Author Archives: anachostic - Page 13

Much Fun With Finance Institutions

Posted by on May 5, 2016 No comments

A Libertarian view of the world is that government interferes with life too much.  Also, that government regulation costs businesses so much money to remain legal that the business can’t make any money. On one hand, I agree.  On the other hand, I say, you made this bed, now look at the fucking mess it is.

Here’s the thing.  New laws and new regulations don’t just appear out of thin air.  They are created in response to a case of abuse to prevent the abuse from happening in the future.  That’s it.  You look at every law and regulation and tell yourself, “That law exists to prevent someone from doing it.”

So now I’m in the process of refinancing my mortgage.  The last time I dealt with a mortgage was when I bought my home, 11 years ago.  You have heard the stories from that era, where you only needed a pulse to qualify for a mortgage.  That’s not the case any more.  So here’s what I have experienced with the new, modern, regulated mortgage industry. 

I initially spoke to a “mortgage consultant” who took my information, ran my credit and locked me in on a mortgage term and interest rate.  Then, I was handed off to a “mortgage processor”.  This person was unable to do the tasks of the consultant, and isn’t actually involved with the mortgage approval process.  They collect the documentation for the “mortgage underwriter”.  One of the documents is the house appraisal.  But the processor can’t call an appraiser directly.  They place an order with a company who will dispatch an appraiser.  After the documents are collected, they are submitted to someone in “pre-underwriting review” before they are submitted to the underwriter.  The pre-underwriting team can request additional documents for the processor to collect.

So, after you get through the mortgage consultant stage, you are charged a pretty significant application fee, which also includes the appraisal fee.  Then you have to fight your way through three boss levels to succeed in your goal of a mortgage.  And each one is going to be pickier than the rest.  I thought I was being proactive in providing a scan of the cleared check proving that I bought out my ex’s share of the property.  Nope.  That just raised red flags.  “Where did you get that money from?”  Are you fucking serious?  That’s pretty much none of your business.

But you know what?  It is their business.  And you know why?  Scammers.  God damn scammers.  Why would they ask that?  Well, what if I cashed out equity in another property to cut that check?  What if I cashed out my 401k for that money?  To you and me, that doesn’t matter.  It’s my money and I’ll use it however I want.  It doesn’t matter if that money came from equity (it’s my money), a 401k (it’s my money), or from saving from my paycheck (it’s my goddamn money).  But to them, the source of the money can be a liability.  And actually, the money is nothing more than a reduction in my net worth, which is something that is very important to them.  No bank wants an over-extended client struggling to pay his mortgage.

How did this come about?  Because scammers.  Because people scammed the system and got away with it.  And now everyone has to suffer and prove that they are not a scammer, too.  Because their actions resulted in a lot of regulation forcing a separation of concerns.  There is absolutely no way for collusion in this structure.  No one talks to the underwriter.  No one talks to the appraiser.  It’s like offering sacrifices to some pagan god and hoping for acceptance.

A New Era

Posted by on April 19, 2016 No comments

Over the weekend, I bought a house.  I’ve been working on this purchase for a long time, something like five years.  But now it’s finally all mine.  And now the story can be told.

To quickly summarize, back in 2005, my then-fiancée and I bought a house.  The marriage lasted about 5 years and we divorced in 2010.  Finally, 5+ years after that, I’ve bought out the ex-wife’s equity in the house.  It sounds ridiculous and it sort of is.  When we divorced, the real estate market was cratered and neither of us wanted to sell at a loss, so we remained equal owners of the property.

Now that’s where it gets ridiculous.  As the ex-wife moved on with her life and pursued new career interests in another part of the state, all her stuff remained at the house, presumably as a safety net to fall back into if everything went south on her.  And then, she stopped paying her agreed-upon obligations – taxes, insurance, and lawn care.

You might imagine what kind of resentment this caused.  I was now paying for the house completely, but I couldn’t make full use of the house because it was filled with her stuff.  I couldn’t get rid of the stuff, nor could I bar her from the house as she was a co-owner.  On top of that, everything I paid into the house and any improvements I made was simply equity for her.  It really hindered my happiness, to put it mildly.

