
I think we started making the plans to move to Hawaii toward the tail end of 2015. We'd previously been talking seriously about leaving the Bay Area because of our growing distress with the decline of the area, but we weren't ready to semi-retire to Hawaii. So we were looking at other places to live prior to moving to Hawaii. Oregon, Colorado, Washington, Montreal, and London were all considered as possibilities.
(Understand what I mean by semi-retire: it means I keep doing about as much work as I have previously, but on my own projects, for less pay and no guarantees.)
And then we decided to just cut through that complexity. Yes, it would be wonderful to live somewhere cool for five or ten years. But planning to move twice sounded exhausting. We could just move straight out to Hawaii without the interim stop, and we could enjoy the beautiful climate and the closeness to family much earlier.
But, it was a five-year plan. I wanted to take some time to really mindfully enjoy our last days in the Bay Area, but I also wanted to get to the point where I felt like our finances were stable enough that even if I ran into problems with Skotos or Blockstream (who I was working for at the time), we'd probably still be OK.
That original five-year plan presumed that we would keep our Berkeley house and rent it out.
We were probably influenced by my dad and Mary's rentals out here in Hawaii (including, at the time, our house). But it just seemed the obvious thing to do.
I mean, everyone said that property was the best long-term investment. And I was pretty sure we could pay a property company to rent it, cover the costs, and have a little money left over: enough to cost the likely higher cost of living in Hawaii.
But over the next three or so years I began to question that.
I noted whenever we visited Hawaii how much effort my dad and Mary had to put into maintaining their properties. Our house was empty at least once or twice with them looking for tenants, and being a little worried about getting it filled. There was often work required at the houses.
And I fretted about the fact that our Berkeley house was in earthquake country, and that's something we'd have to continue to worry about ... and I always wondered if our little Blake street house could even be rebuilt following an earthquake given the fact it was on a postage size stamp of land.
My brother, Jason, gave me the last piece of the puzzle. He's an MBA working in finance, and he said, "Yeah, property, that only gives you like a 1% annual return."
And I crunched some numbers and realized he was right.
If we kept the house, we had continued anxiety and tension due to the state of Berkeley and the problems of renters, which were the exact sort of thing we were trying to avoid by the move, and we also had all of our money tied up in one inaccessible, potentially vulnerable bundle.
Whereas if we sold it we could take advantage of the interest our assets earned, rather than seeing that just keep building up. To be precise, we could use some of it to live on, which would give me the chance to do the writing and work (and, let's be honest, swimming and hiking) that I wanted to.
So I figured out what I thought the house would sell for based on the current market, ran some calculations, compared them to my assumptions about renting the place, and yes, it looked like it would make our lives easier to divest ourselves entirely of our Berkeley holdings.
So something like two years ago, we decided to sell.
Our realtor who helped us buy our house in 2000 was wonderful. Frankly, I never believed that we should have been able to afford our Berkeley house in a market that was running up due to the dot-com bubble.
But, we had out-of-the-area sellers who had no idea what they were doing. They put the price too high a year previous and no one would buy. Then they dropped the price by $100,000 in 2000. Kimberly found it before it was listed, our realtor got us in to see it before anyone else could, and we wrote an offer that they had to accept before any other offers came in.
I've been thinking about black swan events lately, and that was one. It was a black swan in the dot-com bubble, but a good one, because it got us a great house to live in for twenty years, right where we wanted to be at the time (and it ended up being a great investment too).
Oh, we still had to scrimp and save in the years thereafter. We never had a lot of money because Kimberly was on disability and I was offering my technical skills at a cut-rate because I believed in Skotos and in RPGnet. But as we refinanced, things gradually loosened a little bit and then after I published Designers & Dragons and started doing a bit of technical writing on the side, we suddenly had just a bit more money than the breakeven of the first decade or so of our marriage.
So after our realtor got us that black-swan house, we of course called her back 18 years later to sell it for us.
The three of us walked the house in August or September 2018 and she advised us what we'd need to do to give it the best chance to sell well.
Then we spent the next year getting that all done.
As 2019 advanced, I sometimes felt like we were the proverbial lobsters in the slowly heating pot, because we kept being asked to put out more and more money. Inheritances from Kimberly's dad and from my grandmother got us through it (and the other costs of the move). I'd carefully maintained and even slightly grown those principles for over a decade, and it finally paid off. I'd calculated that we'd spend about half of that money to get the house ready and us moved and our new house refurnished and in the end we spent most of it and had to put off some of the new furniture for our house (like a murphy bed for guests and a couch for the family room and most of our shelves) because money was getting tight ... and the sale was getting iffy.
