Monday, October 15, 2012

Vacation Home Investing: Part 2 The Purchase


The first step to owning a vacation home starts with research.  Research to see what’s available.  Research223px-Ohio_counties_map to find more or less desirable areas.  Decide what you can spend and where you will spend it.  Research, research, research.  I love research; it lets me learn new things and explore ideas and alternatives. I spent about 3 years doing research for this cabin, research that ultimately led me to refine my search.  I researched the state of Ohio using aerial maps and driving here and there, and ultimately restricted my search to areas in southern Ohio because there are many more public lands to enjoy.

I looked for something small, within 1 hour 30 minutes to Columbus, priced at $50,000 or less (we did not want to incur debt), hilly wooded acreage, close to a lake for swimming, easy access to major highways, proximity to grocery and other amenities of a city, and close to hiking trails and lakes. I looked in Hocking, Athens, Vinton, Fairfield, Ross, Pike, and Highland counties. I frequently searched online at Trulia, Zillow, FNMA, HUD, and others. I checked out sheriff’s sale lists and individual local realtor sites and auction sites like Williams & Williams, Bid4Assets, and

My husband and I physically viewed some properties ranging from a too small cabin on too little land too far away to a half-underground cabin with a huge commercial light mounted next to the front door, bars on the doors and windows, and lots of mold inside.  We saw land that was too far away and too expensive and land that was in a good location but with poor roads, neighbors, and utilities. My dream continually returned me to the website of a one-room streamside cabin where I imagined myself writing and reading and lounging by the side of the stream, but that cabin was overpriced, far away, with no utilities.  I finally listened to my practical side and turned away from that one. 

I often despaired.  When I did find well-priced land with utilities and buildings, they were useless buildings that would need to be removed (a Quonset hut and a leaky, tiny distressed and damaged mobile home complete with a wheel base).  We visited one cabin where the toilet drained through a hole in the floor and then into an open hole in the ground and the “spring” was a muddy hole dug next to a creek.  I watched a couple of online auctions and wondered at people who paid top dollar for properties needing extensive structural repair.  

I had included raw land in my search and considered the idea of building later because land is more affordable ($1,000 –$3,000 an acre).  But building new is almost always more expensive than purchasing previously built.  So, I found myself narrowing my search once again, now to include only properties that already had a building. 

In addition to the house, water and septic are vitally important.  Water wells are hit and miss in hilly areas. Even though there is sufficient rain, much of the rainfall runs off the hills into streams and rivers and very little soaks into the ground. Unlike the 30-foot well at my Columbus house where the ground is flat and permeable, wells in hilly areas are at least 100 feet deep or deeper and frequently yield poor water quality and weak flow.  The hilly terrain also causes a problem for septic systems.  The soil in these areas tends to be impermeable clay and rock,  so it may be difficult to get a septic system approved. I wanted someone else to have already dealt with the septic and water for anything I purchased.  

I finally found what I was looking for or close to it. And while I couldn’t find everything on my list, I did find wooded hilly acreage, a building the right size, in my price range, with septic and water,  close to the Buckeye Trail, across from state forest land, close to a major highway and city amenities.  This was a Fannie Mae financed house which gave me some comfort because FNMA has standards for houses which it finances.  (Note: most FNMA and other government foreclosures do not have much land with them.  In fact, I have been looking recently and have found most of them to be less than one acre.)

I did not know how greatly Fannie Mae’s foreclosure process differed from other foreclosures and differed from purchasing from any other seller, but I soon learned.  FNMA requires all houses to go to bid and these bids must be submitted to FNMA by FNMA approved realtors.  You cannot submit a bid to FNMA unless you show the realtor proof of your ability to pay the amount bid, such as bank statements or a pre-approved loan.  These are blind bids; you do know know how much the other potential buyers are bidding.  I decided to bid full price.  The realtor suggested I could go lower, but did tell me there were other parties bidding.  A full price offer was a reasonable amount to pay, so I submitted the bid and expected a response within 24 hours as is normal in other transactions.

I discovered that FNMA looks at each bid submitted each day or over a period of days and chooses the one that will give FNMA the greater net proceeds.  In most real estate purchase transactions the purchaser makes an offer that is a contract.  Not with FNMA.  It was several days before I received word that FNMA had accepted my bid, but I did not receive FNMA’s contract until much later.  Before I even saw it I had the realtor fax it to my attorney for his quick review.  Most residential real estate purchase contracts are a page or two.  My attorney called me after receiving the contract and that’s when I found out FNMA’s contract contained thirteen pages.   My attorney was pressed for time, so he addressed his concerns with me, and I addressed mine with him as I drove to Chillicothe to give the realtor my deposit and submit the contract. 

I felt almost sure about this purchase, but it was a sufficiently large expenditure to drain our savings, my husband was not completely happy about it, and I wanted to be as absolutely sure as I could that this was a right thing to do.  FNMA, being a large government agency, does not negotiate changes to their contract.  You can find that information online.  They never make changes or accept changes made by buyers.  Nevertheless, parts of the contract made me uncomfortable so I made changes before I submitted the contract to FNMA. 

I wanted to do what God wanted me to do with this transaction, but I do not believe putting God in a situation where it seems like I am forcing him to act.  After all, who can control God?  It is presumptive to even think about trying to force his hand.  But this one time, I asked God to let FNMA do what they always do and not accept my changes if He wanted me to back off from the cabin.  I told Him that if FNMA rejected the contract, I would not move forward and that would be the end of it.  Final.  Finito.  And that should have been the end of it because government agencies loathe change.  And it wasn’t like mine was the only bid; I found out later that the next closest bid was only $100 less than mine.

It took days for a response from FNMA.  Days when I wrestled with what the loss of a dream would mean.  Days when I felt alternately calm then sad at the loss I was sure to experience.   And yet it felt good.  It felt right.  I have often jumped into situations which may not have been the best choice.  I have friends who believe that some of my decisions have been totally wrong.  I have trouble deciding who to listen to.  Voices from good and wise friends can give opposing advice.  Even God doesn’t usually tell me what is right.  There are clear principals and guidelines found in the Bible, but they may not cover every situation.  Sometimes the Spirit nudges me in a certain direction.  But usually I make a decision with no clear guidance, only a desperate prayer that what I am doing is right. 

How do you decide who to marry?  I tease my husband by telling him that I married the “bad boy.”  Sure, you have your list and you have your feelings, but what if the person who matches your list and shares your feelings says no?  How do you decide what car to buy?  You have a list and you have a price, but what if the car that matches your list and price turns out to be a lemon?  How about your house?  Which is most important:  location, style, fixtures, price?  And when you finally do choose, is it really the right one?

This brings up the subject of cognitive dissonance.  It’s a psychological based marketing term but what it means is that when you make a decision to acquire something costly and actually do spend (money, time, effort) to possess it, you then have feelings of doubt that you did the right thing.  We all have those feelings when we make a large purchase and auto companies, electronics companies and other high-ticket manufacturers do not spend their advertising dollars merely to sell us their product.  No!  Watch a commercial for the brand you own.  Does it make you feel better about purchasing it?  Of course it does.  The advertisers market to you before the sale and diminish cognitive dissonance after the sale, so we will feel good about the product we have purchased.  Think about that the next time you see a television or YouTube commercial or see an ad on the web or in a publication.  We also try to diminish our own cognitive dissonance by extolling the virtues of our purchase. 

Enough of this digression.  I’m sure you are wondering what happened to the FNMA contract and my  changes. 

I’ll tell you in the next installment. 

No comments:

Post a Comment