But they can be awfully cute!

With the foundation set, it’s time to bring the education players on the stage. Here’s a few lessons to share.

(These lessons apply to majority of people and homeowners in the U.S. today. If you’re lucky enough to be part of a grandfathered property and you, your ancestors and your posterity never have and never will move, pat yourself on the back and don’t bother reading the rest of this. Also, if you can buy a house outright with your own cash, you also qualify for an exemption. If you’re not part of this crowd, you probably should read this.)

Lesson #1) ‘Owning’ a home is a misnomer.
To own something signals to our minds a completeness, a finality if you will. You pay for something and then it’s yours to keep and control. To slap this description on a process that typically spans three decades is where the misnomer comes it. Until you’ve made that final payment you don’t own your home, you’re renting it. The owner is who you borrowed the money from to sign a contract allowing you to move in and become responsible for the property. Oh, and you’re also paying them for the privilege of using their money in addition to your rent. However, when it comes to maintenance and all other related costs, rest assured your ownership is immediate and complete. So what you really ‘own’ for 30 years (or until you’ve paid off your loan) is an expensive rental.

Lesson #2) The lender has one goal.
The lender’s reason for existence in this business realm is simple, they are there to make money. There are several ways for them to do this and they have several backups to protect their investment, some of which include:

• Mortgage Insurance: This can be collected in the event you are unable/willing to make your payments.
• Property Value: They can resell the property for it’s value price should you not fulfill your contract.
• Government Aid: This only applies to the current housing mess, but lenders are receiving bailout money for homes in foreclosure in an effort to keep them from going bankrupt.

When you hit the grand scale of lenders that are so common in the U.S. today, there is no such thing as people and common sense. It’s all business and numbers. Programs put in place to help the people don’t work because of this truth and this single objective. Banks have every reason to foreclose on homeowners, not help them. The point of this lesson is knowing the lender is not there to help you once the contract to secure the home is signed. In fact, after that point you’re on opposing sides of the game.

Lesson #3) The home as an investment is a misnomer.
While this is the number one selling point, it is untrue for the average homeowner. The reason this sell works is because generally we are slow and lazy with no desire to do the math. By definition, an investment provides a return or pay out equal to or greater than the amount spent. Some will argue that this is where your home equity comes in as you can leverage it to borrow still more money. That’s a hollow argument to me as borrowing money isn’t the same as earning it therefore your gain isn’t on the investment or net worth side, it’s simply an expense category item used to satisfy a need or want leaving you with still more debt. The greatest irony of this is the pattern of upgrading we so readily buy into. We believe that to be happy and successful we have to keep getting more which potentially leads us to a bigger house. We fail to recognize that more equals more - more commitment, more expense, more everything. So, to qualify as an investment your home has to provide you payout for ALL the money you put into it with an additional profit above that. And here is where we fail because we don’t do the math. If you’re fortunate enough to sell a home and reap the equity, you may feel like your home was an investment. The problem is you never factor in the rest of the equation which is balancing your gain against your expenses, you simply see money that didn’t exist before. That’s a wonderful thing, also something you never consider balancing with it’s opposite which happens when a home’s value suddenly drops through the floor and you can’t sell it even if you wanted or had to. In fact, it took this experience for me to really think on balancing the equation and here’s what I discovered for myself:

$432K (30/yr, 6% on $200k -$528k if 8%)
+$60k (General guidelines say 1% of a home’s value is a good yearly estimate for routine maintenance)
+$50k (30 years of repairs and major things outside routine maintenance - I know this is low but we’re just getting a framework)
+$50k (30 years improvements - again, low but it’s just a framework)

=$592k - or an even $600k for easy math. So this is the minimum you need to receive for your home to hit the break even point - not make money. Big fail for investment math.

Now if we flip this (and I’m not a mathematician and I don’t play one on TV so this isn’t accurate, just info to get you thinking) by saving that same money you were going to spend on the home (I’m not talking the necessary payment amount here, just that excess for maintenance and such) you’d not only do a great deal to increase your net worth you’d potentially earn enough money to buy a home outright in less time than it would take you to pay for one on the “regular” plan. Especially if you invested it wisely in some compounding interest money market account. Food for thought.