At one point my dad and I talked about the money we were putting into the house, and he said, "Well, you can never know if that money was actually useful or not."
But by that time I was seeing a scarily large range in what different companies were predicting the house was worth, so I said, "We sorta can". I figured that if we were at the top of the range (or above!), it was more likely that it had been worth our time and effort, and if it was at the bottom (or below!), it was more likely that it was not.
(Fun story: Zillow was the one low-balling our house, and [spoiler] the day we closed they told us the house was worth almost a quarter less than what we'd sold it for almost two months earlier, so, yeah, I think we can feel like that time, money, and effort was worthwhile.)
When we moved in January 2020, there was still work to be done, but I'd carefully planned it all out. One day to clear junk, one day to clean, two and a half weeks to paint, another day to clean more deeply, a day for the windows, a day for the staging, and then the house to go on sale right around the end of January.
But to a large extent, that's when the day-to-day of managing the house work and I departed (because, of course, our ever-wonderful realtor took it over). I think everything got done on time, but the house didn't go onto the market for two weeks later.
I don't know why. I didn't push and I haven't asked. I always do my best to trust professionals to know their job better than I do. That's why I kept spending money when my realtor and my stager told me to. And I wasn't going to second-guess now.
But there were times when I feared that those two weeks had doomed us.
I should note, I'd already had some concerns if we had waited too long. The Berkeley house market went wobbly in 2019. That was the source of the declines we saw in Zillow values. And another fun story about Zillow: at that time they didn't actually admit that their valuation had dropped that much: they just quietly recalibrated their valuation engine.
When we talked to our realtor in late 2019 she agreed that the market had gone "soft" in the latter half of the year. She still showed us some good comps, but for each one we saw, I could pick out why I felt like that house was better than ours. (I mostly kept that to myself.)
But now, in mid-February 2020, our realtor was actually showing our house: nicely cleaned up, entirely repainted, beautifully staged. There were two open houses and any number of private showings and then a week to give everyone a chance to make offers.
And in that week before people made their offers, the stock market crashed due to fears over COVID-19.
For the first of a few times, our realtor talked me down, because I worried about whether the crash was going to affect our offers. I was worried whether we'd missed a great time to sell by just a week.
And, by the by, she was right. We were still going to do fine.
House sales in the Bay Area are ridiculous. You list your house for much less than it should sell for, then you get a lot of offers, your realtor indicates how many interested parties there are, and the potential buyers then overbid by an appropriate amount.
This has been going on for a long time. When we were looking for a house in 2000, houses were getting overbid by about $100,000, which was about 25% of the listing price. In fact, I'm pretty sure we got outbid by $100,000 on the first house we bid on in Berkeley that year. (And that's why it's amazing that when all was said and done we ended up paying about $25,000 less than the listing price for our Berkeley home, after a negotiation down due to the poor condition of the roof.) If anything, the comps that BL showed us indicated that things were worse now. We saw much more expensive houses getting bid up by that same 25% or 30%.
That bid up wasn't just a ton of money, but for us it was also the difference between having a fund to help get along in Hawaii and having enough money for me to really dedicate the time I wanted to my own projects without stress.
But there was stress in the whole listing & offer process, because we had to ask for a lot less than we expected to get, and then we had to hope the whole crazy system worked out like it was supposed to.
Our realtor called us the evening that our offers came in. I think there were eight. I'd been setting my benchmark as about ten for what we wanted to see in order to get the price I was still hoping for, despite the downturn in the market. One was embarrassingly low and three more generally seemed to show a lack of understanding of the Berkeley housing market, some in price, some in the way they arranged the splitting up of responsibilities for various items (like who pays various taxes and fees), and some in both.
But there were four good offers.
And one offer was at precisely, to the dollar, what I'd set as my hopeful goal two years previous when we first thought about selling the house!
Kismet!
Our second-place offer was a bit of a heartbreaker. We liked the attitudes of the buyers better (yes, because they wrote us a silly letter, even though I'd personally sworn I wouldn't care about silly letters), we liked the use of the house better (because it would be for their kids in college, as opposed to a rental), and we liked the escrow period better (because it was 25 days instead of 30).
If all things were equal, I think we would have taken it.
And it looked to me like all things should have been equal. Their loan preapproval was actually for the same amount as our winning bid. But they dropped it by $25,000 when they made the offer. (Since they did so by taking that amount out of the down payment, I actually wasn't sure their loan preapproval was valid any more as a result, because a loan usually requires a certain percentage down payment.)
