Tuesday, June 7, 2011

Getting A Little Depressed

As reality sets in....in the form of The Almighty Appraiser.......I'm a little saddened and frustrated by the bass-ackwards way that Realty works. Here's the scoop: in order to get approved for financing, the bank hires an appraiser to assess the value of our proposed home. The appraiser sets the bar for our loan. The bank will only loan us the money for 75% of the projected value of the finished home. So, though we may want to spend $15,000 extra on wood floors, granite counters, and extra windows, that doesn't mean the appraiser will see a $15K more valuable home. Sometimes improvements don't mean more value. Especially in a neighborhood as oddly structured as ours. It's an older place, no new homes built since 1998, and most of them built as late as the 60's. We've noticed some are valued around $700,000 (lakefront) and some (only one street back) are more like $119,000. It's very tricky to predict whether our upgrades are going to look good in the eyes of the appraiser.

Now comes the yucky part. If our presentation plan does end up too fancy for the actual value of the home (according to the appraiser), we don't get a second chance with him. We get "Rejected" and then we have to hire another randomly selected appraiser to go over the re-adjusted house plans at the tune of $600 more. :P *stomach in knots* Technically, it's not "rejected", it's just established that the value of the home is not high enough to support the loan we're asking for. They will then offer us a chance to pay the difference up front.....and we will have to politely decline. :D Essentially, it's a Big Fail.

On a side note, it's become more clear to me through this process why Washington homes are so consistently gross-looking. In a neighborhood that was built in the 60's, you have homes that are low-roofed and trailer-like. That was cool in the 60's. But, even if you want to build a nicer, newer home on a nearby lot, because you're younger and have better taste than they did in the 60's (haha) you won't be able to get it financed unless your house plans are of a similar nature to the already-present homes in the neighborhood. No bank will finance a fancy, newer, prettier home in any older, uglier neighborhood, because the surroundings will lower the value of the new home. Now, if you have $50,000 you can fork out to pay the difference, you're golden. Pay the difference yourself, the bank won't care. But, sadly, few people have that. So, what we have is a perpetuating system. No one has the cash in hand to improve the neighborhoods here, so we just keep getting banks financing the same-looking homes all over the city. BLEAH.             YUCK.

What this looks like for us, is that we will be building a lower-quality type home than we had originally hoped. We will likely be doing a combination of carpet and vinyl, and cheaper fabricated trim. We're still keeping the same floor plans, but ditched the nice countertops & flooring & features throughout. We hope to have the money eventually to do some of the upgrades ourselves....but who knows? It may be years, it may be never. We just can't afford a $600 mistake (not making the mark with the appraiser) right now, and having to downgrade some features anyway.

I'm not excited anymore, but I'm grounded. I know this isn't a dream home, it's just...a place to live. An investment. At least I get to paint. :) Still, I'd be lying if I said I wasn't disappointed. I was looking forward to wood floors and crystal-white countertops.

Good things will probably come of this, though. One: we will have more to choose from when we do upgrade and do it ourselves. Two: our mortgage will be lower, and will probably afford us the ability to rent the home out rather than needing to sell it (years from now), since rent rates are more impacted by the upgrades in a home. I.e., I've noticed you can charge more for rent on newer homes with nicer upgrades whereas you can't necessarily ask more when selling it for some of those same features.

Oh yea, I asked the question again today, "Well, why aren't we just buying a crappy home for $100K and upgrading it ourselves?" Well, the structure of the Adair home is newer. It's more likely to sell 10 years from now just because of its bones, open floor plan, vaulted ceilings, home office, Craftsman style exterior & attached garage. We will still be getting all those....and they are things you really can't change in homes that look like this:

And instead, looks like this:

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