Thursday, December 29, 2011

ARRRRrrrggggh!!! Closing Hits a Snag Due to Incompetence

We're down to the wire and we may not be able to close by 12/30, all because my loan processor is a freaking, lying, incompetent idiot.

On December 16, my loan processor inquired whether she can charge $85 on my credit card for an HOA questionnaire fee. I authorized the charge.

Last Friday, on December 23, I was contacted by my insurance agent that my lender requested Evidence of Insurance. I authorized payment on my credit card and my agent submitted a binder to my lender.

On Tuesday, December 27, my loan processor advised that all documents were received and that my file was with the underwriter for final approval.

On Wednesday morning, December 28, my loan processor advises that she needs me to authorize another credit card charge for an HOA certification for the second association. This time, she doesn't advise me of the charge amount in advance. When I inquired, the charge was $217. I discover that the charge includes an expediting fee. When I inquired why she didn't order the documents back on the 16th, she dances around the issue and blames it on the first association for not providing all documentation and the underwriter for not getting back to her until yesterday.

Now, we're scrambling to meet the 12/30/2011 closing deadline placed by the short sale lender. It irritates me that the idiot loan processor neglected to order the necessary documents from both HOAs back on the 16th. Because of her negligence, I may not be able to close in time by the 30th, which has tax implications and other monetary consequences like having to pay 31 days worth of interest in advance. The worst part is this idiot loan processor's failure to admit fault.

Friday, December 23, 2011

Holy Frick On A Stick - - I May Close By 12/30/2011!

I just got word that the State of California agreed to release the Seller's tax lien off of the condo I've been trying to purchase in short sale. I've been told that the Seller also negotiated the HOA delinquencies and it looks like we're sprinting to the finish line. We may actually close escrow by 12/30/11!

The only recent hiccup was that I had to waive the termite inspection. What really irritates me is that the purchase offer that my agent drafted specifically stated that the Seller would pay for the termite inspection. The Seller accepted those terms. However, the genius realtors (mine and the Seller's) failed to ensure that the Short Sale Lenders would set aside funds from the sales proceeds to pay for the termite inspection. (But they sure as hell made sure that their commissions were taken care of.) Since the Seller agreed to pay for it, I could look to the Seller to pay for it out of her own pocket.

Oh yeah... I forgot -- The Seller hasn't even paid her state taxes. Why would she even honor the terms of her contract?

My genius agent now tells me that termite inspections aren't required for condos because termite control is the condo association's responsibility and I'm buying the property 'as-is'. Bullcr&p. First of all, I'm responsible for termites within my unit. Secondly, her blanket statement that termite inspections for condos are never required is only partially true. FHA-HUD loans require termite inspections even for condominiums. She's only correct that my lender doesn't require it.

I agreed to waive the termite inspection because: (1) re-negotiating the term with the Short Sale Lender will only delay the closing, and most importantly, (2) even if I got a Seller paid termite inspection report with adverse results, I'd still go through with the sale. It's still irritating, though, that my agent is selling me a snowjob.

Once I close, I'll hire a termite exterminator to inspect the property. According to this report, experts in the industry say "there is an incentive to "undercall" (i.e., an inspector misses or overlooks something in an inspection) during escrow. Professionals recommend that homeowners should have three or four companies look at their property. They also advised homeowners to watch the inspector during the inspection, making sure he inspects the locations claimed, like an attic or crawl space. If inspectors find termites, experts said to ask the inspector to show where the infestation is and what they found. Experts advised not to accept a single inspection from a realtor. If a termite company misses the problem, they do have to come back and treat it at no cost to the homeowner."

Friday, December 16, 2011

Good News - Bad News on the Short Sale Purchase

My misadventures in purchasing a condo in short sale goes on. Like life, there are ups and downs. And for every good news I get, it seems to have a twin of bad news.

Goods news - I was approved for a conventional loan. I locked in a 3.875% interest with 20% down and 2.125 points. The lock is good 'til 1/20/12 (or so).

Good news - The appraisal for the property came back at $365,000. My accepted offer was $342,500.

Bad news - I noticed a $3600 State tax lien on the condo in the preliminary title report. When I reviewed the 1st mortgagee's consent to short sale letter, it gave an allowance of up to $6,000 to satisfy any liens on the property. The consent letter specifically identified the HOA lien and and the 2nd mortgagee's lien but nothing about the State tax lien. I brought this to my agent's attention. Apparently, the Seller neglected to disclose the fact that she hadn't paid her state taxes on her HUD-1.

The Seller is now scrambling to get a partial lien release from the State. According to the State of California website:
A partial release of lien releases a state tax lien from a specific piece of property. However, the lien remains in effect and will encumber the transfer of title of any other properties owned or subsequently acquired by the taxpayer. Reasons to request a partial release of lien include a need to transfer the rights to the property when there are insufficient funds to fully satisfy the state tax lien or the party with the lien has no rights to title of the property.

As part of the request, the Seller requested that I forward the appraisal (that I paid for) to the Franchise Tax Board. I gave specific instructions to the escrow company that it is only authorized to release the appraisal to the FTB and not to anyone else.

