Things have been a bit quiet over here because we bought a new house! That consumed my time for the better part of the summer. Now that the deal is closed, I’ve had a little time to reflect.
Home Search
We’ve been thinking about moving since our son was born, but after we refi-ed all of our loans, we started taking the home search a bit more serious. Our minimum requirements were three bedrooms and two baths. Nice to haves included a full bath on the first floor (in case my mother visited), location in the Central District (we wanted to be close to our current home), and an ADU.
The ideal home would be another multifamily with a large owner’s unit, but that became increasingly hard to find, especially in our price point. So we focused on single-family homes that either had an ADU, or we could easily add one. We found a few promising properties in our neighborhood, but did not make any offers.
Around April, we started to seriously consider a home that came on the market the prior winter. This home was only four blocks from our current house, and it piqued our interest because my husband and I went to a party there 15 years prior. It was very much out of our price range though. After the winter, the price started dropping, and dropping, and by spring it was close to an amount that we could afford. We asked our agent to view it.
The house is an old Seattle house that was divided into two units. The lower unit has 3 bedrooms, 1 bath and is over 1000 square feet. It was oozing original charm, but it has a smaller bathroom. Upstairs has 7 bedrooms, 2 baths and is over 1800 square feet. Now, it wasn’t originally 7 beds – it was currently rented by the room, and the prior owner added a wall and converted a living room to make it 7 beds. It should really be 5 beds. Although going up a flight of stairs was not ideal, we could install a lift for my mother, and we would have tons of space. We decided to make an offer.
First floor entry 
First floor bed 
First floor bath 
First floor kitchen 
First floor living 
Second floor bedroom 
Second floor kitchen 
Upstairs bedroom 
Small bathroom on top floor – this will be expanded 
The third floor has a second kitchen! this side will be laundry, and the other side will be part of the new bath 
My new office! 
This is half of a divided room. We will take this wall down and make the new primary bedroom 
The other half of our new primary bedroom
Making an Offer
The current asking price was still over what we had hoped to spend, but the property had been on the market for over 100 days. The upstairs layout may have turned some people off. We learned from the seller’s agent that another interested party was viewing it in 2 weeks, but if we made an offer, they would cancel the appointment. So we decided to come in with an offer $100,000 under asking price. Yes, this is probably not a smart move in today’s real estate market, but we also had some additional information.
After we viewed the house and knew we were going to make an offer, I did some research on the current owner. He was a real estate investor that had bought the property in 2019; from what I could tell, his business included financing other investors as well as taking on his own projects. His business had not done well in Covid, however. He had several Better Business Bureau complaints against him for non-payment, and one of the comments stated that he was going through bankruptcy. Sure enough, this was a court-forced sale – the owner declared bankruptcy, and the court ordered the sale of his assets to pay his creditors. We weren’t dealing with an owner, we were dealing with lawyers. And these lawyers probably did not want to hold onto this asset; they wanted to sell it and get paid.
So, we came in low. They countered at $50K under asking. We split the difference and asked them to pay closing costs, as well as make repairs that came during inspection. And they agreed! We set a closing date for a month and a half and set to work on finalizing our financing.
Oh, and the other interested party? Funny story about that. After we had an accepted offer, we told our friend up the street that we would be her new neighbor. She started laughing – it turned out, she was the other interested party. She got a call that morning that their appointment was cancelled.
Financing
When we started this process, we had assumed that we would be able to use my husband’s VA loan, since we just refinanced out of it. Well, turns out you cannot re-instate a VA loan more than once! So that was off the table. However, we did learn that you can use the benefit for two homes, if you did not exhaust it with the first purchase. Because of this, we were able to put over $60,000 from the VA entitlement towards our down payment. And we were able to get the other VA loan benefits – lowest rate possible (ours was 2.5%!) and no PMI.
We decided to use a HELOC for the rest of the down payment. When we refinanced our current home, I commented to our husband that if our house was a person, they would have made $90,000 a year for the past 7 years. I believe I followed up that statement with “It’s time this house start contributing!” Well, in a way, our current house is financing our new house. We tapped into the equity for the remainder of the down payment. And after we move, we will cover the payments on that HELOC from the rental proceeds on our current unit. So other than the first few months, no money comes out of our pockets for the purchase of the new house.
Once we had the funds sorted, we had several more hoops to jump through with the VA:
- We had to show past income to support the required VA debt to income ratio. Although we rented all of our apartments, we had some vacancies while we remodeled in the past few years. The VA only considers historicals, so this made our income look much lower than it was. I had to quickly finish our taxes and pay off the remainder of our car loan to improve it.
- Demand for HELOCs was high, and because the city was understaffed, it would take a while to pull our deed. The fact that we had just refinanced complicated things. We had to get the title updated, processed at the city, and HELOC finalized with our bank, as the VA needed to see the funds in our account.
- Since we had just refinanced, we had an occupancy clause on our current house. To secure the VA Loan, which also has an occupancy clause, our mortgage servicer had to waive our current clause. This was the biggest nail-biter, and it took 45 days for us to clear.
- Since it was a court-forced sale, the bankruptcy court ultimately had to approve our final purchase price. Although we had negotiated our price point with the sellers, the court rejected the final price on the last day. They even said they would relist it if it did not increase by $12,000. After 3.5 months of closing, the buying and selling agents decided to split the cost from their commissions. After 3.5 months of closing, we were so grateful for this!
They accepted our offer on May 12, and we finally closed on August 30th!
The Future
We have the 3 bedroom apartment listed, and hope to have it rented by November 1. There are currently tenants in the upstairs apartment, so we will not be able to move in until their lease is up in January. Until then, we have some small projects in the garage and exterior to complete, as well as get our current apartment ready for rental.
