Cracking the Code

We bought our raised ranch in 2005, right at the height of the Real Estate bubble.  Although we weren’t thrilled with the style, we WERE thrilled that we were able to get ANYTHING on this street in this town with this amount of land etc.  We sacrificed form over function but dreamed of a future project to make the house both more pleasing to the eye (tough) and bigger (yay).  We hired an architect in 2009 to assist us with our quest.  Ultimately, we realized that the “vision” for our home would have to come from us.  The architect we chose added very little value to the project unfortunately (and cost us a bundle).  We went through several drafts of different designs, including a colonial design that would have almost doubled the square footage.  Hubby spent many Saturday nights curled up with his pencil, ruler and graph paper trying to create the plan.  Finally in 2011, the clouds parted, lightning flashed,  and he emerged from his cave with something that just might work.

Our impression is that no one has ever really been able to “crack the code” on the raised ranch.  It is an extraordinarily difficult house to add onto.  It is boxy and boring.  There are few possible roof lines.  Space added to the main level must be supported by space added to the ground floor, which can easily create unnecessary redundancy.  With construction costs still running high in our area, coupled with the rising costs of fuel and electricity to heat and cool, homeowners on a budget do not want to build redundant or excess space.  Plus, in towns like ours where lot sizes are small, zoning regulations limit the number of square feet that can be added.

Cracking the code would be difficult.  We would truly have to think outside the box, the “box” being our 49’x30’ abode.  We would also have to accept our house for what it was.  It would never be a charming colonial.  But maybe it could work better.  Maybe we could take the disadvantages and turn them into advantages.

Disadvantage #1:  3 Bedrooms

Most people in our area would like a home with 4 bedrooms, and 4+ bedroom homes command a premium.  We only have 2 children, so 3 bedrooms suffices for us.  However, we had no comfortable place for guests to stay.  Our downstairs had been a large (28’x17’) playroom where we generally stowed guests, but there was no bathroom.  In order to add to our main level, we needed to extend the downstairs by approximately 9’.  This extra space created the opportunity for us to maintain a playroom almost the same size as before while adding a small office/bedroom and full bath.  We now have a beautiful guest suite – a great “add” to our home.  So far the only “problem” I have identified with this room is that Hubby thinks it is “his” room and I think it is “mine”.  He keeps all of his coats in the closet.  I keep my makeup and mirror on the desk (makeup becoming increasingly important these days, much to my chagrin).  So far we have had no Brady-like wars requiring tape down the middle of the room – hopefully we can continue to coexist.  Result:  Private guest suite now available!

Disadvantage #2:  Downstairs ceiling soffit

In our original playroom, in order to keep the ceiling height as close to 8’ as possible, a soffit had been created around the ductwork that ran down the center of the room.  When designing the downstairs bedroom, the idea was to have the rear bedroom wall end at the soffit and to build closets under the 2’ wide soffit.  One closet would open into the bedroom and one would open into the playroom (both with double doors).   We created an entry to the playroom under the remaining section of the soffit that gives the feeling of an archway and offers a sense of separation between the bedroom/bathroom area and the playroom.  Result:  Soffit drawback GONE and beautiful new storage closets HERE TO STAY!

Disadvantage #3:  Must add space downstairs to support upstairs addition

To support the main level addition, we added 9’ straight across the entire back of the house, including behind the garage.  We had to figure out what to do with the 9’ deep room to be built behind the garage.  A storage room was born to swallow up all of the “large” items Hubby hated storing in “his” garage, such as bikes, snow blower, picnic items, sports equipment, etc.  In order to circumvent FAR restrictions (floor area ratio – which limits the square footage that can be built on a particular size lot), this room had a raised cement floor and could not/would not be used as living space.  Result:  Great storage, happy Hubby, and support for master bedroom addition.

