What Next?

(I was going to use this image but don't want to acknowledge her... she shows up under Google Image search for What Now.)

We ended a confusing week and wound up with some questions that can hopefully be resolved quickly.  My attorney was in contact with the sellers attorney and he did not seem worried that the foreclosure deed was not registered.  We also learned that the video of the water line was scheduled and we'd know the results soon.

I want to mention another recommendation I have... make sure you use a separate email account to handle this sort of process.  Its nice to have all of this communication contained in one email inbox.  I have several email accounts, a work one, my old trusty hotmail (don't judge) and several gmail accounts.  I use one gmail account for my home buying communications.   And if you wind up being a dork and deciding to document your process in a blog, its an easy place to look to recall the dates and process.

I did my best to bide my time but it was concerning that there was such radio silence.  I sent a few emails to my team just outlining the status updates, as I understood them.  I'd sometimes get reassuring emails in return but not much new info.  I do not know what I was expecting or hoping for... but it was hard to be patient especially as the $100 per diem was looming.  But I trust my team and got one more extension for the mortgage and the home inspection... this extension noted we have a new closing date.  I was told that even though the sellers agreed to bump the closing date we were still aiming for our original closing date.  I was nervous about that since I did not want to feel rushed into closing.  My fab sister recommended that I request a copy of EVERY document that I will be asked to sign at closing.  It would be nerve wracking to try to read through 50 pages of documents... so by having and reviewing the pages ahead of time, there are no surprises. 

As-Is Appraisal and Biding Time

So we ended January in a holding pattern.  I was working with the mortgage brokers to make sure they had the information they needed from me.  We had a few quick weeks to get the mortgage commitment released but were still getting extensions on the Home Inspection. 

The mortgage processor let me know they were scheduling the appraiser.    My mortgage broker had laid out a few dates that we'd need to try to meet to ensure we could close by the end of the month.  The appraiser was one of them.  

This was one of those weeks that was a little strange.  My buyers agent and attorney were both out of town and had others filling in for them.  So there was some miscommunication and a lot of me resending documents and explaining things.   

I got an email Monday morning from the fill-in realtor letting me know that the appraiser had contacted her to schedule a time to get into the house but he just needed the Specifications of Repair so he understood the scope of the work we were planning.  Unfortunately the fill-in did not realize we were doing a 203k and that this appraiser was doing a 203k as-is appraisal.  She thought he needed the water and electric turned on.  I was able to get a hold of the appraiser and get him the information he needed.  I lost a day or two there but we were fortunate to get it done in time. 

I got my Mortgage Commitment Letter that week and needed the attorney to release it.  So I spoke to the woman filling in and ultimately we wound up with a few more questions.  But she helped me with some questions we had.  But over the weekend the fill-in realtor got an email from the appraiser that he could not get a hold of the Foreclosure Deed.  He needed the deed so that he could close his report. I emailed the fill-in attorney who deferred to my attorney as he was returming to the office.

I will never begrudge anyone from taking time off... but it was unfortunate for me that these both overlapped, especially during a week with such big question marks.  It would have been great to have someone in my corner for this part of the process... but what can you do.

I received the Appraisal Report and am still not sure what dollar amount I was 'hoping' for.  I hope it will all make sense to me soon enough! 

Dewinterization Progress?

While I was working with the 203k Consultant and my GC to get the required documentation completed for my mortgage team.  I had originally had my inspection scheduled for Monday, MLK Day.  It was convenient for me since it was a work holiday.  Luckily, I'd gone ahead with the 203k Consultant appointment so we were able to get the paperwork in.

We got word Saturday afternoon before the inspection that the water and electric were not turned on yet.  The sellers agent had submitted the order but 'they' weren't able to get it done it time.  They hoped it would be by Wednesday at the latest.  I rescheduled my inspection and got word Tuesday that the water and electrical were not on.  That Friday was the deadline date for my inspection.

