Note: I was requested to post this here by a couple people. I don"t know what direction my life or this journal will take, but my overall goal is to loosely document the process of getting my first house, fixing it up, and then leaving the house in the future (I don"t know when that"ll be, but I hope 10+ years). The intent of it is to create an interesting read that can also inform people who are looking to get a house to see how a complete newbie either pulls off something decent or approaches financial ruin. What happens exactly is yet to be seen, but from a personal preference I hope the former option is selected by fate. If you have any suggestions for what I should do or consider at my current place in the story (It"s up to date currently and if people like it I"ll make an effort to keep it up to date), please mention it. If you feel that part of the journal is boring/useless or that I skipped some steps or need to expand on some part, mention that too. Forward - October 2008 It is with great uncertainty and loathesome trepidation that I step closer and closer to to purchasing my first house. There is no argument that I am in a tremendously fantastic market for purchasing a house, as we sit on a steeply downward trend of housing value. However, I am not at all satisfied with the average of greatness, but must complicate a relatively simple task by demanding a great deal in a great time. It is not just a foreclosure I seek, but the absolute rock bottom that I am for: an auctioned house. Auctioned houses come with an immense burden of difficulty that exist upon the full breadth of aspects to consider when buying a house. Every hill of buying that a person must travel through before walking into "their" house is confused by the particular path I have taken. That is the way I am; the way I was raised. I sit looking at the final goal of home ownership, still a distance away, and the next choices that lay directly before me are still cloudy. Perhaps if this was not the first house I have owned it would be more clear, but I force myself into this position because I know that with a lot of effort and a little luck, I can save some money. An additional stress is that everyone I know is looking closely at my progress either out of genuine concern for me or out of curiousity to see if I can pull it off. Out of the latter group come either people who want me to succeed so they can follow the trail I have blazed, or people who want me to fail because it would fill them with regret to see me succeed. There is no need to elaborate on the importance of a home purchase and thus the importance of finding a good deal for a home. The man who spends 20 seconds haggling at the Saturday morning garage sale over some used boks, just so he can work a 50 cent investment should, in theory, spend a proportionate amount of time haggling for the cost of a house. If that cost happens to be $200,000, then that 20 seconds becomes over 2,000 hours of shopping, comparing, researching and haggling. Most likely he does not. Out of pressure and desire to find a house, uncertainty of the less traveled paths and the undesirability of having a part time job of house shopping, he opts for much easier, and expensive, paths. This is not my way. So I trek on. Blindly onward into a jungle filled with those who would make a career profitting from folly. I am armed with good friends with mixed advice, a sound foundation of patience and frugal behavior, lots of time and the inclination to absorb as much information I can. My hope is that possibly you can watch my progress and perhaps be able to follow my path in your search for a good deal. September 2007 - August 2008 The first issue I face is the problem of information on the current market, available houses and what recent houses have sold for. Most people would find these answers in a real estate agent. The comfort of a professional agent who works to find you what you want is a warmth that I would like to seek. But I was advised against it and discovered that this comfort may be deceiving. The primary motivation of a real estate agent is not to get you a good deal but to sell you as expensive of a house as they can. They want you to be happy with the purchase but they mostly want their cut. For someone like I am, who minimizes the amont I must pay, this can be a conflict of interests. Perhaps I should have given it a shot, but I felt with great certainty that an agent would only attempt to dissuade me from my desired path and veer me onto a course that would prove profitable to them. If I sat down at their desk and explained my strategy I would quickly face the unapproving look, the condemning glare that seeks to unsettle an inexperienced person in order to set them up for a different path. A path whose confidence would be quickly built upon the promise of a good deal for me and a fat paycheck for the builder. So I have not spoken to an agent yet. Instead I have used the great resources of the internet to tabulate through thousands of entries in a database and give me up to the second coverage of all the houses available on the market. I had the distinct feeling that I was peering into the same information that a professional real estate agent would see as they mentally filtered the houses in order to find the most expensive one I would like. While these websites may fade by the time you read their addresses, here is what I have discovered that has helped me replace a real estate agent: Real Estate Valuations, Homes for Sale, Free Real Estate Information | Zillow Real Estateis a website that attempts to programmatically calculate appraisals based upon both history and parameters of the lots. It does this well. www.zillow.foreclosure.comis a part of the Foreclosure.com website that I used that focuses on the available foreclosures in the market. If you pony up the modest subscription fee it provides to you detailed information about houses, along with information about the mortgage they are assigned. With this you can gain insight onto the houses, or contact the owner, set up an inspection, and lowball them until you find someone desperate enough. Auction Zip - Live Auction Locator - Find Auctions Anywhere!is a website that has virtually every legitimate auction in the United States. I have never seen an auction listed anywhere that was not at this website. It also has an excellent interface and search engine. You can check this once every few days and know every real estate auction in an area. Williams & Williams - Real Estate AuctionsIs a website for one