One Year Anniversary (cont.)

I’m following up yesterday’s very long post with a very short one.  Here’s what I was watching one year ago today:


Amazing to think about what has happened in the year since, and that we’ve been living here for almost six months.  Its great to be here!

Flashback — The Lender, part 2

In mid-April we called our real estate agent friend, and he recommended a well-known local bank.  My wife filled out the on-line application, and within a week we had a prequalification for only slightly less than our hoped-for figure, and enough to work with.

Of course, we had to collect and submit the mountain of paper again, with updated monthly statements (since a month had passed).  This loan officer was much better at keeping us informed.  We still needed the all-important appraisal.  It was finally done in mid-May — just enough so that 80% would cover our loan amount.  Success!

We had a couple more hoops to get through: approval from the underwriter and final approval from the bank.  The loan officer assured us that our application was strong and that approval was almost certain.  Sure enough, the final approval came through, and the loan closing was scheduled for May 31.  We informed the builder, and he responded that construction would start the first week of June.  Then, right before closing, he told us that another project had been delayed and he would be starting on June 1, and would have the site staked out on May 31.

We went to the attorney’s office that afternoon, and signed our lives away (or so it seemed).  We’ve been using this lawyer for our real estate matters for years, and he was interested in our project and what led us to Chestertown.  One item of particular interest in the pile of paper was the draw schedule and draw request form.  I made a note to review this with the builder the next day.  Afterward, we drove out to the lot and I photographed the stakes.  I made plans to be out there not much later than 7:30 AM the next day, the estimated start time.

Flashback — The Lender, part 1

We knew from the start we would need a construction loan.  Our cash and investments would get the project started, but we did not have enough equity in our current house to cover the rest.  We also knew we would probably need to pay off the lot loan.

The builders all thought this would not be a problem.  Our concern was that we were still in the aftermath of the real estate crash that started in late 2007.  Credit was still tight, and lenders were still being extremely cautious.  Construction loans are inherently more risky than mortgages on complete houses.

After our decision on the builder in 2010, we were aiming for an April 2011 start date.  We started the loan application process in early February.

We talked to one lender that the builder recommended.  The loan officer was friendly but somewhat pessimistic, and we did not apply to them.  We picked up one important fact; as for a mortgage, the lender requires an appraisal of what the house will be worth, based on the house plans.  This is inherently more speculative than appraising a completed house.  The maximum loan amount would be 80% of the appraised value.

The builder also told us of another lender that would give a construction-to-permanent loan.  This was attractive as it would save us closing costs for the final mortgage.  We started working on the application in February.  The paperwork requirements were daunting:  they included statements from every investment we had (whether or not it would be used for the house), tax returns, income statements, etc.

One item we needed was the signed construction contract.  We got the builder’s contract in late February.  There were a few clauses that I found confusing, so I had it reviewed by our settlement attorney.  He was not familiar with construction contracts, and had more questions.  The builder was OK with us modifying the contract.  It took a couple of weeks, but by mid-March we had the signed contract.  We then delivered what seemed like a small mountain of paper to the lender with the application.

At that point progress slowed down dramatically.  The loan officer wasn’t great about giving us updates unless we called.  There were committee meetings that were scheduled and then rescheduled.  Finally, they came back with what one bank was willing to lend:  significantly less than what we needed.  They had not even ordered the appraisal.

The loan officer said not to worry, they had other banks that might do better.   Then, nothing for a few weeks.  We figured it was time to look at other options.

Flashback — The Builder, part 2

In January 2010, we went to dinner with a group of friends, and met the sister of one friend, who it turned out lives in Kent County.  She highly recommended the builder that had rebuilt her house.  We met with him and were immediately impressed with his overall approach and his knowledge of specific items that we were interested in.  For every point or question that we raised, he had a ready response.  We felt comfortable working with him from the start.

He showed us a house under construction and another that was completed.  One other strong point was that his schedule for completing construction is about four months, compared to about nine for the other builder.  This will save us quite a lot of interest on the construction loan.

He submitted his first bid shortly after our first meeting.  It was still above our budget, but it was nicely structured and detailed, with a basic cost figure plus all of the additional costs for our add-ons and other options he thought we might want to consider.  This made it easy to figure out what we change to get the cost down.  In mid-summer 2010 we made our decision to go with this builder.

He had more ideas for saving us money.  He recommended a supplier for flooring that would help to reduce costs, and we chose our tile and carpets.  He also recommended some good roofing products.  By early 2011 we had converged on a specification and a cost that we could afford.

Flashback — The Builder, part 1

We identified all of the builders we talked to through personal references.  Our real estate agent recommended a builder he had worked with, and the sellers gave us the name of the builder for their house; his son now runs the company.  We met with both of these builders in mid-2008 and showed them our drawings.  They both expressed strong interest in working with us, and showed us some of their recent projects.  Both received strong recommendations from their clients.

We gave both of them copies of the rough plans and asked for preliminary estimates.  The agent’s builder never responded.  We made one last stab at contacting him, and he promised to respond, but never did.  We still have no idea why.

The seller’s builder came back with an initial figure that was well above our budget.  That led to our decision to drop the separate guest room from the final plans.  We gave these plans to this builder for a complete bid.  He continued to solicit our business, and in particular started showing us a house that his company was substantially expanding.  We made a few visits to this location at his invitation in 2009 and early 2010.

His first complete bid was still well above our budget.  He was happy to work with us, and we iterated a few times on the specifications and bid.  At one point he eliminated some items that we were not ready to give up, such as the geothermal heat pump.  In general, we felt like our progress toward a final bid was slow and uncertain.  We also wanted to get another bid to compare with.