Exhalation & Disclosure

November 16th, 2009 by Editor B

I feel like I’m exhaling and relaxing for the first time since — when was it? — late July. That’s when the idea of moving first entered my head.

We’d learned our daughter had lead poisoning and then a few days later I had a close encounter with one of the guys from the corner. Ordinarily I would have laughed off the latter, but the news of our girl’s elevated lead level had softened me up emotionally. It was like a one-two punch.

That evening, as we visited our friends on Grand Route St. John, we stood out on the sidewalk having a drink and talking to neighbors. We noticed a house was for sale on their block, and I couldn’t help thinking how much nicer life would be if we lived there.

In the following days I started thinking about it more seriously and finally called our Realtor on August 5th.

I was leery of writing in much detail about the various steps of the process. Not superstition, just caution. Real estate transactions can be tricky, and I thought for once in my life I’d err on the side of discretion. So I started posting lots of music mixes instead of writing about the nitty-gritty details I was sweating.

I will try to recap the process now, mainly for my own amusement and edification. What follows may not be of interest to anyone else, but who knows?

Let me start by backing up a bit. We bought our house in 2002 for $107,000. Our 2009 Real Estate Assessment from City Hall estimated the fair market value at $170,000, which at the time I thought was a mistake:

I’d love to think we could get $170K for the house. But I’m inclined to think it’s less, probably a few tens of thousands less.

Yet our Realtor guessed we might be able to sell it for as much as $180,000. That gave me pause. After seven years of paying down the mortgage, we only owed $88,000. Thus, I realized that we had enough equity in our house to enable us to “trade up.” It wasn’t the lead paint or the destabilized neighborhood or any single factor motivating us — rather it was the general realization that we could improve our quality of life across the board. A “lifestyle change” is what our Realtor called it, a phrase which still makes me cringe, but which is perhaps accurate.

We developed a short list of features we wanted in a house. As we started looking, we quickly determined the houses we liked started at $250,000. Cheaper houses just didn’t seem like an improvement over what we already owned. But how could we possibly afford a house that costs a quarter million? Several factors at work here: With the sale of our old house we anticipated having enough cash for a substantial down payment. We now earn more than we did seven years ago. Plus, interest rates are even lower now than they were then. But really it all boils down to that first item. Not to be overly pedantic, but that’s the advantage of paying on a mortgage versus paying a landlord. I’d known this theoretically, but I didn’t I fully understand it until we started considering this transaction. I calculated our minimal selling price to be around $154,000 in order for us to afford a $250,000 purchase.

I talked to a banker who verified my numbers. Actually I contacted three bankers. I didn’t “shop the rate,” rather I was looking for the best service. We went with Iberia Bank because they seemed a little more on the ball and a little more personable.

We only looked inside two houses. The first was a couple doors down from Michael (and despite what Adrastos would say we considered that a plus) but the inside of the house left us a bit underwhelmed. It needed a little work; we really wanted a house that was ready to go.

The second house we looked at was down a block and around a corner from the first. It didn’t look quite as appealing from the curb, but as soon as we saw the inside we were sold. It was listed for $259,000. We made an offer of $250,000 on August 24th. Our offer stipulated the seller pay $3,000 of closing costs. The seller made a counter-offer, agreeing to the closing costs but upping the sale price to $253,000. We accepted.

I took a week off work to make some cosmetic repairs to our house to get it ready for market. This included repairing the four-year old damage to the kitchen ceiling.

Sorry Ceiling

In the process of scraping the ceiling I opened up a hole in the plaster, but amazingly enough I had on hand everything I needed to patch it up.

Repainted

I also painted the ceiling in the front room to cover some old water stains. They’d been there when we bought the house. I replaced our defunct garbage disposal; if I’d known it would be so easy I would have done it years ago. And I had a new porch light installed. (Thanks, Josh.)

The next week we did inspections on the house we planned to buy, and found some significant deficiencies. The seller eventually fixed these, but to get it done at the level we wanted we agreed to reduce the seller’s commitment on closing costs to just $1,500.

