Wednesday, December 19th, 2012...18:55

Anniversary Of A Sort

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This is not a post about sorting algorithms; nor is it celebratory. December 10, 2012 marked the 1 year anniversary of what seems to be the worst event in my life to date (and perhaps some of the other people involved). I have resisted writing about it in the past because I felt the need to say too much and there were too many loose ends, but perhaps a complete revolution around the sun has provided enough perspective to get this post mostly right.

Clearly you’ll find my experience pales in comparison to countless horrific events in human history and many people might rightly believe I live a charmed life; but relative to all my other experiences, it and the subsequent events that followed constituted a global minimum, the major low-point in my life. For reference it trumps my parents getting divorced, my lola dying, getting a D in a 5 credit college course etc. Those events, while extremely unpleasant, differed in two important ways:

  • They did not come as a surprise
  • For the most part I had no control over them

Ok, I’m sure I could have worked harder during the college course but the professor and my TA were useless and nothing in my life up to and including that point helped me understand why the Cauchy-Schwarz inequality or Fourier transforms were useful 🙂

On Saturday December 10, 2011 at 6:33am a phone call awoke me, which I ignored as the phone was in another room. For several years while working at I kept the phone by my bed as I was the primary contact for the Amazon MP3 portion of the website. Phone calls at all hours of the night were expected and needed to be responded to immediately. However, when the phone rang a second time a minute later, I got up to see what was going on. I did not get to it in time to answer, but noticed the phone number belonged to one of our neighbors at our loft.

When we moved to Berkeley at the end of 2009, and tried to sell our loft for almost a year, the housing market was in a state where the offers received did not make financial sense to accept. So eventually I broke down and became a landlord. Luckily our renter turned out to be a perfectly normal person and our real estate agent provided property management services at an extremely reasonable price such that the whole landlord experience, while certainly not enjoyable, did not in itself become THE low-point, just merely a stop on the way.

The voicemail was 37 seconds long and explained there was a fire in the loft unit next to ours, the fire seemed to have been put out but there was smoke everywhere, the fire department was going into our unit now and our tenant was out safely in the courtyard. We headed over to the loft as soon as we could and spent the next 8 hours speaking with our tenant, other residents, the fire department/inspector, our homeowners association property manager, a representative from a reconstruction company and one from a cleanup/restoration company as well as cleaning out/drying off certain items from our loft. I tend to try and do everything myself e.g. my wife and I attempted to vacuum water up from a 9’x14′ rug, but after a few hours, realized we weren’t making much of a dent in the cleanup effort. Everything smelled like smoke, we had no way to transport or store all the items and decided to let one of the cleanup/restoration companies handle things. Thus began a strange 9 month journey.

Good times

Had the fire taken place at our house, in almost all respects life would have been worse; however, owning the loft itself was already a large thorn in my side and this event felt like someone replaced that thorn with a salt tipped, hot, rusty sword. Every interaction I had, no matter how nice and/or reasonable the other party tried to be, felt like torture. And the exchanges with completely unreasonable, incompetent people were of course orders of magnitude worse.

Breaking the lease with our tenant and refunding their security deposit was pretty straightforward. What the fire didn’t destroy, the water from the fire department’s hoses did. I met with the representatives of the cleanup/restoration company the next afternoon and they moved out all the items we planned on keeping, would clean/ozone them and store them until the loft reconstruction was completed. Over the course of the next week I met with our insurance adjuster, the homeowners association’s adjuster, board of directors and property manager, a fire inspector from our insurance agency, a City of Oakland fire inspector, a construction manager from the company performing the repairs on the behalf of the homeowners association and one on behalf of my insurance company. After the initial shock of the fire, my spirits rebounded fairly quickly as it seemed like there might just be the initial up-front cost of getting everything in order, 3 months later everything would be repaired, and we could enjoy the trip to Cambodia we had planned for New Year’s.

That rare feeling of optimism slowly turned to despair as the repair dragged on and I spent time every week on the phone with various parties coordinating; sometimes I had to be on site at the loft. Some of the stepping-stones (hard-knock lessons) to the bottom were:

  • Make sure to have landlords insurance when renting a space to another person. Your existing homeowners insurance isn’t good enough and won’t cover lost rent.
  • Be very particular about every single line item of work e.g. “ozoning and smoke abatement” sounds great after a fire until it turns out that part of smoke abatement involves the contractor spraying white sealant on your floor instead of a clear one because they assumed you were going to put a new floor over it.
  • Check on the status of your material delivery right up to the point where you leave work to meet them on site. Don’t expect them to call and cancel/postpone, they’ll likely just not show up.
  • Ask your real estate agent to contact the buyer’s agent and title company representative at least once a week to check in on things and get specific details regarding how the loan funding and other related process e.g. homeowners association documentation is going. Don’t settle for generic statements like “the underwriters are still looking at it”, you want something more along the lines of “the lender is requesting more asset history as the buyer’s income has been volatile as of late”.
  • Don’t be afraid to ask for compensation if the buyer delay’s the sale. Some penalties are already built into most contracts, but you can make them up as you go along as well e.g. if the buyer pushes the closing date out one month you can ask them to cover the extra month of mortgage, property tax, insurance etc. The worst that can happen is they say no. If you’re worried about them getting offended and backing out completely, that would likely trigger a steeper penalty built into the contract so it really isn’t an option.
  • If you live in a building with a homeowners association, read the governing documents thoroughly and if you don’t understand them, ask a board member or management agent or lawyer to explain. Be very vigilant about what goes on during the board meetings. Only run for a seat on the board if you desire to get wrapped up in the minutia of other resident’s lives and expose yourself to lawsuits.
  • Proactively cancel any EFT/ACH even if there’s a penalty. Don’t rely on the other party getting it right in time.

The construction finished in May and after a bit more cleaning, our unit went on the market in June. We priced it “low” at $169,900 (we purchased it for $268k in 2002 but the most recent sale for a comparable unit in 2011 was $114k [short sale]) in an attempt to entice offers. It worked as we received 3: $170k (25% down), $175k (10% down), $180k (20% down). The buyer who offered $170k was looking at it as an investment property, the buyer who offered $175k wrote us a nice letter and intended to live there and the buyers who offered $180k had a lot of demands and extra contingencies. After some negotiation and clarification, it turned out the buyer who had written the letter actually had 20% down and was willing to match the $180k offer and we decided to accept that one. Then at the last minute, someone came in an offered $220k. Figuring it was too good to be true, but with not much to lose and a whole lot to gain we entertained it but it fell through over concerns relating to the fire.

Getting rid of some paint

After clearing a few more unexpected hurdles e.g. delay in funding of the loan and the discovery that our dishwasher wasn’t working, our unit closed escrow on September 4, 2012, saga over right? Not quite, I fielded verbal threats and agitated phone calls from a few parties related to the payment of the reconstruction and had to get refunded for overpaying my homeowners association dues due to EFT/ACH timing and close of escrow notification to the accounting company. To this day I’m still dealing with various departments in the county of Alameda and city of Oakland that don’t seem to have missed the memo stating I am no longer responsible for property taxes and have no rental business income to tax. Come February/March I have an exciting date with H&R TaxCut Premium edition and the intricacies of section 1231 property. Hopefully the government will be kind enough to help us recover some of the losses from the rental/sale of our loft…if they don’t, it’s water under the bridge at this point; and the last 3 months of not having to worry about the loft and knowing that it’s unlikely we’ll ever have to concern ourselves with it again is worth the price. At the end of the day, I’m just thankful to have been in a position to purchase my own freedom.

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