The Weight of Money

Time to discuss last week’s inspection. Obviously, it wasn’t simple, otherwise I would have said “things look great!” and moved on. While the following faults are not necessarily minor, both the inspector and we agree that it is a great old house.

First, the biggest issue is some unexplained shifting obvious in the second floor interior. Old houses settle and shift over time but this isn’t “old sag.” This is clearly recent and active shifting and we don’t know what is causing it. There is no access to the foundation under the addition and that limits our ability to get a better look. What confuses us even more, evidence is only visible on the second floor, no visible indicators on the first floor interior or in the attic and the exterior looks great (well 100-years-old kind of great). So, we don’t know what is going on, but we’re concerned. Do we think it is going to fall over anytime soon? Not at all. But it is something that could cost a considerable amount of cash to fix in the near (within 5 years) future. Strike One.

Second is another structural issue that is low on our priority list, yet high on our response list. There is a newer exterior chimney, probably new within the last several years, that is moving away from the house. Obviously bad news for the chimney and the foundation but it is something that we can clearly point at and say “look! problem!”. But, it isn’t high on our priority list because the broiler has only a few more years left in it and then we would replace it with another heating system that doesn’t need the chimney. So, we want them to pay for a chimney replacement (replacement is the only option at this point) and we’ll hold out another year or so and take it down and the boiler out. In the mean time, we’ll do what we can to ensure no further shifting, that there are no cracks in the chimney liner, and that it doesn’t take out the side of the house or any parked cars. Strike two.

The first two structural issues are not related, at least not obviously. The first issues affects the addition that was added to the house at some point in time. The chimney is attached to the original part of the structure and that part isn’t going anywhere. The primary structure has the heftiest, thickest, and most close-set support timbers I’ve ever seen and a stone foundation that goes down a good 6 feet. That portion is sturdy, but the other part? We don’t know.

There are a bunch of other little things that add up as well: repair a post and bean in the basement that is deteriorating, replace all rotted exterior wood (fascia, soffits, etc.), sand, prime, caulk, and paint exterior, replace side entry roof, repair and clean all gutters, get the kitchen drain working properly.

We’ve made up a price list of the repairs — all numbers are pretty much pulled out of the air.

• Shifting Addition: unknown, $30,000+
• Replace Chimney: $8,000
• Replace post and beam: $500
• Fix drain in kitchen: $300
• Paint Exterior (replace rotted boards): $2,000
• Replace side entry roof: $2,000
• Replace broken windows: $500
• Repair and clean gutters: $500
• Total: $43,800

Our first round of negotiations is to tell them to fix everything. Seeing as this is an “as-is” sale, that isn’t going to happen. Our agent was talking about us getting more cash back at settlement, but we don’t think that’ll work cause our lending agency wouldn’t like it and we don’t want that cash going straight to a contractor. What we want is a reduction in price, even if it means it only saves us a couple dollars a month — that’s a couple of dollars that could be going to principal.

Do I think we’ll get a 40K reduction in price, not at all, but I will be pushing pretty hard on the structural stuff because we don’t know what is going on. That alone means that 30K could be a drop in the bucket to the reality of the situation. Or, it could be what we think it is and the cleaning the gutters an rerouting water will help solve the problem — when you don’t know, you don’t estimate low and hope that you’re right. For now, I’ll assume that we need to replace every single joist-timber under the addition (which would be way more than 30K, I’m sure).

To clarify, we don’t think the house is in serious trouble and our inspector didn’t either, but it is indeed a bargaining chip. We’ve set up a time for a structural engineer to take a look, but we feel she may not be able to tell us much more than we already know because we don’t have access to the foundation under the addition. When we buy the place, we’ll be fixing the grading and redirecting water that is probably not helping the situation. In the mean time, we’ll see what we can do to drop the price of the house somewhat.

Next steps: wait for the seller’s response to our request to fix everything and see what this week’s termite inspection says - maybe that’ll throw in another bargaining chip as they are required to spend up to $5,000 to fix any problems found. However, I’m hoping that nothing is found in terms of termites.

