I had been introduced to real estate about ten years earlier when I decided I needed a home of my own. To get it I had to raise my salary quite a bit, even though I had a relatively good job as a computer programmer-analyst in a large corporation. I did, changing jobs. I changed jobs three times in about two and a half years, each time getting a big raise. If I hadn’t had a job that was in demand, I would have had a hard time doing it.
After the job change maneuver, I ended up buying my first property, my GI Bill home with an A VA loan and no down payment. Yes, I happened to make the first offer on a house that my sister, a real estate salesperson, had just gotten listed. Some might consider it just luck. I didn’t, as I had planned and executed a strategy to get a house once I got my salary to a high enough point to qualify for a loan. If I had not bought that house, it would surely have been another.
The second house that I bought was an investment and not to live in. It was an almost new house, only a year old. Someone I knew well had asked me if I wanted to buy his house. It just so happened to be about three weeks after I’d gone to one of those weekend real estate seminars. I had borrowed several hundred dollars from my credit card to attend, against my wife’s wishes. My goal in that seminar was to come up with a good idea that I could eventually apply. I have several.
So when I got that unexpected call to see if I wanted to buy his house, I immediately said yes, having no idea how I would go about it. However, I did it and with no down payment by letting one of the original tenants stay in the house for two months without paying rent and I took over the loan and ownership of the house. I used a credit card loan to cover two months of house payments.
That could have been considered luck, too, but it took me thinking and talking to pull it off without using any of my money. That was a direct consequence of remembering some of the finer points of that real estate seminar “I shouldn’t have gone to” according to my wife, because it was too expensive.
I could have been lucky on both home purchases, but I tend to feel that despite those opportunities that seemed to arise, my resulting actions certainly wouldn’t have bought those homes. I hadn’t really given much thought to “no down payment” as a way to buy a house, those transactions turned out to be that way.
During that time of buying my second home I was also looking for another house to buy. I thought it would be nice to eventually own a few houses. Since he could get two houses with little or “no money down,” why couldn’t he get a third? That first one didn’t really count as far as I was concerned, since it was for a living.
Is HUD or VA Rest okay?
I did some research and found that the VA/HUD repositories in my area were costing more than they were worth. In other words, people were bidding too high on them, thinking they were getting a bargain. I didn’t want that to happen to me. At certain times and in some areas, HUD/VA repos are very good deals, but not always.
I found a VA Repo to offer
I decided that I would consider those government repos since it was possible to get an asset if you knew the property values. He had a pretty good idea of what the houses should cost. I checked the HUD and VA listings for lists I got from realtors looking for homes in my general area. I found a good-sized house near Ontario, California, with a good-sized yard, a big pool, in a nice neighborhood.
He was only a few years old. Everything was in good condition, except that the pool was empty and full of garbage. It also needed cleaning apart from the garbage. I had a few questions, but the VA wasn’t open and the offer was closing, so I was quick to submit a sealed offer of $103,000, which was reasonable in my opinion.
I got lucky and won the offer!
I was surprised that I won the offer. How lucky I was. What was my next move? I checked with the VA about your financing details.
to disaster! needed financing
My heart sank! They were not offering financing for that auction. They usually do it at rest. That was one of the questions that confused me and I couldn’t get an answer. The terms mentioned getting your own financing, but seemed to apply to investors buying multiple houses at once or buying apartment complexes. What a disappointment! Now he had to find financing that he knew would be difficult and would require a large down payment. I never would have bid if I had known that.
Three days to find financing
He had three days to get financing for the house. Every lender I called told me I needed a 20-25% down payment to get a loan. I didn’t have that. After many unsuccessful calls, I couldn’t get financing because I didn’t have enough down payment.
no funding for me
Sheepishly I called the VA, explained my situation, and asked if they could disqualify me because I misunderstood their financing and couldn’t get a loan. I wasn’t expecting much since it was a government agency, but I was pleasantly surprised. My bid was withdrawn and there was no penalty. I felt very relieved.
VA/HUD Auction Rules: Understand Them
I knew there would be other opportunities to buy a house. I learned a lesson there. One needs to thoroughly understand the auction rules before placing a bid. In my particular case, it was the last night of the offer and too late to contact the VA to get answers to my questions. My normal caution went out the window because I was so eager to bid. It turned out that I won the offer well, but I lost the house.
Copyright © Charles Harmon