Lots to Do

Not a lot of time to write tonight, what with work (behind in two different jobs) and travel (trip to Philadelphia tomorrow that my boss just cancelled out of so I'm on my own) and kid (keeping her entertained until school starts Thursday) and exercise (I did get out for a run in this heat!).  We survived the inspection -- $500 (well, it's a big house) bought me no new significant information about needed repairs, which may be expensive but is clearly good news.  Lots of things to fix for sure but at least the repair bill didn't leap exponentially.  Paul, the inspector, did suggest I talk to a structural engineer about one issue, who I'll call tomorrow, and we still are supposed to get an electrician in to find out if it's more than just an artistic reason that the chandeliers throughout the house are real -- that is, they take candles, not lightbulbs.  

Beyond that, I ran over to the city's CEO office again to get a final determination on how many apartments the city thinks the place has (no luck -- office closed at 4 pm -- Ok, I will decline to make a joke about city workers and their schedules), called another old friend and contractor (someone who I suspect will be cheaper than Craig who looked at the place with me a couple of weeks ago) to see if he can get me a quick estimate of how much it will cost to create the new apartment, called the lawyer to see how likely it is I'll get an official appointment with Marge at the city before Friday...  Suffice it to say, there's lots to do.

Most disappointing comment of the day -- both Paul, the inspector, and Nikki think I may not be able to put a roof deck on the building.  What??  Hardly makes sense since the brand new building of condos right in front of the house, the ugly part of "my" view I'm trying to ignore, has a gigantic roof deck -- how can the city deny me?  This is one I will fight.

Kanha did come with me this morning and saw the house for the first time.   She was bored with the inspection and enthralled with the apartment -- she's claimed the third bedroom as her art studio and has determined how we'll arrange our couch to maximize the living room view of Portland Harbor.  (She also was fascinated by the rotary dial phones throughout the sellers' apartment -- she can figure out how to operate a brand new computer in five minutes but struggled mightily to determine how to dial a phone number on these phones.  Do we count this as progress?)  I called her at her dad's tonight and she gave it the seal of approval -- "We have to buy it."  I'm working on it, honey-bunny.  

The Pleasure of Place

Sitting up in bed on just another one of the dozens of glorious mornings of this summer in my family's lake place in western Maine, staring out the window at the ripples on the water, listening to the loons call to each other -- I imagine they're talking about what a great summer they've had too.  I'm sure spending nearly twenty-five years coming up to this house has drawn me to appreciate a water view and, therefore, at some level to have pulled me toward the big old house.  But more than that, it's created a sense of the pleasure of place, that four walls and a piece of land can connect one to parents who are now gone, to conversations and laughter and hugs that are part of the indelible background of a life, to the quietness of being in a spot that touches nature so closely.  Certainly a house in the city is a different species than one in rural Maine but what I see as offered within those many many walls and nearby gardens and river and ocean makes me certain I can find my place, our place, there too.

I wrote my financial proposal and sent it off to Jim, the bank president, yesterday and he's still speaking with me by email so my dream still lives.  Nikki, in the meantime, has sent me another discouraging note, wondering how I'll make the extra loan payments before the new apartment is completed and rent is coming in and speculating that it will take several months to finish the renovation, a position she has completely reversed herself on in just a couple of days.  Well, as she says, someone has to play the devil's advocate and it's clearly not me.  

Today I officially take up the apparently God-given mantle of every parent of an adolescent in the new millennium, no matter one's own personal predelictions -- "soccer mom."  Kanha's first game of the season is this afternoon, producing the first busy (read: ruined -- oh, sorry Kanha) weekend of the fall.  Oh well, the sun is shining, I have a book, I love to see my kid play -- it will be fine.  

