Friday, April 25, 2014

About A House

We just got back from a vacation trip to Louisiana to see our daughter.
She left to go live there last May, so it's almost been a year since we've seen her.

We've been talking about where to move to once Hubs retires for a couple years now.
Among the places we've considered is somewhere down South, concentrating on looking at states where the retirement $ goes farther(either/or the state doesn't tax it too heavily or the cost of living is low-ish for other reasons).
And we are sick and tired of dealing with snow.  30 years living up north is enough for me!
Plus we want to be somewhere close to at least one of our kids.

The youngest is just entering college(and there is no way to know where he'll end up being based), and the oldest isn't settled yet(due to the GF's schooling still not being finished)....plus he isn't planning on having kids(so far).
Which leaves the middle child, who is planning on getting married and having kids as soon as it's financially feasible.
And since she is in Louisiana, we thought we'd go looking at house opportunities while we were down there visiting her.
This area of Louisiana is lousy with foreclosures!
And it seems the housing situation of choice for 90% of the folks in this area is a mobile or manufactured home.

Since her living situation can't continue on as it has the past year, it needs to change now that she isn't going to school but is working fulltime, we figured IF we found a place now, but aren't going to be able to live in it for at least 4 years from now, the daughter could live there and pay us nominal rent and pay the utilities.
This would be a great deal for her and she'd be able to save some money up and have a good living situation for 4 years or so.  It would also help us to not have the house vacant and a target for vandals wanting to steal the copper wiring/pipes and other things out of it.

If we bought a manufactured home it could be older and if the daughter and her dog lived there we wouldn't worry about fixing it up too much(no new carpets, etc. since the dog would ruin them).  Heck it the home was real old, we'd just have it hauled off when we came down there and build a new home(or buy a new manufactured home).

So that was the initial plan going down there......look at properties and see if anything fit the bill.
Of course, since we weren't going to sell our PA house to use that money to pay for this LA house, it had to be a really good and cheap deal, as we were paying cash out of pocket(savings)for it.

We spent 2 days looking at properties with a different realtor each day.  The daughter went with us, but we saw a couple of houses the first day with that realtor after daughter had to leave us and go to work.

And one of those 2 houses daughter didn't see seemed like a great deal.  It was a foreclosure for $53K, a manufactured house on an acre of land.
So we made plans on our 3rd day down there to take daughter and her BF to go back to see that one.

While we were out with realtor #2, realtor #1 called us with a new foreclosure listing, so we decided to go see that last property the day we were taking the kids to see the one going for $53K.


We went to see the last property before the $53K one.
And both of the kids fell in love with it.  The yard was fabulous and the house was in great shape(as far as we could tell). Though my daughter's commute to work would be a little long(not too long), it was perfect for them in every other way.

We still went to see the $53K property but they didn't like it as well as this last one.

And here is where the plan changed from US  buying the house and the kids living in it for 4 or so years and paying rent, to the daughter buying the house and keeping it.

In the foreclosure game you have HUD houses and you have Fannie Mae(Home Path)houses.
When a foreclosure comes up for sale under these agencies, only owner/occupants get first crack at buying them.  For the first 15 days(sometimes 30 days)these properties can only be bought by a non-profit organization, government agency or an individual who will be living in the home as their primary residence.

This is to allow people who really need the home first crack at them before the investors(flippers or folks who want to hold them to rent them out) and people buying vacation/second homes.
The last home(will refer to it as house #1 from now on)was just listed the day before and wasn't even on the Fannie Mae website yet.
The $53K house(will refer to this house as #2 from now on)was going off the "protected time phase" 3 days later from the day we saw it, meaning bidding was open to all, not just owner/occupants by the time we could get an offer in for it, and Hubs and I could buy it ourselves...but we'd be in a bidding war possibly with investors.

As you can imagine, all the really good deals, if they aren't snatched up within the first 15 days are gone asap as soon as the protected phase expires, plus once the investors can bid, the price usually goes well above the initial asking price if it's a good property.  So if a good property is still not sold by the time the investors can snag it, it's going to be more expensive than the asking price.

So in order to put an offer in on house #1, our daughter had to be the buyer.  We asked about having me and her on the bid and contract/deed but we both would have had to occupy the house.
So she had to make the offer.

This didn't also mean that she had to PAY for the house.  It doesn't matter where she gets the $ to pay for it, as long as the bank gets paid.
But where she gets the $ from can have tax implications from the giver.

We did some research and any person can gift up to $14K a year to their child without negative tax implications, meaning a couple can gift a combined total of $28K a year per child.

So we will gift her $28K for the house.  Since she had decided not to continue college at this point, we used most of what is left of her college money for this gift.

The rest of the cost of the house we will be making her a personal loan(a totally legal contract/promissory note), which she will pay back over the next 10 years at a nominal interest rate.

We sat down last weekend and wrote her and the BF out a budget and between their existing bills and this loan repayment(and the new bills for utilities, house insurance, etc.)they will still have a cushion each month for savings/emergency fund.

So the offer was made the day we left Louisiana on Monday and Wednesday, right as we pulled into a place for lunch in Athens, Tennessee, we got a call from the daughter that the bank accepted the offer.
So we had to drive until 3 am to get home that night to get to the bank to get a bank check for the earnest money and overnight it to the broker, per the bank's requirements.

The kids are so thrilled!
And I'll be able to exhale next Tuesday after the home inspector says all systems are good and there aren't any big money surprises and things that need fixing.

With a foreclosed bank HUD/FM home, you can't ask for reductions if something is not working.  Everything is sold "AS IS".  If the inspector finds expensive problems that need price reductions, you have to withdraw your offer totally and make a new offer and start the process all over again at a lower price.  It's a big PITA and if they don't respond before the protected phase, because then you are bidding against investors and the price could go too high.

If everything goes smoothly from here, the daughter will be a property owner on May 9th and will own it free and clear before her 31st birthday(if not sooner).

**And House #2?
It was snapped up the day it went out of the protected phase on Tuesday by an investor, as we knew it would be.

Next time, I'll share details & pictures of the property.


Sluggy


 

5 comments:

  1. You two are just a wild and crazy guy and gal.

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  2. These are some awesome news!! And those prices - unbelievable! I'm glad you could find an awesome house for a good price for your daughter.

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  3. Very cool! AWESOME!!!

    Peace <3
    Jay

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  4. You both are wonderful parents!
    Ok, when you go on vacation and buy souvenirs most people buy a key chain or a pen. The big spenders buy a coffee mug. You buy a house!

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  5. You are good parents. I know your daughter is thrilled.

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