House Hunting, and Being Out-Bid

Dog sitting went very well. Livy's dad will have me back in the future, which is always a nice thing to hear.

House hunting is not going well at all.

We saw a house we liked pretty well, and made an offer on it. It was a fair offer for the condition of the house. Not extravagant, not low-balled. An actual fair offer. Then we had to wait a full 3 days while they considered it, then they counter-offered for too much money but gave us only 24 hours to reply, we countered for more money but the middle of the two numbers, they took a full 3 days to consider it ... and ended up accepting a bid that came in at the last minute that was $25k over what we offered.

The irksome part is the seller is obligated to TELL us when they receive another offer, and they did not. Now, they're not obligated to tell us the value of the new offer, but they are obligated to inform us there is another offer on the table so we can decide if we want to increase our offer. They didn't bother.

Shady real estate people like this annoy the crap out of me. Why would I want to deal with you, if you're going to behave like this? In an industry that is built on personal reputation and repeat business, what a reputation you are building for yourself.

It's not as if we're trying to "steal" someone's house from them - we're perfectly willing to make a fair offer, but we're going to take into account the items that are wrong with the house - like the water stain on the ceiling (which may indicate mold or worse in the attic), the place next to the garage where from the ground to 3 feet up the stucco is primer grey, like it has been repaired but not painted (maybe someone backed into it with a car?) - we won't be able to match that paint color, so the house will need to be repainted. The garage door that is manual (no electrical opener), the broken window at the front of the house, the rest of the old windows that need to be replaced, the half-working sprinklers, and the carpet that needs to be replaced. Yeah, that kind of stuff. The stuff we would have to spend money on before we moved in.

Frustrating does not begin to cover it. We are probably 2 months into house hunting. We see 5 plus houses most weekends. And then we get out-bid, over and over.

We recognize that we are in a difficult price point - where there is a lot of competition from first time buyers (like ourselves). Houses often have multiple offers on their second day, and the houses sitting on the market have something really wrong with them - like earthquake damage (cracked foundation? no thank you!). A lot of them are REOs or Short Sales. And there are a lot of potential buyers.

Still, I asked my mom how many houses she saw before she found the one where they live now, and she said, "Oh, I don't think I saw 10."

We saw 10 in our first two weekends. And it feels like it will never end.

Wish us luck.

House Hunting to House Sitting

I am house sitting for about a week, for a very nice man with a lovely dog who is essentially his "fur baby."

Olivia, (aka Livy) is a sweet, sweet girl about 9 years old, and just full of love. She is also well-trained, which is truly a wonderful thing for a house sitter.

So many times when I house sit the dogs are just kind of "there" in the household. Someone feeds them sure, but they have little to no training, and they are terrors - which the family never seems to understand. "Oh, they're sweet, except this one doesn't like men." (No history of abuse, so why aren't you training him out of that instead of the exasperated sigh you're currently giving him while he barks and carries on?) Or, my favorite: "He's mostly potty-trained." (Come on lady, he's not a puppy, he's at least 4 years old. Get with the program - if he's not potty trained at that age it's only because you are too lazy!)

But Livy is a real joy. She has a schedule, sure, and she wants to go outside to potty as soon as I walk in, but that's the whole point of potty training, isn't it? She's so well behaved I can actually go on a walk with her, and she heels! And sits! Like she's supposed to! She also lays down on command, and is very responsive to your words, like "Go get your toy" or "Get that frizz" (Frisbee). No tricks, though I am trying to teach her to shake hands. Not going too well.

splorp! usually stays at home while I'm off house sitting. We do have a bird to take care of, after all, and some of the places I house sit just do not have comfortable beds (one in particular is a rock). But he will come and visit me tonight, and we will go out house hunting with our Realtor, and then he will take me out to dinner.

Normally I would cook, but (and this is a first in my many years of house sitting) this man has NO pots and pans in the house.

