becoming a homeowner http://www.wisebread.com/taxonomy/term/5984/all en-US The Process for Purchasing a House With Cash http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-process-for-purchasing-a-house-with-cash" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/front_porch.jpg" alt="Woman and kids on front porch" title="Woman and kids on front porch" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Several years ago I wrote an article about <a href="http://www.wisebread.com/the-pros-and-cons-of-paying-cash-for-a-house">the pros and cons of paying cash for a house.</a> Some readers asked me how this can be done and what the procedures are. Last year my husband and I actually did purchase a property with cash, and here is our experience. (See also: <a href="http://www.wisebread.com/going-green-how-to-live-a-nearly-cash-only-life">How to Live a (Nearly) Cash-Only Life</a>)</p> <p>The property we bought was listed on the public multiple listing service. It was bank owned, so I called the listing agent and asked for an appointment. The listing agent immediately told us that the bank could only accept cash offers at this point because the property already has another cash offer on it. After seeing it and finding that it was in great condition, I made a pretty fair offer that was about 95% of the listing price. I also had to submit evidence of my funds along with my offer. The bank gladly accepted, and I sent in an earnest deposit check for $5,000. This check was then put into escrow towards the purchase of the house.</p> <p>Next, we hired an inspector to look at the property to see if there are any defects. Unfortunately, the air conditioning system was broken, but the bank refused to pay for it, and we agreed to fix it out of pocket. The bank did agree to pay for title insurance, half of the escrow fee, and clear all liens from the property. So I made sure that all the unpaid bills and taxes on the property were paid before closing.</p> <p>Meanwhile, I was gathering my funds all into one account so that I could send it into escrow before closing. We were able to choose our closing date to be the end of June, since we didn't have to deal with a loan. This was advantageous to us, since the bank had to pay all the property taxes for the first half year. I asked for the HUD closing statement about three days before closing and made sure that everything looked correct.</p> <p>On the day before closing, I made sure all the funds were in my account and then sent the money to escrow. Everything went fairly smoothly, and the whole process took about three weeks from looking at the property to getting the keys. The closing costs were less than 1% of the price of the property because we didn't have to deal with a loan.</p> <p>We were able to fix the air conditioner for a very fair price, and we rented the property out after several weeks of open houses. Now that we've owned the property for more than six months, we are actually eligible to take money out via a cash out refinance, but we don't need the money right now. The point is that if we didn't make a cash offer, then we would not have been able to procure this property at all. Basically, the process to buying a house with a cash on the open market is pretty much the same as <a href="http://www.wisebread.com/buying-first-home/home-loans">buying a house with a loan</a>, but you have more flexibility on the closing date, and that is a competitive advantage over offers with a loan contingency. You don't have to sign as many papers, but you still have to do your due diligence and make sure that you have a bit of cash buffer left over after the purchase for possible repairs and improvements. &nbsp;</p> <p><em>What do you think? Are you thinking of buying a house with cash?</em></p> <a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash" class="sharethis-link" title="The Process for Purchasing a House With Cash " rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Real Estate and Housing becoming a homeowner buying a house paying cash Mon, 30 Jan 2012 10:48:22 +0000 Xin Lu 879768 at http://www.wisebread.com Our Worst Financial Mistakes and What You Can Learn From Them http://www.wisebread.com/our-worst-financial-mistakes-and-what-you-can-learn-from-them <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/our-worst-financial-mistakes-and-what-you-can-learn-from-them" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/145220445_c9eb496967_z.jpg" alt="worried man" title="worried man" class="imagecache imagecache-250w" width="250" height="195" /></a> </div> </div> </div> <p><strong>&quot;Learn from the mistakes of others, because you can&rsquo;t live long enough to make them all yourself.&quot; (Anonymous)</strong></p> <p>I&rsquo;ve asked my fellow bloggers here at Wise Bread to tell you about their worst financial mistakes (and have included mine). Hopefully, wherever you may be in your living-large journey, you can learn from us. After you've read our story, we want to hear yours! Tell us your worst financial mistake in the comments and be entered into a random drawing for a $25 Amazon Gift Certificate! (See also: <a href="http://www.wisebread.com/common-money-saving-mistakes-that-can-cost-big-bucks">Common Money-Saving Mistakes That Can Cost Big Bucks</a>)</p> <p><em><strong>UPDATE: Congratulations to Charile, our winner for the $25 Amazon Gift Certificate drawing. Thank you to everyone for participating!