Points 1 to 4

A beautiful sunny day back in Portland, a glorious day to think about buying a house with a view.  I'm feeling a little more relaxed -- perhaps it's a good night's sleep, perhaps it's knowing I don't have to be back on an airplane until Tuesday -- but I like to think it's mostly because I've taken a paring knife and excised, almost completely, my emotions from the cold hard financial facts of this house purchase.  Since my brain works like it's still solving problems from my high school math team, I need to clearly lay out those facts that must be faced -- four of them, to my count:  

1. Assurance from the city on two issues:  a)  I can buy the house and get the commercial space converted to residential and b) they'll work with me to resolve the fact that the two small rental apartments are out of code
2. An appraisal that's high enough to allow me to borrow enough money in a conventional mortgage once the new residential space is in place for the list of known repairs 
3. An inspection that doesn't add TOO many more very expensive repairs to that list
4. (Here's the big one) A source of a $50-$75K loan to do the apartment conversion and other initial repairs

Just this morning I've made good progress on points 1 and 2 -- another reason this is a good day!  I talked to a lawyer (painful $$ signs but worth it I think) and then went to the city of Portland's code enforcement office to look up some documents.  Bob, my new lawyer, thinks it shouldn't be hard to convert the commercial space to residential (apparently much easier in that direction) and the boss lady in the CEO -- named Marge, which seems like a good omen -- took a few impromptu minutes to discuss the situation and, without making commitments, said she would try to work with me on all issues if I bought the property.  So that seems point 1 is 3/4ths addressed.

In addition, Rusty, a freckle-faced real estate agent/contractor/appraiser with a pencil behind his ear and a Blue Tooth stuck in it, took an hour in the house this morning to come up with an estimated value;  while he made no commitments (appraisal report will come next week), he talked, in a somewhat awestruck way, about how unusual the house is -- the artsy nature, the views, the amount of space -- which makes me (a little) optimistic on where the appraisal will come in.

Beyond that, inspection (point 3) is scheduled for Monday bright and early, and my ex, Chip, gave me a smart suggestion about point 4, which puts him on my plus side for today.  He reminded me of the bank president who we both know -- he better than me since his bank account is quite a bit bigger -- and suggested I go talk to him.   As Chip said, if anyone would know whether this kind of loan was possible, he should.  So I've set the wheels in motion on that front -- should have a meeting with him later this week.  

Lots to do, which is not a bad place to be -- easier to keep the incision between emotions and finances clean.  I'm going to take Kanha with me on Monday morning for the inspection -- I look forward to seeing the look on her face as she runs from one unexplored and alluring room to the next.  

The Way the Dominoes Will Fall

The sellers said yes, and agreed to leave most of the furnishings I asked for -- the bookcases in the hallways, the pot racks in the kitchen -- and even volunteered to leave the white antique hutch in the dining room.  At that moment, all my anxiety washed away and I remembered exactly why I wanted to live there -- it's a glorious home with a sense of warmth and place that Kanha and I would love.  

Unfortunately, my anxiety had only disappeared briefly.  My biggest concern isn't about all the work that needs to be done but about having enough money to make the necessary fixes, in the necessary amount of time.  As I've said a million times, the numbers work well once the commercial space is converted and that new, third, apartment is rented, but so many hoops to clear before then.  Will the city allow that space to morph from a quaint old retail shop into a shiny new living space?  Can I convert the owner financing quickly into conventional financing, perhaps even before the apartment has been created?  Will I be able to get enough out of the conventional mortgage to finance enough improvements to keep the place from falling over?  Is there a real risk of it falling over or can I do the repairs sequentially as I find the money to fund them?  To mix a metaphor, it's more like a series of dominoes -- will they all (mostly?) fall neatly into place?  

The good news is if they fall askew, I can exit with very little financial pain -- the fees for the appraisal and inspections -- although substantial emotional hurt I expect.  But one can always get over a broken heart, even if it's such a huge gorgeous house that breaks it.

I am in fact in Detroit, staying right downtown in the Omni Hotel that sits on the Detroit River, with Windsor, Ontario directly across the watery divide I see out my hotel window.  I went out to walk for a few minutes along their Riverwalk when I got in;   the city may be beat up and abused -- broken windows, broken buildings on every block on the drive here -- but what a glorious spot tonight to clear my head.  Breeze blowing, smell of bread baking from a factory across the border, people biking, dogs barking.  My load feels a little lighter.