Hopefully, when the FTB sees that the condo was appraised $83,000 less than what she owes, it will release the lien off the property. I am hoping that the State does not demand that I increase my offer to cover the lien.

Bad News - Due to the deadbeat Seller's failure to disclose her State tax delinquencies, I probably won't be able to close on this condo before the end of the year, much less before the 2nd mortgagee's consent expires on 1/15/2012. My locked interest rate will likely also expire and knowing my luck the rate will probably increase. Oh... did I forget to tell you that this Seller will get $3,000 bucks if this deal goes through? Yes, you read that right. This woman who took out a "Liar's Loan" and hasn't paid her taxes will get $3,000 from this sale. I'm really starting to resent this Seller and I will be pissed if I end up paying her State taxes.

Sunday, December 11, 2011

Inspection Result of the Short Sale Condo

I had the short sale condominium inspected last week. As expected, the inspector found additional issues that require repairs. Many of the repairs are due to neglect and lack of maintenance by the Seller.

Before I go on to discuss the repair items, I learned something about the Seller that somewhat irritates me. The Seller purchased the home in 1997 for $180,000. In 1999, she was let go from her job that she had for 17 years. She was unemployed for 2 years until 2001. Her next employment only lasted 1 year. The Seller was then unemployed for another 3 years until 2005, where again, she was only able to maintain a job for 1 year. She's been essentially unemployed (or "self-employed") ever since.

In August 2006 (hopefully during the time she was gainfully employed), she refinanced her home to the tune of $375,000. In March 2007 (during her unemployment period), she took out a 2nd mortgage in the sum of $73,000, probably via a NINJA ("no-income, no-job application") loan.

I know I have no right to judge the Seller because I don't know her entire story. But considering that she's had a spotty employment history since 1999, I can't help but to think she was either greedy or irresponsible for refinancing, rather than selling her condo. Personally, if I wasn't confident about having a steady income to repay my mortgage, I would sell my condo. I certainly wouldn't take out a 2nd mortgage during a period of unemployment.

Had the Seller sold in 2006 or 2007, she could have easily sold for $483,000 - $508,000 and broken even or even made a small profit. The Seller instead chose to live off of borrowed money despite her unstable income. She spent $0 on maintaining the condo and it shows. Every repair item that I know I have to make due to "lack of maintenance," sticks in my craw. I guess it infuriates me because I should've asked for a bigger discount during the negotiation. *Sigh* Live and learn, I guess.

Oh... and did I tell you that the Seller is going to get rewarded with an additional $3,000 from the HAFA program? Oh righty. I'm finished ranting and raving.

Anyhow, here are some of the issues the inspector found:
  • Broken garage door hardware;
  • Corroded pipes underneath all of the sinks;
  • Chipped kitchen sink and broken garbage disposal;
  • Damaged fire door;
  • Leaky bathroom faucet;
  • Dirty and unmaintained air conditioning unit;
  • Dirty and unmaintained heating unit;
  • Unsealed platform at heating unit;
  • Rusted and discolored burners at heating unit;
  • Vent pipe at water heater stained;
  • Various locations of drywall damage;
  • Various locations of ceiling damage.
The inspector surmised that these repair items total about $2,000 or so, assuming I don't need to replace any of the major items like the AC or the furnace. Even assuming that those items need replacement, I can just choose not to turn on my AC and central heat. One of the benefits of living in a temperate climate like San Diego.

I'm a bit nervous now that I've underestimated what it would cost to make my unit "move-in" ready. I'm getting a dose of home ownership reality before I've even closed.

Saturday, December 3, 2011

I'm Officially in Escrow - - Budgeting for The Expiration of the Payroll Tax Cuts

Good news: The second mortgagee, Wells Fargo, consented to the short sale on 11/30/2011. Although the first mortgagee, BofA, has not agreed to extend its consent that expired on 11/25, I'm told that this is common and that it will likely do so later. Once a bank consents to a short sale, it is highly unlikely to refuse an extension, especially when there's a willing buyer. Or so I'm told.

I guess this means we're now officially off to the races. I just paid $315 for an inspection and another $400 for the appraisal. I was hoping to close by the end of the year, but looks like the target closing date is 1/15/2012.

Bad news: Interest rates are inching up right now because the stock market is doing gangbusters for whatever reason. I managed to lock in an interest rate of 3.875% (2.125 discount points) for the next 50 days. Knowing my luck, the rates will subsequently dip. *shrug* I'm okay because I doubt it will go down by much. I'd rather have the peace of mind of knowing what my rates will be for budgeting purposes.

Speaking of budgets, I've estimated that my paycheck will be approximately $95 less per pay period. The reason is two-fold: (1) my out of pocket costs for health/dental/AD&D insurance is going up by about $15/paycheck, and (2) my pay will decrease by $80/paycheck if our moron Congress members fail to come to any consensus regarding the Social Security payroll tax cuts. I will be flabbergasted if Congress makes a decision one way or the other by 12/31/2011.

I personally don't like to see my pay go down approximately $200/month, but I can absorb it. After all, when the payroll tax cut was implemented, I decided to hoard it rather than spend it. I wasn't a very good citizen since I didn't use the tax cuts to stimulate the economy.