We did it

Wow it has been more than 2 years since my last entry, and quite a LOT has happened. To explain, in the autumn of 2010 I was approached by my former employer, Jones Lang LaSalle, about a potential job opportunity. With children in full time school, and 8 years of stay-homed-ness behind me, it seemed to be an offer I couldn’t refuse. So on December 6, 2010, I boarded Metro-North and began my journey back to me. Employment, with all of its “advantages”, brought more income to our household, and a renewed interest in doing something (ANYTHING) with our house to make it work better for us. We contacted our architect and began the ball rolling again. Hubby got to work on the plan – we had realized that while our architect could be useful, no one was better to put our ideas to paper than…us. Plus, I am living with a somewhat frustrated would-be- but non-engineer, so it made him happy. We would face a few challenges along the way – the floor area ratio in our neighborhood is severely limited, and all “above ground” space (including the garage) is included in the calculation. For a house like ours with a gloriously large garage, this is a down side. It meant that we were limited to the number of square feet we could add to the home (less than 500) without a variance from the city. This was mostly a challenge because in order to add square footage to the main living areas, it must be added to the downstairs as well. We applied for a 13% variance and were granted the same, thank goodness. During our planning phase, we talked about what was important to us: 4th bedroom, powder room for guests (so they would not have to share with our fast-approaching-teenagerhood daughters), new full bath for the girls, larger master bedroom, walk-in closet and bath, decent sized dining room (as opposed to the 9’ x11’ original), and a kitchen/family room on the main level. We decided that having more substantial sized rooms would be more important than the number of rooms. And that is how we ended up with a 30’ x 18.5' kitchen! Over the next few entries, I will reveal how we transformed our modest raised ranch to a sizeable home that flows beautifully for entertaining, has the right amount of “WOW” factor for our tastes, and feels more than ever like the house we have always dreamt of. Construction began in April. Our contractor (whom we LOVE) recognized our need/desire to stay in the house as long as possible before moving out to make way for his work. His plan was to excavate, pour foundation, replace windows and do practically anything and everything he could do while we were still living here. He framed and built the addition abutting the existing house, so that as I sat at my dining room table I could look out the window “into” my new kitchen. For a period of time this was fun, and exciting, especially for our cat. But in mid-May, as the dust began to accumulate and the workers were encroaching on our space, we moved in with Grandma and began our summer of displacement. The plan was to turn the dining room and kitchen into a more substantial dining room and hallway leading to the kitchen, which would be 100% addition. We would also add about 9 feet onto the Master bedroom and bath, with a deck behind. Downstairs we would add 9 feet to the family room which would make space for a 4th bedroom and 3rd full bath in the front of the house. What I learned very quickly (the day after we moved, in fact), is that contractors love to rip sh** apart. So when we walked back in on that fine May day, our WALLS WERE GONE. I seriously did NOT know they would rip everything out, so that I could literally walk between walls. But I trust the professionals, and have no expertise in the area of residential construction, so there we were, wall-less.

Guessing Game

Who can figure out this Real Estate market? I am seeing houses in this town sell for anywhere between $350 and $650 per square foot, and I cannot fully understand what accounts for that spread. It appears as though brand new homes are still able to command a premium, up to a certain square footage at which there are diminishing returns, meaning the price per square foot begins to slide because people do not want or need the excess space the home offers. Updated older homes that exude charm are also in demand, unless they are in a poor location. Friends just bought a lovely remodeled 1960’s home in a nice neighborhood on a flat ¼ acre lot for $360/sf. Granted, the street is a double yellow cut through between two busy roads, but it is generally a quiet neighborhood nonetheless. A tired but cute Cape Cod with deeded water access and a somewhat funky layout (MBR on ground floor, garage access though MBR sitting room, etc.) just sold for $400/sf. But a brand new house with a small (.11 acre) lot on a main road is in contract for somewhere in the neighborhood of $550/sf.

It comes down to this: there are not a lot of buyers out there, and those who are looking want value. If a house needs work, they want a discount. And so, our offer of over $425/sf for the house on our street was actually high. I keep thinking it is worth closer to $400/sf, but then the sales come through and begin to make me think otherwise. We wonder when they will come back to us, although my husband suspects that it would be too difficult for them to admit they were wrong. Of course, we would admit we were wrong too, and lower our offer. That should go over REALLY well. We are still hearing about “quiet layoffs” all around the New York area, and if the trend continues, Real Estate as a lagging indicator of the economy could continue to slide. No one can predict the bottom of the market – it is a guessing game. My guess is that the Real Estate market will keep us guessing!

(Taps)

The deal is dead. At least, for now. We went back and forth with the owners of the house, and before we submitted our “final offer”, we went to look at it again. Unfortunately (for them), it was a rainy day. The basement smelled musty, the gutters were showing their inadequacy, the rotting wood trim had nowhere to hide, and we decided that our most recent offer (we had increased our offer by $75K at this point) was as high as we could go. We began to feel scared about the daunting task we might be about to take on: fixing this neglected house. To be fair, the more anyone looks at any house, the more they will be able to find wrong with it. But when we first saw it, we had stars in our eyes, and the owners should have capitalized on that. There was a time, a few weeks ago, when we would have offered about $25-$50K more than where our final offer ended up. But as our enthusiasm waned, and our feet came back to earth, our desire to negotiate further dissipated as well. I guess that’s why they say, “Strike while the iron is hot”!