Plunged

Late at night, the offer officially in, feeling exhausted.  Lots of contingencies, lots of potential outs, but it's another big step forward, a $15K check if nothing else.  The thing to remember is no one else sees the house with my eyes, for better or worse -- I would argue I see all the possibilities and am not worried about the difficulties, the unfinished edges that may last a long long time, while my friends, my protectors, tell me the difficulties will overwhelm me and my pocketbook.  Who is right?  The problem is  I can't know until long after I take the plunge.  But, in any case, won't I -- we -- have had a great place to live?

The sellers' response is due by 6 pm tomorrow when I'll be on a plane to Detroit.  Heading for the most depressed city in the country might be good -- any celebration will be appropriately muted.

Craziness

Lots of phone calls back and forth with Nikki this morning, see-sawing price and financing ideas.  We're at $535K with the sellers' mortgage terms, which is a better price than I thought I would get but doesn't leave me any money to fix the place up.  Where will that come from?  Oh, I think I asked that question yesterday.  

I'm meeting with Nikki at 5 pm this afternoon to put it in writing -- I also have a call in to a commercial real estate broker in Portland and an appointment with a lawyer who does real estate work with the city on Friday.  And I'm not signing anything without an out through the inspection -- they may not bring the price down any more, but I can still bail out if - as my friend Barbara (who thinks I'm crazy) suggests -- all the walls have to be ripped out so that wiring has to be replaced and the repair bills go from $100K to $300K.   (If that's true, I would agree that I'm a bit crazy.)

Hard not to feel anxious but as I said to Barbara -- I like excitement in my life and nothing in my life right now, except Kanha, is exciting.  This would be, to say the least.  

Living or Escaping?

I went to see another house with Nikki today, and brought Kanha too - a house at the other end of the scale:  sloping floors (not just crooked or soft in spots but at least a bunny ski hill routing through the kitchen), carpeting instead of hard wood, odd shaped rooms sold as extra sitting areas, a tiny bowling alley of outdoor space, and, for sure, no view.  Of course the price is only $189K -- too bad it doesn't work that I could buy a view with the differential I'd save vs. my desired house.  

When we had finished walking through the property and stepped out onto the street, Nikki said to me, "Oh, I have some information about the other house" -- to her, it's just "the other house" -- and my stomach did that slight flip that comes whenever news that matters is about to be given or received.  I looked at the flowering garden in the next house's yard and froze the moment in place, then listened.  To fairly good news, as it turns out.  They've come down to $575K, a full $120K down from their asking price.  Of course, this is a price that no inspection can undo -- it's take it or leave it.  Which would (will?) be fine as long as I don't have to get financing.  If the sellers can't finance it -- and that seems slightly less certain based on Nikki's feedback today -- and I have to get a bank or mortgage company to come up with the money, I will no longer be the one with the final say.  

Nikki is going back with a counter offer of $525K and then we'll have to put something in writing if we're still talking.  Another offer is still threatened, which might or might not happen.  As Nikki said, better not to think of that and pursue my own interests independently.  Whatever else happens is in someone else's hands, hands that have been persistently unforthcoming so far.  

I'm feeling hopeful now and, more surprisingly, nervous.  I suppose it's the natural outcome of getting closer to the reality of what has been hard to get -- it's the old problem of loving something you can't have;  once you can have it, perhaps it (he?) is not so hot.  For me, I think it goes beyond that though.  I went to see the uber-chick flick Eat Pray Love tonight after dropping Kanha off, all about a woman's search for identity and meaning in life after a searing divorce -- it's put me in that soul-searching zone, a place I visit often for reasons confusing to me as visiting rarely feels either comfortable or particularly clarifying.  So am I searching for a life, my life, in this house, a place to put my energies and passions and creativity?  If so, is that wrong?  Perhaps the better question is -- is it an escape from the life I'm living or can it become the life I want to, was meant to, live?  No Ketut, Julia Robert's Balinese spiritual advisor, to answer me tonight.  