Do you think the Social Security payroll tax cut will be extended? If so, are you preparing for this possibility?

Friday, November 11, 2011

I'm Starting to Think Short Sales Aren't Worth The Hassle...

I finally got the Short Sale Consent letter from the first mortgagee (BoA). But it demands that the property be closed by 11/25. 11/25 is the Friday after Thanksgiving, not to mention only gives us 2 weeks to fund, douche-bags.

When I pointed this out to my genius real estate agent, she said the Seller's Agent will seek an extension of time. The only problem is, the Consent Letter clearly states that if an extension is sought, interest will accrue and either the Buyer or the Seller will be responsible for the interest. Uhhhh.... yeah. The deadbeat Seller is really going to have funds to pay the interest. Uh-huh. I'm not going to agree to pay interest on a loan that I had no involvement in taking out. Mea culpa -- If an extension is sought, the Consent Letter does not say that the Buyer or Seller would be responsible for the interest if an extension is requested. Only the Seller would be responsible. My real estate agent assured me that if the Seller can't come up with the money, the Short Sale Lender will eat it. Not so sure about that...

And here's another thing - - the Consent Letter states that it will give an allowance of $1485 to pay outstanding HOA fees. I previously inquired about outstanding HOA dues with my real estate agent and her response was a flip, "You're not responsible for it so don't worry." Ummmm... unless the HOA agreed to write off outstanding amounts in excess of $1485, I doubt it's going to give up its lien rights and the Seller won't be able to give marketable title. I again, requested my genius real estate agent to look into this.

Finally... the first installment of the real estate tax is due 12/12/11. If not paid by the due date, penalties will attach. Again... I doubt that the deadbeat Seller is going to have the funds to pay the penalty, much less the first installment.

I can't help but to feel that my real estate agent just wants me to sign to everything and get to the point of no return when they spring these "surprise" costs at me at closing. I have no faith that my agent has my best interest in mind.

I'm so over this stupid short sale.

Sunday, October 30, 2011

Short Sale Whiplash - Update

My agent called me last Thursday to tell me that she got verbal confirmation that the Short Sale Lender approved the short sale at our offer price. My agent seemed excited but I was less than thrilled since: a) I was on a business trip and was tired and b) I don't believe it until I actually see the Short Sale Approval letter.

At the risk of sounding like a broken record -- what an idiot this Short Sale Lender is. Had they countered even slightly less than their original counter, I would have (probably) increased my offer slightly. Instead, they countered twice with a comp price that is (probably) no longer applicable in this market. Their arrogance sufficiently pissed me off to make me want to walk away from this property.

If this is how most Short Sale Lenders negotiate, I have little hope for the housing market and the economy rebounding any time soon. These banks won't be getting these defaulted properties off their books quickly enough and they won't be negotiating top dollar either. Ay, ay, ay...

Sunday, October 23, 2011

Short Sale Whiplash -- Lender Reconsidering?

While I was in the old country placing my father's ashes into the family grave, I got word from my real estate agent that the short sale lender wants a "live signature" (as opposed to an electronic signature) on my offer of $342,500. I'm told the short sale lender will then submit the offer to an investor for final decision.

I re-submitted my written offer but I'm not holding my breath. Knowing these greedy idiots, they'll probably counter back at $375,000 for the third time.

You know what's funny? Had these idiots countered at, say, $360,000, rather than holding firm at $375,000, I would have seriously considered increasing my offer. Now, I'm more motivated than ever to stick to my line in the sand. I am not the desperate one at this party. I'm not the idiot that lent $450,000+ on a condo that's never been renovated since 1991.

Friday, October 7, 2011

Short Sale Fail...

The Short Sale Lender countered again. And they countered with $375,000 -- the same figure they countered with before. Stick a fork in me, I'm done. The Short Sale Lender is clearly telling me that $375,000 is its bottom line.

Seriously, BofA??? You want me to pay the same amount that someone else paid for another pristine unit? This unit has dingy carpet, old paint job and crappy appliances.

No thanks. I'm not going to bid against myself for a fixer upper. I'd rather pay more for a move-in ready unit. I'm walking.

Friday, September 16, 2011

Short Sale Approval Delayed...

I got word that the Seller of the condo unit on which I made an offer just got approved under the Home Affordable Foreclosure Alternatives (HAFA) program. According to this article, HAFA is "[a]imed at borrowers who are underwater on their mortgages and who've been denied a modification via HAMP [Home Affordable Modification program]... The program pays cash to both the borrower and lender to encourage a short sale, a deal in which the bank accepts the proceeds of the home sale as full repayment of the mortgage debt, forgiving any loss." Supposedly, the Seller will be getting $3,000 if this deal goes through.

Assuming that the Seller's agent is telling the truth, she resubmitted the short sale approval paperwork on Tuesday. The Seller's agent also claims that the short sale lender's own negotiator is recommending my offer. I've been told to expect a response in the next 30 - 45 days.

I guess I shouldn't presume that the short sale approval will be forthcoming, but I have to admit, I have. In order to temper my expectations, I've been reading blogs like this one, which is forecasting another significant price correction in the California housing market.

