Season's Greetings all!
Today marks exactly three years to the day that we started our tiny house blogging adventure, and boy has so much happened along the way!
First, I apologize for the long absence. Many, many things have been going on in the background for us these past months, and I have been working 6-7 nights per week for the past couple months in anticipation of some rather exciting news I had hoped to share with everyone by now on several different fronts. Alas, none of those plans have come to fruition as of now for various and rather complex reasons, but the background work continues despite the repeated setbacks.
I am on shift 23 of a 31-night stretch that was supposed to produce the remaining funds necessary for a 10% down payment on a 20 acre parcel of land in Washington state that we had been under contract on since mid November. I found it in late October and started watching it closely, drooling over the fact that it already has septic, power, a 1br/1ba cabin, greenhouse, shop with power, 2-car and 1-car carports, gazebo, 2 sheds, and a mountain spring creek traversing the heavily treed parcel. We'd have a place to live in the tiny house immediately and plenty of room to eventually build a slightly larger permanent home, plus we could start homesteading immediately with all the existing infrastructure already in place. When the price dropped to a range I knew we could afford, I jumped on it immediately and was set to buy our forever property via an FHA loan since that was listed as an option for purchase. While there were many communications between us and the Realtors, lender, inspector, and appraisers from the time we submitted the contract on 11/21/16 (technically it was the 2nd contract) until we ultimately had to cancel it on 12/15/16, the final nail in the deal's coffin was that it was determined the property only qualified for a "cash out" purchase or some kind of land loan, which so far has been impossible to find in that area.
In a matter of just one month, we went through all of this (take notes... it may be useful to you if you're looking for land yourself):
- Approved for FHA financing with $8500 (3.5%) down and 3.875% APR on our dream property (the first contract 11/16/16) that we'd likely never leave since it had everything we were planning to add on to raw land already in place!
- Re-approved for a conventional mortgage and $12,600 (5%) down at 4.75% APR when the house didn't qualify for FHA (house too small compared to lot size; uses spring water vs. well or PUD, which is considered a "non-permanent" water source)
- Terms for the conventional mortgage changed to $24,600 down (10%, the 2nd contract on 11/21/16, and the reason I'm working so much right now) because we don't already live in the state/have jobs there and would be buying it as a "second home" despite not owning a first
- Paid $425 for an inspection on the cabin (that we would eventually salvage out anyway), which revealed it needs a new roof that the owners must fix before an appraiser would pass it
- Informed by our lender that seven different appraisers refused to even visit the property stating per their research the "Highest and Best Use" of the property is timberland and the little cabin was valued too low (about $40K) to make the property qualify as residential; we'd have to find a land loan
- Given 3 different land loan lenders to contact: 1 never responded, the 2nd only deals with completely raw land, and the 3rd initially accepted at 20% down ($47,800) and 7% interest until discovering they don't do business in the county of the property
- Again researched agricultural lenders and farm loans (also listed as an option for financing) despite having had no luck during my initial searches, and again found that only 50+ acres or those sold at $300K or more would qualify for ag loans (plus some require you to have a business plan in place for near-immediate profitability, of which we would not be able to meet for many years if at all)
- Asked for owner financing and a lower price since the property is only valued as "land" now, but they must have their own mortgage paid in full to move forward with the house they were under contract on as well. They offered to cover a partial amount of the total price $239,000 if we could get the other $200K covered on a land loan (the was still under the assumption the 3rd land lender would approve it as we hadn't yet been told they would not), and they would move the closing date back to 2/15/17 from 1/20/17 to give us more time to gather funds.
- 12/15/16 we canceled the contract due to inability to find land loan financing in the time frame they required, and 12/16/16 they dropped the price to $225,000 in hopes someone else will buy it quickly.