organizations auctions. While everything in it is listed at AuctionZip, it has the unique ability to see auctioned properties and what they"ve sold for. Other than making phone calls or attending auctions this is the only way to get an impression of what the auction market is like. You may even witness the ridiculous nature of auctions by finding the extremes that could only happen at an auction. HotPads - Map Search for Real Estate, Apartments & Houses for Rent, Foreclosures and Homes for Saleis a website that lists rentals, roomates, houses, foreclosures and statistics, and it is here because it has, by far, the best interface. Google MapsIs the best website for distance calculations and satellite images. They also have limited access to terrain, but you"re better served by accessing topography maps for that. With these resources, I replace a real estate agent. My focus now rests upon determining what I want. Oh what a troublesome task this is! The freedom of my youth allows the difficulty of thought on future changes rather than upon the reality of today! Virtually every aspect of a house rushes at my mind at once, disorienting my thought as I attempt to discern what is important and what is an imaginary desire that will not pay comfort upon acquisition! So rather than prioritizing desire, I instead build requirements. These requirements set up a firm foundation of what houses I will consider and what I will not: 1. Location - close to work, family and freeways. Freeways become important when you abandon the flawed technique of measuring the distance between two points on a map, and begin calculating real drive times. 2. No major issues with the foundation, structure, roof, plumbing or electrical. 3. Family friendly neighborhood. You will notice an absence of highly critical items including any real parameters of the house, land and area. This is done intentionally because even in such a buyer favorable market the number of auctions that fit these parameters is low. But even If I ditched auctions and went with a broader method of purchase I would still desire a short list of requirements in order to raise my chances of a good deal. I begin my search timidly and without commitment. I am approaching a project I feel will extend long into 2009"s long winter months. In April of 2008 I have finished paying off my student loans and am building up the cash for a down payment. Thus, I am in no rush and my home search carries on without incident. September 2008 I find a new auction. What catches my eye about this is the amount of land under this house. 9 acres. 10 football fields. 20 times the number of acres I wanted. It is also in an amazing location I am very familiar with, because I have driven that road many times, enjoying the dirt road because it was an open stretch I could reach 100MPH on, and I remember it because the view opposite of the house is amazing. The area is a bubble of rural area surrounded by four developing cities. I am excited. Quickly after announcing my discovery, my social circle wanted to check out the house. We jumped into a car and when arrived at the house everyone remarked at the amazing view. We walked timidly towards the house wondering if it was vacant. We didn"t want to trespass. It looked vacant. There was a large dumpster next to it full of home goods that apparently weren"t valuable enough to auction. We presumed it was truly vacant but then noticed the neighbor casting furtive glances at us. We quickly introduced ourselves and began asking questions about the property that only a neighbor could answer. He reported that the woman who lived here has resided here for 62 years and that her family has owned the area since 1840. The neighborhood was cozy, not a lot of noise except for the occasional fool that would drive down the dirt road too fast. He gave us an open welcome to traverse his back yard and inspect the property freely. We said our thank yous and departed. Eagerly we hiked into the backyard noticing the healthy terrain, the large trees. We came across a beautiful willow tree that was surrounded by grape vines eagerly climbing the branches. We tasted the rich fruit and agreed it was delicious. From then we walked towards the outer barrier of the forest. Wanting to see what was held beyond the grassy terrain I left my fellow inspectors and passed into the woods. It was fairly standard until I came to the edge of a large expanse of an open meadow. At the center lay a trickling creek, meandering through the pasture at the heart of the nine acres. I inspected the area and was pleasantly surprised to find no pest insects in this grassy haven. I walked back towards the house to meet up with my party and could see the excitement in my woman"s eyes. I smiled, asked her what she thought and she responded with glee. I smirked cynically and told her that I thought this house would be our first disappointment because I felt we wouldn"t bid high enough for it. With this sudden arrival of a potential house came two difficult questions. Are you pre-approved at a bank? Well, no. Do you know how to inspect a house? Not really. To answer the first question I quickly asked for the advice of my friends who knew about that, one of which happened to be a loan officer. He was witness and perpetrator of the same slimy atrocities that are blamed in the media for the very downfall that would allow me to purchase a house at a cheap price. And while I did not think I would collect debt I could not afford, I was concerned with both the reliability of a bank and the hidden fees they make a living on. I was unable to find any books I felt were valuable, as the libraries and book stores were filled with such trite documentation of flipping houses and get rich quick schemes. In a sea of uncharted territory I became slowly more informed of its waters and made my first move to get "pre-approved". Armed with a 771 credit score, a good job and $12,000 of cash (Which was not bad considering I was broke when I graduated 14 months ago, and also paid off $14,000 in loans.) I first looked at what appeared to be a reputable online mortgage website,E-LOAN: Mortgage Refinance, Home Equity, Auto Loans, Savings Accounts, CDs, Line of Credit, Home Loans, Second Mortgage, No Hidden Fees, I applied for a loan there and was well received. Within minutes of finishing the application I was called by one of their loan officers. He ran the paperwork and eagerly pre-approved me for 200,000 at %6.5. We discussed specifics and happily made arrangements to get in contact once I successfully signed