Look Mom! I Bought a Brownstone
Part 1: The Acquisition
By Caren Chesler
My mother always said childbirth was the worst pain you ever feel and the easiest to forget. Otherwise why would women have more than one child? The same could be said for buying real estate. I don't know, maybe I was greedy. I was certainly in love, and maybe just a touch crazy. More likely, I had no idea what sort of white-knuckle roller-coaster ride I was in for. I bought a five-story brownstone in New York. I wanted a backyard, I wanted renters to pay my mortgage, and I wanted to be in Manhattan. I found myself in Harlem, the only neighborhood I could afford.
There were problems from the start. Harlem brokers won't show you properties unless you're pre-approved for a mortgage. Unfortunately for me, the banks wouldn't return my calls. I'm single, female, a freelance writer earning less than $20,000 a year (yes, it's true), and I was looking for a $765,000 mortgage. Hold on. It's not as ridiculous as it sounds. For one thing, I planned on buying a building with four apartments in it, and rents in that part of town were pretty high. I also had a chunk of cash to use as a downpayment: $80,000 I made selling a three-family home I owned in New Jersey, and $70,000 I raised by cashing in savings bonds my father had accumulated in my name since I was a child. (He had passed away four months earlier. Thanks dad.)
Obtaining a ludicrously large loan was just the beginning of the battle. A large portion of the loan was going to be used for construction. That's because most buildings of this size in Harlem are considered boarding houses, and banks won't give you a standard mortgage on a boarding house. They will, however, lend you money to buy and renovate a place, with the intent of converting it from a boarding house to, say, a four-family home. So part of the loan is to acquire the property and the rest is to renovate and convert it. Needless to say, banks can be a real pain about these mortgage-cum-construction loans (one being the right to approve your contractor). It didn't help that I had a judgment on my credit report that weighed down my FICO score. My former tenant, Doris, sued me for $2,000 as payment for feeding my cat. A courtroom TV show along the lines of "Judge Judy" found it so amusing, they asked me to be on the program. The judge in my case, however, wasn't amused. He ruled I owed Doris $450.
It was a Friday afternoon when I spotted the ad of my dreams in The New York Times. I called the number.
"When do you want to see it?" queried the broker.
"Now," I said.
It was a magnificent Victorian with nine fireplaces, pocket doors that were oak on one side and mahogany on the other and an antique bathtub so thick, it looked like cement. The grain of the oak paneling in the parlor was patterned like tiger eye, and you could run your fingers over the ornate plaster leaves that ran along the stairwell. I was in love.
Can't Buy Me Love
I made an offer for the asking price on the front steps of the house. The broker had me sign a "Letter of Intent to Buy," a faux legal document created by his office. Days later, after the seller had already accepted my offer, a bid came in that was $50,000 higher, and the broker tried get me to go away pronto. Faux legal or not, the "Letter of Intent" saved my deal -- that, and finding out that the broker had accepted money under the table from the competing bidder. My lawyer threatened to report him to the real estate board. The broker backed off.
I signed the contract in June. The seller was in foreclosure and needed $35,000 of my down payment to fend off the bank. I consented, which almost pushed my lawyer over the edge. I was warned, in no uncertain terms, that taking money out of escrow and giving it to the seller was risky. She could leave the country; she could refuse to pay her obligation to her bank forcing me to spend thousands in legal fees just to get the money back. In light of the "Time is of the Essence" letters, she could have claimed that by taking too long to close, I violated the terms of the contract. I took the gamble: I knew I might not get that money back, but I didn't want the foreclosing bank getting the house either.
I needed $200,000 to close the deal and I was still $50,000 short. I called Dean, a high school friend who was now a retina specialist in Detroit making more money than he knew what to do with. I was hoping Dean would see the building's potential – both as the roof over the head of his old friend, moi; and as a great real estate investment. I spent hours on the phone with him, explaining how Harlem was gentrifying and how our rents would cover the mortgage. I showed him the neighborhood. I showed him the house. But my timing was off --- someone was arrested across the street while he was there. He said thanks, but no thanks. In the end, I borrowed the money from my mother and had to listen to her tell me I hadn't yet repaid her the money she'd lent me to buy my house in Jersey.
We Can Work It Out
Elaine, my loan officer at Wells Fargo said we would close in mid-August. In September, she said the bank had eliminated my loan product but they would find me another. In October, I began dealing with Elaine's boss, Glen. I left so many unanswered messages on his voicemail that his salutation, "Have a blessed day," seemed to mock me. When he finally called back, he said my credit score wasn't high enough and that I needed an exemption from underwriting.
"I thought I already had a loan," I said.
"I never told you that," he said, emphasizing the word, "I."
By November, Glen and Elaine stopped returning my calls. I heard they got into an argument with their supervisors over my deal and were let go. (Sorry Glen and Elaine.) My seller was growing impatient. She issued me another "Time is of the Essence" letter compelling me to close or our contract would be nullified.
In early December, my lawyer suggested I write the state banking commission and the chairman of Wells Fargo. I sent emails to every permutation of the bank chairman's name. I wrote everyone on Wells Fargo's board of directors. Within 12 hours, I received a call from a regional manager. I got a loan at the same interest rate I was promised all along: 6.75%.
About 36 hours before the scheduled closing, my contractor (who, by the way, was also my boyfriend) said he didn't have the insurance the bank required. I spent days on the telephone in a cloud of cigarette smoke trying to find a contractor whose insurance would fulfill the bank's requirements. I wound up paying a contractor named Roy $2,500 to stand in for my closing.
Happily Ever After
Two weeks later, I closed on my $650,000 home. I bought the seller a sterling silver snowflake from Tiffany's. I even bought the broker a Tiffany's key chain. During the closing – which took six hours -- Wells Fargo never asked me for my $90,000 down payment. They walked away from the table $90K light. I must say, I had a twinge of regret when I called them the next day to tell them. But my parents raised an honest girl. I wonder if mom will forget about the $50,000 I owe her…
Caren Chesler is a freelance writer living in New York City. She writes about education, politics and finance. Her work has appeared in The New York Times, Investor's Business Daily and Bloomberg.
Copyright © 2005 WomensWallStreet, Inc. - All Rights Reserved.