Closing

That was much harder than we had anticipated.

Finally, on November 9th, we signed all the papers to close on LJH. In fact, it was such a relief to get through the actual signature process we forgot to get the keys from our realtor. It turns out that doing what we are doing is somewhat complicated, especially if you would like to borrow money to do it.

The problems started with the damage caused by the June derecho storm. We struck a deal with the sellers to minimally remedy the issues with the house, namely sealing it to weather and wildlife, because we anticipated mostly undoing what a "full remedation" would have entailed. The contract modification for that was not well understood, and we ended up in a situation where both sides thought they were waiting on the other to get through remediation.

After a good 2 months had passed, the communication issue was finally recognized, and the sellers proceeded quickly to doing what we all agreed needed to be done to get through our walk-away contingencies. By then we had approached the closing date, which fortunately had been scheduled 3 months after we ratified the contract.

All of the other challenges we faced stemmed from our desire to stay in our townhouse until construction was complete. That pushed us down the road of construction financing, and the myriad issues that came from that process. We wound up working through three "closings" on financing-related issues, but the most complicated was the construction loan.

We had two main challenges to overcome. First, we had to have a very detailed scope for the project, including a monthly draw schedule for our builder. That schedule depended on our final design, how much we were putting down toward closing and the schedule for the actual work. The bank of course needed to review all of this, and the deadlines came up much faster than we had anticipated. This issue alone caused one postponement of closing for a week.

Second, every financing requires insurance on the underlying property, of course. However, in our case we weren't just insuring an existing property, we needed insurance on a property AND a project. This type of insurance is called "Builder's Risk", and it is not straightforward. For anyone ever going down this path: do not call your mass market insurers who run the neat TV ads. They are not set up to write this kind of insurance. After 6-8 phone calls over 4 weeks to 3 brand name companies, we were unable to even obtain a QUOTE for an actual policy. Find yourself an old-fashioned, independent insurance agent who is competent to handle this type of coverage.

I started shopping for a policy 4 weeks before closing, assuming this was plenty of time. When I finally got someone qualified on the phone, I was told it typically took 3-5 days to produce a quote. Given that I had 5 days until closing at that time, and that the bank wanted to review the actual policy first, that created another delay.

Weather Event #2

In the meantime, we had rescheduled our closing for October 29th. If that date sounds familiar, it is because that was the date for the landfall of Hurricane Sandy. The first brand name company we were dealing with told us on October 28th they wouldn't write a policy on anything, period, let alone a renovation project. Since we were about to reschedule our closing to November 9th, that didn't matter too much. On the other hand, every insurance company was in the middle of taking massive losses from the storm.

As a result, the price quotes we got back from the 2-3 companies who would actually write the policy were jaw-dropping, like 5-6x at least what a standard hazard insurance policy would cost. Not left with too many options, we wrote a check for it and moved on. More expenses that don't do a thing for the final product. We were tempted to sign "Walter Fielding" to the check, and we didn't own the house yet!