Everything is Negotiable

So the offer was made on Friday, Nikki and Francine sitting on the stoop of the house, the breeze blowing the wildflowers, the boats gliding past into Portland Harbor, and Nikki didn't get laughed off the property, although she said Francine winced -- almost imperceptibly, but it was a wince -- when she heard our price.  But she said she would share it with the sellers.  And I just checked my email and Nikki says there will be counter-offer news tomorrow.  So I haven't fallen totally off the table, out of my dream.  Not yet.

The most interesting part of their discussion was about financing:  the sellers are now offering to finance the whole price, assuming it's a number they like (big assumption since we are now $220K apart...), but the terms, which they say are non-negotiable, are interesting -- $150K down, 15 years, 4.5% interest.  Not terrible, but not optimal either since the downpayment would take a big chunk of the $$ I was planning to put into the house, the length is twice as long as I had hoped to get, and the interest rate, incredibly, is higher than I could get on the open mortgage market.  Of course, to say something is non-negotiable when you've been trying to sell a house for 7 months seems foolish, naive, perhaps even an oxymoron.  As far as I'm concerned, at this point, EVERYTHING is negotiable, particularly since their willingness to finance works greatly in their favor:  someone else -- ME -- buys the house and takes over all the problems that the city could confront them about, which they, in the 9th decade of their lives, understandably have no desire to deal with.

But it is also appealing to me, assuming I truly want to buy the house, because it would allow me to buy it soon (and move in!!), without having to jump through financing hoops, and then have a little time to figure out how to fix it up and get it to meet the city's standards before the code enforcement officers were banging down my door.  Obviously lots of negatives too -- have to find another way to get the $$ to do the fix up (who else will loan me $100K??) and the responsibility for all the fixes could turn out to be a lot to handle.  (That last statement, I'm sure Nikki would say, could be the understatement of the decade that I am committed to living there.)  But if I want to buy it, if I want to create this life for Kanha and me, maybe this is the way to make it happen.

Tonight Kanha and I watched Last Chance Highway on Animal Planet and fantasized about the dog -- she: big, hairy, slobbery;  me: tiny, non-shedding, house-trained -- we'll get once we have our own place to live.  Whoever we get -- Pepsi or Hope or Champagne or Spot -- I'm sure will love the big house with the view.  

Letter of Love of a House

Last night, alone in my friend Lynn's apartment (I was in Cambridge for work, she was on the Cape for fun), I wrote my letter of love and longing:

Dear Mr. and Mrs. Blake:

I so much would like the opportunity to buy your home. From the time in January I made the decision to return to Portland with my nine-year-old daughter, Kanha, I have been searching for exactly the right house for us – somewhere in the West End, an older building that hadn’t been shined up too brightly, not too small but not too big, with a piece of private outdoor space, and, most important, a strong sense of personality and warmth. When I walked into your home a month ago, I felt I had found exactly the right spot; since then I have been working hard to sort out all the details so that I can have a chance to buy it. To give my daughter the gift of growing up at 26 Brackett Street would in fact be a tremendous gift to me. 

The research that I have done on all these details is, unfortunately, leading me to make a very low – perhaps shockingly low – offer. Please know this is not at all a reflection of how I feel about this amazing house. However, between the advice I’ve received from my contractor who came to evaluate the property with me, my real estate agent and her colleague’s experience in selling old houses in Portland, and the things we don’t yet know about work that may need to be done, either related to necessary repairs or city requirements, I feel I have to make a low offer to protect myself financially.

On the positive side, I have already sold my home in Cambridge, Massachusetts, where we’re moving from, and have a significant down payment available in the bank. In addition, I have been pre-approved for a residential mortgage.

However, because I do need financing to purchase the property, I would have to meet the requirements of any lender related to inspections and insurance (as any other buyer would who needs financing): I would need to get inspections for the general building, air quality (to check for asbestos), and electrical (to check for knob and tube as that affects my ability to get insurance). In addition, due to the significantly less favorable terms of a commercial loan, I would be looking to get a residential loan, which would require an agreement from the city to decrease the amount of commercial space in the property to less than 25% of the house’s total square footage, a process that would require me to pay for architectural drawings and take several weeks. Finally, any questions re: the structure and designation of the building and its total number of units would have to be worked out to ensure the building accurately conforms with city code – this could also take time and involve additional expense.

