How I Bought My First House From Out of State

Andrea Lawson in a chair hammock enjoying her condo balcony

How I Bought My First House From Out of State

And how I survived when my loan fell through before closing.

Image: HouseLogic

Name: Andrea Lawson, 36

City: Madison, Wis.

Year of Home Purchase: 2014

Sale Price: $222,500

Home style: 2006 condo

Profession: Social worker

When Andrea Lawson got a dream job in a new city, she knew exactly where she wanted to live: an urban, walkable neighborhood near her new job in downtown Madison. Though she was hesitant to commit to buying a home before knowing for sure the job and city were the right fit for her, rental prices made buying the smarter financial move.

In just a two-day trip to Madison, she found a place she liked, made an offer, and had it accepted by the seller. All was great until her loan fell through prior to closing.

Before we talk about the horror story of your deal collapsing at the eleventh hour, let’s start with your house hunt. What made you take the plunge and buy a home in a new city, even before you’d started your new job?

Andrea: Actually, I wasn’t ready to buy. I wanted to rent a place. But prices of rentals were steeper than I expected, because of pressure from the University of Wisconsin and the tech industry. Students snapped up the best rentals, and lots of people wanted to be in the city center.

You switched gears in 24 hours, going from looking-to-rent to looking-to-buy. How did you manage that fast of a change?

Andrea: I only had a weekend to look because I was still working in Michigan at my previous job. I had to make a decision fast. I got my agent Kari Manson Hvam [a referral from a friend], to help me find listings of houses for sale. Her access to the MLS helped me see what was available. I had a price limit and geographic requirement. The agent said, “These are the four properties that fit what you are looking for.” I looked at all of them in one day.

How did you know when you found The One?

Andrea: The condo had all the things I wanted. It was open and had south-facing windows that let in a lot of light. It has one bedroom, but it also has a Murphy bed so I would have room for guests. It was in the city center where it’s happening, not out in the boring ‘burbs.

There were waiting lists for rentals. Was it tough to get the condo?

Andrea: Not really. I was the only interested buyer. The developer still had it and was renting it out. It was listed at $234,000. My agent was helpful in determining where to start negotiations, telling me not to lowball too hard. I started at $215,000, and I ended up paying $222,500.

Was it hard to get a mortgage?

Andrea: No. I had been saving for six years, so I had the down payment. I have great credit. My agent gave me a couple of names of lenders. I called each one and went with the one that had an appointment that afternoon. I made an offer in June and did the paperwork in July. I met with the lender midway through the process, and the lender assured me everything was fine.

But you got to the closing, and everything was not fine.

Andrea: No, it was not. We got ready to sign the paperwork, and the lender said they could not underwrite the loan because they were missing some information on their end. We were unable to close. So I was there with my cashier’s check, and I couldn’t get my condo. I couldn’t move in.

Good grief. Were you crushed?

Andrea: I was disappointed — mostly in the lender. I feel like they dropped the ball. Worst of all, I was staying in an Airbnb until I closed on the condo, and my time was up there. I had no place to go.

So you had no mortgage and no home. What did you do?

Andrea: Thankfully, my agent was able to talk to the seller, and they let me move into the condo immediately and rent it until I could buy it. My agent also helped me find a local lender, a local bank. The condo association recommended them, too, and said there were several other people in the building who had gotten mortgages from them.

Things went better with the local bank?

Andrea: Yes, they did a great job. I was able to close a week after the first deal fell through. The woman I worked with at the local bank was nice. She said, “I don’t know what the problem was [with the other lender] because everything you need is here.”

Did you ever find out the problem with the other lender?

Andrea: No. The lender seemed to be interpreting some requirements for offering a loan on a condo very strictly. But I’m not sure because the first lender didn’t respond to any communication after the deal fell through. My agent and the condo people both said they had never seen anything like that happen.

Your advice for a first-time home buyer?