</strong></em></p> <p><strong><a href="/andrea-dickson" title="http://www.wisebread.com/andrea-dickson"><font color="#800080">Andrea Dickson</font></a></strong></p> <p><img src="http://static2.killeraces.com/files/fruganomics/pictures/picture-14.jpg" align="right" alt="" />My biggest financial mistake was running up a huge credit card debt. The thing is, I did it three separate times.</p> <p>I'm terrible with credit. I've known this for a long, long time. In fact, I knew before I got my first credit card that I simply could not be trusted with a credit card. That didn't stop me from getting one, though.</p> <p>The first time I ran up several thousands of dollars in debt, my mom bailed me out, and then made me get a summer job to pay her back (I was a freshman in college). I worked the graveyard shift as a security guard for the summer &mdash; I'm not a night person. The worst part was that my mom had signed me up for the card herself, and her name was also on the card. She believed that the card would only be used for emergencies, but she soon learned that to me, &quot;shoes&quot; are an emergency, as is Starbucks.</p> <p>The second time, I was 23 years old, and a boyfriend actually signed me up for a bunch of cards, using his own name to co-sign. I fought the idea, but he convinced me that he could hang onto the cards and that his good credit would build mine back up to acceptable levels. I managed to spend 5K so quickly that I'm sure his head was spinning. Incredibly, I managed to pay this off myself by simply digging in my heels and not spending any more money. I cut up the cards, ate ramen, and sent in a couple thousand every month. Mind you, I didn't have any significant payments that I had to make outside of rent at the time, so it was easy for me. I was leaving for China, so I wanted a clean slate for the trip. My then-boyfriend expressed regret at having convinced me to sign up for the card to begin with, since using my checking account had worked just fine for me up until I got the cards.</p> <p>When I returned from abroad and found myself unemployed, I turned to those same credit cards (new ones had arrived in the mail). I treated the credit cards like debit cards, thinking that I would surely find a job within a few weeks and easily pay off the debt. When weeks stretched into months, and then into a year, I realized that I could not afford to pay off the debt. Over the course of 10 months, I rang up over 10K in <a href="http://www.wisebread.com/how-much-does-your-credit-card-debt-cost-you" title="How Much Does Your Credit Card Debt Cost You?">credit card debt</a>. I made all the payments, never delinquent, but when I realized how long it was going to take to pay down all that debt, I called a consolidation organization. They combined all of my debt into one big debt pool, lowered my interest payments, and charged me an ungodly monthly fee that was buried somewhere in the legal agreement that I signed with them.</p> <p>I've long since realized that if I have access to money, even if it's borrowed money, I will spend it. That's why I've set up a system in which I can only spend what I have in my checking account, and money is taken directly from my paychecks and deposited into other accounts (for savings, mortgage, etc.).</p> <p>It's sad, I suppose, that an adult can't trust herself to behave, well, like an adult, but that just happens to be the case for me. I've since sworn off credit cards, and in a way, feel liberated from their grip. I realize that all of my problems with credit stem from my own weaknesses and irresponsibility, so I don't blame the credit card companies because I rang up a huge debt. Don't get me wrong - credit card companies behave terribly. But there was no Earthly reason for me to behave as if I had more money than I did. I hurt no one but myself.</p> <p><em>Lesson Learned: Credit cards can be dangerous; stick with the system that works for you.</em></p> <p><strong><a href="/lynn-truong" title="http://www.wisebread.com/lynn-truong"><font color="#800080">Lynn Truong</font></a></strong></p> <p><img src="/files/fruganomics/pictures/picture-11.jpg" alt="Lynn" title="Lynn" width="85" height="85" align="right" />Signing up for beauty school.</p> <p>It had been a year since I quit my full-time job to &quot;figure out what I wanted to do&quot; in life. I had been fooling around with gigs like background acting, and transcribing, and had run out of unemployment checks. My mom and friends were throwing pointed questions in my direction and I was feeling extremely lame for being unemployed. (See also: <a href="http://www.wisebread.com/feeling-stuck-100-ways-to-change-your-life">Feeling Stuck? 100 Ways to Change Your Life</a>)</p> <p>I'm also rather impulsive. I know this about myself, and so I've learned to mostly be able to distinguish the difference between things I know I'll get over in a few days if I ignore it and things I know I absolutely have to satisfy the drive for. Except in this case.</p> <p>After getting an amazing facial one day, I suddenly decide that I want to be an esthetician. I think I would love to make people's skin beautiful. I don't think my anti-socialness would get in the way at all.</p> <p>I do a quick search for beauty schools and find two good options. One is Citrus College &mdash; $1500 for a 600-hour course. I call for information. They tell me they're pretty full and it's hard to get in. I may have to wait a semester. The other is the Cao Institute &mdash; $6500 and their next class starts in 2 weeks.