Sunday, September 11, 2011

Stiffing Bank of Mom and Dad

I previously wrote that my Snowball Plan will come to a screeching halt now that I'm purchasing a condo. In actuality, I've just revised my Snowball Plan, yet again, to include my anticipated new debts: my mortgage and the down payment lent to me by Bank of Mom.

Come 10/31/2011, my debts will look something like this:


Fed'l Sub'd Student Loan

$ 50,558.49

@ 5.125%



$ 274,000.00

@ 3.875%


Down Payment

$ 68,500.00

@ 0.000%



$ 393,058.49

Based upon these estimates, here's my new Snowball Plan ver. 3.0.

I know that the "real" Snowball Plan requires me too pay off my debts in the order of the smallest balance to the largest. I do plan to pay off my smallest debt first, but I'll also be snowflaking $4,000/year to my Bank of Mom debt.

Some would argue that the $4k/year snowflake should be applied to my student loans instead of to Bank of Mom. But I feel that Bank of Mom deserves the not-so-insignificant snowflaking since she was generous enough to lend me the money interest-free. Additionally, my mom's 69. God knows how much longer she'll live. She got a relatively clean bill of health recently so I'm thinking that she'll be good for at least another 10 years. Hence, my goal is to pay off Bank of Mom in 10 years. I guess I should also be prepared to make a balloon payment for the balance in the event my mom's health deteriorates prematurely. The bottom line is, I intend to take my debt to Bank of Mom seriously and will treat it no differently than any other debt to a "real" creditor.

I'm going to switch gears now and I'm going to engage in some catty gossip. My best friend recently confided to me that she and her husband also "borrowed" approximately $20,000 from the husband's parents for their down payment. It's been 8 years and they've paid back $0.00 so far. In the mean time, they've taken vacations, bought a new car and made improvements to their house. My BFF claims she feels guilty for stiffing the in-laws, but not guilty enough to initiate a repayment plan. My BFF further feels that it's her husband's responsibility to make the repayment arrangements since they are his parents.

I'm appalled at my friend's cavalier attitude about how she and her husband are stiffing Bank of Mom and Dad. I guess since her in-laws haven't said a "peep" about being repaid, perhaps the in-laws intended to "gift" the money. Either way, the issue has been swept under the rug and no one is dealing with it.

I'm a bit disappointed with my friend. No matter how you slice it, she and her husband are deadbeats. They're deadbeats because they're stiffing their family members on a significant sum. Even assuming that the in-laws were willing to gift the money, my friend and her husband are deadbeats since they didn't pay taxes on the non-exempt portion of the amount that was gifted to them.

I wonder if the in-laws have forgotten about the "loan"? Or I wonder if it will always stay in the back of their minds that their kid and his wife stiffed them?

Saturday, September 3, 2011

August 2011 Progress Report

My focus on my personal finances took a serious nose-dive after I paid off my private student loans in March. Paying off my private student loans literally free'd-up $900/month in my budget and I started living the "good life." I stopped paying attention to my spending and spent money like it grew on trees. I'm happy to say that with $900/month in discretionary spending, I didn't get myself into any trouble. But I really hadn't saved much and I hadn't significantly paid down my $50k+ federal student loans either.


Starting Debt (6/08)

Last MonthThis MonthDIFFERENCE
Private SL$49,528.99$0.00$0.00$(0.00)
Fed'l SL$55,852.68$50,965.88$50,834.65$(131.23)
Car Loan

In light of the fact that I've decided to buy a condo, my debt snowball will come to a screeching halt. Rather than putting the extra money towards paying down my student loans, I've decided to "invest" it in real estate. Only time will tell whether this is a good financial move on my part or not.





The savings I report here is with respect to my emergency fund only and does not include my future spending earmarks. The increase in the chart above does not represent an actual increase in my savings. I merely shifted money from my unreported earmarks to my EF. I figure I'll need more $ in my EF since my housing budget will likely double in the next couple of months.

In case you were wondering, my unreported earmark fund is down from $10.8k in June to $4,765 currently. This makes me a bit nervous.





My "X"-Fund represents a part of a windfall that I had originally set aside either as an emergency fund or a down-payment for my first home. Either way, it's money that I didn't intend to touch unless it's for an emergency or for reinvestment purposes.

In February 2011, my X-Fund had $28,573.36. I used approximately $26,319 in March to pay off my private student loans. It left me with only about $2,254.58, but I slowly built the balance back up to $5,898.14 by July. In July, I sold a bunch of my company stock, liquidated one of my Roth IRA accounts and shifted some of my earmark money to my X-Fund which explains the sudden $13k+ jump.

I anticipate this fund will be exhausted in October on closing costs and home improvements.





Long story short, I'm pretending to pay myself an additional $55/month for a "hypothetical" return of premium (ROP) term life insurance policy. I'm basically trying to "earn" back the term life insurance premiums through savings and investments.

Considering I saved $55 last month and my gain was only $36.26, I guess I lost money on my investments. But who didn't in August?



August was a brutal month for my 401k, IRAs and other investments. It could've been worse, though. I didn't suffer as big a loss as I could have since I liquidated a bunch of my company stocks and one of my Roth IRA account at the end of July in anticipation of buying my first home.

The breakdown and the history of my net worth can be seen here.