Lesson #4) When things go wrong, they go terribly wrong.
The saddest lesson in home ownership has come in recent years with the mortgage industry crash. The reality is, your home isn’t worth what you paid or even what the economy says it’s worth at the time, it’s only worth what someone is willing to pay for it. And the extension of this is it’s only worth what your lender is willing to accept. To further complicate things, a big mess, like the mortgage industry created with inflated values it couldn’t support, can result in a wave of consequential changes from new programs, to new legislation. The impact is far reaching and will be felt for years to come. The things you know and understand today may not be the same tomorrow. This is also the point at which I learned how the bank is actually on an opposing side from you. See, if they chose not to accept an offer when your home is upside down, you lose and there’s nothing you can do about it. And remember all those ways listed above for a lender to make money? They all work against the buyer. The bank will make more money by refusing or messing up a short sale offer and pushing the home into foreclosure than to help the buyer resolve the debt. Oh, and conditions of need over want in regards to moving - say for a new job, they have no influence. This is all about money and you’re on the short end of the stick. The worst part of all this is learning the hard way about the instability of what you thought was sound. It’s a rude wake up call to realize that circumstances completely beyond your control can change everything and leave you helpless. In fact, it’s a rotten feeling indeed.

Yes, it’s been a wicked learning curve. While we’ve successfully navigated away from the drowning Titanic, we’re still watching helplessly on the sidelines and feeling the waves of the aftermath. But we’re fortunate, we’re fine. Our credit will be marred by circumstances beyond our control, but we don’t need it to live and enjoy life as we’ve known it. We’ve been blessed to have a great job with a terrific raise, a comfortable and nice home we’re renting, money to meet our needs/wants and the knowledge that we did everything we could regarding our home in Arizona. Most people who have lost or are losing their homes today aren’t anywhere near as fortunate. I feel for them. We’re all wiser for our experience, but it doesn’t ease the pains of weathering the storm.

There seems to be more broken about our system than works. Did you know you can’t start a short sale process until you are behind on your payments? For us that meant we had to deliberately not make a couple months of payments to qualify for the only way we could sell our home. Some suggested renting in hopes the value would increase to the point we could sell it. Unfortunately we could never rent it for anywhere near the monthly mortgage payment and a partial payment is looked on the same way as no payment. Further, the recovery time looks to be about 12 years. Two mortgage payments are out of the question, especially when one was already our limit and we moved to one of the most expensive areas in the country. So with no option, we hired a real estate agent to list the home, agreed to maintain our utilities to the property and skipped a couple months of payments. We were encouraged when the bank approved our status for the government short sale program and although that was a bugger of paperwork and red tape, the offer was submitted to the bank. All was looking great until the bank decided they wanted more money and countered asking both seller and buyer for more. That did two things, first it caused the buyer to withdraw their offer and second the added paperwork and process delayed the process. To our disappointment, the next thing we learned was that our approval had been disapproved because of timelines not met - not met because the bank delayed the process. The ray of light was that we had a second offer ready to submit and while it would be a pain to restart the application and approval process for the short sale program it could be done. Well, it was supposed to be an option until we received foreclosure notices in the mail yesterday. Now we’re told that because the process is too far into foreclosure short sale is no longer an option. Apparently, while the left hand of the bank was processing our short sale program, its right was simultaneously pursuing foreclosure procedures. I am so saddened for our good neighbors too. Our home had the potential to be inhabited with new owners and continued home care. Now I fear it will fall into a state of ugly abandonment and for absolutely no reason. While we’ve always known we’re at the complete mercy of the bank and system, it is still utterly disappointing to see it work against us.

So let’s recap. A program is devised to alleviate insurmountable challenges with relocations. Approval is granted and two offers are obtained. The first isn’t accepted and the second isn’t considered. Bank forces both credit damage and foreclosure as a result. Epic fail - definitely broken. Is there any wonder that our legal system is now littered with lawsuits over messes like this?

The fine print is something I’ll not miss again. I may never own a home again - by choice. If I do, it will be when it can truly be an investment because it’s paid for from the start. But through all this, I feel we have been truly blessed. The weight of the ball and chain are gone. The mess isn’t cleaned up yet and I have no idea how long it will take with the bank running the show, but it will eventually be cleaned up. A whole new world is open to us with these cables of home ownership keeping us anchored. Maybe we’ll end up in Spain for employment yet. Regardless of where we go in the future, the knowledge that we can, and the freedom and ability to reallocate our income to our advantage are liberating and wonderful. Life is good.

Chalk it up to lessons learned. One very, big lesson to be exact: home ownership and what it really is and isn’t. Now, to be fair, this isn’t a news flash lesson but it is definitely a course correction and eye opening learning curve. Think of it as an expanded view. I literally feel like I just climbed on top of the barn and got a whole new perspective. This is good, this is a sign of growth and if I can keep it in my memory a sign of potential wisdom.

