To Buy or Not to Buy....but HOW is the Question...
When we decided to bid on this auction just days before the deadline to register, I knew we needed financing to make this project happen and warned Lia and Mary Jane that we would have to be willing to close with cash if necessary, or we shouldn’t bid at all. We took quite a leap of faith putting down the $5,000 deposit just to allow us to bid and wondered how and where the funding would come from, not only close the deal, but to do all the work needed to restore this Pre-Revolutionary War estate. Had we just blown $5,000 for no reason? There were over 4,000 views of this property at the auction site, so we strategized on how we would bid in the Ebay-like platform to try and win this property. Our strategy was all worked out as to what we would open with, how frequently we’d bid, how much we’d increase the bid each time, if needed, and how high we thought it possible to go and still be able to get the needed financing.
As bidding opened, I sat at my computer and entered the base bid amount (since no one else had bid yet) and submitted while Lia paced nervously behind. Mary Jane was calling Lia to check in on the bidding every 5 minutes. I sat there watching the screen and refreshing it, expecting to see a higher bid and ready to counter our next price. But nothing happened. Talk about nerve-wracking! I kept thinking…my computer must be frozen. Slightly panicked, I logged out and back into the bidding portal several times because each time there was no change. No other bids were showing up. I started thinking someone was about to outsmart us and wait until the last possible second to enter a bid to win the property. That wasn’t possible though because, unlike Ebay, the bidding automatically extended 20 minutes after each additional bid, to allow others time to counter. After 45 minutes of watching, waiting, screen refreshes, nervous chatter, phone calls, and sweaty palms, we watched the bidding portal close. No one else had bid, or so it appeared. How was that possible? A few seconds later an email showed up in my inbox from the bidding portal starting with, “Congratulations…” We had actually won the auction. OMG!!!
Honestly…my first thought was…what did we miss? Why were we the only bidders? That can’t be good, could it? Was there something we overlooked in the condition of the house, the numerous restrictions, the agreement of sale that everyone saw but us? To this day, I am still surprised we were the only bidders. Now we were on the hook for the second deposit of $25,500 due within two weeks of bidding. Several folks have reached out telling us about their hopes and plans to pursue this property that did not happen for one reason or another. I thought our chances of winning this to be slim at best. By the time we started bidding, Lia, Mary Jane and I were fully engaged and in love with this house and property, and I knew we’d all be extremely disappointed if we lost it, but we’d move on and find something else, though it’s hard to imagine another place that would meet our needs and desires so successfully.
It was Fate apparently. I think the restriction on use as a single family house only, requirements to restore the 1744 & 1811 exterior and first floor interior to the NJ State Secretary of the Interior Preservation Standards, designation of the entire site as an historic archaeological site, the need to get approvals from no less than 4 local/State agencies, and stiff financial penalty clause in the case of failure to close may have had something to do with the fact that we were the only ones crazy enough to bid on this. Whatever the series of circumstances and combination of others hesitations that led us here…this was always seen as our ‘FOREVER’ home and we were ecstatic to have won the bid.
Just over a year after the auction, we finally took possession and signed the agreement of sale. Why did it take so long to go from instantaneous satisfaction in winning the bid to an actual closing date, you might ask? Well…let’s just say that construction loan financing is not anywhere near as straight forward or easy as a conventional home loan for a standard purchase. Because this house was not market ready we needed financing for both the balance of the purchase price as well as the costs of renovation to at least make it habitable. We discovered that few banks or mortgage companies offered construction loans, or even financed farms at all, and the requirements to qualify were more challenging than any conventional loan I’d ever experienced. To complicate matters, Lia and I are self employed and Mary Jane had retired in 2016, so our own financial situation was not exactly conventional either. I’d never been through construction loan financing before and neither had my partners.
After asking around through a few brokers I knew, a company was recommended that we started working with and the seemingly endless requests for documents to get qualified for and close the loan started in March of 2018. About two months later, we received our first conditional approval. As we sent in additional documents to satisfy the conditions, often the same documents again and again, our mortgage broker became harder and harder to reach. A second conditional approval, another round of documents…a third round and then no contact from the broker or mortgage company for a month. At this point we had watched June and July slip by and were becoming increasing anxious about getting approved at all or in time to weatherize the house before winter set in. After some rather harsh emails, voice messages and text messages, our broker finally resurfaced when our attorney threatened to report them to the Commerce & Finance office and sue them for misleading us, not to mention for the cost of the stiff financial penalty the NJDEP would charge us if we didn’t actually close. To our disappointment, after a promise that they had everything the underwriter needed, we received yet another conditional approval, with the same conditions we had already answered a month and a half earlier, and multiple inaccuracies which has been pointed out to them repeatedly. All the while, we were pushing the State off month after month, week after week and had extended our original 90 day closing requirement twice.
Fearful the State would disqualify us, causing us to forfeit the property and become liable for the financial penalty, we started discussing other options among ourselves. Needless to say, after 5 months of going in circles with the broker and underwriter we were frazzled, nervous, and generally angry. The broker would tell us one thing, weeks later the underwriter would come back with additional conditions or tell us that what the broker said was not acceptable. Weeks would go by before we could get in touch with the broker again and the cycle would start all over. I’ve never experienced such unprofessional and discourteous treatment as this before. I would surely have been fired if I had treated any architectural client this way. Thankfully, we had a plan B all along. Despite not really wanting to do this, we were in a position to close with cash. After much debate, and exhausting all reasonable patience with the mortgage company, we made the decision to do just that, and on October 17th the deal was signed and we officially took possession. We still need the funds to do construction, but at least now we own the property. As I write this, we are working with a different lender to obtain our construction loan financing and are having a much different, more professional, and competent experience thus far.
Now that we own the place…we are responsible for it. Getting insurance in place, managing access, worrying about leaks from the extremely worn roof and windows, and preparing an emergency repair package for the roof and windows for historic preservation approvals, has been our focus since closing. Next steps, seek approval to get the house weatherized while we simultaneously finalize our construction loan, and I need to finish drafting detailed overall plans for the house and property for a full submission in a couple months. The precarious condition of the decayed roof and windows is deeply concerning and we have impressed this upon the local and State agencies that stand between us and executing this critical stabilization work, which in a regular situation wouldn’t even require permits. As I write this, a tornado watch just popped up on the TV late Friday night and I can only help but wonder what I will find tomorrow. Stay tuned for more….Jason