At the beginning of 2015, I made a strong effort to get her to sell her share to me.  Because of lawyer difficulties and finger-pointing, the year went by with no resolution.  Near the end of 2105, I attempted to get her to cooperate on refinancing the mortgage so at least I could save money, which I would use to move into a new place on my own.  That plan was stonewalled as well.

At the beginning of this year, I made an ultimatum.  Accept this offer or a Partition action will be filed.  Partition is a very expensive legal action that results in a court order that essentially forces the house to be sold.  Magically, the offer was accepted.  I suppose the timing was right.  The ex had secured a stable job and was ready to move on.  It’s a shame I was forced to wait in limbo until she made that decision.

The purchase contract provides 60 days for the ex’s personal property to be moved out, and the clock is running.  I’m working on refinancing the mortgage, which is going to be a huge improvement for me – from a 30yr (10 years paid into it) at 5.6% to a 15yr at 2.75%.  A lower payment and 5 years shaved off.  Making the same payment, I’ll save another 10 months, if I keep the house that long.

I have to give an incredible amount of gratitude to my girlfriend, who remained with me despite the unnerving effect of seeing my ex-wife’s stuff year after year.  The arrangement had been difficult on our relationship and it’s going to be very liberating to be able to have at least a partially clean slate.

But it’s not all awesomeness.  I have a list of over 30 things I want or need to do to the house.  Some of which are simple ($10 dryer vent cover), some of which are difficult ($8000 pool resurfacing), and some of which are pipe dreams (redo kitchen/baths).  But the thing is… it’s mine.  As Last Crack’s Energy Mind says appropriately – “To build or destroy, only you decide which joy.”

All Signals Go

Posted by on April 14, 2016 No comments

It’s been a couple weeks since the last update and a month since I started this round of negotiating.  If all goes well, we will have this wrapped up this weekend and the countdown begins for move-out.  I expected it all to be done in a week.  Yeah, right.

Today, after a ridiculous series of document corrections and delayed responses eating up day after day, I visited the attorney’s office to do the signing.  This is the process that my co-owner and I are taking.  Of course some parts can vary, but this is one option.

I signed two copies of the quit claim deed and two copies of the contract.  The contract was just a signature; the deed was notarized with two witnesses.  These two originals are going to be overnighted to my co-owner’s attorney.  My co-owner will sign the deed with two witnesses and a notary and also sign the contract.  Then the papers will be brought back to me and together we will go through the house contents determining what stays and what goes.  When I get the fully signed deeds (yes, both) in hand, I hand over the check.  I get to keep one copy of the contract as does my co-owner.

I requested next Monday off work so I can do the final step of this process.  I will take both signed originals of the deed to the county clerk and have them “recorded”.  What happens is the clerk takes both copies of the deed and stamps them as recorded.  The clerk keeps one copy and I get one copy.  If my co-owner wants a copy of the recorded deed, that can be provided, but I keep the original forever.  So that’s why there are two originals of the deed.  Believe it or not, but you don’t have to record the quit claim deed with the county.  Why anyone wouldn’t do it is beyond me.  You’d be asking for a huge headache in title searching when you go to sell the property.

Also on Monday, I’ll contact the mortgager and find out what steps are needed to modify the mortgage.

Now, all that cost me $3000 just in attorney fees.  Could you do it yourself?  Absolutely.  The only thing this gained me with the deed drafting was a sense of propriety – the deed was pretty much a fill-in-the-blank form.  The contract being professionally prepared might be worth a little because self-authored contracts could have their wording picked apart in court and you could lose out.  The contract is the defense against someone claiming the quit claim deed was forced upon them.  The contract states what the person is receiving in return for the deed and that the transaction is voluntary.

Again, the process isn’t that important, but I gave it a lot more weight than it probably deserved.  At different points, I thought we would all meet together in a room and sign everything all at once, or that the documents would be emailed (or mailed) blank, mailed back signed, then I would sign them, and also sometimes I stuck a document review step in there.  I had no idea how to do the process effectively.  In the end, it doesn’t seem to matter.  All you need is an executed deed and a contract to cover your ass.  How you get there isn’t important.  We both chose to involve attorneys so that there would be uninvolved parties making sure neither of us got taken advantage of.  It’s costly protection, for sure.