We’ve finally made it to the home inspection and I’m nervous, anxious, excited. This could be a great day if we learn that everything look good enough to survive another 137 years, or devastating if we learn that there are some problems too major for us to fix later on. I’ve moved from refusing to be excited to confidence that this is ‘the house’. Of course, it isn’t ‘The House’ in the sense that it’s the greatest thing since sliced bread, but instead it is the house that we can live in for the next 10 years at least. The neighbor factor is what impacts the longevity - perhaps they’ll be selling their property in the next ten years, we’ll have conquered our finances, and be able to buy them all out, level their houses, and expand our borders — basically reverse the process that allocated all those lots anyways (chopped up farm land).

I needed to get a lot of stuff done before the inspection, but pins and needles have prevent any rational work. Instead, I’m just watching the clock tick and looking forward to getting more pictures, measurements, and anything else we can think of. I’ll post some pictures tomorrow.

It looks we’re a few steps closer to buying a home. We put an offer in on Saturday and our realtor called us last night to say that they wanted another $10,000 to cover the points we requested. We said no, that wasn’t going to happen, we refused to go higher on the price but we did reduce it to just 2 points (which we needed to do anyway according to our mortage broker).

I figured we’d lost the house, but I got a call today and they accepted our compromise and it looks like all system go for getting the house. Now, I’m refusing to get excited because we’ve made it to this point before. I’ll get excited after all the inspections come up clean and it appraises high enough.

But, if all does go well, we’ll be walking into our new home come the middle of June. Guess we need to start packing — didn’t we just unpack!?

Life continues to be a whirlwind of activity.

We put an offer in on the house we saw on Friday and are anxiously waiting to hear back from the seller. I had a flutter of excitement when my realtor called this morning, but it turns out that she forwarded the wrong approval letter with the contract and is faxing the right one off today. We’re still up in the air whether well be applying jointly or with just the partner’s name — there is one lending agency that will have much better rates if the partner applies alone, otherwise combined is not problem.

Monday brings the Carnival of Personal Finance No. 95 and many visiting readers. Thank you to the many kudos, your support encourages me to continue our positive progress.

This Friday is opening night for the art show that a friend and I are presenting in. I spent all Sunday putting the finishing touches on my 3D sculpture. I spent one evening last week painting a beautiful underwater scene in the exhibit space. Tomorrow I’ll be going down to finish the painting and see what else we can add to the space to make it attractive.

My progress on getting sewing work completed has been falling behind. Hopefully my client isn’t too upset by this since I did tell her there would be a delay while I worked on artwork for the show. She emailed me today hoping for product delivery early this week and I’ve still not started. Hopefully I can drop something off on Friday and pickup some more items to help gather more funds for our home — I’m debating earmarking 50% of these funds for home decoration since the partner has already vetoed any improvements within the first 6 months of moving in.

I have five interviews scheduled for this week (interview in connection with my job, not job interviews) and that’ll keep me out of the office for a couple days. While I don’t care for my current office/job, I must admit that I am getting some great professional experiences and opportunities.

We’ve seen a house we think we want. Oh, madness to think that spending just an hour scouring a place from top to bottom is enough to commit to living there indefinitely. The space isn’t as much as we wanted, but enough for what we need. The house isn’t tiny but may have some space challenges just the same. There may be some structural issues that need addressed — for older home, you don’t jack them up, you just stop them from sagging more.

I’m excited. The partner actually wanted to act on this, he’s been the one always dragging his feet with considerations. Perhaps it is the losing the last house that we were on the fence about that has him suddenly motivated. Time has been ticking and we’ve certainly felt the strain of it.

So, the nitty gritty details: It is an awesomely, old house - 1870s old house. There are three spacious bedrooms, two full baths (major plus! for old homes), gas stove (major plus for the area we’re looking in), .8 acres (not what we wanted, but not too small either), small cellar good for wine and veggies, and a couple of small extra rooms.

The potential major downsides: it is an older house with older heating system (coal and steam to water conversion radiators), the floors sag in some areas and concerns about structural integrity versus normal old house drooping, high speed internet is not available, maybe there are not enough extra rooms, no garage or workshop - must add something for the machine shop, we’ll not be cutting our expenses getting this house.

So, tomorrow we either go and make and offer or we decide that this isn’t the house an continue the process. However, it’s looking like we’re leaning much more on yes, than no, this time around. But lets see what dinner and a bottle of wine does for our decision making process.