To understand where I’m coming from I must back up the train about 18 1/2 years ago, for this is where the seeds for independent living and home ownership began. The time is spring of 1992 and I’m engaged. Blake and I are talking about our new life we’ll be starting together in May, we’re making plans, dreaming, plotting our future course and such. One of the topics on the burner is where we’ll live. While apartments are the most common and expected avenue, we start thinking that if we could get into a little duplex we’d have something to show for the 4 or so years of expected rent. Problem: we have no money for a downpayment and we’re going to be living in a new and unfamiliar place. Extension of the problem, we can’t convince Blake’s dad, our only source for a solution to the problem and super smart accountant, that this is a wise investment. He counters that we don’t know where we’re going to be after graduation which is only a few years out and thus staying flexible with renting makes more sense. Hindsight shows this would have been very wise indeed, however all is not lost as through this exercise Blake’s younger brother received the fruits of planting these seeds a few years later. You’re welcome, Ryan. ~wink~ But I digress. The point of this share is that even before I was married I had a belief in the value of owning a residence; an accepted social truth that it would be an investment instead of flushing money down a toilet never to be seen again.

Blake and I spent the next 5 years spending every possible downpayment dollar on taxes. We were DINKS (dual income no kids) and we had no deductibles. It was most disheartening and we grew accustomed to the reality that we were locked into renting. In our 5th year of marriage we moved back to Idaho where Blake had taking a job for a start up company. This was a turning point as after 6 months, Blake’s dad asked us why we weren’t settling down with a home, which would be a wise move. We explained the lack of downpayment and this time he offered to help which made it possible for us to purchase our first home. ~Thanks Dad!~ It wasn’t anything fancy, only 1,000 sq. feet and $65k, but it was ours and it felt wonderful. We spent the next six years making it ours, creating a yard and increasing it’s value. When we moved in 2002, we felt it payed off as we were able to sell it for about $87k. The point of sharing this is the reality that our fist expectation of ‘making money’ or receiving a return on our investment was achieved.

2002 was an ugly year for us. Our business had gone under, I’d suffered a medical disaster that stretched over 3 long months building a mountain of medical bills and there was no work for Blake in the small Idaho town. Suffice it to say it was a miracle we were able to purchase anything when we moved back to Arizona. We found an affordable townhome for about $120k. It took us 5 years to dig out of the hole we’d dug with our financial disasters, but toward the end of year 4 our home provided us some additional help with a home equity loan that helped us clear our consumer debt. In 2006 we were blessed with a nice salary increase for Blake. This coupled with our cleared consumer debt gave us a new lease on life. We decided it was time to really “settle” and bought our first dream home. I describe it this way because the first two homes we bought were choices made by lack of options more than anything. This time we went looking for something we wanted and we found it. A great home, nice sized yard, pool in the backyard, everything we thought we wanted to live the good life and be super happy for the rest of our lives. We had added confidence as the townhome we’d bought 5 years before had nearly doubled which fueled our ability to purchase our dream home for $374k. The point of this share is multi-faceted; 1) we gained experience with the process of buying and selling, 2) we were able to use home equity to help us make progress on financial goals, 3) we capitalized on selling high returning more profits, 4) we followed the typical ‘American Dream’ pattern of upgrading.

So far so good right? I thought so too. However, my lesson was just beginning.

In fairness, things were really good for about the next three years. When the dust settled, our monthly house payment was about $500 more a month than promised when we purchased the home but it didn’t kill us. However, when Blake took a job he really wanted that let him work from home we sacrificed some monthly income and in the 4th year we’d have some bigger home maintenance and growing kid financial needs. We didn’t actually see the results for about a year, when we started noticing the consumer debt had crept back up to compensate. Naturally, this would be about the time the nation would experience financial distress and our area was hit with the demise of bank mortgage disaster. The long and short is that the value of our home fell to half what we paid for it. For the first while this was disappointing to be sure but it wasn’t a show stopper. We had no intention of moving so we figured we’d weather the storm and eventually the value would come back up to what we’d paid for it - by all practical and realistic projections about 7-12 years. I was blessed with a work opportunity about this time that would allow us to tackle the consumer debt and with some diligence we’d be back on top of things soon. If you’ve read many stories, you know this is the point where the curve ball comes. And sure enough it did, Blake got recruited for an amazing job opportunity in a different state. The point of this share is unforeseeable consequences can come from circumstances and factors beyond your control and vision.