I suspect this sounds a bit daunting – a lot of work would have to get accomplished for such a sale to go through. But you should know that I, in fact, am not daunted by any of it – I would consider it a labor of love to take on these details in order for the chance to live in such a special place. However, because it would indeed involve a lot of labor, my real estate agent and I thought it would be best to present this idea to you and Francine verbally to see if we could possibly come to an agreement, before I begin such a large but ultimately so rewarding endeavor.

Thank you for your consideration. I hope to have the opportunity to meet you in person soon.

With very best wishes

Marge Stockford

Nikki will present it to Francine, the sellers' real estate agent, tomorrow morning with an offer of $475K -- Nikki convinced/shamed me into not being any crazier than that.  I hope I'll be thanking her tomorrow, or maybe some other day. 

Too Much Time

For the first time, during this whole dream, I'm feeling a bit down.  Not because of the price, or the work that has to be done, or the regulations I have to figure out, or the approvals I'll have to get.  The problem is it all adds up to time.   While we were developing our plan today, Nikki told me that she thinks I'll be lucky to close by the end of the year -- and that's assuming the sellers agree to my measly offer quickly and we get all forms and conversations with the city, the contractors, the mortgage broker, etc. etc. moving right away.

Not that I care so much -- I have lived in smaller spaces than this cute apartment for longer times -- but how fair is it to Kanha?  She's about to start 5th grade - she's going to have homework to do and friends that want to come to visit, and, believe me, there's little space for either in our three rooms, plus unheated office area.  This is a girl used to doing cartwheels in the living room and dance routines in the kitchen -- better than TV! -- how long can she live without?  I realize I could move into a bigger space while we work out the purchasing details but that is even more horrifying to me -- another move?  More boxes, and stairs to climb, and apartments to clean, and bodies to crash?  I don't think I can do it but once more, for the final, hopefully, dream house.

In any case, we did come up with a plan.  Nikki's going to write up the details of what has to be included in the offer, I'm going to turn it into a loving, plea-ing letter to the sellers, and she's going to approach them with it and a verbal offer of $500K.  And the laughing will begin.  

Climbing Mountains

Back from vacation, back at my desk (such as it is, on the little "dining room" table in my tiny  - hopefully very -  temporary one bedroom apartment), back in the hunt for the huge and creaky old house with the view.  And still no offer on the table from anyone else.  Me thinks the other real estate agent was stretching the truth a bit.  Or -- I'm feeling kindly this morning after my week filled with sunshine and laughter and very few electronic devices --  perhaps she was misled by her client.  In any case, it seems like better news for me -- perhaps there is no longer anyone else in line to immediately top my measly offer.

So I'm ready to take action -- might as well put my little offer on the table, absorb the incredulous response, the derision, the hilarity, the disdain, from the sellers, let it all run off my back, through our mini-apartment, down the hill, into the Fore River, and, then, wait.  Maybe, just maybe, the offer won't seem so laughable over time.  (Seriously -- I can hope.)

But before action, we need more info, specifically from the city of Portland.  And hurray, today, finally, Nikki heard back from them (Note to self:  build lots of time for their approvals into the offer conditions) and the plot thickens further, which is no longer surprising to me.  The person who wins this house will have climbed the most mountains of bureaucratic red tape among city governments, banks, mortgage companies, inspectors, code enforcement officers, architects, builders, uncomprehending real estate agents, overpromising real estate agents, lovely elderly artist sellers, etc. etc. etc.  

Today's bump has two peaks:  first, it turns out that "my" beautiful old house is known to the city as a two unit, not as the -- whoops... --  FOUR unit the elderly artists have it structured as.  Apparently some time during their thirty years of ownership they exercised their artistic skills on a large 3 dimensional wood-based "canvas" and cut and pasted a few walls and appliances, an effort that produced two more spaces but not the inclination to tell the city about their creation.  Oh well, guess we just fixed that problem.  

