Rick’s Downtown Ordeal
by Tony Chavira
Having grown up in East Los Angeles, Rick was told from a young age never to visit Downtown. His family could remember when it was a hotbed for sleaze in the 1970s and it eventually became a domain for an immense homeless community once government-run psychiatric facilities callously dumped their less-aggressive patients on the streets in the 1980s. But deep in the center of his brain he had his mind set on a very specific kind of loft: a large, industrial space he could move, shift and rearrange as he saw fit. He was, after all, a budding young senior architectural designer at a relatively prestigious architectural firm ... a blank slate to play with is any artist’s dream house. He had something close to that while at school at Cal Poly Pomona when he and his friends found a loft space in Ontario and gutted and renovated it. They even increased the value of the space, which the landlord was ultimately pretty happy about.
With the intention of getting something open, designer and cool, Rick spent a few long months hunting through the eastern neighborhoods of downtown L.A., checking out anything that would suit his needs within his price range. When he discovered an amazing new development (designed by another relatively prestigious Los Angeles-based architectural firm) in Lincoln Park, he put in his offer right away. A former warehouse from the 1930s, gutted and completely revitalized into something much more dynamic and designer, it was right within his price range, exactly what he wanted in terms of layout, and (oddly enough) in an area of Los Angeles where he had some family history. Though Rick grew up in Monterey Park—just east of East Los Angeles—his grandfather and his mother’s aunt grew up just a few blocks from the development.
In November 2009, the project officially completed construction, and in January 2010 a sign went up offering lofts for sale. Following the progress, Rick tried filling out whatever paperwork he would have needed to move into the place. He had diligently provided every scrap of financial information he had to whoever was interested in checking it. He even had a real estate broker assist him with the process. But for some reason, he wasn’t able to get any of his paperwork moving through their system, and it seemed like the developers weren’t completely done filling out their own.
So, after a few months of frustration, Rick finally conceded that he would have to look elsewhere, and he told the lofts in Lincoln Park that he would be backing out. It didn’t take long before he was able to find a historical renovation on 9th street in downtown Los Angeles, closer to where he worked, and by March he went into escrow to purchase a space in the building. Things finally seemed to be moving: he found a lender (which is difficult in downtown Los Angeles, since very few banks are looking to lend for lofts), he worked with his real estate agent to get all the necessary paperwork together, and got his finances in order.
And then the appraiser arrived. Although Rick was originally willing to purchase the loft at the price stated, the appraiser determined that it was worth significantly less than what the seller was asking. From that point forward, negotiating for a purchase would become a fool’s deal: if Rick wanted the place, he could only pay the seller’s outrageous asking price, knowing that his loft would be a huge financial loss. He had no other option: he backed out of the deal and fell out of escrow.
But all was not lost. The reserve he put down for the loft in Lincoln Park back in January 2010 was still honored when he reapproached their agents in May. They were no faster at processing paperwork than they were back in January, but at least Rick expected it this time.
Similarly to how a lot of new developments operate, the loft developers tied themselves to a particular lender, a Citigroup subsidiary based in New Jersey, and if Rick would have no other option but to go through them. He still can’t remember the reason why that was the case, but it didn’t seem like too much of a problem: he already had the 20% down payment (after saving for almost five years) and his credit was nearly impeccable. Being tied to a specific lender may have been useful for the developer; when the economic climate in 2010 deterred banks from giving loans on spaces like lofts, they could screen a potential buyer’s finances until the cows came home. And Rick may not have been able to get a loan were it not for the Citigroup deal, so maybe it was the good for him too.
Rick was approved for the first time homebuyer mortgage program and, after hearing from friends and family how tumultuous the process of buying a home could be, he decided to take advantage of the opportunity right away. Oh, and also, the lender required it. Even better, the building advertised itself as being “FHA Approved,” which essentially means that the Federal Housing Administration approved the loan officers to manage first time homebuyer mortgages. This was music to Rick’s ears. He figured the program might involve more paperwork and headache, but ultimately it was designed to assist people like him.
More approval requirements meant that getting into the program, getting the loan, and using it to purchase his loft would slow down Rick’s homebuying process indefinitely. But that wasn’t nearly his biggest problem. Once Rick went into escrow, he discovered that the developer had falsely advertised both standard FHA and first time homebuyer’s program approvals. So anyone interested in buying a loft in their amazing designer units would be forced to wait ... even if they had their own money, credit and approvals all lined up.
The straw that broke the camel’s back was that the California Department of Real Estate had not yet given the developers approval to actually sell anything yet. And poor Rick found this out after he went into escrow.
Five months crawled by with a trickle of a small federal approval here, a state signature there. More paperwork was mandatory, more approvals were required, more sign-offs from more officials were needed before they could accept Rick’s money and let him move into the fully operational structure that just sat there, waiting for him. Other buyers moved from sometimes distant locations, put down a reserve or went into escrow, and waited for months. While some stuck it out, many others were forced to moved on.
While the developer refused to give him a date for when he could close escrow and move in, Rick’s paystubs began to expire (they’re only valid for thirty days). This put him right back where he started, providing all the same personal and financial information he supplied first with his reserve, and a second time when he returned to Lincoln Park.
In the meantime, the developer seemed completely comfortable leaving Rick and the others in the dark about their timeline. They were unresponsive regarding their approvals and paperwork and even less responsive when it came to an estimated move-in dates. And once it seemed that things were finally beginning to move, Rick discovered just how much more paperwork and how many more approvals the first time homebuyers mortgage program required over the conventional loan process. In fact, it seemed that some people who began the conventional loan process after Rick went into escrow were actually going to get approved before him.
At some point, everyone in Rick’s life began to tell him to pull out of the deal. He had faith that the situation would work itself out, but responded cynically to positive news. The way he saw it, the process wouldn’t be over until he had the keys in his hands.
On October 7, 2010, almost five months after he went into escrow, he finally had those keys. It felt sweet to know that all of that hassle paid off in the end. Though, as it turned out, he always had the down payment required for a conventional loan, dooming Rick to a longer wait than he ever would have expected for a loft he wanted from the moment he saw it. Meanwhile, only three other people have moved into the building, while 20 more deal with the same issues as Rick did.
But he has his loft now, in the building he wanted, in an area of town with some familial roots. And he will get the first time homebuyer tax credit for $10,000—although the program asks that you fax in your information while explicitly stating that they will never acknowledge that your fax has been received. Rick has faxed in his forms several times and is hoping for the best.
Having a great real estate agent was an immense help in both Rick’s and Trevor’s stories. But real estate agents are still salesmen. You never know what they’re going to try and sell you, or if the deal they’re trying to get benefits them more than you. In both Trevor’s and Rick’s cases, the only consistent factors to their experiences were their respective stellar, knowledgeable agents. But next week, we’ll discuss a different first time homebuyer and his tumultuous experience with the property sellers, the lenders and the real estate agents.