The real estate market in town is dead in general, so I would be surprised if they were able to drum up an offer at all between now and the end of the year. One of the sticking points in the negotiation was the closing date. They desired a January 15, 2011 date, while we had asked for March 31, 2011. We are not clear on why they were in such a hurry, considering that they HAD A BUYER WHO WAS WILLING TO PAY A LOT FOR THEIR HOUSE, but we stood our ground and, eventually, they gave in to our desired closing date. However, as far as price, we ended up being about $45,000 apart. Our final number was 10% below the asking price. Most houses here are trading at prices more than 10% below the final asking price, which is usually a reduced price to begin with. The other problem for them was that they agreed to a bum deal with their broker. She required them to have a contract signed on the private sale within one week after the Listing Date in order to avoid a brokerage commission. We received the owner’s final offer the day before the deadline, with a stipulation that we would need to have a contract signed by close of business the next day. Hilarious! Considering that we had not yet agreed to terms, and had not completed a professional inspection of the premises, signing a contract within 24 hours was a completely unreasonable expectation. In the end, the owners admitted that our offer was too low and that they felt they needed more time to test the market. I wrote back that we do understand (because we do – even though we know we are right! Ha!), and wished them the best of luck.

Since then, we have had several chance encounters with them on the street, and it has all been perfectly friendly and charming – there are no hard feelings at all. Unfortunately for them, it has rained for about six days straight, so there have been few (if any) showings of the property). Did I mention that one of my closest friends (a true BFF) lives across the street from them and has been spying regularly? She also offered to park an old beat-up pickup truck on her lawn and throw old beer cans around in order to make the neighborhood appear less than appealing to any potential YUPPIE buyers. What a pal!

What does the future hold? We heard last night from some friends on Wall Street that trading volume is slow – and that more layoffs are looming, even if not the 80,000 predicted by one fairly reliable analyst. Since this town’s real estate values are so closely tied to Wall Street wealth, I would say that’s bad news for anyone trying to sell a house. Will our neighbors get offers? Yes – it is a fabulous neighborhood with many amenities, and the house has good space. But they will get lowball offers, and will have to pay a broker 4% of the sale price. They will end up with less money in their pocket than if they had taken our deal. There is no doubt in my mind, they truly believe, or want to believe, that their house is worth more than it is truly worth. There is nothing wrong with that mentality, unless you are in a hurry to move, and you have no offers. We have not heard the last of them. It is really just a question of “when” we will hear from them again. We will see them on Halloween when my children go up to their door for some candy. And I wonder – will they offer us a trick, or a treat?

Let It Roll, Baby, Roll...

The stage is set, the die is cast, whatever you want to say – the ball is rolling! On Thursday, we submitted some questions (mostly about mechanicals, roof, etc.) which were answered very quickly. I “gently” broke it to the owners that their square footage calculation was wrong (they never replied to that email, but you can bet they went down to City Hall that day!). The offer letter was ready yesterday, but we sat on it all day, for no particular reason other than that we were scared ____less. But at 7:01 PM last night, the letter was submitted via cyberspace.

It was a fair offer – one they cannot possible perceive as an insult. But let’s face it, they have not done anything proactively in that house. The kitchen is 17 years old. The roof is 13 years old. The windows are original (1970). The house has not been painted in eight years. So to receive an offer that is 15% off the asking price is not too shabby. And lest we forget, if we do this private sale, there will be no broker’s commission, which will save them over $50,000. Nice work, if you can get it!

Last night, ½ hour after I sent the offer, I picked up two of my friends and went to dinner at a great local restaurant. And wouldn’t you know it: There, seated at the next table, was the owner of the house we just offered to buy! I text-messaged my husband, and his response was, “Too bad he is not there with another woman. (Note: wife is away, looking at houses in their target community) Then we could steal the house!” He did have his arms around 2 ladies, but it was clearly a gathering of old friends – all couples except this guy. I don’t think there was any hanky-panky going on. Perhaps I should shoot him an email saying, “Was that you at the restaurant last night? I am sorry I did not get a chance to say hello, but I did not want to intrude on your fun.” Then, if there were any question about his actions, he would know that I knew. Food for thought.

Just kidding, of course, but it would be nice if there were a way to steal this house. I guess the fact that it will go to market at the end of September could work in our favor – as the holidays approach, there are fewer buyers out there. However, now that they have secured our offer, they will undoubtedly use it to drum up others. I can hear the realtor now: “Well, there IS an offer already, after all, so you may want to act quickly.” What better words to drum up interest? It’s part of Queuing Theory, I believe (very rusty business school Operations Management memories) – haven’t you ever noticed that when you walk into an empty store, it suddenly starts to fill with customers? Whatever happens, I am proud of us for our due diligence and for taking this risk. While I do believe it is a calculated risk, it is still outside of our comfort zone, and we will have to continue to push the envelope in order to secure our future, and that of our children. So, let’s see what comes back, if anything, this weekend. We are ready to talk!

Didn't See It Coming

Oh what a difference a week makes! While chatting with neighbors on Sunday, we learned that the owners of the colonial on the hill (mentioned in my previous post) are putting their house on the market in the next two weeks! My initial reaction was, “Oh, that’s too bad. Better luck next time!” Thankfully, my husband immediately began the first round of “What if…?” The most important “What if” being: What if we can come up with some lenders and make this happen? We decided to “pay attention to the signs”, and be aware if the process of vetting this investment became too onerous. We would then have to understand that it was not meant to be.