Fortunately that bump should have little impact on me as my mortgage guy has pre-approved me for a loan that doesn't take into account the rents that will be coming in on these additional fictional units from the city's POV.  (Not that I could actually afford this gigantic mortgage without the rental unit income -- didn't Congress just fix this problem??  Oh well, it works in my favor this time around).  However, bump number two is a little larger, causing a little more distress to my time and pocketbook.  Apparently the city is open to the possibility of me taking a big chunk out of the 2200 square feet of commercial space and adding it back into the owner's unit in order to make the the residential mortgage equation work -- i.e. shrinking the commercial space to less than 25% of the house's full 5700 square feet.  Terrific!  I'm scurrying up over the hill, hands clapping wildly.  

HOWEVER -- whoops, I'm starting to slow down... -- prior to making that determination, they must see an architectural plan -- hmm, architect, that word seems to flash big $$$ in front of my face -- that lays out exactly how the commercial space will be reconfigured -- I'm slowing to a walk -- and details how it will meet the city's code -- I think I just tripped over the bump and my butt has hit the ground.  Yes, this can happen after I've agreed on a price with the sellers but it won't be approved until AFTER the plan is developed and, of course, paid for (to those high-priced architects flashing those dollar signs at me).

Still, I'm undaunted.  I'm a girl who can leap over hills, hike up mountains, scale cliffs -- well, figuratively at least.  I know how to ask the right questions, find out details, follow up, organize and prioritize, find the right people to do the right work, budget and scrimp and save -- I've done it for years for pay on projects that still, strip, and stop my passions so it is only right, even wise, to do it for something that thrills me.   

Nikki and I meet tomorrow to cook up our plan.  I can't wait to see what it is.    

Looking Out for Me

Now it's Thursday and the supposed other buyers have not been heard from and the seller's agent has headed to Acadia for vacation.  So all the drama appears manufactured, which is neither unexpected nor upsetting.  The calmer and cooler we can stay the better deal I'm likely to get is what I think.    

Unfortunately I'm not sure my real estate agent Nikki and I are on the same page.  She's made it pretty clear she doesn't think it's smart for me to buy this house and every piece of feedback she gives me is twinged with the negative  - we have to get the electrician and the city and the structural engineer and the inspector in before we can agree to a deal, it's uncertain the city will approve the shrinkage of the commercial space, we'll never know what other offer comes in so we won't know what to offer.  Sometimes I feel her goal is more to protect her own position -- cover her ass, as it were -- than to help me buy the house I want to buy.  Which is a bit counter-intuitive since she'll only make money if I buy something.  When it comes time to make the offer, I'm going to have to give her a big pep-talk about making sure she's presenting things in the best way possible for me, and not letting her personal feelings seep into what she says.  I appreciate that she thinks she's looking out for me, but I'm not sure she knows me well enough to see what to look for.  

Still need to know whether the city will approve the smaller commercial space -- but after that, I think I'll put an offer on the table -- $525K?  Or even less?  

Best Offer

On vacation this week, in another house with a view -- my parents' place on Kezar Lake in Lovell.  Sunny, warm, green leaves, a flat lake, hanging out with my family who I really like -- great time so far.

In the meantime, back at the other beautiful house in the big city, another offer is being threatened, although apparently not until Wednesday, which my advisors here (my niece, Becky, and her boyfriend, Jonathan, who recently bought a condo in Cambridge) say sounds fishy but I guess the competition is on vacation until then.  So what to do?  I just found out from Nikki that if we make an offer in response, we never know the content of theirs.  So all I can do is make my "best" offer possible and see what happens.  I suppose that is a bit freeing -- you let go of the consequences - very Zen.

Everyone -niece, boyfriend, Nikki -- is recommending I offer no more than $500K but I seriously doubt that that's going to do the trick.  But what if it could?  And is it worth the gamble?  For some reason, $525K is seeming more saleable, but am I being a fool?

