I made no secret here that Mike and I were trying to buy a house using the VA loan. I think I first mentioned it back in September of 2016. In late December, we officially started the process, as our apartment lease would be ending at the beginning of March. We applied for the VA home loan and I was so happy that I already had all the documents we needed. Everything went really smoothly.
The Hunt for a Home
When we finally went on the hunt, we were discouraged by our options, even with a budget of $325,000. That’s a lot of money for a first home, and in Colorado, even old, shabby homes are priced between $270k-$300k. Those homes often go through bidding wars.
Needless to say, the first home we put an offer on was rejected, as numerous offers came in, beating our measly $5,000 above asking price bid. I was actually happy that we lost that home because I wasn’t in love with it and I felt we had made the decision hastily – due to us being on a very strict timeline.
The next day, we searched far and wide for homes, trying to be flexible on the things we wanted and felt like we needed. We really only had a couple of major wants. The home had to have at least 2 bathrooms, a fenced yard, and preferably a garage. However, the yard and bathrooms would beat out the garage if it came down to brass tax.
At the end of the Day 2, we found a quirky ranch home that had been remodeled. It had everything we wanted and more, despite some of its odd features and design points. It was set at $300,000 – down from $320,000 prior. We bid generously above the asking price at $315,000. The seller knew we were using a VA loan and asked our realtor if we would be willing to bring any cash to the table if the home didn’t appraise for $315,000. He had multiple offers, but for some reason, he went with us. Our realtor told him we had no money because we were first time home-buyers. All we had to our name was the $3000 in earnest money we had given them, which we had planned to use for closing costs.
The final deal we agreed upon was that if the home didn’t appraise for our offered amount, we would give the seller our earnest money to sweeten the deal.
Fast forward 3 weeks.
We had made it through the inspection and everything seemed to be going as planned. I felt confident everything would work out. We were less than 3 weeks from our closing date and were waiting only on the appraisal to come through. We shared the news with our friends on Facebook and began prepping for the big move.
Last week, I get the call from our mortgage broker telling us that the appraisal had come in extremely low at $275,000. I won’t go into why it appraised so low, but it was fair and valued appropriately. Our realtor called and said things were not looking good and the seller wasn’t prepared for the appraisal to be that low. Even after much discussion, the seller said he would not take less than $300,000 for the property. Could we come up with the difference?
Before I go on… let me tell you a little bit about the Colorado housing market. Everyone thinks their piece of crap shack is worth $25k-$50k more than it is. It could be completely outdated and seller’s will still ask for your first born child to make the deal. There are also a lot of flippers going around right now and fixing up older homes. Unfortunately, those flippers, (like the seller we worked with) pay too much for the property and then try to sell it for more than the going market value of that neighborhood. This is fine if you have cash buyers willing to go underwater on a home, but it doesn’t work for people trying to use loans such as VA or FHA. They have no bargaining power. Do I sound bitter?
The best way I can think to describe it is… If you put a mansion in the middle of the ghetto, that mansion isn’t going to be worth as much as it would be if you put it in a neighborhood with other mansions.
So what happened? We lost the house.
In the end, we had to pull out of the deal because we obviously didn’t have the money to make up the difference that he wanted, and we wouldn’t have done it anyway because we didn’t want to be $25,000 underwater on a home. I mean, we’re ignorant as first-time homebuyers, but we’re not that dumb.
We are devastated, to say the least. We allowed ourselves to fall in love with the home and we lost it. There was literally nothing we could do. And because we were so far in the process, we are now out of time in searching for another home because our lease is up in less than a month. We already put in our notice, and if we decided to try for another home, we would have to find a place to store our stuff and find a place to stay in the meantime.
The truth is… in a market like this one, you simply cannot compete without cash. I also think you’d be a fool to place financial awareness on the back burner just because you love a home. Going underwater on a home is never a good idea. Think 2008.
The Risk of Doing Business
They call it the risk of doing business, but because we lost that house and decided to stop the loan process, etc., we also lost a lot of money. We weren’t willing to take that chance again on another home. A lot of first-time homebuyers don’t know this, but if your deal on a house falls through, you’re out the price of an inspection (anywhere from $300-$600) and the seller now knows everything that’s wrong with their house. You will also be out the price of an appraisal. A VA loan appraisal runs about $750 now. Sometimes your lender will eat the cost of the appraisal if you go for another home. We are not that case, as we are stopping our home-buying process and saying… NO MORE. Overall, we lost about $1500 on this little house-buying adventure. Still, we decided it was smarter to cut our losses and move on with our lives than worry about what we lost.
Where are we going to live?
Considering our dreams have been shredded and my hate for the great state of Colorado continues to grow, Mike and I will continue renting. We are not going to stay in our current apartment, as they’re still raising the rent $150/month and 55 miles from Mike’s job.
In the coming weeks, we’ll be looking for a condo/townhome/apartment to rent that is near a park for Mots. Maybe we can even find one with a garage. Overall, we would like to find something similarly priced and sized as our current place. We definitely need a second bedroom, and while one bathroom would work, we’d rather not compromise on that. Too many of our friends and family like visit to go without a second one.
I have no worries about finding a place to live. It just sucks that we have to lose out on all that deposit/fee money for another rental. That’s the bad thing about renting and moving around so much. It costs a lot of money, though I keep telling myself that it doesn’t cost $315,000.
Haha! So there you have it.
We’re done with home-buying for a while. I never liked Colorado all that much anyway. (That’s #truth) Has anything like this ever happened to you or someone you know? Are the feelings mutual? We’re completely jaded.