Ultimately, we spent two weeks back and forth with the sellers agent just being told that the utilities would be turned on and we heard excuses about the snow and other excuses.  Finally almost three weeks later, we learned that there was an issue with the water company.  The water had been shut off to the house in 2008 due to non-payment.  So the Boston Water and Sewer Commission was requiring a video was taken of the sewer pipe to the street.  They needed confirmation that there were no problems before they could authorize the water main begin turned on.

The sellers agent stated that we could pretty much skip the dewinterization and come back with a lower offer.  So... could be, there is nothing wrong with the pipes and I can get a few thousand knocked off the price.  Or there could be a major issue that I am responsible for.  I am not much of a gambler... so I wanted them to do the video and get the water turned on.

It was one full month from the day I learned about the water until I was finally able to schedule an inspection.  There was more talk about the snow and scheduling... and waiting for bids and getting the bids accepted.

I haven't seen the video report yet but hope to soon... we have been told the report was good.  And all outstanding payments and liens are taken care of. 

After all of our waiting for this, I still did not have water for my inspection.  The first reason we heard was that the water commision went out to install the meter but could not because their was snow on the ground.  Um... this was Boston in February after during something like the 10th snowiest winter on record.  Of course there is snow on the ground. 

Then we found that the dewinterization crew went into the house and realized the extent of the burst pipes in the basement and were not able to turn the water on inside of the house.  I had already anticipated replacing the basement pipes and heating system but would have preferred them to be able to get the water on.  I spoke to my plumber since he'd seen the house and he didn't seem overly concerned.  So finally have my inspection scheduled!!

203k Specifications of Repairs

A few days after my walk through with the 203k Consultant, he emailed me his Narrative and a Specifications of Repairs.

The narrative was a room by room write up of the work needed on the property.  It was written out in paragraph form.  Its for the lender and buyer to be on the same page of the work to be done and why.

The Specification of Repairs is a 14 page Word document detailing the work.  I had one copy that the 203k consultant put his estimates in and a blank copy for my GC (General Contractor) to fill out.

I know most of the people who ever see this blog will know me personally and know my GC as well.  My GC is a very good friend.  His wife is a one of my besties... we are practically family.  (Okay, I show up at meal time like a sitcom neighbor so they treat me like family! :)  But I usually bring wine!)  So I am fortunate to have a GC that I can get an honest opinion from... and who I can call/text and get an immediate response.  I called him when I got the writeup and we were able to get back into the house that night to do a walk through.  My plumber is also a friend and I was able to also get him into the house and get his assessment of the work we'll need to do for the heating and broken pipes.

After our walk-through I went to my GCs house.  We opened a bottle of wine, my bestie, his wife, gave me dinner and we went page by page through the Specifications of Repairs.  (I doubt others will have that experience but hey I am spoiled!)  I had gone to Lowes and Home Depot to do a walk through on my own so I could get my head around pricing of materials.  But as we went through the SoR, its amazing to me how he had all of the prices in his brain.  'Six panel wood doors cost $375 each plus the frame and installation... so if we need four doors...'  There were some things we'd noticed on our walk through that the Consultant missed on his list so we added those in.

While we were working through the SoR, my friend was working on the Contractor Package from the mortgage company.  It was 10 pages or so of information about the GC... his license info, insurance info, references...  paper paper paper.  She was able to crank through that package.  I imagine if you have to pass that on to your GC it might take them a few days to get it back to you.

I am fortunate for my friendship with my GC since this process alone was time consuming.  It was 40 minutes or so walking through the house and determining what exactly we'd be doing.  Then an hour or so going through the SoR step-by-step.  I could see a lot of contractors not wanting to get involved in this process... and this is just the writeup.  I was also fortunate that I could get back into the house several times.  Its vacant and the sellers side had no problem with us going back in.  I imagine it would be a more difficult process if we were able to spend time going room by room, item by item determining the scope of work.

I sent the completed paperwork off to the mortgage brokers.  I was missing some initials and had one change to make.  I had to go back to my GC and have him initial.  A few weeks later there was another change so I was able to pop by and get his initials.  So again, I am not sure how easy that sort of thing is with a GC who is not as accessible.  I imagine too if you are getting bids from multiple GCs, this step could take longer in your process.  The speed we were able to get this paperwork turned around definitely helped the mortgage team get the loan moving along quickly so we can hit the 45 day deadline.