Short Sale Approval Is Supposedly Coming Next Week

I just got word from my agent that the seller submitted her final approval paper work for the short sale along with a recommendation from the short-sale lender's negotiator. The short sale is expected to be approved some time next week with an anticipated closing date of 10/10/11. I requested that the closing date be pushed back to 10/31/11. I haven't heard back from my agent so I'm not sure whether my request will be honored or whether it will jeopardize the deal.

Anyhow, here's my new monthly housing budget, assuming the short sale is approved:
Mortgage (P&I): $1,289 @ 3.88% interest (3 disc pts)
Assoc Fee: $320
Property Tax: $343 (est.)
Payback Mom: $225
Insurance: $45
Total: $2,222

My current housing budget is:
Rent: $1,175
Renters Insurance: $20
Total: $1,195

Difference: $1,027/month+

Wednesday, August 24, 2011

Maybe I Shouldn't Have Countered

Hmmmm... No response from the short sale lender after we put our counter-to-their-counter in writing. Is it possible that the delay is caused by a new boss at BofA's troubled mortgage servicing department?

I initially thought BofA's lack of an immediate response as a sign that it's crunching numbers to decide whether to accept our counter. I would think that if BofA was planning to stand firm, it wouldn't have asked for a written counter and just rejected us verbally. But now I'm wondering if BofA is entertaining other offers right now? Am I being cheated on???? Surely they've read the most recent bad news in the San Diego housing market, right?

I don't deal with uncertainty in my personal life too well. I dwell and obsess. Maybe that's why I've never been married and am still single. Hmph.

I guess I need to think about the bright side - - the longer this is drawn out, the better, because my apartment lease doesn't end until November 3o, 2011. If we had a sales contract now, we'd probably close by the end of September, leaving me with double housing payments (rent + mortgage) for two months.

And perhaps I just need to remind myself that if this doesn't go through I'll still be okay...

Saturday, August 20, 2011

Counter Offer

I'm not exactly thrilled with my agent. When the short sale lender countered at $375,000, I was expecting my agent to discuss with me viable arguments with which we can counter. But instead, my agent's attitude was, "comps are comps." It was almost as if "comps" were gospel and irrefutable. W T F?? The only advice I got was an unscientific/unproven hypothesis that a short sale lender will likely accept an amount that equals 95% of its counter.

Fine. I decided I'll play them at their own game. I carefully examined the comps. As I previously noted, the "comps" weren't exactly comparable to my unit. When I pointed these out, my agent responded, "Those are all cosmetic. At most, it will get you a $10,000 discount."

Okaaaay. I then looked at the numbers.
  1. Comp #1 (a 1185 sq. ft. unit) closed escrow on 7/15/11 for $410,000.
  2. Comp #2 (a 997 sq. ft. unit) closed escrow on 6/10/11 for $375,000.
  3. Comp #3 (a 997 sq. ft. unit) closed escrow on 3/8/11 for $367,500.
I wrote to my agent:

After careful consideration, please counter with $342,500. My unit does not include upgrades and appliances of the other comps such as newer carpet, paint, hardwood floors, kitchen appliances and washer/dryer. I believe that the upgrade/appliance/repair allowance is valued at $10,000+.

The price per sq ft of one of the comps was $345.99 (i.e., $410k div. 1185 sq ft). Using that price, I've calculated: $345.99 x 1019 sq ft = $352,562 - $10,000 = $342,564.

The short sale lender based its counter on June/July comps, but I think it's worthwhile to point out that the stock market took a significant dive in August, which has reduced the net wealth of many potential buyers, including myself. I imagine that other buyers' purchasing abilities have been similarly affected.

I thought the last argument about the recent market dive could be irrelevant. But according to the WSJ article titled, New Round of Upheaval Reduces Home Buyers' Urgency to Do a Deal (Note: click on top search result to get full article), many buyers are actually reducing their offers because of the market dive. Maybe it wasn't superfluous at all.

My agent verbally conveyed our counter on Thursday to the short sale negotiator (whose fee I agreed to pay if this deal went through). Yesterday, the short sale lender requested that we put our offer in writing.

Will the short sale lender accept? Or will they counter? I'm on pins and needles.

Wednesday, August 17, 2011

The Short Sale Lender Countered - And I'm Not Happy

I just got word that the short sale lender countered... $46k above my offer. The counter was based upon comps of recent sales in the development.

But comps are a peculiar thing - - they're not necessarily apples-to-apples comparisons. First of all, the "comps" conveyed with a fridge, washer and dryer (approx value $3k) and my unit would not. The other unit had wood floors (kitchen and bath), newer carpet and range/oven/dishwasher upgrades. So even without taking the condition of my unit into consideration, there should be a discount.

I've asked my agent whether I can look at the property again. After all, I suspect that there are issues with the unit that I didn't catch the first time around, like a leaky toilet that the seller tried to hide with towels.

I learned that the seller owes approximately $450,000 on the unit. The short sale lender wants $375,000. My agent says that with her experience, a short sale lender would more likely than not accept a counter that equals approximately 95% of the approved amount. In other words, my agent estimates that the bank would be hard-pressed to reject a counter of $356,250.

