How I Messed Up A Home Purchase Last Week

When I first came to western North Dakota in 2011 to find work during the Oil Boom, the housing prices had quadrupled during the previous four years. This was caused more by greed, than purely a supply/demand relationship. To illustrate this, it came to the point that local people were charging $750 per month to rent a small tent in their backyard. Perform this self-check, could you look out your back window, see someone living in a small tent, and feel good about charging this person $750 per month to live like this?

In 2011, I stayed in my $500, 1975 truck bed camper on company property where I worked. In 2013, I stayed in my 7’x14′ enclosed utility trailer at various locations that were not campgrounds. 2014-2016 I was room mates with a homeowner in his 3br/2ba home where I paid about $450 per month rent.

The North Dakota Oil Boom ended in 2015 due to the price of oil dropping below $80 per barrel. As thousands of out-of-state workers and their families began leaving to return home, it created a large number of housing vacancies. By 2017, I was able to rent a large 2br/1ba apartment in downtown Dickinson for about $400 per month. Back during the Oil Boom years 2007-2015, this same apartment rented for about $1,500 per month.

Because of the North Dakota Oil Boom, still to this day, there are homeowners in Dickinson who believe that their 1960s, 3br/2ba, 1,400 sq. ft. house, on a small city lot is worth $150K-$200K. And for a recently built, similar house, on a small lot, $250K-$300K. I am not going to stop and explain why this pricing is off, you will probably begin to understand this for yourself as I continue with my story below.

Dickinson is the largest town in southwest North Dakota, with a population of about 24,000 people, a commercial airport, two hospitals, four new car dealerships, Walmart, etcetera. Outside of Dickinson, within a 50 mile radius, there are at least ten small towns, with populations 40-1,000 people. In these smaller towns, there are quite a few houses for sale in the $50K-$150K price range. Sometimes, there are surprisingly underpriced houses in these smaller towns, that are decent size, good condition, and nice looking.

In 2020 I was able to buy a small house occupying two city lots, in a small town 25 miles from Dickinson, for $50K. I was very happy with this. Remember what I wrote, in 2011 I stayed in my truck bed camper, in 2013 I stayed in my 7’x14′ enclosed utility trailer, and 2014-2016 I was room mates in someone else’s home.

The house that I bought was built in 1920. It was well-built and sturdy, although it was not impressive looking at all, nor pretty. I want to point out, that in many places in the U.S. right now, the average home price is about 4-5 times the average person’s annual income, whereas in the town where I bought, the average home price is 1-3 times a local person’s income. It is much less stressful to own a home in this small North Dakota town, compared to elsewhere in the U.S.

The total population of the state of North Dakota is less than 800,000 people. Yesterday I read a newspaper article that said the population of North Dakota actually dropped by several thousand people in 2021. It is usually very cold here from November-April, at least six months of being cold. The cold, wind, barren grasslands, sparse population, lack of things to do, make North Dakota unappealing to many people.

To me, besides Wyoming, or Alaska, I don’t know of anywhere else that I could move to, to get away from people. People have a variety of qualities and characteristics, which one can like or not like, but for me, the best and most comfortable circumstance to be in, is to not have too many people around in the first place, this in itself solves all kinds of problems.

Maybe because of greed, maybe because I don’t like people, especially noisy obnoxious trashy people, for over a year I have thought about how nice it would be to buy the house next door to me. To have that much more of a buffer zone to keep people away from me. There was an elderly widowed lady living next door to me, who was nice and quiet, a good neighbor, but still I coveted her house. It was a two-story house, larger than mine, with a large attached garage.

It was an unpleasant surprise when the elderly woman living next door to me, went into a nursing home about eight months ago. I didn’t think that her health was that bad. From time-to-time I heard news that her health was declining. Several months ago her grown children in their 50s, mentioned to me that her house would probably have to be sold soon.

Even though I wanted to own this house next door to mine, I didn’t think that I could afford it, because it was larger than my house. Keep in mind, I wasn’t going to sell my house, I wanted to keep my house on two city lots, plus obtain the next 1-1/2 city lots next door with this two-story house on them. I wasn’t planning on renting out the house next door if I bought it, because of the “CDC Rent Moratorium” where renters think that they don’t have to pay rent once they move in.

Last week, the adult children of my elderly neighbor said that they would be willing to accept a cash offer from me, and each of my other neighbors, to give each of us a chance to buy the house. They did not want to go through a lengthy, time consuming, tiring process of appraisals, inspections, house showings, and bullshit offers from people who didn’t have money.

I explained that I wanted the house, but I did not think that I could afford it. I asked what was the ballpark price that they were looking for? It was very close to what I paid for my house. I felt that it was less than what the house was actually worth. I was greedy for the opportunity to buy something for less than it was worth, and to have the house next door so that no one else could move in to it and begin bothering me.

In my mind, I knew that I actually had enough money at that moment to pay their cash asking price, but I wasn’t about to spend all of this money, because of the possibility of unforeseen emergencies like becoming sick, injured, or losing my job. I said that I would go to the bank tomorrow to see about getting a personal loan, I was short about $12K-$20K from their asking price.

