Posts Tagged ‘women buying real estate’

June Fletcher writes, in an article in the Wall Street Journal, about 24-year-old Brendt Montgomery. He shares his experience in purchasing a distressed property at a bargain price – or so he thought.

Here’s how his search started out:

After looking around for a day, he quickly found a condo that had been repossessed by the bank. He gave it a quick tour, made an offer and then embarked on a short vacation. While he was gone, a bidding war erupted, and spurred by the competition, he upped his bid to $143,100. His offer was accepted, and as soon as he returned, he signed a 33-page contract without really reading it.

Clearly one day is not enough time to search for a property – even if you’ve already logged hours with your internet search.

See what happens to him:

After paying $2,000 for an earnest money deposit, plus $250 for an inspection and $85 to the condo association—but before the deal closed–he again toured the condo.

There were problems: dirty carpets, mold in the air conditioning system, holes in the wall. He had second thoughts about how secure the first-floor location might be, and realized that the north-facing windows would never let in much light. “It was a little depressing,” he says. “I realized I’d acted hastily.”

The $8,000 tax credit is attractive, along with foreclosure pricing. But, to make sure it remains attractive, you’ve got to keep your head about you. (See previous post!)

House in Phoenix

My friend, Janet, who lives in Phoenix is planning to buy a house for herself.  Her last two purchases have been investment properties.  This one she’s going to live in.  Janet is very practical, but

“I feel very emotional about this,” she says.

Right.  Is IS emotional. But as long as you throw in some common sense, the decision to buy could be right for you.

Janet is doing it right. She:

1. Already owns her current home outright.
2. Has her emergency fund.
3. Is buying within her financial comfort level.
4. Is planning to live in the house for many years.

She’s working her plan.  It is scary though.  We’re talking about Phoenix –  property values have gone down tremendously in the past year.  There is a possibility values may continue go down in the next year. It won’t matter to her because she’ll still be in the house when they rise.

If you are thinking about buying, are you working your plan?  Are you keeping your wits about you, while at the same time realizing it is emotional?

$700 Billion Club, that is.  Last night we had the biggest bank failure in U.S. history — Washington Mutual.  Today we’re waiting to find out what happens with the Treasury Secretary Paulson’s plan.  And, tonight there may or may not be a presidential debate.  It’s enough to make one want to take the day off and go to the movies.  Bad news.   More news.  Too much news to process.

Yesterday I had lunch with a friend who is saving as much money as she can right now.  Her plan is to start looking this spring for her first house to buy.  She believes prices will be just right by then.  Between now and then she’s researching neighborhoods so she’ll be ready to jump on a property if she needs to.  The important thing is:  she has a plan.  What’s your plan?

I didn’t wait to get a diamond before buying my first home.  I bought within my budget.  Those were 2 very important issues.

However,  my research on the whole real estate process was limited to just about no research!  I didn’t know who to ask, so I didn’t seek counsel of anyone.  I went into it with blind trust.  I didn’t obtain the best mortgage for my situation.  I didn’t even live in the property for much more than a year.   When I sold it, that too was done without a lot of thought or research into the tax implications or future.

Fortunately now there are many more resources available.   And women have lots of company.  In fact, the second largest homebuying group, after married couples, is single women.  That’s why I wrote my book, You Don’t Need A Diamond To Buy Real Estate — to help single women find, buy and finance real estate.

The next step, after signing the purchase contract, was to obtain a mortgage for my condo purchase. Again, my ‘friend,’ Suzie, the real estate agent, was more than happy to bring me to her lender. (Many years later I discover that my best option would have been to get an FHA mortgage — fixed rate, with low down payment.) But I was 24 years old and it was 1985, and I didn’t know what I was doing! Suzie did!

Since John, the lender, was a friend of Suzie’s, surely he wouldn’t steer me wrong. I signed a mountain of papers, gave John all my employment and paystub info. Before long I was approved! Wow! It was exciting and scary at the same time. My monthly payment was $984. The lender said I only had to pay $684 each month! Cool! “That will really save me money,” I thought.

I went to an attorney office to complete the loan closing. Suzie was there. I got my keys — the condo was mine!! Vistas of Vienna here I come!

Six Months Later
What a nitwit! I get a notice from the lender telling me the payment is going up. My payment isn’t $684 anymore. I was getting used to that. Hmmm. The notice also shows my mortgage balance — it was more than I originally borrowed. That just doesn’t make sense.

Another Six Months Later
Second notice from the lender. The payment is going up, again! This time the loan balance is even higher. What is going on!

After several phone conversations and close reading of my loan documents, I learn that I obtained a loan with negative amortization. Those lower payments I was making each month — it wasn’t a gift. They let me pay a lower amount (essentially a lower interest rate) but it didn’t cover the amount of interest due on my loan. They added it to my outstanding principal balance. It was a 6-month, adjustable rate mortgage — meaning the payment could go up (or down) every 6 months!

Later I began making my full interest and principal payments. I didn’t want my balance owed to keep growing! It was helpful in the early years as far as my cash flow went, but it sure would have been smart to be better informed up front.

Vistas of Vienna - My First Condo

I thought the real estate agent was my friend. After all, I was only a 24 year old single gal, what did I know about real estate? It was 1985 — none of my friends were buying real estate. I trusted her.

The agent, Suzie, drove me around all day long looking at different condo projects. It was Fairfax County, Virginia – a Washington, D.C. suburb. Finally around 4pm, we were at a condo project being built. I was hungry. Feeling shaky. I loved the place — it had a fireplace and a cathedral ceiling. Pretty cool for 1985. Boy, was I hungry. Suzie was insistent we get this contract written up before I lost the condo. I was not excited. I was hungry!

What I didn’t know was the real estate agent wasn’t my friend. Far from it. In those days the agents worked for the Seller; there were no Buyer Agents. She wasn’t looking out for my interests. The fact that she didn’t take me to lunch should have been my clue!

The next day, after I had eaten two meals, I felt really nervous. What had I done? This condo was way over my budget! Yikes, I had to get out of it. I didn’t want that place. I called Suzie and told her I didn’t want it, but I wanted the older condo we saw which was about $25,000 less. It didn’t have a fireplace or cathedral ceilings, but it was in my budget. That’s how I found my first condo at the Vistas of Vienna — a first floor, two bedroom, two full bath brick unit with a nice patio, double ovens and a garbage compactor.

Today my next door neighbor, Sheila, is a successful, long-time real estate broker. Sometimes she regales me with stories about taking her clients out to look at property, stopping at Starbucks and buying them drinks, taking time for a nice lunch. Suzie could learn a thing or two!