I won’t bore you with the myriad of details that make up a property transaction, but a few items do stick out in my mind.
The seller was asking for $60,000. I offered $55,000. The seller reluctantly accepted; the house had been on the market for a long time. I had to write him a check for a $1,000 deposit--also known as “earnest money”--to prove I was serious about buying the house.
Kirsty came over to my apartment on a Friday evening. We filled out some more forms, and I signed the mortgage application.
Worried that interest rates would go up, I asked, “Can I lock into the current interest rate? I believe it’s eight-point-five percent, right now?”
“I can try to put you on what’s known as a ‘floating lock,’ “ Kirsty answered. She explained that this meant I would be locked in at the current rate of the day I signed the mortgage application. If the interest rate went down, my obligation would go down also, but if the rate rose higher, my obligation wouldn’t go higher than the original rate.
“That sounds good,” I said.
“Yes, but the mortgage company may not agree to a floating lock because they’re usually reserved for larger loans than yours,” Kirsty warned. “Call me on Monday. I should be able to tell you by then if you’ve been approved for the floating lock. I should also tell you, though, if you are approved, it’ll cost you a point. About four hundred dollars, I’d say.”
“That’s not so bad if it gets me locked in,” I said. Eight-and-a-half percent was low in those days (1991). A few years previously, mortgage interest rates were as high as twelve percent.
I called Kirsty the following Monday, and finally reached her on Tuesday.
“The interest rate’s gone up to nine percent, but I’ve been able to put you on the floating lock,” she told me.
With a relieved sigh, I walked into the office of the plump, bespectacled real estate attorney who would be handling my closing. “Phew, Rita! I don't have to worry about the interest rates going up any more,” I told her. “I'm locked in at nine, and it’ll go lower if the interest rates go down."
“Glad to hear it, Stacy.” Rita smiled at my excitement from behind a mound of paperwork. Her desk always looked like a cyclone had just passed through her office. Clients were never invited in. She always saw them in the boardroom.
I assumed the cost of the point would be added on to the mortgage. Kirsty never told me I had to pay it in advance, nor did she send me any paperwork to that effect. When I received the mortgage commitment letter stating that my mortgage would be at the current interest rate at the time of sale, I didn’t worry. I knew I was locked in at nine percent. In hindsight, I wish I’d questioned that letter and shown it to Rita.
A few days later, the bank's appraiser called. “Compared with comparable properties in the area, the house on Manson Street is worth a lot less than the asking price,” he informed me in a somber tone. “Schemmerhorn is a depressed area and sinking fast, in our opinion.”
This was encouraging news - not!.
“How much of a mortgage will you give me?” I asked.
“Thirty-nine thousand.”
“What! Only thirty-nine thousand?”
“ ‘fraid so.”
“Uh . . . I’ll get back to you.”
That night, I drove around Schemmerhorn to look at other similar houses against which the bank might have compared 51 Manson Street. They all appeared to be in worse shape than the Manson Street property. Although I conceded there could be some truth to the statement about Schemmerhorn being a depressed area, in my usually optimistic fashion I felt sure the area would improve again. Anyway, since the bank wouldn’t lend me the original amount I’d asked for, I was in rather a fix.
Good old Gershwin came to the rescue.
“How much do you have in your savings account?” he asked, when I told him the disappointing news.
“About fifteen thousand.”
“Okay. Well, how about this for an idea? If you really want the house, we can ask the seller to come down another five thousand. So that would make the selling price fifty thousand, right? You’ve already paid him the thousand dollar deposit, right? Then you can make a private arrangement to pay him the balance of ten thousand. That would leave you with five thousand dollars. The Bargain Registry’s commission, as you know, is nine percent, so . . . “
I heard him performing some quick calculations on the other end of the line.
“. . . that would come to four thousand five hundred.”
I thought for a minute. It didn’t seem to make much difference to me. I’d been planning on using the money in my savings account for a down-payment, anyway. I would just be paying it to the seller instead of the bank.
“Go for it,” I said.
“A-okay. I’ll get on to the seller and let you know.”
Once again, the seller reluctantly agreed to the proposition that Gershwin put to him. I couldn’t believe my good fortune. Compared with the dregs I’d seen, I thought the Manson Street house was worth every penny of the original asking price.
The closing was set for March 31st so that the seller could avoid paying another month's interest. I would have to pay various expenses but no attorney's fees. It’s at times like this when it’s useful to work for a law firm.
I did a lot of the work myself, organizing pest inspections, title reports, and so on, but soon floundered under the weight of all the paperwork and computations that a property transaction requires. Eventually, I thankfully handed over the whole mess to Rita to complete the finishing touches.