The week after that we put our house on the market. We had our first open house on Sept. 20th. Nobody came. Not a soul. A week later we had another, with only a couple visitors.

I had been secretly nursing a suspicion that this was all an empty exercise, that we in fact would not be able to sell our house and therefore not able to buy a new one, and that we were merely going through motions for the sake of some weird formality, that we were all players following a script, but when the show was over we’d sleep in the same bed as always.

And then, on the last day of September, we got three offers within a few hours of one another. All were from couples hoping to buy their first home. No slumlords. All were hoping to take advantage of a stimulus from the current administration which expires at the end of November.

Following the wisdom offered by my friend and real estate guru John Byrne, we didn’t go for the most lucrative offer. Instead, we selected the one which seemed to have the most solid financing. In fact that offer was the least lucrative of the three. We dickered back and forth over the exact price, with counter and counter-counter offers, and finally settled on $163,000, with us covering $3,000 of their closing costs.

In early October, they did an inspection on our house. The results were interesting to me because we’d never had a professional inspection done when we bought the place. They didn’t ask for us to fix much, probably because they knew were getting the house at a good bargain. We were to replace a couple missing gutter downspouts, replace some broken windows, and repair a couple dripping drainage pipes under two sinks. I’m glad they didn’t ask us to repair the water damage caused by the drip under the kitchen sink.

Over the next few weeks I got these repaired. I asked for referrals on the neighborhood discussion group and found some good people who knocked it out right quick and for a reasonable price. Louis Blady did the gutters so fast it made my head spin. We had six windows that needed to be replaced. Six! (I recently referred to it the “House of Broken Windows.”) I could have replaced them myself, but it would have taken me twice as long and the work would have been half as good as what Kevin Krause did for us. He and our former neighbor Jesus tried to help with the dripping sinks, but ultimately I had to call in JC Services to resolve that situation.

Meanwhile I was shopping for insurance for our new home. Even though I’d been pretty happy with our insurer in the post-Katrina scenario, I didn’t like the rates they quoted me. We ended up going with Whitney Insurance and saving over a thousand dollars.

And so October slipped away.

Somewhere along the line, somebody dropped the ball. I really don’t know who. It’s entirely possible that it was all my fault, but I’m going to blame it on a bad cell phone connection. All of a sudden I was informed we were supposed to close on October 30th. Oops. I already had plans to be in Houston that day. Our buyer was leaving town after that, so the closing had to be postponed until mid-November.

Then we had to negotiate a pre-occupancy agreement with our seller. We agreed to pay $500 for one week’s rent, and move in a week before the closing.

So we got ready to move. Major props to my mother-in-law who spent a week packing our possessions into boxes.

And then we moved. Major props to our friends and neighbors who knocked that job out in a mere four and a half hours.

The week after we moved was a strange one. We were living in a new house, but we did not own it. We were living out of boxes. We were making frequent trips back to the old house which now stood vacant and forlorn (and seeming more spacious than ever) retrieving those last little things like garden hoses and potted plants, cleaning out the shed, and so on. We were also going back there with loads of laundry, since we did not yet have a washer and dryer at the new house, and our old washer and dryer was included in the terms of the sale. It was also a strange week because Seph was out of daycare more than she was in. Monday was a wash because of Ida; Wednesday was Veteran’s Day; Friday we kept her home because she was sick with what turned out to be an ear infection.

On Wednesday our buyers had their final walkthru of our old house, which I attended. It was my first time to meet them; a young couple, buying their first home, they reminded me of no one so much as Xy and me seven years ago. Younger, even. It was a good feeling.

Finally, on Friday the 13th, I experienced the joy and wonder of a double back-to-back closing. There was some last minute confusion of course. The title company was telling me I needed to bring a certified check, but they wouldn’t know the amount until the documents arrived from the lender. They were supposed to be there a day in advance, but as the hour approached the ambiguity remained. Finally I left my office and headed to the Garden District office where the closing was to transpire, with instructions for the title company to call me when they got the amount so I could pass by the bank and get the certified check. But in the final analysis this wasn’t necessary, and I didn’t need to bring a check at all.