Becky also suggested that I have to make other terms of the offer very appealing -- reasonable downpayment, quick closing, and my story -- that I love the house, want to live in it, bring my daughter up there, create new memories and maybe even a new artist.

I think Becky is right -- make the offer the absolute best, and then let it go.....

Old Age

Back from the visit -- unfortunately I continued to love it while the others from my village weren't so enthusiastic.  Lots that need to be fixed -- roof, deck, electrical, chimneys, shingles, a section of the foundation -- OK, I know it doesn't sound good.  But Craig, my contractor friend, said he saw potential -- after he told me it would cost $100K -- yes, I do understand the conflict of interest implications.   Mary Ellen, on the other hand, is acting cautious and Nikki isn't acting at all -- she just thinks it's a mistake, which she has pointed out in the nicest way possible.  

The question comes down to -- is it a house that deserves to still stand?  Because either you do all this work -- you invest in propping it up and patching it and bringing it, not back to life as it clearly has life, but up to standards.  At risk of over-anthromorphizing a 121 year old building, it feels unloving and ignorant of potential to imagine giving up on it, now that it's old and a little wheezy.  A little surgery and a little face paint won't make it young again but perhaps vital, just as vital as it ever was.  Isn't that a worthwhile value?

Smack in front of my beautiful old dream house is a brand new 5 story condo building with perfectly symmetrical brick siding, front balconies from each apartment looking over the water, and a full footprint roof deck.  I can see its appeal, from afar, both physically and mentally -- it looks impressive when you ride across the bridge from South Portland, its commanding view of the water is hard not to desire.  And the idea of it appeals:  everything -- materials, appliances, paint -- shiny new, every view available.  But it replaced something, I'm sure, something no longer good enough, no longer of value in our 21st century economy, no matter how historic or unusual or unique it was.  Should we - should I -- allow that to happen to another Portland property, especially one I've already been seduced by?  

Now I can hear my village reminding me of the funds I'll need to retire, which I will have to think about, but later.  

A Village Visit

Today I go to see the house again, with my friend, Mary Ellen, my real estate agent, Nikki, the seller's real estate agent, Francine, and an old friend and contractor, Craig -- who knew that it takes a village to buy a house?  Craig is there to protect my finances - to make sure the necessary repairs won't break my bank account -- and Mary Ellen is there to protect my future -- to make sure I haven't entirely lost my mind such that I'll be stuck with a house I hate and can't afford and am faced with a life I definitely didn't want.  Only your closest friends can tell you that, and truly only a subset of those -- I know Mary Ellen is up to the task.

I've done a little more research on the issue of a commercial loan.  Yes, it turns out, I can get one. Apparently you don't actually have to run a commercial enterprise, they'll lend money to pretty much any fool who wants to take on the challenge AND - and this is a big AND -- can prove that the commercial enterprise is commercially viable, i.e. it can actually make money.  Which, it turns out, in this case is not so easy to prove.  

When they do the loan analysis, they look less at your income - kind of nice that that isn't the biggest issue for once --  but more at the total revenue you can bring in from the property.  So the apartment that I'm dreaming of living in, to them is just another place that can generate rent, even if that's not my plan, along with the two one bedroom apartments and the big chunk of commercial space.  Once they have that revenue number -- in this case it comes to around $50-$60K per year -- they subtract out all of the expenses, and not surprisingly, those, from the bank's point of view, are a lot larger than what the seller's agent printed on her glossy brochure.  The bank needs to think beyond just taxes, insurance and heating costs to the expense of having a unit vacant and keeping the building maintained and all the other little expenses that I can't even imagine but they're paid to remember.  In the end, those expenses come out to more than $20K per year, making the building's net income in the $30-$40K per year range.  