As best I could figure, that second place bidder had been affected by the stock market crash, and had suddenly found themselves $25,000 short in their down payment. So, my guess is, they reduced the bid accordingly. Which means, by my reckoning, that COVID-19 cost them the house.
And I should say that our decision wasn't 100% mercenary. We did see one other advantage in the winning bid: the bidders had another rental just around the corner, and we felt that meant that they were more professional buyers, less likely to freak out if anything weird happened during the escrow period.
And though in the end having a 25-day escrow period instead of 30 *could* have made a world of difference, having calm, professional buyers *definitely* did.
So Kimberly and I went out to dinner to celebrate. Though it was February 28th, it was our first nice dinner since arriving on Kauai.
And as we ate dinner at The Dolphin, as I enjoyed my sushi and taught Kimberly how to eat lobster, we roughly calculated the escrow and figured it would end right around March 28th, and so we could celebrate again on our birthdays.
Ha.
We got home afterward and our realtor had a counter-offer ready to sign, which cleaned up some issues in the offer, and we were off to the races.
Our expected close date ended up being March 30th. This was another nice match for my pre-move plans, because I'd arranged our finances and my job plans assuming we'd sell the house by March 31st.
I was probably a little smug about my planning come out so neatly.
Ha.
It's never a good sign when your realtor says, "I've never seen this before in all my years of realty." We heard that around March 14th, when our realtor told us that the buyer's bank, the one with the pre-approved loan, had decided to place a condition: the sewer lateral work had to be done before the escrow closed.
Now sewer lateral work is a relatively new requirement for house sales in the Bay Area. It's one of those things where the local governments have decided they can use the large amounts of money being exchanged in a house sale to require compliance for something that benefits the community. In this case, they required the sewer lateral line that runs from your house to the main sewer line in the road to be inspected and if it has problems, to be repaired. I fundamentally have somewhat mixed feelings about the regressive nature of ever-increasing fees like this, because they make it harder and harder for people who aren't rich to buy houses. But fixing sewer lateral pipes to protect the Bay is a pretty good cause.
So that all means that the buyers were going to have to do this sewer lateral work anyway. The way the law is written, the buyers hand off a deposit to the city in order to close escrow, and then they get it back when the work is done, else the city does the work with a contractor of their choice.
There's no drama here, but for some reason the bank freaked out, and decided it had to be done before escrow.
What we hadn't even now realized was that there was one other advantage in the backup offer. Their preapproved loan was from Bank of America while our buyers' preapproved loan was from Roscoe & Cletus' Loans While You Wait (not its real name).
But it shouldn't have been a big deal.
Ha.
Oh, one other wrinkle: the day after we signed the addendum for that sewer lateral work, extending our escrow by four days to April 3, Berkeley and most of the greater Bay Area issued a shelter-in-place order.
Suddenly we weren't even sure if the sewer later work could be done, putting the whole sale in question.
Good job, Roscoe and Cletus.
Oh, one more wrinkle: our former neighbors did their best to engage in Tortious Interference. One of them threw a fit when our stager showed up to clear out her furniture from the house. Then, two of them threw fits and called the police when the plumbers showed up to do that sewer lateral work.
Then afterward one of them threw fits about the plumbers leaving some materials while they waited for the city to show up to do their inspection.
Besides the fact that our thankfully former neighbors clearly need to mind their own fucking business, they were bitching about a lot of stuff that was covered under the shelter in place order. Our stager was probably OK to recover her stuff because recovering inventory was allowed, and the order was eventually adjusted to account for moving services like this. And, the OK for plumbing work was entirely explicit.
Our neighbors were petrified, by the by that the movers and plumbers were working within 6 feet from each other, and so people were going to die. And then, when they tried to make them stop doing their entirely lawful work, they were surprised that they got (from what I understand) very rude feedback.
Now we'd found one neighbor in particular to be an annoying busybody the whole time we were in Berkeley, but this was a whole new level because if she'd managed to stop the work, then the bank would not have extended the loan, and our escrow was in grave danger. So, as I said: Tortious Interference.
The neighbor seemed to think we were friends or something when we lived in Berkeley, though that was never the case. I've been nice in online chats with her in the last year or two, because I felt sorry for her and didn't think responding to a few dozen messages every several months when she remembered we existed was a huge cost if it made her happy. But, screw her. She's getting blocked as soon as I'm sure she can't damage us anymore. (I think that's the case now.)