Housing adventure summary, thus far:

• Round One was a four bedroom rowhouse in downtown Westminster. Our offer ($175K) was accepted, but the seller failed to behave ethically and drug his feet so long we walked out on the contract.

• Round Two was a one (actually two) bedroom, tiny, cute house in dense, residential Catonsville. We put an offer ($180K) in but it was reject in favor of a higher offer — it was listed at $200K and a one-bedroom simply isn’t worth that much.
• I’m not getting my hopes up on round three because I expect another buyer will come in and outbid us ($250K), or that the inspections will uncover something more than expected. However, I do hope the inspection will give us some wiggle room on the price and on what needs to be taken care of.

We finally met with a new mortgage broker. The broker we were using last year dropped out of the business and we’ve been trying to find someone new. I think I like this one, she seems really on top of things, supportive on our needs, and willing to do whatever to help us into a house.

So, we now have some new numbers to go with. Last year we were looking at 150K-175K for a house. We’re now looking more in the 200K-250K range. That really helps us find something, but it is still slim pickin’s. These numbers will help us move forward and give us something real to work from instead of the numbers I was making up.

Oh yeah, those are not “what we’re approved for” numbers, those are numbers based on what we want to spend a month. Of course the bank will give us much more (much, much more) but were smarter than thinking we can afford what the bank wants to give us.

I’m racking my brain to solve our current housing dilemma — not enough income/savings to buy a house and the rental market is too high to be able to save for a house. Another idea I’m tossing around may work or may destroy us — stay in the partner’s one-bedroom apartment for a year.

The daughter and I currently live in the house upstairs and would have to give up our two rooms and compact into a 1000 square foot basement apartment with the partner. It would be a big adjustment to the space that we share now, but not something that hasn’t happened for the daughter and I before. The daughter and I shared one bedroom apartment in Wisconsin and, prior to this place, shared a single bedroom in a single family house where we had to share the rest of the house with 8 other people — we didn’t use the public areas of the house.

This is a big basement apartment but it is currently seriously cramped with the partners things. If we clear everything out, which would be the plan if we were to move somewhere else, then maybe we could configure the space so that it would work for the three of us.

The benefits:
- the daughter would not have to move again — we have moved 9 times in her 10 years and would be moving into temporary housing if we move now just to move again in a year. We’ve been here for 20 months — the longest she has ever lived in one place.
- rent is affordable — $600 a month is the current rent and keeps us well within the partner’s ability to provide for everything while my income can go straight to saving for a house.
- workshop space — the partner will retain the use of the workshop space until we can move to a house where he can move his thousands of pounds of metal.
- good commute - the partner is 7 miles from work.
- good community - we don’t have to worry about the neighborhood, get to remain in a beautiful area for another year where the daughter has many, many friends just down the road.
- good schools - our cheap rental options will put the daughter in lower quality school for a year.
- month to month rental - there is no formal lease agreement or anything and we wouldn’t have to lock in for a year or anything

The drawbacks:
- very cramped living spaces for three people — with two it was alright cause I didn’t need privacy, but with three of us on top of each other, when will we have time for the intimate things (shock, newlyweds who’d like to ensure they’ll still have a sex life).
- continued living near housemates that are driving me nuts — but I won’t be living with them anymore
- big change in living conditions when the daughter won’t have free reign of the house anymore.
- not many places to go to get out of the house — I worry I’ll get really cramped and need to “get out” for a while, but there is not a lot of places to get out to
- serious reduction of hobbies and living space activities if we are really cramped — how to still give us downtime when we are all on top of each other?
- not sure the housemates would go for it.

This is a lot to think about and I’m feeling a bit pressed on alternative options. What do yall think? I’ve really enjoyed and appreciated the advice and comments I’ve been getting on here.

UPDATE: The housemates want us to move out and also move everything out of the workshop as well. So much for this plan.