I'm having a hard time right now separating out emotions and sound financial judgment. My bank has already pre-approved me for the full $375,000 amount. And if I can seal the deal now, I can get a mortgage at 3.75% APR (with 3 discount points).

I can make the payments, but I'll be seriously house poor. And I'm not sure whether the home is worth $356,000 to $375,000. Based upon the sale prices of comparable units from 1989, it looks like the home values are back to what they were in 2003. But if you look at the graph below, 2003 was in the beginning stages of the housing bubble.

Of all the properties that are on the market right now, I like this unit the best for the intangibles -- a south facing patio/windows, a "walkable" location, beautiful landscaping, etc. But... I'll also be paying a premium for these intangibles.

I have until Thursday to make up my mind. I'm not sure whether I should walk or buy.

Tuesday, August 2, 2011

My Offer Was Accepted

I got an email Monday morning from my agent that the Seller accepted my offer. Egads! I meant, yahoo. I meant, OMG. I meant, hurray. I meant, "What have I done????"

One of the "minor" concessions I had to make was that I needed to deposit $3,290 of earnest money into escrow within 3 days of the Seller's acceptance, not when her lenders approve the short sale. Feh. July was a three-paycheck month - - I's got the money!

But when I checked my bank account, I had barely any money. WTF??? It looks like an inter-institutional transfer from my primary checking to an online savings bank that I set a while ago, but canceled over the weekend, was pushed through nevertheless. I called both banks to cancel the transaction, but no dice. Frick! The money is floating in the cyber-transfer ether for the next 3 days and possibly inaccessible until after the due date. F#$K!!

Fortunately, my sister agreed to wire the earnest money. Truth be told, the only reason why I'm able to purchase this property at all is because my mother is lending me a portion of my dad's life insurance proceed for the 20% down payment. My sister is the trustee of the funds so it made sense that she pay the initial deposit. Mini-crisis resolved.

I have a good feeling that the Seller's lenders will approve the short-sale. A comparable unit in December sold for $333,000. Another comparable unit (but with hardwood floor upgrades) sold for $375,000 in June. Looks like I'm in the ballpark.

Even if the short sale is rejected, I'll be okay. After all, my cost of living will skyrocket and I'll be living on rice-and-beans for the foreseeable future if this goes through. Assuming the short-sale is approved, this is my new housing budget: (Oh, God, I'm feeling sick.)

Mortgage (P&I): $1,275
HOA Fee: $320
Property Tax: $340 (est.)
Payback Mom: $225
Condo Insurance: $60
TOTAL: $2,220/month.

Do you see why I won't really be disappointed if the the short-sale is rejected?

Sunday, July 31, 2011

Getting Caught Up in the Frenzy - Budget Increase Round Two

It's starting to look like I need a budget of $300k to $330k for a "move-in ready" 2br/2ba condo in my area. At this price range, I've estimated that my housing cost will be around $1,914 - $2000/month = mortgage (P&I only) $1,274 + associations fees around $300 + property tax $340 + insurance $10. (The reason why my "insurance cost" budget is $10 is because I'm only taking into account the increased premium from a condo-owner's policy vs. my current renter's insurance policy.)

I'm currently paying $1,175/month in rent, so this is a jump of $739-$825/month in my cost of living. Of course, I'm currently only renting a 1 br/1 ba apartment, so it's not really an apples-to-apples comparison. If I were to rent a 2 br/2 ba apartment at my complex, I would be paying approx. $1,600 - $1,700 month. So I concluded that buying makes sense, even with the significantly increased cost of living.

With this conclusion, I made two offers:
1.) $300,000 back-up offer on a townhome for which the seller had already accepted a $300k cash offer from someone else. The buyer, however, has a date certain that they need to move-in. With the townhome being sold as a short-sale, the property may not close in time for the buyer. In the event the buyer drops out, my back-up offer will be considered.

2.) $329,000 on a short-sale townhome. The seller countered yesterday with minor concessions, which I accepted. The seller is entertaining multiple offers so I'm not sure whether I'll "win" the bid yet.

I have mixed feelings about this process. On the one hand, I hope I can buy the $329k property. On the other hand, the thought of the increased cost of living is giving me heartburn.

Saturday, July 30, 2011

My Budget Round One: From $231,250 to $275,000

My initial, "What I Can Afford" budget was a condominium up to $231,250. I based that budget on a cursory review on Zillow for 2 BR/2Ba condominiums in my area. There were a couple of apartment conversion units with upgraded interiors (i.e., granite countertops, stainless steel appliances) in the $229,000 - $230,000 price range. Poifect!

My agent sent me an updated MLS listing with a search criteria of 2+BR/2+Ba up to $235,000. I got 9 hits. The 2 condo conversion units were still on the market. Yipee!

Unfortunately, when I did a "drive-by," I quickly discovered why those units were so cheap... errrr.... I meant affordable. The units' balconies and windows face a major freeway. Semis and trucks drive through this freeway all day and all night. The noise pollution from the freeway is overwhelming. There's no way I can sleep at night. *Sigh*

Okay... Maybe if I increase my search criteria to $275,000? Yikes. That means I need to come up with a $55,000 down payment and my loan amount will be $220,000. My monthly mortgage payment will go from $890 to $1,066. I tell myself, "I can swing it! It's still less than my monthly rent!" (I'm conveniently ignoring property taxes and COA fees.) I instructed my agent to increase the search criteria.