So let’s recap the history:

• I believe in the theory that home ownership is a wise investment and will provide a return for monthly money spent on housing.
• I experience this ‘return on investment’.
• I gain experience with the process of buying and selling, am able to see the value of home equity, made a high return on our home sale and followed the upgrading pattern.
• Unforeseeable and uncontrollable events generate substantial consequences on the home buying decision.

I’d keep writing, but I’m exhausted so I’ll break this post out into two parts. I’ll tackle the wealth of knowledge gained and my personal thoughts as a result in Part 2.

It’s long overdue, but I’m finally posting details about our new home in the bay area. Blake came to the bay the first week of October for an introduction to his new job and to find us a new home to move to. This was a daunting task as we only had rental images and information we could find listed online to start with. The number of times he called with a report that a place was really unappealing, super de duper small or not in an area we’d want to live in was by far the norm and disheartening. Further, time was short. However, his first visit to the Admiralty in Foster City resulted in an immediate feeling that he thought he’d found the place. Turns out he did, and the 3 bedroom, 2.5 bath, two-story condo was secured. The kids and I moved here sight unseen, which Blake will tell you had him plenty nervous (and I must add that after driving around he did very well indeed!) I have many thoughts to share on the psychology transition and shift that made this possible, but that’s a post for another day.

I’ll start with Foster City. For reference, we’re about half way between San Francisco and San Jose. The long bridge we’re closest to is the San Mateo bridge and it costs $5 to cross! We learned quickly you don’t want to miss your exit.

For time reference, the San Francisco airport is about 15 minutes away. A drive to either San Jose or San Fran would take roughly 30 minutes by car.

The city sits separate from most of the surrounding area. This makes for a very small town feel and slow pace in our neck of the woods that I’ve really enjoyed. Several of the homes here are arranged on water fronts and the entire little city is connected by bridges to the surrounding area. There are just under 30,000 people, 3 elementary schools and one middle school and the culture is incredibly diverse with people from all walks of life living here. The community is packed with events, classes and activities for families. The city is beautiful.

We live in a central location (the blue ‘Adm’ marks our location on the map below.) The Admiralty was one of the first residential buildings completed on the island in the 60s by reknown architect Edward Durrell Stone, who also designed Radio City Music Hall and the Kennedy Center. (I had to add that tidbit because it just sounds cool)

Ironically, we live in the corner unit of the photo above. The willow tree is right off the end of our balcony. The complex is currently undergoing a major facelift so it now looks like this, which isn’t so fun to look out on. However, it’s going to look really nice when it’s done which we hope is only another 6-8 weeks away.

All the two story condos are on the top two floors. From the photo above you can see what the size of ours looks like from the outside. The two sliding glass doors are on the main floor, one off the dining room and one off the family room and the two windows above are to our and Taylor’s bedrooms.

My only complaint about the new place is the lack of storage. The two inside closets you meet upon entering the unit have both been converted to house a washer and dryer. This is great for laundry, but stinky for storage. When you walk in the front door you look right at two doors, the one to the left is the half bath the other the washer with the family room to the left and the living/dining room to the right. The washer closet is right beside the main entry door, which you can’t quite see in the picture. Oh, also note the coat hooks I put up by the entry - that’s in place of a missing closet for storage, but it works!

The kitchen and office provided some real challenges. The kitchen has cabinets but no pantry, so I had to get really creative. There is no office so I found a corner unit for my computer and a bookshelf to organize all the office papers (why do we alway have so much paper crap?!)

The family room is very small compared to our old home, especially housing the kitchen dining set, so for now the kids are using bean bags for chairs in that room. I’m hoping to make a couple of recliner chairs fit. On the upside I can see the TV perfectly from my favorite computer corner.

Note the conversion of the shelves into a “pantry” by the TV.

While Taylor says we live in a hotel, I think it’s starting to feel rather homey. We’ve even found places for most of the Christmas decor.

And most importantly, we all have our own bedrooms and separate bathrooms! Yes, Blake choose well, and Christmas has found us here just as it has in every other place we’ve lived.

And there you have it, our new life at the Admiralty.

I thought it might be fun to make a Christmas cake today. I did a vanilla cake with strawberry filling. You can never go wrong with Holly. ~wink~ I tried something new and for the first time on this one, I used a small paint brush to stroke in the frosting on the leaves for a tole paint look. It was kind of fun!