Thoughts on Being Denied

It sucks to be denied. Though our offer was "not accepted" rather than "denied" as I wrote, it doesn't soften the blow.

splorp! and I tried hard not to get too excited about the house we liked. We knew it would be a big blow to get our hopes up, and then have them taken away from us, so we made an effort to not talk about, "we could do this, we cold do that, wouldn't it be great to do ..." This turned out to be a good mindset, because in the end, we didn't get the house.

We have heard so many stories about people who put in offers on homes, only to get "not accepted" (aka "denied") time and time again. It seems like if you read any of the real estate sections on the major news sites you will read about people who placed offers on 6 different homes before finally being accepted for the one they now live in. And we personally work with people who have made offers in the local market, only to be "not accepted," or to withdraw their offer because the selling bank was taking too long to respond.

Too, we know the process of offer and escrow is not likely to be a quick process, even if our offer is accepted somewhere. Our Realtor told us 30 day escrows are unlikely, and sometimes 45 is pushing it, too. The banks are just so busy with all the houses under contract it's taking them longer and longer to process properties.

In fact, one of splorp!'s co-workers experienced a 3 month delay on their close of escrow - not because of anything he did, but because the house they wanted was found to have mold problems during the inspection. They petitioned the selling bank for either a repair before closing or money for them to do the repair themselves, and ended up receiving a $6,000 credit toward closing costs from the selling bank, so they could afford to do the mold remediation before moving in. This was probably a smart move on that bank's part, because now they would have been forced to disclose to a new potential buyer that "yes, we know the house has mold, and no, we're not intending to do anything about it." Giving up $6,000 was less expensive for them in the long run.

In spite of being bummed about losing the house we liked, we went and saw a newly listed property last night. Something just seems "off" about this one. The stupid part is this house has almost the exact same floor plan as a house we already saw and liked (but turned down due to a cracked foundation). I'm having trouble pinning down what seems strange about this house. All I can come up with is the master bedroom is much smaller than we would like, the neighborhood is a bit more run down, it has a bad asphalt driveway (which could be an expensive fix to pour a new concrete one), it's very close to a busy street (but we can't hear any road noise anywhere on the property or in the house), and the house was very, very cluttered, which made it hard to see the potential life we could have in this house.

The owner of the house was present, and she was very nice, answering all sorts of questions about repairs done, or not done, and apologies about the clutter as she and her soon-to-be-ex-husband are trying to find a rental while their house is being sold as a short sale.

Side note: I will have to remember something this house had which I have never seen before: a drive-thru garage. The 2-car garage had the standard 2-car garage door (and it was new) on the front as normal, but on the back, there was a 1-car garage door (also new) that led out to the back yard. I guess it would be perfect for a boat or small trailer, or a mechanic, or something. At the very least it's ideal for getting the lawn mower to the back yard (not that the house had any back lawn to speak of - it was all dead).

So, splorp! and I have not ruled this house out, but my mom probably said it best when she said, "It sounds like you're trying to talk yourself into liking this house."

What makes decision making hard is we know we are comparing it (unfairly) against the nicer, larger house we just lost out on, and it just doesn't match up.

Denied

... And our offer was declined.

Goes to show how screwed up the housing market is in So. Cal.

Offer

And today splorp! and I signed all the paperwork to make an offer on a house.

Wish us luck!

House Hunt Thoughts

I mentioned those pay-option ARM loans, and our guess that we're going to see a larger number of foreclosures soon. I glossed over how truly evil these loans are.

What happens with these pay-option ARM loans is you get a set of payments you can choose to make.

1. You can choose to pay the full amount of Principal, Interest, Tax, and Insurance (PITI - like if you had a traditional 30 year loan). [Most money out of pocket each month.]
2. You can choose to pay the Interest-only payment (where you're only paying interest on the loan, not paying down the principal balance you owe). [Lesser amount of money out of pocket each month.]
3. Or you could choose to pay an optional, even lower amount, which is what made these loans special. This amount was significantly less than either of the two other payment choices. What the Broker glossed over, as they were selling you the loan, is the amount of principal and interest you didn't pay was added back onto the loan as principal. [Least out of money out of pocket each month.]