So, our house buying adventure isn’t going smoothly any more. I find it rather amusing since earlier this week I’d told the partner that I don’t want the house — more on that in a bit. However, they sellers have been majorly dragging feet on the amended contract that includes the details that we’re going to do repairs prior to purchase so we can get the house. We’ve been pestering them and getting no where. Yesterday, our agent finally gets theirs and is told that they have had interest from another buyer. The house has been on the market as available this whole time — argh! So basically, our agent is pretty certain that they are just stringing us along hoping something better will show up. However, closing is only two weeks away since the extended closing date is in the amended contract that hasn’t been signed and there is no way we can meet it since no repairs have been done. This really pisses me off, but–

Like I said, earlier this week I really wanted to walk away from the house. As I think more and more about all the repairs needed now and learn more and more about repairs and restoration and renovation of old houses, I’m certain that this is going to be a much bigger headache that I originally planned. Yes — now is certainly a bit late to think this, but that is irrelevant. I would not walk out on our contract just because I changed my mind — that is wrong. But, if we were given an out, like the one that has presented itself, I would want to take it.

No, I wouldn’t hate it if we got the house — I do like the house a lot and have gotten very committed to the house. But, when I consider the negative impact it will have on our budget, the fact that we’ll have almost no equity in the house for several years due to the creative mortgaging needed to get it (35-year fixed rate, first 5 years interest), and the expenses bound to show up once we are living in the house and see things that must be fixed and how one things always leads to another in old houses.

Also, this is not a dream house for us. In fact, it is just a place holder for needing to move again in a few years. I’ve had lots of dreams of fixing the place up to how we would like it — but what is the point when it still won’t be what we need? Plus, we won’t really have the money to fix it up any more than to just be able to live in it. Then, when it comes time to sell it, it’ll still have all the limitations it does now and probably be just as hard for us to sell as it has been for the current owners.

So, I’m trying to sell the partner on just renting for another year somewhere — finding an affordable place in this area is almost impossible — would give us enough time to get all our ducks in a row to buy a house that we really want. I know that I can build a savings plan and a budget that will get us out of all credit card debt and build up house savings within 1.5 years. I don’t think the partner believes this, but since I saw myself save over $5,000 in less than six months I know that I can make it happen. Plus, in a year or so, I’ll have a job too and that will add a lot of help in being able to buy something we want to live in for a while.

So, I’m annoyed about the house things but I am hoping that the people bow out and we can either start looking at other houses — a possibility if the price/space is right — or get on with finding a place to rent for a while.

The home inspection was completed and I’ve just read over the report — bummer. He didn’t write up the report on the spot to deliver to us, which I was expecting and even our realtor expected — anyone else ever have that?

But the main issue is that there is more on the list than what he mentioned to us during the inspection. This really sucks because we’d already wrapped our minds around the issues he mentioned and figured we’d be able to get them taken care of. But now, I’m not so sure. Written up on paper sure makes it look a million times worse than it is.

There are tons of comments about cracking plaster ceilings and how they must be repaired, but they really looked more like minor blemishes on the ceiling. He is listing that the ceilings need repaired for every room, which will be impossible while tenants are in the house and may be out of our budget.

Now, this inspection is a sore point for me because, due our loan product, any needed repairs must be completed before they’ll approve it. The seller refuses to do any repairs and we said we’d do minor ones if it meant that we’d get the house. Yes, we want to know about the other issues wrong with the house because we’ll fix them once we move in. We just wanted to have the bare minimum repairs required in order to get into the house. I’m not sure how this will affect things and our ability to get the house.

I’m so pressed for time right now, it being finals week and all, that I am trying to avoid thinking about it.

progress update:

We offered 168.5K on the house, in writing, with a 5K ernest money check. Within a few hours, we had a response for 175K firm and no repairs. We already figured on the no repairs thing and haven’t seen much that would need repairs, just updates needed when we can find the money.

However, there is some concern about the financing we’re planning to use. It is a Maryland program that will give us the purchasing power we need to get up to 175K and an ideal interest rate (6% fixed with no points) and we can use a down payment/closing cost program to help offset the cash needed. The problem is that this loan program is known to be very picky about the properties and requires repairs. It looks like we may agree to do an amount of repairs within reason — I think we have to put a dollar amount on the within reason parameter but I can’t say what that should be.

So, tonight (hopefully) we meet with the loan officer to get the underwriting started. The partner is getting swamped with work and starting to feel very stressed with everything pulling at him from all directions. I’m trying to be supportive but I feel like all of my life is pulling me apart right now.