So what happened to the Romero house?

Our purchase of the Romero house fell through for several different reasons -- I'll go through them one by one here. I have contemplated feeling personally cursed, but many of these will be common to old adobe family complexes, so I thought them worth sharing.

First, the owners told me that the property had several issues: it was zoned commercial , there were two encroachments -- one in the last six months of a few inches, and one that happened 100 years ago. The Heraras' [the grandparents of the sellers] neighbors, the Montoyas, asked if they could build their house (the Montoya house) up against the Herreras' house and the Herrera's said yes, go ahead. That meant that six feet of what had been the Hereras's land was now under the Montoyas' house. I never considered this to be a negotiable issue. Clearly the grandparents had given verbal permission -- who was I to demand the land be returned?

However, in this day when bank loans are commodities to be sold on the open market, every bank loan must be exactly like every other bank loan and the general market -- Bank of America, mortgage brokers via Lending Tree, my bank (USAA), cannot deal with anything unusual.

A second issue is that all the national banks pick their own appraisers, or rather they have a blind system where an appraiser is outsourced. What this means is that some out-sourced city slicker appraiser who doesn't know adobe from dirt, gets sent 70 miles south to our little city of 8000 and complains that the house has cracks in the walls (some cracks are normal for adobes, some mean that the house is falling apart -- it would be nice to know the difference) and that no houses like this were sold in the last year (yes, if you limit it to adobe with two houses on the property, with left handed owners, you will never find any comparables). We have one appraiser in Socorro, he's been working here for 40 years. He's got the experience to tell structurally sound adobe from unsound and interpolate between a duplex and a house with a casita.

USAA refused to discuss a loan because the structures were touching (the Herrera house and the Montoya house).

Bank of America refused to lend because one of the two houses wasn't currently habitable.

First State Bank, which is our local Socorro bank, had two issues. First they would only lend $68,000 (basically they think the property was worth $85,000 which might be right, but they lend only 80%) and they wanted 9% interest (keep in mind that at the time the going rate was 4.5-5% for people with our credit score. We could have put it on a credit card for less interest).

I went to a mortgage broker, who said the only thing she could do for me was a construction loan -- it could handle the complexities of the property, but I had to finish the work in 6 months, with a possible 6 month extension.

Then came the New Mexico Educators Federal Credit Union and Karen Trujllo-Tsoodle. This competent and intelligent loan officer had it all -- she knew what 100 year old adobe buildings were like, she knew how to handle the encroachment (the credit union would hold the loan until I finished formally giving away the property to the Montoyas) she knew how to handle the zoned commercially, we were all set.

To get the paperwork I needed for the Credit Union (a statement from the city that I would be allowed to rebuild a residence in a commercial district if the house was destroyed) I went to the city...only to discover that the area, a little pocket around the San Miguel Mission, was actually R2 -- a perfectly respectable residential zoning.

Then I discovered that the smaller of the two encroachments didn't even exist. The owner might not have liked the location of the rock wall but in fact it was located legally.

Thinking everything was now in place, I went back to the family with a new offer. Only now interest rates had risen. In December, when I started, they were 4.5%. Now (April) they were 5.8% (at the Credit Union a 6.4% APR). Also I now had to put 20% down, reducing the money we had to renovate, and the original offer from Bank of America had zero closing costs (which in effect meant closing required about $2000 less). The family had asked for $120,000 for the house. I researched house values (which should be the subject of another blog) and how the loan would compare to our rent and found that with the Bank of America loan, we could afford it.

Now, with the Credit Union offer in hand, I went back to the family and explained that because the property was complicated, we could only borrow from the Credit Union. The Credit Union's rates are always a bit higher, but interest rates had also gone up in the six months I'd been working on it. I offered them 6% and $120,000 if they would carry the loan, or $92,000 with the Credit Union loan.

At this point the sale fell apart. Only one sister, the eldest, needed to sign the contract -- she was the sole owner. However, her brother represented her, but couldn't negotiate on her behalf. She wouldn't come down more than $5000, neither would she carry the loan (I'm sympathetic, she was in her late eighties and didn't feel like she had the time).

We didn't feel we could afford the renovations the house needed, at that price, interest rate and money down. And thus the sale fell apart.