Guess which one most people chose to pay?

All is merry until the loan reaches a certain point: usually where they have added $10,000 onto the principal amount of their loan. Then the payment terms change, and the homeowner no longer has choices about what to pay, they MUST pay the full PITI amount. Suddenly they have to pay an amount that doubles or triples their current payment. How many families do you know who live comfortably, but paycheck to paycheck? Doubling the mortgage payment can throw a real bender into the budget.

You may be thinking that this is a scenario that is uncommon. Just so you know, in our local Southern California area (and Las Vegas, Arizona, New York, Florida, and many other places where real estate was booming) prices and loan amounts are such that the homeowner enjoys a reduced payment for only a few months before they have unknowingly added $10,000 to their loan balance. Then they can't refinance without paying $20,000 or more in prepayment penalties.

Applicants were frequently "sub-prime" candidates, meaning they have credit scores which would not secure them the best rates on a traditional mortgage. Frequently these applicants' credit scores were pulled down by debt: tens of thousands of dollars of debt on their credit cards, car loans, and more.

Add to the mix inflated property values, Brokers encouraging the subprime loan applicants to "take advantage of the increased value of your home, take out a larger loan so you can pay off the debt on your credit cards," and loose lending standards, and you have a financial mess resulting in thousands of naive people choosing these pay-option ARM loans, choosing the lowest payment, quicly adding the $10,000 to their principal balance, and having their payment soon double or triple. They can never quite catch up with the drastically increased payments, and end up losing their home.

It was a nasty cycle, but one that was profitable for loan officers and brokers for many years.

Patience in the House Hunt

Why exactly do we have to be patient in our search for a home? We're waiting for a bunch more foreclosed homes to hit the market in our price range, and we're pretty confident they'll come soon. Stay with me here.

It's an unfortunate truth that the real estate market doesn't function solely on the number of houses available and sold. Ultimately it doesn't matter that a higher number of houses were sold last month than the month before. But the market also relies on the ability of homeowners to pay their mortgage.

Here's the thing: until unemployment numbers consistently go down we're not out of this recession, and people will continue to lose their houses.

Yes, fewer people were laid off last month, but overall there were still jobs lost, and the number of people unemployed still went up. Which means average people are still losing jobs, cutting expenses, can't afford to buy luxuries, and (surprise) can't afford to pay their mortgages, ultimately resulting in foreclosure.

A month ago (or so) the major news sites were exploding with the information about the number of foreclosure filings increasing dramatically "all of a sudden." Well, duh, remember back during the holidays, there was big news about a 3-month moritorium on foreclosures by Fannie Mae and Freddie Mac? Well, the 3-months is over. Foreclosure filings are picking up again, and the number will continue to rise for a while yet.

Here's an insider's scoop. I mentioned once before that splorp! worked for a big mortgage lender. The company was a major part of the predatory lending problem, and they were bought up by a big bank not long ago, so just recently dropped the mortgage company's name completely. I'm sure you can figure it out. For over a year he was a loan servicer, and his job was to answer peoples' questions about their loans, take payments over the phone, and solve problems.

Anyway, while he was doing this, he noticed a pattern: a whole bunch (tens of thousands) of these pay-option ARM mortgages (aka reverse amortization loans) were scheduled to re-set in April 2009, (where the interest rate will go up from its advertised low, low 1% rate to the average market rate) AND they featured pre-payment penalties that make it costly to re-finance before that.

Gee, April came and went, and we didn't hear about a massive number of re-financed mortgages (some, but not a lot). What we did hear about was a large increase in the number of NOD (Notice of Default) filings - this is usually the first letter from the bank to the homeowner stating their payment is late, and they have 90 days to catch up.

The clock is officially ticking. Three months from now, we'll see if our prediction comes true.