I got a couple of more hits. There was one unit for $257,000. The MLS pictures were kind of dark and depressing. But the location is great, so nothing a little paint, extra lighting and some elbow grease can't cure, right?

The walk-through was scary... errrr... I meant enlightening. Everything from the common area to the living area screamed 70's kitsch. Imagine a generic Motel 8 structure with an age-worn Brady Bunch decor. The unit doorway had a tiki-like, wood panel embellishment. I like tikis well enough, but at Disneyland or Trader Vics. Not my home. And since the ugly tiki is in the common-area, I can't just rip it out.

Once inside, it was bright and spacious, but everything was soooo dated. The prior owner appeared to have started DIY removal of the acoustic (popcorn) ceiling in the kitchen. But they stopped a little ways into the living room area, probably saying, "F*#k it. This $#it is too much work." The fireplace had some weird, orange-ish psychedelic tiles above it. When I got close, the tiles had a picture of a flamenco dancer. Egads.

*Sigh* I'm coming to the realization that even in this economy, a 2BR/2Ba for <$275,000 will only get me a fixer-upper. If it's move-in ready, I have to be prepared to wear earplugs at all times while at home. I'm getting depressed...

Friday, July 29, 2011

I'm In the Market to Buy My First Home

The US economy is on the brink of crumbling and I've decided now is the good time to buy my first home. I've always had a knack for good timing. Like that line from the movie Airplane!: "I guess I picked the wrong time to quit drinking."

I won't be writing about stuff like "How I found my agent" (friend referral), "How I found my first mortgage" (credit union), "How I determined what I can afford". Other (much knowledgeable/experienced/smarter) people have already covered that territory ad nauseum. I'm just going to write about my personal experience. My posts, for all practical purposes, will be of no use to anyone but myself.

I started the process on Monday. So far, my emotions have ran the gamut of hopeful, excited, optimistic, scared, ambivalent, dejected, sad, frustrated, anxious, impatient, depressed, etc. I don't deal with stress very well, so these extreme fluctuations in emotion have immediately manifested into cold sores (plural) on my bottom lip. Nothing exudes and inspires confidence like outwardly visible herpes sores.

I've already had to adjust my "maximum" budget twice in the span of a week. *Sigh* Not a good sign. For those who like witnessing a train crash, you may be in for treat.

Saturday, March 19, 2011

Paid Off My Private Student Loans

I purged the variable-rate-debt snake from my household and paid off my private student loans on St. Paddy's Day. Yep, made one lump sum payment of $31,584.24 to pay it off. Now I have approximately $51.5k in federally subsidized student loans remaining. I'm less concerned about paying my federally subsidized student loan off because: (a) it has a fixed interest rate of 5.125% and (b) the monthly payment is only $360.08/month.

You may be wondering how I got the money to make a huge lump-sum payment. Back in December 2009, I came across a significant windfall of ~$33k. (Due to a confidentiality clause, I can't divulge the source or the reason for the windfall.) I spent some of the windfall on various things, but managed to hold onto $28.5k for over a year. I didn't know what I wanted to do with the money. Should I keep it as a potential down payment for my first home? Should I just stash it as my secondary emergency fund? Or should I pay off my student loans?

I finally worked up the courage to use the money to pay off my private student loans. Although the interest rates are really low right now (3.583% APR), I'm not sure how much longer it will stay low since it is a variable rate loan. Secondly, I've been accruing anemic interest on my savings accounts ranging between 0.5% - 1.59% APY. Thirdly, if you add my EF balance and my "earmarked" savings, I have approximately $24,000 remaining in the bank. I felt I had enough of a financial cushion to pull the trigger.

I was planning to snowball my entire student loans but I've changed my mind. As I've indicated above, the minimum monthly payment and the fixed interest rates on my remaining federal student loans are both relatively low. Although the balance is still relatively high, I feel less urgent to pay it off.

Instead, I'm going to focus on saving money for a down payment on my first home. Although I'm pretty confident that interest rates aren't going to skyrocket any time soon (in the next five years or so), I want to be able to have money to buy something before it does.

Sunday, January 23, 2011

Give More Than You Get

I've made a personal commitment to live by this motto.

In the past, I lived by the motto, "Do unto others as they have done for me." For example, if some one didn't do "X" for me, I won't do "X" for them either. I guess in many ways this is a pragmatic way to live. But it also made me miserable because I was keeping score. And I've come to the conclusion that keeping score is exhausting, limiting and ultimately, self-defeating.

Don't get me wrong - - I have no intention of trying to make friends with those who have intentionally wronged or back-stabbed me in the past. I'm just talking about those people who haven't necessarily reciprocated my kind gestures in the past.

I bring this up because my BFF told me, "If 'giving more than you get' is your motto, you're going to discover that you got taken advantage of your entire life." My BFF said this with respect to my friend, "Tara," who I take out to lunch every year for her birthday. Tara has never remembered my birthday. This irked me for a while, but I came to the conclusion that I'm just being petty.

