James Pine Has A Blog

I graduated college in 2000 and after spending the summer in student co-operative housing, girlfriend and I moved into a < 500sqft studio apartment in Berkeley on the corner of Ellsworth and Dwight. Location and price drove our decision as she still had a year of college left and I had a job in San Francisco. In the fall of 2001, we began looking at places to buy. We desired a place we could call our own, paint, remodel, etc. knowing that it was ours until we chose to part with it. And of course the tax breaks and lure of home equity did not hurt either. We confined our search to the East Bay as it seemed like a perfect location from which to easily enjoy everything the North/central California area had to offer. I figured remaining gainfully employed somewhere in San Francisco/Oakland/Berkeley would not be a problem and she was likely taking a job at a company in Berkeley which she interned with the previous summer. Financially, we were in pretty good shape regarding paying any monthly mortgage/tax payments but did not have much money for a down payment, certainly not 20% which would have been $50+ at the time since there really were no reasonable places to buy under $250k in the Berkeley/Northwest Oakland area. After a few months of looking, we realized a single family home would most likely be out of our price range unless it was a fixer in a bad neighborhood. We had seen a few lofts and the spacious, open floorplans appealed to us, as did the lower prices. There were two types of lofts, new construction and conversions (anything from an old elementary school to commercial laundry facility). In early 2002, my wife and I put 5% down, took out two mortgages (too avoid private mortgage insurance which is not tax deductible, while the interest from both loans would be) and purchased an Oakland loft conversion. Over the next 6 years, we painted a few thousand square feet of walls with vibrant colors, upgraded the kitchen and bath and even built a hookah lounge. For the most part, the positives out weighed the negatives, but little by little the desire to have a yard, no shared walls and no homeowners association grew. Neither of us are big spenders and typically live below our means. We typically max out our retirement contributions and still manage to sock away a decent amount per month into savings. When the housing bubble popped late last year it seemed, with some planning, we might be able to buy a single family home in a nice neighborhood. Sadly, while the overall housing market tanked, the East Bay market merely cooled off. Sure prices went down and bidding wars no longer involved 10+ people, but nothing seemed "cheap" and plenty of houses were still getting multiple bids and going for more than asking price. Our goal was to put 20% down towards a new home and still maintain ownership of our loft such that we would not be rushed into finding a place or moving twice. In addition, our loft would be a challenge to sell and if the market indeed recovered, we would end up selling low and buying high for sure. In May, I estimated we might be in a position to do that (for a house in the $500k-$600k price range) by Labor Day, so we transitioned from just looking at houses online to started going to open houses. This was our criteria: - Enough yard space to plant redwood and fruit trees as well as a vegetable garden - Off-street parking for at least 2 cars (garage not necessary) - Within 1mi of public transit to SF, preferably also running outside of commute hours - Move-in ready unless the price was low enough that we could afford to fix things before moving in - In a safe neighborhood e.g. able to walk/bike at night without too much concern - Grocery store/restaurants/shops within walking distance - More than 1 bathroom or at least space to add one with relative ease Finding all of these in our price range turned out to be extremely challenging. Initially we confined our search to Berkeley and Oakland, but eventually expanded to include Albany. As the months dragged on, it seemed less and less likely we would find a place that met all our requirements. Typically for $600k or less, if the house was in a good neighborhood it needed a new bathroom and/or kitchen, or the yard had been landscaped with lots of concrete/was tiny/did not get good sun, or the electrical and/or plumbing was original from 1903. In some cases you could even feel the house was not level while walking through. On top of these deficiencies, in most cases the house was just 2 bedrooms/1 bath, or if the house was in better condition, more like a 1.5 bedrooms/1 bath. Undaunted, we contacted a realtor in August and began the pre-approval process with a mortgage broker. Contrary to what I had believed, owning a home actually made it harder to get a loan for another one, at least in the current economy. We had high credit scores, but our current mortgage (never late on a payment) counted against us in terms of what we could afford, no more bridge loans :(. It turned out $600k was not just a mental ceiling e.g. what we would be comfortable with monthly payment wise, it also was about as much as a lender would approve us for without selling our loft first. The Sunday before Thanksgiving went to an open house in Berkeley and found the typical $600k house in a good neighborhood that needed $100k worth of work (original electrical/plumbing/kitchen/stove, slanted foundation, etc.) which would likely sell for above asking price. On the way to another open house we passed by one that had not originally been on our list. It was a tiny 3 bedroom/1 bath at the northern end of South Berkeley, ~900sqft on a ~3500 sqft lot; however, it had been laid out really well and the backyard received good sun, even at this time of the year. The previous owner tastefully updated the bath and kitchen, the foundation was solid and the small front yard was perfect for a row of redwoods. It had a garage in questionable shape, the roof was 16+ years old with only a year left if we were lucky and there was an old gravity furnace which probably need to be looked at, but the backyard had a pristine, nicely crafted wooden fence and the hardwood floors throughout the house were in magnificent shape. Asking price was 475k so I asked the realtor what was wrong with the house; clearly, something had to be wrong but the pest report was $0 and it was RECO compliant. If anything was wrong with it only an inspector would know. We left in a state of disbelief and continued to the the last open house on our list. It was in reasonable shape, but the yard would make gardening difficult, one of the rooms was about 3/4 the size of a normal one and it was $579k in a section of Oakland just off Piedmont Ave. Still, it was one of the better houses we'd seen for < $600k, was walking distance to many great shops and restaurants, a bit of a hike to MacArthur BART, but that station was nice since it had 2 lines running through it from San Francisco. Yet, it didn't hold a candle to the previous house. How much over asking price would the South Berkeley house go for we wondered; what was wrong with it? We contacted our realtor and mentioned we might have found a house worth perusing. The next day I took BART from work to Ashby and my wife met me so we could try out the walk. It seemed fine, we stood around outside the house, looking in and walked around the neighborhood before heading back. The next morning, our realtor called. The seller wanted to review offers that night (we had attended the second open house). We arranged to get another look at the house that morning and uncovered one thing that was "wrong" with it; the renovations had been done without permits. This wasn't the end of the world as nearly every house in Berkeley that has had work done to it had something done without permits, but it still was something to be concerned about. We went down to the Berkeley City Planning Office and spoke with a few people there who allayed our fears. Apparently many inspectors tend to focus on what they're there for, ignoring everything else. As long as we were confident with the quality of the work done, we should be ok. Coming up next, the offer.