Speaking of damage: on my birthday, our realtor said, "I've only seen this happen once in my entire career as a real estate agent."
(Not good.)
Roscoe and Cletus decided to stop offering loans. None. They didn't honor their preapproval for our buyer. They didn't care we were a week from closing.
The only other time our realtor had seen it was a bank that immediately afterward went under.
My theory is that Roscoe and Cletus were a small-enough time operation that they could get away with investing money in the stock market ... and when the stock market tanked, they didn't have money to loan anymore.
Hopefully they did (or will) go out of business, because when a loan is pre-approved, we assume it's good, and when a lender doesn't keep to that promise, they're poisoning the whole system.
To a certain extent, whether our buyers could get a loan or not was innately their problem, not ours. But we obviously wanted to keep working with these buyers as long as they remained the best offer. And beyond that, as the COVID-19 situation deepened, I became increasingly concerned that we might not be able to sell our house at all in the current circumstances if the first bid fell through.
Fortunately, it was our realtor talking to the buyers (and their agent) so no one could see my concern. Because that's the type of concern that an unscrupulous buyer could have leveraged. (Not that we ever had the least indication that our buyers were anything but great, but it's the sort of thing I worried about, perhaps due to playing too many negotiation games at the tabletop where I couldn't let myself blink.)
Our buyers tried to get a loan with Wells Fargo as try #2. Wells Fargo told them that they were no longer extending loans for non-owner-occupied purchases (and as noted, our buyers were planning to rent).
At some point, I began to wonder, "Why in the world are our buyers so intent in staying in the deal?" I mean, obviously, that's what we wanted. But I couldn't see their reason to stay in when things were problematic.
I mean there was a bit of sunk-cost fallacy: they'd paid for an appraisal and they'd paid for a sewer lateral. But that was at best maybe $3,000. And it feels like the value of real estate had the potential to get wonky at a much higher level in the age of COVID-19. It sure felt like the Bay Area was ripe for a correction especially after the "softness" the previous year.
My step-mom thinks they might have seen it was a good time to take out a loan. She's expecting a high level of inflation in the near future because of all the money the government is ponying up. So that means that if they get a loan for a million dollars now, it could easily be valued at two-thirds or three-quarters of that in several years time.
I think they'll planning to rent the house out room by room. This was actually one of our problems with turning the house into a rental: the numbers don't work out for renting a whole house. You can rent a 500 or 600 square foot apartment for $3,000+ in Berkeley, but if you hop up to a house almost triple that size you're still at $4,000 or so. Which is great, until you compare it to the property tax and a mortgage. But if they rent out every room individually and the sun room and turn the dining room into a bedroom too (as was the case before we moved in, and apparently once in the '80s too, as someone told us he'd lived there when we talked to him on the street), you could probably get a lot more. We wouldn't, but the new owners could. Not that we've seen any actual indication, I just hypothesize about why things happen.
(Poor house!)
Maybe all of these are true, but the buyers certainly seemed determined.
The third attempt at a loan was through a lender directly associated with our realtor's company. So, seemed good, eh? Except they required a second appraisal, which was more money for the buyers and more time for us all. Fortunately, the appraisal came back "right", though we'd started to have concerns that an over-enthusiastic appraiser might try to forecast a drop in property values.
We were told that the appraisal was the last item that they needed to drop in the file, and we all thought then it would be closed, and a loan would be issued at that point.
So of course bank #3 came back and said that they couldn't approve the loan because they now had COVID-19 related list of what incomes could not be used to qualify for a loan. Which is damned ridiculous, because they're using an ill-considered list of occupations that might have their income affected in the next year to determine whether to issue a 20- or 30-year loan.
And that list was definitely bad. The buyer's now non-qualifying job was home tutoring. So it's non-essential and non-social distancing, right? Meaning they're not earning any money now? Nope. They'd already moved over to online tutoring through video chats.
Idiot bank.
Or perhaps I should say: cowardly bank. It was reminding me of our second refinance (I think), when the bank suddenly acted like they were discriminating against Kimberly for her disability by asking for proof of continued disability income in a way that they could never get for an actual job. And after a bit of arguing over that, they started raising more and more problems. Because (I would guess) something had spooked them and they were looking for an out.
And it looked like the same thing was going on here.
(And this level of cowardice really astounds me given how stupidly brave the banks were in 2008, which I'm pretty sure fell in between our refi problems and this sale problem.)