a purchase agreement with a seller. I later ran the numbers on the deal and found out it would be very difficult to afford the payments on a $200,000 loan, and I would face certain ruin if unexpected costs came my way. This was ironic to me as the same day I was pre-approved for a loan I could not safely afford, the stock market lost one trillion dollars because of loans people could not afford. I had no intention of even approaching that number, but shook my head at it. Although I had a pre-approval already, I did not want to abandon the local bank I"ve used for over a decade. I sought their approval and was curious to see what their numbers were. It turned out they were much superior to ELOANS, both in rates and upfront costs. I did not bother seeing if I could get approved for the $200,000 loan, but instead went with a more conservative $150,000 loan, which was still much higher than I expect to pay. This was happily approved as well. October 2008 The open house was scheduled for the next Monday, merely a few days away. I had until then to answer the second question better. While my friends had sporadic advice about home inspection, I had more luck at printed material than I did with loans. I shippedAmazon.com: The Home Inspection Book: A Guide for Professionals: Marcia Darvin Spada: Booksthis book to my house as soon as I could. In one weekend I read through it all and memorized as much as I could in order to adequately inspect this house. I sifted through the dull material, being largely familiar with most of it, I was able to quickly go through it and absorb its contents. The open house quickly approached and my excitement spread to many of my friends who began to peer eagerly into my adventure. As I mentioned earlier, people were typically excited either because they wanted to see me succeed so they could possibly take the same actions, or see me fail so they could be assured they did not make a mistake with their strategy. Word spread about me finally venturing to an open house and a group of four people were interested enough in my progress to check out the house with me. We arrived roughly at the same time and strode into the house. Overall its conditions were better than I expected. The house had been vacant since March, but it looked well maintained, without odors, major structural defects or serious issues. At the very least it was livable, and at the worst it was a house that needed some extra work. It was originally made in 1870, but had been well kept until 1973, where two additions were basically stapled onto it. The basement was sobering as the ceiling grazed my head and I felt cramped in its mere 400 square feet. I climbed into the attic and found no defects, though it was quite small. Overall the open house provided me exactly the information that I needed, the house that rests upon a heavenly nine acres of land is without major concern. All that was left was a water test conducted by the Michigan Department of Environmental Quality.DEQ - Department of Environmental Quality So now comes the first real decision of this process. I must ascertain the maximum amount I will bid at the auction. What the home appraises for is important, but much less so given my circumstances. I sit at the bottom of a huge rut of economic depression that gives me the distinct opportunity to purchase a home for much less than it appraises for. Additionally I seek out the troublesome candidates that make their way to auctions, most likely lowering the price considerably. I am in no rush, and that offers me the advantage of being able to low-ball auctions until I get lucky. I have been monitoring house prices for the last year, anticipating decisions like this. However, any data I have gathered holds little weight for a variety of reasons. The volatility of the recent market and the lack of data I have on houses in decent locations with lots of land make it difficult to predict. As I think I consider likelihood of winning, my desire to come out of this adventure with minimal debt, how much I would love 9 acres of land, how great the view is, the short term and long term economy, the average number of eligible auctions per month. I speak with my close friends, run simulations in my head (day dream) and pray. I come up with a number. $80,000. "You"ll never get it at that price.", a colleague exclaims as he admits he paid $50,000 for 0.25 acres of undeveloped land not far from there. "I"ll give you 1 to 200 odds on winning it at that price.", states another colleague who owns similarly sized property. "I"d hate to see you pay that much for that house.", guides my father, who says I should limit it to $50,000. "You should totally think about raising it to 125", advises a colleague who really wants to see how this plays out. "I trust you to do what"s best, but I think you"d be okay to make it one hundred thousand.", says my girlfriend. All these voices, coming from people as in the dark as I, the auctioneer and the owner are. I don"t have long to wait, a couple weeks from now I will be leaving work early, venturing to the location and watching someone"s life be poured out the lawn and literally sold to the highest bidder. Before then another open house is scheduled and I will have a chance to speak to speak to the actual auctioneer and review the details of the auction. October 9th, 2008 Initially I was intimidated by the auction process, with how the payments worked and how insecure the entire process was. Now I still feel intimidated but more secure as I understand it better. I expect to go to the auction, register, attempt to win the bid at a sinfully low rate, and if I am successful at my heist, I must have a cashiers check for $7,000 ready as a deposit to hold my prize. I then have thirty days to hope that a bank is capable of lending money in a time of such financial ruin. If so I, well, I don"t know, I haven"t figured that part out yet. I intend to hire an attorney simply out of paranoia, though I feel that these auctioneers are fairly reputable. I have a certain degree of (possibly misplaced) trust in my bank, and if they are the ones to loan the money I will feel even better about it. The two risks are that if I can"t get the loan approved I"m out $7,000, and if I screw up the process I may buy an $80,000 mortgage and no actual property. I am attempting to safeguard myself against the first risk by hiring an attorney, and my only option against the second is to get pre-approved at a lot of banks before hand and brace myself for having to take a bad rate on the chin if need be.