Price

Okay, here’s the latest in the house buying saga.

As I wrote before the building inspector found some defects to the house. It turned out there was nothing major (the foundations are fine) that would prevent us from buying it at all, but still some things that will cost a considerable amount of money to fix. And this on top of all the stuff that we knew had to be done because of a serious lack of maintenance over the last ten years.

But worse was the news that the bank wouldn’t want to give us the mortgage we need. Not because our credit is bad, or the bank thinks we can’t afford it, but because they evaluated the building much lower than the price we offered. The building itself is worth it, but because it has more than one apartment they also look at it’s investment potential. The return on investment is not that great because the current rents are very low. So they are only willing to give us a much lower mortgage. Darn! Especially since the fact that we paid such low rents the last couple of years also made it possible for us to save enough money to afford the high down payment we need to make.

But our hopes of being able to buy our house were pretty low all of a sudden. Especially when we approached another bank and asked them if they would evaluate the house differently and the answer was no.

With this news we called the owner Wednesday and told her that we needed to talk. She was busy the next couple of evenings so we agreed we would meet today.
This gave us the time to do a lot of planning, prepare elaborate spreadsheets with all kind of scenarios and options. This is the maximum we can pay with this type of mortgage and then this will be our monthly costs. And the same with other options and amounts. A big thank you to the inventors of the spreadsheet is in order here. And no that was not Microsoft but a couple of math geeks who made VisiCalc for the Apple. But I digress.

Just a couple of hours before our planned meeting the owner’s friend, who helps her with selling the house and also does the lack of maintenance, called that she wouldn’t be there because she just heard her son had a serious accident and was in a coma.

But the owner herself did meet with us and she had a cunning plan up on her sleeve.

When we showed her the building inspection report and some of our calculations she was willing to lower the price with a considerable amount. And she proposed to lend us the rest of the sum (above what the bank is willing to finance), so in fact we would take a loan with her for a couple of years. We looked it up in our “how to buy a home” books and on the Internet and this construction even has a name. It’s called a Vendor Take Back Mortgage, and is not too uncommon.

We prepared a new ‘Promise to Buy’ document with the new selling price and the new financing method and both parties signed.

Of course this was all on a Friday evening, we couldn’t consult the bank and our notary, so we’re still not 100% sure.

Beginning of next week we’ll find out more. It looks much, much rosier now, though, but don’t congratulate us yet. We’re not there yet.