- Communicate early and often with the seller and his lawyer / Realtor - make sure they understand the need to close "on time"
- Perhaps have your lawyer add a "late closing" penalty into the contract
- Try to schedule your closing date for the middle of the month / expect delays.
On the last point, I was walking our dog this morning and I ran into a woman I know from our building. She asked how the process was going and I gave her the update. She said that they once had a similar issue - there were three houses involved and they all needed to close at about the same time. Owner A was selling and moving into House X, Owner B was selling and moving into A's home, while Owner C was selling and moving into B's home. Closing needed to be coordinated for the same day. Needless to say, there were problems and the whole thing was a mess.
So, anyone have a place for Pamela, Akina, and I to live in for a few days?
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