We laid out a methodical plan for our due diligence. First step: call the owners and indicate our interest. The call was returned and a date for showing was made. Second step: Drum up possible lenders. Check. Yes, there is still money out there for investors, if you can be creative! I realize that it appears as if I am referring to this house as an investment, but in actuality, part of the plan is to KEEP our current house as an investment while we move to the larger home. It is truly the only way this deal works. With brokerage fees and transfer taxes, a scenario in which we sell our current home becomes a money-losing proposition, while renting could potentially turn a profit. Not to mention the long-term benefit of owning a $1,000,000 investment that pays its own mortgage and other costs. This house, in a sense, becomes our “retirement plan”. If the mortgage is someday paid off, we simply collect rent as our income. Another possibility is that refinancing the investment house in the future creates the opportunity for other investments.

We were truly blindsided by this opportunity, which may or may not happen. At this point, we have seen the house twice, and reconciled with its plusses and minuses. We have asked questions which have been answered. One sticking point which I will need to address soon is that the square footage is not what they claim (and it’s not their fault). The city records are wrong, unfortunately, and counted the family room (a 12x 16 foot, single-story space) as two-story. So, the house is about 200 square feet smaller than they told us. I will have to figure out how to call their attention to this disparity without royally pissing them off. We are close to submitting an offer. But it is a clear case of the “cart before the horse”. Our income, like that of so many people across the country, has been down for the past year. I had not officially begun to look for work. For some reason, though, we are at peace with all of this (beer and wine sure do help!). One of my greatest concerns throughout my adult life has been the funding of college and retirement, mostly because my parents did not plan for either. The fallout from that lack of planning has been close to devastating, and I have always been terrified of repeating their mistakes. But equity in a thriving asset – that could be the ticket for us.

The next step will be to begin the negotiations. If we cannot strike a deal in the next few days, the house will go to market. This could be good or bad for us – in the past, non-updated houses on this street have languished on the market. Renovated homes have gone to sealed bids. Where will this house fall? Hopefully into our outstretched hands within the next couple of days!!!

Next Chapter...Colonial?

The summer is gone – there is a strong breeze and a chill in the air. The flowers are all but dead, and a friendly caterpillar has made his cocoon under our Japanese Maple tree. It is time for me to emerge from my summer bubble and announce that we have decided not to add onto our house, for a plethora of good reasons.

It all started when we heard that our empty-nested neighbors were putting the word out that they would entertain a private sale of their home over the next couple of years, if anyone were interested. The house, a colonial, is one of the largest on our street (about 2,800 square feet), and sits perched on a hill with a very private wooded backyard. My husband does not love the sloped driveway, but the front yard is perfect for small-scale sledding. It will need quite a bit of renovation as the front steps are crumbling and the interior appears to be completely original. But to us, a renovation project is infinitely more desirable and doable than an addition. Of course, we are not chasing this particular house, and in fact there are several other empty-nester homes on the street that may go to market first. But this one got our juices flowing.

While we have determined that we can make an addition to our Raised ranch work (yes, we revised it again), by simply adding a new kitchen, expanding the dining room, and adding a bedroom and bath downstairs, it does not give us what we truly want out of our house: flow and lack of redundancy. Our enormous downstairs family room was virtually unused all summer. We have separated our daughters into their own bedrooms, so we no longer have a guest/play room upstairs on the main level. And we can see with clarity now that we will want more separation between the public and private areas of the house as these girls grow up. With my aging brain, I continue to go up and downstairs ten times a day because most of our storage is downstairs and I am forever forgetting why I went in either direction/what I was looking for. This can only get worse as I get older!

Besides, moving to an existing house is GREENER. Wouldn’t it be nice not to have to disturb the plant and animal life that live in the earth behind our house? We have a large number of boulders at the very back of our yard that were excavated when the original foundation was dug. We would undoubtedly find more rock in digging a foundation for an addition, and I can only imagine the added expense (and noise, and irritation to our neighbors) of chipping it out.

Another consideration is that I will (hopefully) soon be returning to a regular job, and will have less time to manage a large-scale project. We would have a much easier time managing one project at a time, when we can afford it, to make an existing house perfect again. In the meantime, we have outlined about $20,000 worth of projects that we would tackle immediately to make THIS house perfect before selling or renting it.

I still believe that our addition plan would work for any Raised Ranch. But based on our specific needs, we do not feel it will work for us going forward – at least, not to the extent we would like. This family is entering a new era, in which our kids are older, we spend less but higher quality time together at home, and we are not as willing to compromise when it comes to our house dreams. The next 12 months should be interesting…