My head is still spinning from rehashing all that let alone experiencing it, and I'm frankly too tired from working so many days in a row to properly process it all. The biggest frustration of the whole matter is the fact that had the listing not said FHA as an option for purchase, I would have simply saved the listing to my favorites and watched it. The ONLY reason I jumped on it was because I knew we'd qualify for FHA (and conventional if need be) financing, and I thought it couldn't be more perfect to already have all the infrastructure in place. It was like one of those "plug-and-play" games that bypass the need for a console or computer; just plug in the A/V cables to your TV and you're ready to play Pac-Mac in no time! We'd have the required permanent septic or sewer connection the county required to make our tiny house legal to live in, and we'd add a well to meet the permanent water source requirement as soon as we got there. In the meantime, though, we'd have this little old 700sqft cabin as our legal residence while we modified the tiny house to meet any other requirements the county might ask for. Then once the THOW was approved, we'd deconstruct/salvage the cabin or maybe sell it off to a house flipper and be all set for 100% legal tiny house living. We'd be homesteading (fiber goats, honey bees, organic garden, chickens for eggs) in no time with a few modifications to the existing outbuildings, and then we'd have all the time in the world to save up enough to eventually build the larger permanent home deep in the forest below the creek.
It would be very, very easy to be completely woe-R-us over this whole ordeal, and I do feel I'm entitled to at least one small mental/emotional breakdown every time my hopes are dashed about a project of this scope, particularly when the failure had nothing to do with us not meeting XYZ requirements. At the end of the day, however, the experience did provide many lessons on real estate transactions across state lines and a sharper focus on what my job priorities will be once we do finally relocate. For example, we had also been under contract on a 2.2 acre parcel in Washington back in October that we ultimately canceled (and in many ways I wish I hadn't) once our kind, hard working (and still unpaid because the contracts keep falling through - bless you, Karl!) Realtor visited the parcel and sent us video of how not flat it actually was. The only areas we could put our tiny house happened to be easement "driveways" to the parcels on either side of it, which meant even the cash price of $10,000 was too much in our eyes. Add to that the fact it was really, truly raw land - no power, no water, no septic, no nothing other than dirt, trees, and rocks - and even that low price wasn't affordable when considering the added expense of making it suitable to park on let alone actually live on. Still, that would have been an easy-peasy purchase, and at the very least we'd have a place to camp until we found a permanent home.
The beauty of the 20 acre parcel, despite the fact it would lock us into another mortgage vs. being paid-in-full had we bought the little 2 acres, was that very little extra work would have to be done. That alone made it worth the purchase price and the "death pact" it would come with, but as the deal devolved it became gradually more complex and less affordable. Even with the five years of private mortgage insurance (PMI) that comes from FHA or Fanny/Freddie Mac backed loans (about $240/mo according to both our financing offers), the mortgage for the 20 acre property and all the included infrastructure was almost $500/mo less than we paid for our 3200sqft house on a 7500sqft lot in Texas ($2199 @ 6.5% in 2009, $1850 @ 4.25% when we refinanced in 2011). When it switched to a land loan, however, that interest rate of 7% would bring the payments dangerously close to $2000/mo despite not having PMI attached. When we owned our big house, we had two full-time incomes from two different people, and we felt house poor the whole time. I don't want to HAVE to work 2 full-time jobs to afford our dream property (since Brand is still in school for a couple more years and a full-time SAHD) and not be home to enjoy it. That's stupid! That's a huge part of why we built our tiny house in the first place - to reduce our overhead so we could pay off our existing debt completely - and the amount of work I'd have to do to come up with the $47,800 20% down payment in a short time is... well... not going to happen. lol I value my sanity, thank you very much!
So, now we are back to square one except with less debt (we spent the $10K we didn't use on the 2 acres on bills instead) and quite a bit more money saved in the bank. We have found another potential source of financing options, but we are looking at less costly land options that, while not being as perfect as the 20 acre property would have been for the long term, will suit our needs for the immediate at the very least. The plan is to keep paying off bills, save as much as we can in my high interest account, and keep looking for properties that have at least some infrastructure in place that we can either buy outright or work out owner financing. We had hoped to make our move to Washington a "one and done" deal where we buy what will be our permanent home site, but considering all that we have learned from the last month's attempts at doing just that, we are now open to interim possibilities as well. We are still trying very hard to avoid buying an existing house there as an alternative, but the idea of paying rent that is as much or more than a mortgage is equally displeasing. I have a few places in mind that would actually make excellent holiday rentals in the future (I've always wanted to own a B&B after all), so we're keeping an open mind.
In the meantime, we wish you all a joyous and fruitful new year. To steal and alter a line from the Brits circa WW2, Keep Calm and Tiny On!