</p> <p>I check the Cao out and everyone there is friendly and hip. The place is spotless and the students, dressed in all black, look stylish. They tell me they're more expensive because their classes are smaller, their teachers more qualified, and the owners have a lot of connections to help their students find jobs once they finish the course. The next class starts in 2 weeks and their deadline to enroll has already passed, but they could get me in if I sign up immediately. I sign.</p> <p>Over the course of those 18 weeks, where I spent Tues-Sat, 9:30-5pm, I not only received a terrible education at a school run by completely incompetent directors, I decided I don't like giving facials, and wonder what in the world made me think I would like it. There were a total of 5 students in my class, and none of us went on to work at a spa.</p> <p><em>Lesson Learned: Beware of offers requiring your immediate response, especially ones you&rsquo;ve just uncovered and that cost $6,500.</em></p> <p><strong><a href="/paul-michael" title="http://www.wisebread.com/paul-michael"><font color="#800080">Paul Michael</font></a></strong></p> <p><img src="/files/fruganomics/pictures/picture-17.jpg" alt="Paul Michael" title="Paul Michael" width="85" height="85" align="right" />It was the fall of 2002. My wife and I had grown tired of renting, throwing our money away to help someone else pay for the mortgage. And although we&rsquo;d only been married a short while, just over 18 months, we thought the time had come to buy a new home. That decision turned out to be the worst financial decision we have ever made, and we&rsquo;re still paying for it.</p> <p>We had not put together a plan for what kind of home we wanted, how far away from the city-center we wanted to be, what we could afford, we didn&rsquo;t even have a down-payment. But no worries, you can get zero-down loans so why bother saving up all that cash? (Oh, how naïve I was).</p> <p>We looked around for a few weeks and found a brand new home that had just come onto the market because the previous owners backed out of the sale at the last minute. I liked it (at the time) and thought it was worth the money. $188k for a new town home on the outskirts of Denver seemed like a good deal. We didn&rsquo;t shop around to check, but what the hell. Real estate always goes up, we&rsquo;ll stay in the house 5 years, cash in our equity and get a much nicer place. We rolled closing costs into the loan, too, and didn&rsquo;t even <a href="http://www.wisebread.com/the-7-laws-of-negotiation" title="The 7 Laws of Negotiation">haggle</a> over the $20k of extras the previous couple had wanted in the house but that we didn&rsquo;t really care for. The base price of the home was $166k, which I now realize we should have fought tooth and nail to get. I had no idea how much power I had at the deal by just getting up and walking out.</p> <p>Anyway, it&rsquo;s 5 years later and we&rsquo;re still in that house. The housing market has slumped. It&rsquo;s now worth less than $180k and we owe more than that. We have no basement and our family has grown from two to four. Storage is always an issue; we&rsquo;re giving away all sorts of things to Goodwill and other charities on a regular basis to stop ourselves from living in a junk pile. We have done our best to decorate the place well, so that we have a nice cozy place to call home, but at the end of the day we&rsquo;re paying a ton of cash each month for a tiny house that&rsquo;s losing money every year. We want to move, but are afraid of making the same mistakes again.</p> <p>We know now is the perfect time to buy, the slump is favoring buyers. But we are also sellers. Do we wait until our own home is worth more than we owe (which could take years) and then buy a home that has increased in value 20% from what it is today? Or do we take advantage of the great deals around right now, but try selling our own home in a depressed and lackluster market for even less than it&rsquo;s worth, just to escape? It seems like Hobson&rsquo;s choice. And all because we just didn&rsquo;t have the patience or the maturity to do our homework and weigh-up our options five years ago.</p> <p><em>Lesson Learned: Research the market in your corner of the world and don&rsquo;t feel pressured to become a homeowner just because it seems like the right thing to do.</em></p> <p><strong><a href="/julie-rains" title="http://www.wisebread.com/julie-rains" style="color: rgb(128, 0, 128);">Julie Rains</a></strong></p> <p><img src="http://static1.killeraces.com/files/fruganomics/pictures/picture-95.jpg" align="right" alt="" />When my husband decided to leave his employer of 18+ years, he had a retirement savings consisting of an ESOP (Employee Stock Option Plan) and an ESIP (Employee Stock Incentive Plan), the company&rsquo;s equivalent to a 401(k). He had company stock in both plans.</p> <p>Now, I know what you&rsquo;re probably thinking; &ldquo;whoa, you had a concentrated position?&rdquo; Okay, maybe you weren&rsquo;t thinking precisely that but rather &ldquo;don&rsquo;t put all your eggs in one basket.&rdquo; (A concentrated position means that most of your portfolio is in a single stock).</p> <p>Though both my husband and I were business/finance majors, he thought it would be wise to consult a CPA and financial advisor with experience in handling the ESOP distribution and his pending displacement. By the way, most advisors and people with three or four letters next to their names will either 1) sweat and squirm at the prospect of having a client with a concentrated position or 2) rub their hands together greedily thinking of ways to make money helping you diversify.