I like having the SoR written up so I can get a obsessive clear understanding of the work that is being done.  I trust my GC and know he knows what he is doing... but as this is all new to me it helps to sort of have it laid out so neatly and basically.

A Note about Buying a REO Property

The home I am buying is REO, Real Estate Owned property.  As I understand it, the home foreclosed on in May of 2010.  The home went to auction in July, 2010 and came on the market in November.  I spent time on the Suffolk County Register of Deeds and the City of Boston Assessors websites to try to stalk figure out who owns it and what they paid for it.  I am closing on the house this week (hopefully) and I still have NO idea who 'owns' the house.

I have a buyer's agent and she is in communication with the seller's agent.  The seller's agent works for a company and that company communicates with 'the bank' (dun dun dun).  Its a strangely convoluted situation.

But when we got the Purchase and Sales agreement from the seller's agent, it was a pretty hardcore agreement.  My sister is an attorney and I've been very fortunate to get her advice almost daily through this process.  My mortgage broker suggested I get an attorney to assist with the P&S and buying process.  Its $500-600 in addition to the fee the attorney will get for assisting my lender in the closing.  When I got the attorney's name, my sister recommend I ask her if she has experience working with foreclosures.  Shortly after I sent her an email asking that... I got a call from my mortgage broker saying the attorney recommended a different attorney who has foreclosure experience.  Yet another thing I'd recommend... its great to have someone on your team who has experience in foreclosures!

The attorney and I (with my sister on the phone) went over the P&S.  Essentially with an As-Is REO you are signing away everything.  I could have a Home Inspection and just walk away if I didn't like what I saw.  There was one line in the P&S that pretty much said that if another buyer was able to close before I did... the seller could go with that buyer and I would just get my deposit back.  But I would lose the 203k consultant fee, attorney fee, home inspector fee... yikes.  The other concerning portion of the P&S was a line that said that if the closing is delayed by me, I am assessed a fee of $100 per diem.

When you google info about 203k loans, there is a lot mentioned about how they typically take longer than a standard FHA loan.  With a typical loan, they go through every single financial aspect of your life.  With the 203k, the entire renovation write up is scrutinized and your GC needs to be approved.  So its a whole other level of paperwork.  Here is where I am fortunate to have my great team in place.  My 203k mortgage broker put me in contact with the loan processor.  She laid out the time lines of what we'd need to do to hit out deadlines.

I had provided my mortgage brokers with all of my info so far (W2s and copies of a years worth of bank statements showing rent payment).  But the 203k adds lots of extra steps (17 according to that website!  Dag!... I want to bring Dag! back FYI... use it...).  So I am under the gun with the $100/day fee looming.  I didn't yet realize the volume of paperwork to come (most of it for the GC) but having the 203k paperwork completed is vital for me to hit a 45 day closing date.
So long story short, my recommendations, make sure you have an experienced team behind you.  An attorney with foreclosure and 203k experience and a 203k team (mortgage, contractor and consultant).  Oh and a great sister who puts up with your questions, calms you down and gives great advice! :)

203k Consulting and Dewinterization

So I had my Home Inspection and 203k Consultant meeting set up for MLK Day.  I asked my GC to also come by so he could get another look at the place and we can plan out the work.

I get a call from my agent letting me know that the sellers had requested the home to be dewinterized for our inspection but that the work would not be done Monday.  I frantically call the inspector and change the appointment.  I called my 203k consultant and asked to reschedule.  He said we may as well go ahead without water or electric.  (Glad I listened to him!)

What is winterization?  When a home is foreclosed, the bank or seller will send a company into the home to winterize it.  They turn off the water and electricity, drain the pipes, put antifreeze in the toilets and lock the home up.  This is to prevent pipes from freezing and I imagine to deter squatters.  Normally before an inspection, the same company that did the winterization, goes back in and reverses the process so the inspector can, um, inspect.