If all goes well, next week is a fresh start and this blog will become what it was intended to be.  A home makeover documentarium.

Light At The End Of The Tunnel

Posted by on March 29, 2016 No comments

Quite a bit has happened in the two months since the last post.  Since then, I got both appraisals done, had the attorney draw up an offer letter and have gotten an acceptance.  As you probably know, an acceptance is nothing until it is signed, and I’ve been holding myself back from posting anything so I don’t jinx it.  But, here’s some details on what happened so far.

The second appraiser was completely different from the first.  He used comparables from a totally different part of my neighboring area and they came back much higher.  I disagreed with his choice of properties because they were in a completely different development.  He used values from the local government sites, whereas the first used information from a service called CoreLogic, which I felt was more accurate.  In the end, I ended up with a $20k difference between the two appraisals.  I didn’t have the money to do a buyout at the highest appraisal, so I took the midpoint of the two values, then subtracted my co-owners unpaid obligations.  The result was almost exactly the original purchase price of the house.

I took supporting documentation and the numbers to my attorney and had him do his thing.  That cost me $1500.  I thought that would be the end of it.  My co-owner contacted me with questions and after we hammered those out, I contacted my attorney to write up the revisions.  This is where I was a little surprised.  The original $1500 was just to write the offer letter – nothing more.  For another $1500, he will draw up the actual purchase contract and quit claim deed.  Whew, that’s not cheap.  But I think that’s the last step, at least I hope it is.

The contract states that within 14 days of signing, we will exchange payment for the signed deed.  Then, within 60 days after signing, my co-owner will have all personal property removed from the house.  And then, freedom.  What does freedom cost?  $475 in consultations with three lawyers, $400 in a failed offer by one lawyer (you get what you pay for?), $750 in appraisals, and $3000 in a (potentially) successful offer and contract by another lawyer.  That’s a total of $4625.  but it’s less than the $5000 to do a partition and possibly lose even more by having a forced sale.

In the future, I also have to contact the mortgage company and refinance the property into my name only.  That may have some details worth recording.  I’m not sure what may need to happen with the county property appraiser.  Maybe the quit claim deed gets filed with the county?  More to come.

Appraiser One Is Done

Posted by on January 27, 2016 No comments

Not a whole lot to report on this.  I had scheduled the first appraiser for yesterday and I had to call the other appraiser and get a date scheduled, which will be Friday.

I showed up after work and Steve the appraiser was just finishing up his outside review.  We went inside and he snapped some pictures of each room and made some notes about the layout of the house.  Oddly, he took a picture of the kitchen faucet running.  He said “They like to know the utilities are working.”  It’s probably just a habit for him, dealing with banks, but it’s kind of out of place for my needs.

As if he realized what he had done, he asked again what the appraisal was for, and we discussed the situation.  He shared his preliminary research which was pretty insightful.  As far as recent comparable sales, my house could be valued at 56% to 105% of its original purchased value or 88% to 164% of its payoff value.  It’s pretty unlikely it will be at the upper range and I have the funding to do a buyout at 100% of original purchase value.

So, appraiser two on Friday, waiting for probably a week to get the reports, set up an appointment with the attorney to draw up the purchase agreement, probably another week waiting for that.  Then 30 days for my co-owner to review the offer.  That gives me a timeline somewhere in the middle of March.  Let’s just try to get that far first.

Buyouts and Partitions On The Anchor

Posted by on January 19, 2016 No comments

Although this blog was intended to focus on the purchase of a new property without really discussing the current property situation, I’ve come up with some information that may be beneficial to record, so now there’s a new category on this blog.

To be frank, I am in a situation where my current home is co-owned with another party and quite simply, this situation needs to end.  An offer to buy out the co-owner’s share was fruitless.  That is what lead me to pursue a second home of my own.  Recently, I was searching for more information on how I can resolve my situation and I discovered a process called a “Partition Action”.