</p> <p>Thankfully, our people (the CPA and advisor) didn&rsquo;t get particularly nervous but they weren&rsquo;t particularly helpful in looking at the big picture. Instead, they spent time figuring out the tax implications of receiving the ESOP distribution, which was important but&hellip;</p> <p>We were so focused on the ESOP that we barely paid attention to the ESIP and the rules that governed the plan. We decided, independently since the advisor didn&rsquo;t bother to discuss the ESIP as I recall, that we should diversify holdings in that plan. What we learned too late however is that when the ESIP transferred from my-husband-the-employee to my-husband-on-his-own, all of the shares of stock were sold immediately rather than being transferred or rolled over to a tax-deferred account or IRA, awaiting our sale of them. The stock price happened to be at low value on the transfer date; just a few months later, the price doubled and, from my perspective, we lost tens of thousands of dollars.</p> <p><em>Lesson Learned: Pay attention to all aspects of your financial life.</em></p> <p><strong><a href="/sarah-winfrey" title="http://www.wisebread.com/sarah-winfrey"><font color="#800080">Sarah Winfrey</font></a></strong></p> <p><img src="http://static1.killeraces.com/files/fruganomics/pictures/picture-9.png" align="right" alt="" />My worst financial decision was choosing to take out grad school loans without thinking about what they would mean for my life after school.</p> <p>I didn't have undergrad loans, due to an inheritance from my grandfather and my generous parents. But, when it came time for grad school, that money had run out. I signed up for loans right away &mdash; it seemed the only way to go. I wanted to go to school, and I wanted to finish relatively quickly, so I wanted to go full-time. I half-heartedly wondered if that was a good thing, and if maybe I shouldn't take one more year through school but earn a little bit more money, but that wasn't what I wanted. I wanted to go, I wanted to go NOW, and so I went.</p> <p>Regarding other matters in my life, that timing was good. But $25,000 is a lot more than I thought it was 4 years ago. I have a job, I can pay, but they tie me down. I had to get a job after school, which means that I'm working outside my field until I can find something in it. I can't work as a teacher overseas unless they pay enough to cover my loan payment. They extend my financial commitment every month, making it that much harder for me to go freelance.</p> <p>Overall, I'm not sure what I would have decided had I thought more. But I wish I had sat down and thought about it, or even talked to people who were paying off their school loans, before I clicked the button on the internet. That was part of it for me &mdash; it was so easy to apply and accept my loans over the 'net. In some ways, it would have been more real (and therefore worth more thought) if I had to sign my actual name to an actual paper with an actual pen.</p> <p><em>Lesson Learned: Just because getting a loan is easy doesn&rsquo;t mean paying it off will be easy.</em></p> <p><strong><a href="/will-chen" title="http://www.wisebread.com/will-chen"><font color="#800080">Will Chen</font></a></strong></p> <p><img src="http://static1.killeraces.com/files/fruganomics/pictures/picture-4.png" align="right" alt="" />My biggest mistake was my decision to stop living with roommates after grad school.</p> <p>&quot;I can't have roommates,&quot; I said to myself. &quot;What if I want to cook naked? What if I have a bunch of women coming over all the time?&quot;</p> <p>Alas, I never really cooked and there wasn't exactly a traffic jam of the opposite sex. I did walk around naked a lot, though.</p> <p>I recently did an informal survey of my friends who lived with roommates. They told me that not only do they save money from the obvious rent and utility sharing, but they also save cash by alternating the cooking, providing free entertainment for each other, and keeping each other accountable during their budgeting and personal development projects.</p> <p>I thought living on my own was a sign of maturity. But in the end, the mature decision was to recognize that I need to make real sacrifices to achieve my financial goals, even if it meant putting on some pants once in a while.</p> <p><em>Lesson Learned: You may need to make sacrifices to achieve your financial goals.</em></p> <p><strong>Feel free to join the party: In <a href="#comment">the comments below</a>, tell us your worst financial mistake story and lesson learned, and you'll be entered in a random drawing for a $25 Amazon Gift Certificate. Deadline to enter drawing is 6/17. Don't forget to enter your email address in the field provided and only one entry per person!</strong></p> <p><em><strong>UPDATE: The drawing has ended. Congratulations to Charlie, our winner of the drawing!</strong></em></p> <a href="http://www.wisebread.com/our-worst-financial-mistakes-and-what-you-can-learn-from-them" class="sharethis-link" title="Our Worst Financial Mistakes and What You Can Learn From Them " rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Credit Cards Debt Management Investment Real Estate and Housing 401(k) distributions 401(k) plans 401k plans becoming a homeowner buyer's market credit card debt credit cards debt financial advisors mortgage rollovers roommates seller's market student loan debt student loans vocational colleges Mon, 11 Jun 2007 05:29:55 +0000 Julie Rains 695 at http://www.wisebread.com