05 July 2007 - 5:34 pm

Big News of the Day:

I just made an offer on a place. Here in Los Angeles. A place of my own. Here. In one of the least affordable cities in the United States.

We are in negotiations. They want lots of money up front, the more, the better, and I am using a tried and true American technique known as using OPM. OPM for the down, OPM for the closing costs. For those of you not in the use of the business world jargon, that's Other People's Money. It makes it sound like I have a wonderful sugar daddy, but I don't. Not really. Because there is a flip side as to how this deal will look in about six months.

It's an interesting situation as to why they are asking for so much up front. The truth of the matter is, it's not presently financeable through the mortgage lending business. Remember hearing all those stories about sub-prime lenders and all that going out of business recently? Well, just a year ago if I had bought a place in this building, I could have gotten financing. The sub-prime lenders were more than willing. That's because it is run as a Co-op. Co-ops may be common on the East Coast, particularly in New York City, but here on the West Coast, it just is not common, and few lenders knew how to deal with them. So cash is the way to go. The reason they are so frightening to the lenders? There is one tax property bill for the entire building, one utility bill for the entire building, and it is all split among the owners. 94 owners in this case. So if a few people can't pay their tax portion, that means everyone else will need to pay more than their fair share.

I looked into it a little over a year ago down in Long Beach, and the unit was called an "Own Your Own." I really liked the unit, a little studio with built in vanity/walk through closet into the bathroom, with an air vent it shared with the kitchen, which had some more built in cupboards, and a beautiful Western exposure, looking at the bridge to San Pedro and the canal that runs along the 710 Freeway. Nice. There used to be a Murphy bed, and instead previous owners decided they wanted shallow, long closet space, and the first thing I intended to do was install a Murphy Bed right back into that unit.

That was over a year ago. I talked with a lender, she looked at my credit and it just being a bit over 700 meant she was salivating to approve me. The unit was just under $100k. But the whole shared tax bill made me really nervous, and no one could tell me that there was any intention to turn the building into condos, with the individual tax bills. So I walked and never made an offer.

So this unit I am looking at and made an offer on today, it too is an old building, and the unit used to have all the built-ins and Murphy Bed, but someone renovated it, took all the unique charming built-ins out, and created a one bedroom with an open living/kitchen instead of the separated kitchen from the large living/sleeping space. I don't like what they did to the unit, but I do like the option of having a room to go close the door within this studio. 420 square feet, the entire space smaller than my living room. Anyone who knows me knows what a challenge to paring down my possessions that will be. I am interested in it because I have not seen a deal like this anywhere in the city, and I have been looking for over a year. More, intermittently.

The neighborhood is "transitional." It means I am one of few white people. But although I saw someone passed out from inebriation (the bottle beside them) on the sidewalk each time I have visited the neighborhood, I haven't felt unsafe. No parking provided. I just called my car insurance company and discovered my insurance rate will rise nearly $400 a year just by moving into this neighborhood. Thank god my car is nothing to get excited about. Two blocks from a metro station. Two blocks from a well used park with lake. Close to downtown LA, close to Koreatown, Filipinotown, close to Los Feliz, Echo Park and Silver Lake, all areas I want to be closer to. As for transportation, I could probably take a bus down Wilshire or Olympic and get to work everyday, in one bus ride. Better than my close to work, two bus rides any way I try to go I presently have. A Ross, El Pollo Loco, Payless Shoe Store and 24 Hour Donut place within blocks. Grocery store three blocks away. Everything nice and easily accessible, whether or not one owned a car.

The reason why this unit is SOOOOO attractive, besides also being on the top floor (no upstairs neighbors!), overlooking the green treed courtyard (no direct street noise!), is because the 94 owners of this building are already well on their way to turning it from a co-op to condominiums. They have already been assigned separate tax ID numbers by the city, and the shared utilities will be separated out next tax billing cycle. They have meetings (in the next 3 weeks), approval timelines (90 days after the vote), the whole works to get through the formality of converting, but the separate IDs already prove the intention is well on its way.

So, I am borrowing someone else's money to put down a down payment, the present owners of the unit will carry a second loan to finance the rest, I pay them monthly amounts, no bank involved for my end of the transaction. As soon as the condo conversion is complete, I immediately re-finance, and cash my generous down payment provider out, for a small percentage for tying up his money, along with buying out the sellers, then I deal directly with a bank that finances this second deal, directly with me. This should be about four to six months from now.

The sellers want this deal to close as quickly as possible, hopefully escrow will close in 30 days. Since it is still a co-op during that time frame, (or even 45, 60 or 90 days hence) I still have to be approved by the co-op board. I have to be interviewed and approved. The realtors involved said they hadn't had any problems with buyers they had worked with, thus giving me the indication that I would not be a problem either.

Nose ring remains in for that interview, or not? No visible tattoos, steady job, and now, as it turns out, a fabulous credit score, I am quite a good looking candidate as a resident on paper. The fact I love throwing loud parties, blasting my stereo and breeding full sized hogs of course will not be apparent. (All the more reason for the separate bedroom, so I don't have to sleep with the hogs.)

I am mentally arranging the unit, trying to decide what furniture comes, what stays. What needs to be sold. The unit comes with a washer and dryer. Or, maybe. I think that gets to be negotiated too. There is one in there now, something I cherish more highly than whether there is a dishwasher. (There is no dishwasher.) But no matter, there are clothes washing machines in the basement too. Not very many for 94 units, but whatever. Back up.

Nothing further to be done today, I wait to hear what the sellers think of the deal we have proposed. Three people are involved at their end, the owner, her daughter whom she is making responsible for the deal, and the daughter's boyfriend who seems to actually be handling it. Then they talk with the listing agent, and that agent talks with my agent, who happens to be my broker. I knew I could not do this deal myself, not with OPM, and be confident about the legal intricacies. I will pay that commission to have a realtor who has dealt with this for the past 30 years, gladly. She is doing all the negotiating, and then I am relaying information to the possessor of the funds, keeping them in the loop. So seven people involved in this transaction.

I am nervous, excited, thrilled, expectant, jubilant, and trying not to get too emotionally invested, since it is not a go yet. Hopefully tomorrow will be the day? Hopefully tomorrow I will know if tomorrow is the day.

Keep your fingers crossed, and a prayer on your lips. Sarah is getting her home of her own, at last.