Here’s the gist of a partition action:  No one can prevent you from selling your interest in a property.  That might sound confusing.  What I am trying to do is force my co-owner to sell to me.  But go forward one step – The partition action forces a sale of the property and the proceeds of the sale are split evenly between the owners.  My co-owner and I then have equal opportunity to purchase the property.  I have the means to purchase it and my co-owner does not.  So, in effect, my co-owner gets half of the sale proceeds, which is exactly the same thing as accepting my purchase offer.

The downside of a partition action is that it is very expensive.  Thousands of dollars expensive ($5000 non-refundable retainer to begin).  And a little detail I learned yesterday is that the legal fees come out of the sale price of the property, which means my co-owner bears half of that expense as well.  This is an excellent means of leverage in negotiating.

Step one in this process is to create a fair and equitable purchase offer based on the appraised value of the house.  I plan to get two appraisals as documentation that the offer is fair.  So, let’s get some appraisals.  This simple task gave me some interesting information.

First lesson learned: appraisers don’t answer their damn phones.  Out of a list of seven candidates, only two answered the phone.  One was answered by a receptionist and the other was a groggy “Hello?”.  Out of seven, these are my winners?  Second lesson: appraisals aren’t cheap.  The number I had in my head was $280, but I ended up with $350 and $400.  $700 in total just to make this fair offer (lawyer fees are more than double that so far).  Third lesson: It’s not a quick service.  Both appraisers had at least a week backlog and would take almost a week to get the report back after the service.

But here’s the interesting thing I learned.  When I spoke to these people, the first question they asked was, “What is this appraisal for?”  I explained it was for a buyout offer and both clarified, “this isn’t going to be used for a mortgage, right?”  And I said no, but that was weird.  The receptionist said they would only do appraisals requested by a bank.  The groggy appraiser explained that they won’t do appraisals for mortgages at a person’s request because people would take appraisals to banks and say, “See?  This is the value.”

I thought I was allowed to choose my appraisal/inspection companies in my last effort, but the post reports that it was the title company I was allowed to choose.  So I guess I can understand that situation.  And since it was just for my use, “market value” was the term used, they didn’t have any problem after that.

Future posts in this category will discuss some of the details of the purchase offer, since it will involve some non-standard elements, like the quitclaim deed and terms of how the co-owner will remove personal property.  Hopefully, there will be a happy resolution, but if not, expect more posts of the details of the partition suit and how it’s going to be used to force the sale of the property to me.

The End Of That Story

Posted by on December 14, 2015 No comments

This story has reached its end.  The seller did not accept my offer, which is probably just as well, since I was having a hell of time trying to scrape the money together.

I learned a lot in this process, so the next time I do this, I’ll be much better prepared.  For right now, I’m going to enjoy the Christmas holiday and de-stress.  The next chapter will probably come sooner than I expect and the war chest will be stronger than ever.

Fortunately, I didn’t get overly emotional about the purchase, although I was willing to do a lot of crazy things to make it happen.  That’s a fine line to tread, for sure.

Until next time…

Denied? I Don’t Even Want To Know

Posted by on December 13, 2015 No comments

Two things have happened.  The first is that the house I’m pursuing has been “delisted”.  I don’t know exactly what that means.  The last time it went off market, one website said it was in “pending” status, and the website I see it on now says “delisted”.  But that website also shows it went “delisted” the last time too.

What does that mean?  My first reaction was that I didn’t win the bid.  Later, after thinking about it, I haven’t gotten any information from my agent, so maybe the seller has collected all the bids they want and has closed the bidding process while they evaluate them.  That makes sense, right?  So I’m not exactly out of the running just yet, am I?

Or am I?  My options for funding are running extremely thin.  I got an email back from the credit union.  They will not budge over $20k, not as a personal loan and not as the clever credit card option.  So, that leaves me short by $18k (ideally) or $10k (aggressively).  What’s left to do?  I can tell you unequivocally that I am not going to do some insane thing like take out a cash advance on a credit card, even though that could be accomplished.