We actually made money on this deal. Here’s the final breakdown. We sold our old house for $163,000 and bought the new one for $253,000. When all the closing costs and whatnot were sorted out we left the table with $6,600.28 in hand. We got an interest rate of 4.875%. With hazard and flood insurance, our monthly payment will clock in at approximately $1,400 — only $200 more than what we were paying on our old house.

At the end of the day I believe everyone was happy. Our buyers were getting their piece of the American dream. Our seller was making good on his investment. Our Realtors were getting their commissions. And we were definitely happy with the way things worked out.

I do have to wonder how Katrina and the floods of ’05 factor into all of this. If it wasn’t for the flood, we surely wouldn’t have renovated as extensively. We would not have rewired and replumbed the house. The disaster forced our hand. But it also destabilized the neighborhood. I wonder if our house would have sold for more or less if it had never flooded. And would we have been motivated to sell if the neighborhood hadn’t changed so drastically?

In retrospect I now realize this was the biggest financial transaction of my entire life. Yet it didn’t seem nearly as momentous as when we purchased our first house seven years ago. That event is of course documented in ROX #91 and #92. I suppose that was a bigger transition — becoming a property owner for the first time. Now that we are amongst the landed gentry, trading up is more of an incremental move rather than a paradigm shift.

13 Responses to “Exhalation & Disclosure”

  1. E Says:

    Weird. Still can’t imagine owning a house. Haven’t seen any photos of new house. Do you have them?

  2. Editor B Says:

    Oh yes, I thought I’d covered all the bases but I forgot to mention that. I will post photos once we get a sufficient number of boxes unpacked. Soon, as we are making good progress. Promise!

  3. Julie Says:

    Bart, I am very happy for you, XY and your beautiful child. I must admit, however, that I’m a little concerned about the little creatures that you guys so lovingly cared for but had to leave behind. Hope the new owners love cats too.

    CONGRATULATIONS !!
    Julie (Marietta,GA)

  4. Jenny Rieth Says:

    Thank you for the edification! Very fun to hear about. I cannot wait to see your new house and neighborhood.

  5. Grampa Ray Says:

    What happened to my little friend, Crybaby?

  6. Editor B Says:

    We moved three cats, two fish, and one rabbit with us. So don’t worry about Crybaby. I think Julie’s concerned about the constantly rotating cast of feral cats who would come by our deck for meals.

  7. Lee Says:

    I take it that you’ve moved to a 15 year mortgage? Thanks for letting us in B!

  8. Editor B Says:

    Um… no, it’s still a 30 year. Did you assume it would be shorter because we’re in our 40s now?

  9. Lee Says:

    Nope, just assumed it on the numbers, $1400…..that’s a honkin’ payment! I take it insurance isn’t cheap in the big easy huh?

  10. meekorouse Says:

    Congrats Bart, Xy & P*

    I”m glad to hear the cats came along too! I’ve never been a homeowner (been married 8.5yrs now & just over 40) but it’s something we keep hoping to do.. It seems like a really big step into adulthood.. and responsibility.. Lots of work & very rewarding, but I know you are all used to that.. the hard work part, especially..

    Wishing you well & have fun settling into the new place!

  11. Editor B Says:

    Lee, I can’t really say that I’ve compared insurance here versus insurance elsewhere, but I’ve heard we are somewhat expensive. Still, when I plug our numbers into an online calculator, the monthly payment seems in line with what you’d expect for a 30 year mortgage, not even accounting for insurance. So I assume the real determining factor here is just the price of the house, or more accurately the price of the loan.

  12. Lee Says:

    You’d have to be right, the mathematics of mortgages is insane imo though…congrats on the new digs tho, I’m kinda sad I wasn’t able to visit your old pad.

  13. Lindsay Says:

    Congrats on all of it! I look forward to the time when my husband and I can buy our first home.

    -Lindsay
    longtime reader and flickr friend

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