Funny about Money

The only thing necessary for the triumph of evil is for good men to do nothing. ―Edmund Burke

WooHoo! The Refinan¢e Apprai$al Is IN!

So the appraiser showed up the other day, after my son, a housecleaner, Gerardo’s crew, and I spent two days sprucing up his house and yard. He’s trying to refinance the downtown house, to escape the scheduled balloon payment inherent to the 30/15 loan he took out when he moved down here from San Francisco.

I’d helped him to qualify for that mortgage, figuring he’d be here about five or six years and then (as he planned) would go back up to the City.

That was before the Crash of the Bush Economy… As you know, we lost our communal shirts in that, six ways from Sunday.

We did manage to hang onto the house, though, even though we sank underwater to the tune of about 80 grand.

So over the past eight years, the economy has turned around, people have jobs, young folks are buying houses again, and his neighborhood is once again gentrifying.

It’s all Obama’s fault, of course…

Seeing that interest rates were about to rise, M’hijito managed to lock in a low rate through the credit union…something like two days before the Fed raised its rate. All we’ve been waiting on was the appraisal.

Last time we tried this, the appraisal came in well below what we felt the house was worth. The cost of the refinance struck him as too high, and the fact that the appraisal made it look like we didn’t have 20% equity in the house (we’d put 20% down at the time we bought!) meant he’d have to pay mortgage insurance. That irked him so much he declined the deal.

This time he got much better terms for the loan. A-n-n-n-n-d…

The house appraised for $300,000.

YES!

That’s $65,000 more than we paid for it, and about $145,000 more than it was worth at the bottom of the Bush Recession.

Meanwhile, just down the street from the Funny Farm, a house that’s the same model as Wonder-Accountant’s just went on the market. Hers has the same square footage as mine, and both of our places are on larger lots than said new offering. They want $395,000 for the shack!

Holy mackerel. I paid about the same for this place as M’hijito and I paid for the downtown house. So…kaching kaching…let’s imagine the seller extracts $385,000 from some sucker. That would put the value of my shack at $150,000 more than I paid for it.

Wow!

Welp, the value of this place is really neither here nor there for me, except insofar as it affects the property taxes. But where my son’s house is concerned, the assessor’s valuation is a HUGE relief.

It means my son will not have to worry about being turned out of his home when the present loan matures, only a few years hence. If interest rates rise back to their historic norms, there’ll be no way he could afford to refinance what he owes for that place. At 4 percent, he can pay for it; at 8 percent…not so much.

So he should be in pretty good shape indefinitely, assuming he hangs onto his job or moves into a better one. If he chooses to move back to the City — or to Oregon, where some of his friends are, or to Idaho, where he figures there’ll be more water in the ongoing drought — he will be able to sell the house without a back-breaking loss. Who knows? He might even make a little profit on the thing.

Some day.

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Author: funny

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5 Comments

  1. Congrats… what a relief for Dear Son….And thank goodness for the Credit Union. Wait til he goes to settlement. If it’s anything like the refi I had a couple of years back at our CU…he’ll be stunned as to how fast it goes. Seriously our CU did a lot of the work well in advance…..and it has taken me longer to buy an appliance at Lowes than that refi took. MAYBE 15 minutes….soup to nuts. IMHO 4 years from now this move will be considered pure genius…..Merry Xmas..

    • I hope you’re right. It’s no fun to have to take two or three hours off work to fill out forms and jump through bureaucratic hoops. At least now he has a better employer that gives its workers more leeway in coming and going, as long as the work gets done.

      I’m sure the rates will be through the roof by the time that 15-year maturity provision would have kicked in. Of course, “through the roof” will only look that way because we’ve become so accustomed to rock-bottom interest rates.

      When I bought my first house after the divorce, I paid 8.25%, and my RE agent and I thought that was a smokin’ deal. My payments amounted to half my net salary, leaving me with less than enough to live on unless I had a roommate. (HOW does a bank imagine a consumer can afford to pay half of a pretty piddling salary on a loan?)

      Because real estate costs are now so high, even at these low rates, the kid is paying half his take-home pay. The amount we financed, AFTER we ponied up enough to cover 20% of the home’s sale price, is more than twice the loan I had on that first house. That house, the house I’m in now, and his house are 100% comparable: the present valuations are exactly the same for all three. Actually, I think mine is now valued slightly higher than his: Zillow thinks mine is worth $312,000.

      There’s no way people can afford to spend more than half their take-home pay on a mortgage. That’s insane! What will happen is at the first sign of the next economic slowdown, as people start to lose their jobs, they’ll default on these crazy loans. When you need two salaries to pay for a roof and one person loses her or his job, it won’t be long before you lose the roof.

  2. Good news for Christmas!

  3. Excellent news! I kept waiting to buy here in the outer edge of the Bay Area because I kept thinking the prices must stop their steep increase “soon.” But instead the prices kept steady (and maybe even creeped up a bit more) and I decided it wasn’t going to get any better. I hope I don’t regret it. :-/

    Zillow values seem really off to me. Their “zestimate” is wildly inaccurate in this market. Do you find it more accurate in your area?

    • Well, it’s hard to tell. At the time you bought (quite a few months ago, right?), it looked like the market had more or less returned to normal. As we know, there is no “normal” in the Bay Area, except insofar as “crazy” is Bay-Area Normal.

      If the market drops so that you find yourself underwater, don’t panic: sooner or later it WILL come back. Just look at the payments as “rent”…and consider what you would actually be paying for rent if you and the bank didn’t own the house together.

      No, I don’t trust Zillow. The value of a house is what somebody will pay for it, not what some logarithm says it’s worth. Zillow is all over the place in my and my son’s neighborhoods…they have no credible clue. About the best you can figure is that the “Zestimate” represents a rough guideline.

      Zillow pegged the value of my son’s place at $280,000. The appraiser, based on comps of houses sold within the previous three months, said it’s worth $300,000. That’s a difference of 20 grand!