Just for illustrative purposes to show the possibility:  I jumped on the Capital One website, since I have a high-limit card with them.  I can do a cash advance of $10k with them.  The APR for cash advances is… WHHHHAAAT!  24.9%!!!!  Ok.  Ok.  That would be fine.  Let’s see.  A $10k balance would be a little over $200/mo just in interest.  Assuming it’s still “like a credit card” like I calculated with my credit union, the payments still would be achievable in the short term.

But, we have to kill that 25% APR.  So, we initiate a balance transfer to someone who is running a 0% promo APR for balance transfers.  You want to know why banks do this, even though it seems they won’t make any money on it?  There’s a balance transfer fee, which is either fixed or a percentage of what you are transferring.  They get money.  Ok, off to NerdWallet so we can check Balance Transfer cards.

Well, surprise, surprise.  Chase has a card that has 0% APR for 15 months and 0% transfer fee if done within 60 days.  But just to point out how normal luck would play out, the next two best cards have a 3% transfer fee.  So that’s $300, right there.  But you get 0% for 18 months.  Not all bad news.

So let’s add this up.  My first month at Capital One would be $200 in interest.  My balance transfer would be another $300, then I would probably have some residual interest from Capital One because of the average daily balance calculation, so let’s guess another $100.  A total of $600 in interest and fees to get 18 months of financing, which I would eventually convert to a home equity loan anyway.  Not to mention the previously-discussed major hit to my credit score based on utilization, which would affect my home equity rate.  It’s doable, but far from ideal.  There’s a reason the boring and simple solutions are so much better than clever solutions.  You know the old adage, banks only lend to people who don’t need the money.

Back to reality.  What’s my last-ditch option?  The Internet.  Lending Club offers up to $35k personal loans at 7-9% APR (for 5 years) with a 1-4% fee.  The APR is pretty much in line with other personal loans, but that origination fee… man.  Let’s see, working on a $30k loan, that’s a fee between $300 and $1,200.  Worse, the fee is deducted from the amount you borrow, so a $30k loan may only net me $28,800.  Maybe this isn’t such a viable solution.  Any other options?  Yeah, a 401(k) loan.  But I can’t even stomach that thought right now because of reasons.

Right now, I’m not even sure what’s going to happen.  All I know is that I haven’t paid any earnest money yet, so my only loss at this time is a few credit inquiries on my credit report and a whole lot of time.  I’m still safe to bail if I feel this is just too risky.

The Bank Run

Posted by on December 11, 2015 No comments

Well, that was interesting.  Over lunch, I went to my local credit union at which I am a member.  I met with the branch manager (but I’m not sure if she was the actual manager or just had a manager title).  Anyway, I explained the mortgage situation and she said she would have to refer me to an outside department that would call me back probably on Monday.  That’s not good enough.  I didn’t want to be handed off.  I wanted to discuss my issue.

“Orrrr…” I interjected.  Then I pitched her the idea of a personal loan.  She asked how much I needed and I told her $34k.  Something in her face told me that wasn’t a good number.  I asked, “too much?”  and she said their personal loans only go up to $20k.  I pressed a little further, “never more than 20?”  And she said, unless it’s an exception.  Well, let’s get ourselves an exception.

We started in on the application process and, as expected, my credit qualified me for the maximum of $20k.  Then we move to the exception part.  She wrote in an application note the details of why the loan needed to be $34k and sent it to underwriting.  Soon (pretty quickly, I thought), they responded with some questions.  Those got answered.  Then more questions.  More answers.  I emailed them a copy of my latest paycheck.  I gave them balances of other funding accounts.  And we waited and chatted.

I ended up leaving to give her time to have lunch and let them munch on the credit risk.  But while we were talking about this loan, she said to herself, “I should have submitted it that way.”  What’s that?  Well, It’s a pretty damn clever idea, that’s what.

The idea is:  She submits the application for a credit card, then, when approved, immediately does a cash advance into my checking account.  You’re probably thinking, what the fuck?  A cash advance on 34K at probably 18-22%?  Insanity!  But the credit union is running a cash advance promo, 4.5% for 36 months until the end of this year.  That’s pretty good.  That’s a better rate than the personal loan.