Our buyers wrote up a long response about how the bank was wrong not to use the tutoring income to qualify for the loan. But I had zero faith, and I think the buyers didn't have a lot of faith either. So they offered me an alternative for bank loan #4.
They wanted to go with a hard-money lender. They'd actually mentioned this as a backup possibility back when loan #1 failed, to keep us on the hook. And now, they were good for their word.
If you don't know what a hard money loan is, I didn't either back when it was first mentioned. So I asked our realtor and then afterward looked it up for myself too. It's apparently a loan made by an individual lender, who is trying to generate good interest from his own principle. He lends out as a high interest rate, and tends to get his money back pretty quickly, as borrowers replace it with a real loan when they can. Oh, and it tends to be backed up by other property. I explained it to Kimberly as our buyers going to a loan shark, but I think there's less leg-breaking involved.
The catch was that (1) this loan was more expensive, and so it was costing our buyers more, and so they asked for a reduction in the price; and (2) for whatever reason hard-money loans like the seller to pay all of the (quite expensive) transfer taxes, whereas usually they're split.
Overall, the buyer asked for a reduction somewhere in the area of $30,000 dollars.
Fundamentally, we would have taken this. I told our realtor that. Because the market was growing so fraught (and our finances were growing sufficiently tight that I might have to dip into IRAs within a few months, which of course creates penalties).
But I really wanted to ensure that there was no chance I'd feel taken advantage of. And, I had a silly little threshold I was looking at: this request took our buyer's offer beneath the value of our backup buyer's offer. So I offered a compromise. We gave them half of the rebate they asked for and paid the transfer. So we gave back more like $20,000. I also suggested to our realtor that she mentioned we were making this counter to ensure their offer remained above our backup offer. The implication being that we would have jumped to the backup offer otherwise, which I certainly wasn't going to. Since I've always found negotiation games exhausting, I was thrilled that it was our realtor, not us, who took this counter back to our buyers.
(And it feels pretty weird talking about negotiating for those amounts of money, like it should be a game.)
My realtor was back very quickly saying they agreed.
We were off to the races.
Again.
My realtor told me a few days later that she thought we'd made a good decision telling the buyers to go with the hard-money loan rather than waiting for bank #3 to kick us in the teeth again. OK, maybe she didn't put it quite like that. In any case, like us, she had doubts that the bank was going to extend a loan under any conditions.
And she told me something I hadn't known: that the buyers were afraid that the hard-money lender was going to invest his money somewhere else, and thus disappear.
From there, things were almost anti-climatic. We got almost daily updates, rather than the week or so between events when working with a bank. I think they had the loan fully secured with a week. It was funded last Thursday, then the title was recorded on Friday. The day's delay was due to the fact that Alameda County is only recording in the morning. Apparently it's harder to get COVID-19 in the morning. (As far as I know, it's not.)
We no longer own a house in Berkeley.
It took a little longer to get our money.
The house closed on Friday, so we expected maybe the payment to clear on Saturday, but at the latest on Monday.
It turned out on Monday they were still waiting for the escrow to disburse.
And when it finally did, we had problems with my bank's checking account, as the info printed on the check apparently isn't where you wire too. The escrow agent tried, and it bounced, which was a little unnerving. I talked to the bank and got different routing information.
The payment finally came through this morning.
And that's the long story of selling our house, with some details I didn't want to write while it was still in process.
And the moral?
1.) All the best laid plans don't necessarily mean a lot. We worked hard to prepare for this sale, starting over a year and a half in advance. We carefully managed repairs and upgrades. We meticulously scheduled all the work both and after our departure from the Bay Area. And it all ran smack-dab into COVID-19 — as much of a black swan event as our purchase of the house in the first place.
2.) We got really lucky. We could easily have had the sale fall through and our backup buyer fall through. We might have been unable to sell the house for months, and then we could have gotten substantially less money if the market did correct. I really feel like we missed a life-changing catastrophe by that much — the difference between me being totally comfortable doing the work I want to ... and slowly looting our IRAs as we ran out of money.
3.) A tenacious realtor can make all the difference in the world. I know we wouldn't have been able to buy that house if our realtor hadn't pushed hard on the acceptance of our offer just more than 20 years ago, and I think it's entirely possible we would have lost this sale if she wasn't constantly managing it. We owe our success in life to many of the same factors as other "self-made" people: the luck of genetics, the generosity of our parents, and the toss of the dice. We also owe it to a really great realtor: Barbara Levy.
One more moral:
4.) Don't sell your house during a pandemic.