Tara is a single mother who is sandwiched between taking care of her college-bound daughter and a sick, invalid father. She has a lot on her plate and I doubt remembering my birthday is high on her priority list. Besides, I haven't really cared about my birthday since I turned 30 either.

My BFF said, "Tara is just using you and she'll see you nothing other than a free meal-ticket. She will do nothing for you. You watch." Of course, my BFF has never met Tara and is casting a broad judgment based upon this one issue. Fact of the matter is, Tara wouldn't care if I never paid for her lunch. I just take Tara out to lunch on her birthday because it's an excuse to get together and catch up. She never expects or have asked to be taken out.

I took Tara out to lunch for her birthday last week. She offered and even insisted on paying for her own meal, but I paid anyways. She finally sheepishly said, "You always do this for me and I don't even know your birthday. When is it?" I told her my birthday was in June but didn't say the specific day . After all, I don't take her out with the expectation that she'll take me out for mine.

On a side note, my BFF complains that she has no "girl-friends" that she can hang out with. What she really means is that she has no friends that she deems worthy to hang out with. I guess when you expect your friends to reciprocate every kind thing you do for them, you're pretty much going to limit your circle of friends.

Saturday, January 15, 2011

2010 Year-End Progress Report

This is my (belated) 2010 year-end financial review.

Due to family obligations last year, I hadn't been updating my blog regularly other than to blow steam about my parents' financial irresponsibility.

With my father now deceased (RIP), I am hoping that my life will return to "normal" and that I will be able to resume a semi-regular update of my financial progress.


Starting Debt (6/08)

Last MonthThis MonthDIFFERENCE
Private SL$49,528.99$33,936.80$33,486.00$(450.80)
Fed'l SL$55,852.68$52,101.45$51,953.37$(148.08)
Car Loan

I totally fell off of the snowball plan last year. It's partly because my monthly budget took a whack every time I traveled out-of-state to attend to my parents' bankruptcy and health care issues. I also blew beaucoup cash to deal with my emotional upheavals in dealing with my parents. Hey, retail therapy is a proud American tradition, no? Even if it isn't, our economic recovery depends upon it, sadly.

Anyhow, here's a recap:

Total debt in 12/31/09: $96,750.67
Total debt in 12/31/10: $85,439.37
Reduction in $: $11,311.30
Reduction in %: 11.69%





The savings I report here is with respect to my emergency fund savings only and does not include my future spending earmarks. My ultimate goal is to save $36,000.

Total EF in 12/31/09: $8,472.64
Total EF in 12/31/10: $9,696.45
Increase in $: $1,223.81
Increase in %: 14.44%





My "X"-Fund represents a part of a recent windfall that I'd set aside for some unplanned expense. I was thinking it could serve as a supplement to my emergency fund or a down-payment for my first home, but I'm very, very tempted to use this money to pay off my private student loans some time down the road. After all, this money is currently accruing interest at an anemic 1.3% APY. My private student loans are costing me ~3.6% APR. On paper it's a no-brainer, but the emotional security this money gives me is incalculable.





Long story short, I bought term life insurance but created a hypothetical whole life insurance policy (or, return of premium (ROP) term life insurance policy). I'm basically trying to see whether I can earn back my life insurance premiums through various investments.

So far, my investments have yielded a 9.06% return. With the stock market surging though, I don't think I'll be buying any stocks or ETFs in the near future. I'll wait for the inevitable (yet somehow unexpected) market correction.



Looks great doesn't it? But if I omit my 401k and IRAs, my net worth is... -$35,413.41. I'll do the happy dance when my net worth (excl-retirement accounts) is no longer in the red.

Net worth on 12/31/09: $53,922.34
Net worth on 12/31/10: $143,084.85
Increase in $: $89,162.51
Increase in %: 165.35%

The increase in my net worth is mostly attributed to: (a) 401k value increased by ~$45,000, (b) net windfall of ~$28,000, (c) debt reduction of ~$11,000.

The breakdown and the history of my net worth can be seen here.

What Are You Doing with the Social Security Payroll Tax Cut?

I got my first paycheck of 2011 and it was more than I expected. (This is partly due to the fact that I reduced my 401k contributions by 1% back in August because I would have otherwise maxed out my 401k contributions before my last paycheck and missed out on some of the company match.) But it looks like my Social Security payroll tax cut accounts for an additional $80 per paycheck or so.

I'm not too thrilled about this tax-cut, though, because I've always been worried about the solvency of the Social Security program when I retire. As a sign that we probably can't afford this tax cut, the government is borrowing $112 billion to make Social Security whole.

I guess the thought behind the SS payroll cut is to stimulate the economy. Unfortunately, I'm probably not going to put the money back into the stream of commerce. I intend to use the money to pay down my private student loans and/or to increase my Roth IRA contributions. I guess I'm no better than the companies that are hoarding cash rather than hiring, despite tax cuts and other government cheap money.

If I'm worried that I won't be able to collect on Social Security, I might as well reduce my debt and sock this money into my Roth, right? But does this make me a bad citizen? Maybe to alleviate my guilt, I'll continue to buy I-Bonds despite the less-than-thrilling rates they've been giving lately.