Oh, but wait, it’s for 36 months, not 5 years.  How the hell can I pay that?  Jesus, that’s $1,000/mo.  But no, it’s a credit card.  Your minimum payment is only 2% of the balance, which is $680, a little less than the $700/mo for the personal loan.  Hey, that’s pretty awesome.

Oh, but wait.  I ask, “But how will it get paid off at 2% a month?”  She smiled and said, “It won’t.”  And I realized, it’s a credit card.  Just like every other credit card.  Your minimum payments will take a balance into timelines approaching infinity.  I know that very well and I‘m surprised I even had to ask the question.  Still, a clever idea and still a potential option.  It’s actually a pretty good option because I really only need some floating money until I can get the home equity loan.  36 months is plenty of time.

There’s one real significant risk with the credit card approach and it’s one that most people would not consider.  A fair amount (30-45%) of your credit score is based on credit utilization.  I’m talking about adding 34k to my available credit and immediately using 100% of it.  My credit availability isn’t bad, spread over five cards, but we’re still talking a utilization level well over 30%, which is traditionally when bad things start to happen.  But the negativity isn’t permanent; nothing ever is.

So, when I left, I hoped I had all the questions answered.  The bank manager would call me when she had more information.  This is all dependent on whether my offer is even accepted.  On that front, my sales agent told me it wouldn’t be any issue to switch the payment in the contract to cash after it’s accepted.  So that’s good.

Then I got the call back from the credit union.  I was only approved for $20k, not the $34k I needed.  I had to tell her that wasn’t good enough.  To her credit, she said she would call them back and plead my case.  I fired off an email saying I would accept $30k.  That will lower the war chest to $6,000, still enough for a hot water tank and insurance.

Then I got a call back from another person at the credit union.  I’m not sure it was a return call from my previous attempt or from today’s visit.  It was someone from their mortgage department, though.  So, I switched gears (this took a little umm-ing and hold-on-let-me-think pauses) and talked again about a loan that would let me buy without having the required stuff installed.  It seems the more I discuss it, the more the story changes.  It becomes more matter-of-fact and less oh-my-god-what-do-I-do.  A lot of the things I thought were important early on are not important to mention now.  The lady was helpful in that she listened and seemed to try to come up with solutions for me, but not helpful in that she didn’t have something she could sell me.  We left that conversation with her going to do more research.

You can’t say I’m not trying.

Fire Up The Calculator

Posted by on December 11, 2015 No comments

I’m giving some fair consideration to the idea of buying the house in cash with a personal loan and then paying off that loan with a home equity loan.  That gets me around whatever issues a mortgager has with the condition of the house.  Yeah, screw mortgages.

So then, let’s do some rough math.  A personal loan has an APR of about 9% and a max term of… ohhhh… 5 years.  I need to borrow $38k, and that works out to a payment of about $800/mo.  Holy shit.  I could handle that for a few months, but not for very long.  Ok, assuming I can stomach that, a home equity loan has an APR of about 6% for a max of 15 years.  That’s a payment of $322/mo.  That’s nothing like my original budget of $181/mo for 30 years at 4%.  But between that and nothing at all, it’s a viable option.

Now for some finer math.  My initial numbers were still working with the amount I would finance if I put 20% down, which was $9,500.  With a war chest of $24k, that left $14,500 left for repairs, insurance, etc.  If I pull out an extra $4k and borrow $34k, that makes the personal loan $700/mo and the home equity loan $288/mo.  Then I have $10k remaining for repairs and updates.  That’s an even more viable scenario.

The war chest is growing by about $600/mo, which will put me in a deficit as long as I have the personal loan going.  I do have other funds that can make that up, but I want to try and keep this as safe as possible.  I would hope to be able to get the home equity loan within 6 months, so that would be $600 gone from the war chest in the time I maintain the personal loan.

There’s one unknown issue at this point: the roof.  If the roof needs replaced, that would destroy my savings entirely.  However, this is dry season and many months until next hurricane season.  And who knows, by then, my housing situation may be 1000% different.

I think I’ll be stopping at my bank during lunch break.