Friday, May 22, 2009

House Hunting to House Sitting

Livy
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.

Tuesday, May 19, 2009

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.

Monday, May 18, 2009

Denied

... And our offer was declined.

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

Sunday, May 17, 2009

Offer

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

Wish us luck!

Wednesday, May 13, 2009

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.

Tuesday, May 12, 2009

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.

Monday, May 11, 2009

Housing

As I said (oh, months ago), splorp! and I signed our new lease.

Then we started house hunting.

Hmm, maybe we went about that backwards. Maybe we should have started the house hunting before deciding if we were staying or leaving.

We did a lot of deep thinking about what kind of home we want to buy: Single family detached, 3+ bedrooms, 2 baths, with at least a small yard (we would like to get a dog), no pool, low or no HOA fees, a slab foundation, and an attached garage. In theory we would find a home exactly in between our places of work, but really we're hoping to settle for something that will shorten splorp!'s commute without making mine completely ridiculous.

Not a lot of success to report so far. We did find a house we liked, with a good listing price. It had a smaller square footage than we expected to like, but it made up for somewhat small bedrooms with a layout that was very open, and a kitchen that was very nice.

So, we brilliantly thought, before we put an offer on it, we'll take my parents to see it. Hey, they're local, they've owned a home, they've done home repairs, they know what to look for, right? Dad was the only one available, so he and splorp! took a trip.

Turns out tapping into my dad's experience was an excellent decision, as he saw a number of things we never would have seen. Between the visibly cracked and slumping slab foundation in the garage (probably damage left over from the 1994 Northridge earthquake), the electrical wiring that was not updated (still two-prong, with no grounded outlets, though it had what were probably "faked" grounded outlets in the kitchen remodel), the 60 amp electrical panel (my parents' 4-bedroom uses 160 amps), and the water and mold damage where the bathroom wall butted up to the kitchen wall (and the resulting 10 feet of soggy wall), we decided to pass.

Right now we are waiting for more to come on the market. We have been on tours with our Realtor, and been to a couple open houses on our own, and we have come to the realization that we have more or less tapped everything in our price range in our market right now. Our realtor is being very good, though a little pushy on the "can you stretch to $xxx" over what we told her was our final budget (no, no, and NO). We're realizing we just have to be patient.