Buying a Foreclosure – An Interesting Story
In March, my husband and I purchased our first home. We live in Arlington, VA across the river from Washington, DC which means that real estate is pretty expensive in our area. As a result, almost all the homes in our price range were foreclosures or short sales.
The nicest place that we could afford was a two bedroom, two bath condo is a three year old building. It had an underground parking spot, fancy kitchen, a balcony and was next to the Metro bus stop. Pretty much everything we were looking for in a home.
So what was the problem? The previous owner had been foreclosed on and in retaliation he stripped the condo bare. He took everything and I mean everything. The kitchen was missing every appliance – fridge, stove, dishwasher, microwave, washer and dryer. He even took the four-prong outlet for the dryer out of the wall – couldn’t tell you why.
Now taking the appliances isn’t all that unusual. He also took all the doors out of the condo – closet doors, bedroom doors and bathroom doors. Most of the light fixtures also went with him. Next he took everything in the master bath – shower head, medicine cabinet, large mirror over the vanity and my personal favorite – the toilet. Why in the world would you take the toilet with you? You can get a new one at Home Depot for a little over $100 and the toilets in the condo weren’t anything special.
Lastly, he took around 25 knobs off the cabinets and drawers in the kitchen. Now this shows an impressive attention to detail. The time it would take to unscrew all those little knobs that would be so easy to replace. I thought it really made a statement.
This is the condo we ended up buying. Since there were so many things missing from the apartment, it had been on the market for months and the price had been lowered three times putting the condo squarely in our price range. Why Fannie Mae, the bank that now owned the condo, couldn’t be bothered to fix everything, I’ll never know.
But I’m grateful, we have an almost new condo and since we had to replace most items inside, we also have a chance to fix things up exactly the way we like! So in a way I should probably be thanking the previous owner – otherwise a place like this would have been too much money and already snapped up!
Do you have an entertaining foreclosure stories? If so, please share in the comments.
$8000 First-time Homebuyer Tax Credit
Tax credits and deductions usually don’t get me very excited, but I’ve been following the first-time home buyer tax credit in the stimulus package with unusual interest over the last month. As we may actually be buying a condo this month, an $8000 tax credit makes a huge difference for us.
The original law had a tax credit of $7500, but it was essentially a loan as the credit had to be paid back in $500 increments on your taxes every year for 15 years. If you sold the home before then, the full amount was then due immediately. A first-time home buyer is defined as someone who has not owned a home in the previous 3 years. If this tax credit had stayed on the books and our condo purchase came through this month, I’m not sure we would have taken this credit. In fact, the original $7500 tax credit has been found to have little effect on the housing market.
The final bill of the stimulus package (American Recovery and Reinvestment Act of 2009) has an $8000 tax credit for first-time buyers (same definition as above). The $8000 is not a loan and is yours to keep as long as you live in the home as your primary residence for three years. If you do sell or rent it before then, you would have to pay the tax credit back. The size of the credit is 10% of the purchase price of your home up to $8000. So as long as your home costs more than $80,000, you can take the entire credit. However, the credit is subject to income limitations. You have to make less than $75,000 if your single and under $150,000 if you are married filing jointly.
What is less widely know about the tax credit is that even if you purchase your home in 2009, you can claim the credit on your 2008 taxes! We did this and used the money to immediately improve our new home. If you’ve already filed your taxes for 2008, you can submit an amended return to claim the credit early. But it’s worth looking at whether or not the credit will be more valuable to you in 2008 or 2009.
Do you plan of taking advantage of the new first-time home buyer tax credit?
Emotional side of buying (or not buying) a home
Now that we’re staying in DC and had already saved up a substantial amount of money for the move, we are seriously considering purchasing a home. I’ve been wanting to buy for several years now, but since we were always planning on moving to London, it never made sense. Of course, I’m very glad we didn’t buy a couple of years ago since it would have been at the height of the market.
So being a first-time buyer, I sought out friends who had recently bought a home, did some research online and started moving forward. First, I submitted an online application on lendingtree.com. That seemed to bring in a lot of offers, but I was a little concerned that I hadn’t heard of any of the companies. Next, I submitted a pre-approval application to Bank of America, where we have our large checking account. We were approved for their No Fee Mortgage Plus Loan, which seems pretty good. Closing costs are low, but you pay for it with the points. Even still, the loan seemed to work well for us.
A friend had recommended her realtor. After some email exchanges on what type and price of home we were looking for, I spent Sunday looking at 10 places. Five at open houses and five with our realtor. Out of the 10, we saw one viable option. By viable I mean somewhere that was in our price range, close to public transportation, didn’t need too much work and was in a safe neighborhood. Unfortunately the one viable option was at the very top of our price range.
However, our realtor thought a low offer within our budget might do the trick. So for two blissful days, I really thought we might actually end up with a three level, two bedroom townhouse that was in excellent shape. Everything I could have wanted! While the loan numbers worked out to pretty much what I had estimated, the ridiculous condo fees completed busted out mortgage payment. Well that and the fact that our dream home’s zip code was labeled as a “declining market” by Bank of America meaning that we could could no longer use the No Fee Mortgage Plus Loan. I’d like to know just how many markets in the US right now would not be determined “declining”!
While the more expensive mortgage was annoying, it was really the condo fees that sunk the deal. Condo or home association fees could be an entire post by themselves! While the property that we were considering was a townhome, the community is organized as condominiums. The fee was almost $400 dollars a month. A huge amount considering that it wouldn’t go towards building equity and couldn’t be written off as a tax deduction. The fee covered some utilities but also went to landscaping, snow removal, and exterior maintenance of the townhomes. While I appreciate that it’s great that someone else will fix the roof if it starts to leak, I’d much rather be the one deciding the timing and extent of such repairs.
In the end, we couldn’t justify the huge chunk of our monthly income that would go towards all our housing costs and ended up not making an offer.
I, however, was truly upset. I had imagined us living there already with plenty of space for our growing family, no other dogs in the building to upset our dog, room for guests and entertaining, a chance to buy some real furniture, and no more ridiculous rent increases.
While I had not “fallen in love” with the townhouse, I was seduced by what it represented. Fortunately, my sensible husband and I spent a couple of evenings looking hard at the costs and our monthly budget. If not, I might have been tempted to go ahead and hope for the best.