Sounds pretty good to me, I thought -- should be enough to cover the principal and interest on any loan I need to take, especially if I can get the house for less than $695K.  But -- you knew it -- there's another problem -- well, actually, two more.  First, the terms of a commercial loan are far less attractive than those for a residential mortgage -- more than 6% interest rate, twenty years at the longest, has to be adjustable, etc.  My monthly payment, no matter how much the house costs, would be a chunk bigger than I first imagined.  I won't be living for free any time soon.  

Second, and quite a bit more important, the bank will only make a loan based on how they value the property, not the value that the lovely elderly artist sellers see in it.  It's a cold hard calculation for them, based on a capitalization rate (or cap rate), which the bankers I'm talking to are setting at 10% -- here's the formula:

I did go to business school but I'm not going to try any fancy explanations -- suffice it to say that the bank wants to make sure they're loaning money on a property that is at least making back 10% of its value every year.  

It doesn't take a math genius to figure out that, by this calculation, from a banker's unemotional, mathematical, dollars and sense perspective my dream house is worth at most $400K, more than 40% less than what the seller's are asking, which is already a price that's come down 30%.   One banker said perhaps he could go to $450K, thanks to its beautiful location, which could push the income up a bit.

Ouch, $450K.  Hard to imagine making that kind of offer to this lovely couple -- I know, I haven't actually met them but in my dream scenario they're eccentric and lovely;  it's likely that this is their planned retirement money.  I don't want to turn them into the old lady with the cats and canned food that I first imagined in the house.

However, I realize there's a silver lining in all of this news:  this is not a personal problem, just for me, owing to the skimpy size of my bank account or lousy credit rating or anything else less tangible.  Perhaps someone will arrive on the artists' doorstep with several hundred thousand dollars in cash and buy the house without a loan (although personally I suspect anyone in that cash-rich situation would be taking their money elsewhere, not to a house that is more project than living space);  but anyone else who wants to make an offer will eventually end up in front of a commercial banker who will be offering the same bad news.  

I understand -- it still makes my dream all the more complicated and daunting and seemingly impossible.  But I'm looking at it as good news -- why not? -- for the time being at least.  

Off to meet my village...

Money Always Complicates Things

To buy this house turns out to be a little more complicated than I might have imagined.  First of all, it's expensive -- right now they're asking $695,000, a price that has fallen in $50K chunks from just under $1M since January.  (The dramatic descent is nice but it's just barely dropped the price into a level I could consider.)  Moreover it's obvious there's a lot of work to be done on the structure -- just walking by you can see there are shingles missing from both the roof and the clapboard siding, and that's before an inspector starts digging around inside.  So I know I will need lots of $$ to make this happen.

However, the problem goes beyond the amount of money I need to buy and fix it;  I also have to find someone willing to give it to me.  Obviously this wouldn't be a problem if I had the cash myself - I could make an offer, negotiate a price, hand over the check, and walk off with the deed, and my dream.  But I don't.  I'm just a working single mom, with a decent down payment from selling a house in Cambridge, MA, a job that will cover a reasonable mortgage, and an appetite for both a great place to live AND a challenge.   But my assumption that all I need is a standard issue mortgage to fund this project -- what I would need if I was buying most any other house I've looked at in the past several months -- turns out to be a bit spurious.  Well, in fact, very wrong.  

It turns out you can't get a "reasonable" or "standard issue" or any other type of residential mortgage for this house.  If it was just apartments (up to four total), you could.  But because there is commercial space in the house -- that adorable little artist's studio/shop filled with old books and dust -- that takes up more than 25% of the total square footage (2200 out of 5700), I cannot -- nor can anyone else -- qualify for a residential mortgage, one of those 4.5% interest rate deals that bankers say we'll almost surely never see again.   Because this house houses this "big business," it will only qualify for a business, or commercial, loan.

I first get this report from my mortgage guy who I used to see more often than my plumber, and for much better reasons -- he helped me refinance my Cambridge house at least three times for better and better rates.  So I trusted his report, and then I heard it again from an insurance guy in Portland, and then finally from a commercial loan broker himself.  Apparently there are no creative angles around it.

So, she - a girl not to be daunted in her quest- thinks to herself, why can't I get a commercial loan?  Next question to be answered.