Andrea: Confirm if things are on track [with the loan], then confirm again. And if you’re debating between renting or buying, like I was, buy. For me, the total cost of my mortgage was a little more than a rental would have been, but it’s worth the investment.

Is living in a city condo all you had hoped it would be?

Andrea: Yes, I’m three miles from my job, and I bike to work at least once a week.

Even in the winter?

Andrea: In Wisconsin? Ha! No, I take the bus.

Thinking about Buying a home? Watch out for these pitfalls!

Real Estate Pitfalls

You are probably expecting me to tell you the normal pitfalls you see every time you google “things home buyers need to watch out for”.  You know to make sure you get a home inspection, make sure you don’t bust your budget, make sure you get everything in writing, etc.   Although all of these are very important, they are not the most common in the Tuscaloosa area.  Here are the most common in our area.

  1. Not adhering to contract timelines: We see inspection dates of 14 days fairly regularly in this area.  On our contract we included home inspection, wood infestation report, septic inspection and survey in this inspection period.  That date is not something we merely TRY to adhere to, we MUST adhere to it.  If the inspections are not completed during this time frame then you are accepting this property in “As-Is” condition.   Your Realtor should make you aware of these dates and make sure you don’t forget about these inspections.   Other deadlines are applying for a mortgage, and closing dates.
  2. Not getting a septic inspection: Obviously this is only needed on properties that have a septic tank.  But I have seen many buyers want to pass up this inspection due to the cost, which is around $300-$450.  This inspection can save you thousands!  I have seen some septic repairs in excess of $10,000.  This is not something you want to have to deal with right after you make one of the biggest purchases of your life.
  3. Thinking foreclosures are the best deals:  Although many foreclosures can be deals, most of the time in order to make that deal a reality you need lots of cash on hand!  The banks that own these properties will not do repairs other than what they have already done.  This means all of the work that needs to be done falls on you.  Not to mention the issues you may have getting a mortgage on the property due to its condition.  I am not saying to avoid foreclosures completely but you do need to be very discerning when looking to purchase one.  You don’t want to be in a situation where you purchase a home and find thousands of dollars in repairs and upgrades that are needed once you move in, even though it passed appraisal.
  4. Spending money on credit before closing:  DO NOT BUY ANYTHING ON CREDIT UNTIL YOU CLOSE! If you must: talk to your lender before you do it.  I have seen this happen too many times.  Once, while representing a seller we had a buyer that purchased almost $10,000 worth of furniture before closing.  She didn’t think the lender would pull her credit again.  Just FYI lenders pull credit one last time a day or so before closing to make sure your situation has not changed. The situation with the woman who purchased $10,000 in furniture put her over the allowed debt to income ratio, and the furniture company would not allow her to return the furniture, so she now has $10,000 worth of furniture and no home to put it in.  The seller kept her earnest money.    This is not a situation you want to put yourself in!
  5. Letting too many people tell you what is best for you:  Now I am not saying your parents and your friends opinion is not important, but I have seen a few people that “know” the market better than the statistics from MLS.   I saw a young couple loose out on a great deal because they allowed a distant relative to convince them that the home was way over priced for the area.   The statistics showed that the home was underpriced by about $10,000.   Needless to say the home sold a few days later for more than asking price and shortly after the home down the street came on the market for $15,000 more. It was smaller and had fewer upgrades.  If you feel good about a property you like and the statistics show it is not overpriced don’t let others convince you differently.  They will not be the ones purchasing or living in the home.
  6. Don’t forget to check your emotions at the door:  Its easy to fall in love with a home and overlook, or underestimate repairs and necessary upgrades.   By allowing yourself to fall in love with a home too quickly you risk overpaying, or worse, not getting the few necessary inspections that will cost you down the road.   Also, there is no guarantee you will get the home you are in love with.   The market has become very competitive and we are seeing more multiple offer situations on homes that are in popular areas and are priced right.  If you don’t get the home, don’t get down.  There will be others!

Chris Lee   –  RealtySouth  –  Tuscaloosa, AL           205-233-5183