I met the 203k Consultant who is also a contractor.  We walked through the house and he inspected it and took pictures.  We discussed the work to be done.  Now, there are certain FHA requirements, like requiring double-paned windows and hand rails on stairs.  We had some discussion about 'wish list items' taking out a wall, adding a dormer and adding central air!  When we got down to brass tacks though... we realized my hopes of streamline was out the window.  The tile in the bathroom was in rough shape and the kitchen cabinets were going to have to be redone...so we are now gutting kitchen and bath.  We also put in for new doors (interior and exterior), new storm windows in the back porch, carpet for the basement.

As we were wrapping up my GC and his wife (my BFF) came by to go over the work we outlined.  The consultant was going to send me a write-up of our discussion and then pass that info on to the GC to get his estimate.

By the time we were done... I was exhausted and suddenly very poor! :)

So... tell me about 203k

When I spoke to my mortgage broker, she mentioned the 203k Rehab loan.  She outlined the basics of it and said if I was interested she could put me in touch with her coworker, who is the 203k specialist at the brokerage.

Let me say right here... that I cannot recommend enough that you work with a brokerage that specializes in 203k loans.  With the research I've done, all of the complaints and pitfalls stem from first-time or inexperienced home buyers trying to figure this process out on their own.

After my broker mentioned the 203k product, I got to googling.  The wealth of information can be found on the HUD website obviously.  There are two types of 203k loans:  Streamlined and Conventional.  The basic differences are that the Streamlined has a maximum loan amount of $35,000 whereas the Conventional can go to 110% of the home cost.  Let me mentioned here... that I am cheap.  Champagne tastes on a water budget!  So... I was absolutely positive I was going with the streamlined.  Period end of story.  Hrmph.

I met with the 203k mortgage broker, we went over the paper work (just a taste of paper work to come).  I laid out the things I saw that needed to get done:
* Plumbing: missing pipes in basement
* Heating: old oil tank, I want to convert to gas
* Floors: yank the horrific laminate flooring and refinish the hardwoods.
* Bath:  Paint over existing tiles
* Kitchen: Replace cabinet doors and get new appliances
All for less than $35k... yeah right.

My 203k mortgage broker referred me to a 203k consultant.  A 203k consultant is not required for Streamlined 203k loans.  But its $800 one time charge and they are required for the conventional 203k.  [I had a feeling I was going to want to up my budget when I got into the house so I went with the consultant.  I think even if I did stick to the $35k budget I would prefer to have the consultant.  He knows the in's and out's of this loan process and was a great resource.]

I set my home inspection for Martin Luther King Day (no time off of work for me, yay) and luckily, my 203k consultant could also meet me that day.

Unfortunately I am about to get a taste of what its like to deal with a corporate owned property.

Let's Get It Started...

At the very end of 2011 I will turn 40 (gulp).  Shortly before my 39th birthday, I started making a '40 Before 40' List.  That is a list of 40 things you'd like to do before you are 40... anything from riding a roller coaster to going to Europe.  Well... I started my list and then something came along to trump my list... I made an offer on a house.

In late November of 2010,  I saw a listing for a small 900 square foot home.  It was a post-foreclosure in a neighborhood I am interested in.  The price was $222,900.  I called my realtor and we got an appointment to see it.  I asked my best friend's husband to join me.  He is a contractor and  I had a feeling I'd need some advice.

The house was in 'good' condition but need work.    We made a very low offer of $150,000.  That was rejected and we went back and forth for a bit and ended at $185,000 without a word from the sellers.  Early January, I saw the price dropped to under $200,000.  My agent got a call from the seller to see if we were interested.  We ultimately went in at $190,000 with $5000 in closing costs... and it was ACCEPTED.  Woo hoo... gulp.

I spoke to my mortgage broker who recommended the 203k loan.  I was already planning to do the FHA loan since I do not have 20 percent down for a home.  The 203k loan allows you to take out an additional loan amount for rehab work to your home.  Its an amazing opportunity for a situation like this... but its also a lot of work!  Paperwork!

This blog is my place to tell my story of the 203k process... hopefully its all happy happy positive stuff and not just a spot to vent :)  I want to try to use this as a spot to keep track of the renovations as well.

Wish me luck!!