I added up all of my assets, and the personal loan that I wanted was less than 5% of my assets. I have good credit, the personal loan monthly payment would be less than 8% of my monthly income, so I believed that there was no way I would get denied a personal loan. That night, I completed an online personal loan application with one bank, although I used a personal loan calculator with two different banks.

The following day, I received a message from the bank to call them regarding my personal loan application. The manager of this bank, who I like, she said that the longest loan period they would allow was 36 months. I was angry, I wanted to have loan payments that were like $240 per month for ten years, not something like $750 per month for three years.

I calculated the property taxes on the house to be $110/month, insurance $60/month, electric $60/month, water&sewer $70/month, so that’s $300 per month. I didn’t want to pay another $750 per month for this personal loan. I asked the bank manager lady for any suggestions, she didn’t have any good ones.

I was angry, I dreaded this would happen, once you start getting a bank, a realtor, an inspector, an appraiser involved, something is bound to go wrong and ruin everything. This is why the sellers wanted a CASH offer, so that nothing and no one could get in the way. Just even being short a little bit of money, ruins everything. I thought about using a no-questions-asked credit card check for $12K just to say “fuck you” to the bank, even though the credit card company interest rate would be twice as much.

I sent an email to the seller, explaining the amount of cash that I was willing to pay, the personal loan amount that I had sought to meet their asking price, but that I didn’t want to repay the personal loan over the short period of three years, so unless they had any suggestions, I was out. They replied that they were not willing to do a contract-for-deed, but I didn’t want that either.

For the next week, off and on I had panic attacks about a contract-for-deed going wrong, where I imagined being in the hospital for two months, or jail for two months, or bank auto-pay didn’t work for two months, or the sellers pretended they didn’t get the last two checks in the mail, and I lost $40K because I failed to make two monthly payments. What homeowner wouldn’t want to keep $40K in payments, AND get their house back?

Besides the panic attacks about contract-for-deed gone wrong and imagining monthly credit card payments of $1,000 per month, I realized that what I should have done, was get a personal loan from the other bank for a five-year loan for something like $17K, where the monthly loan payment would about $350. Even if I didn’t like the five-year personal loan, just get the house bought, THEN get a longer-term home-equity loan.

A local person who owns several other houses, bought the house for cash, for less than the asking price that I was trying to meet. Do you see how much of an advantage wealthy people have? Any kind of entanglement with a bank, realtor, home appraiser, or home inspector can knock every non-cash buyer out of competition for a house. California refugees who sell their houses are in this advantageous position against local buyers as well.

6 thoughts on “How I Messed Up A Home Purchase Last Week

  1. I learned this the hard way after leaving Dickinson with nothing…I didn’t even have enough cash for a down payment on a shit hole house…$40 for $200. Took me 4 years to recover from the mistake of trying to have a normal life for 6 years in Dickinson.

    This must be what it’s like to be a war veteran, you can’t explain any of your problems to anyone because they either don’t believe you or assume you are a lazy, low effort bum.

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    1. In reply to Rusty Shackleford,

      Parents, employers, peers, wives, business people, realtors, banks, chambers of commerce, pressure, lead, communicate, suggest that buying a home as soon as possible is the thing to do, good, desirable, a necessary first step towards building a life, getting ahead, advancing, building wealth.

      Because of the beliefs and attitudes about buying and owning a home, plus the teachings on buying single-family homes as investments, and “flipping houses”, the average family home price in many areas is currently 4-5 times the average person’s annual income. Looking at what an individual’s budget would have to be in order to pay for a single-family home, it’s very precarious, it’s cutting it very close, if anything goes wrong, such as sickness, an injury, losing employment, major repair on a diesel pick-up, a person could soon face losing their home to foreclosure for getting behind on mortgage payments. But so many people just go along with this, that this terrible position to be in is normalized.

      After I graduated with a B.S. in mechanical engineering, the same thing happened at my first four jobs, the employer wanted to hire me as an “engineer” on a yearly salary, Monday-Friday, 8:00 am-5:00 pm. Then, in order to maximize their profit, my work load would be that of what 1.5-2 people should be doing. Some of my co-worker engineers on salary were coming in to work early, staying at work late, and taking work home with them, this too was normalized. It was kind of insinuated that when work was not busy, engineers would be in the situation where they would work 8:00 a.m.-5:00 p.m., but if work was ever not busy, engineers got let go. It turns out, with all of the non-paid overtime hours that salaried engineers worked, they were effectively being paid $12-$14 per hour. Meanwhile, construction workers being paid $16 per hour, and receiving overtime pay, were making 1.5-2 times what engineers were being paid annually.

      I’m not trying to make you feel worse, but I am gathering that when you graduated in Civil Engineering and began working in Dickinson, you were probably on a yearly salary of $40K-$50K, but had to work about 50-60 hours per week, without any compensation for overtime. You were doing the work probably more to get started in your career and use your engineering degree, rather than it being primarily about pay. Meanwhile, at this same time in Dickinson, barely-made-it-through-high school, ADHD idiots were being paid $18 per hours, working 60-70 hours per week, and making $75K per year.

      After you spent about 6 years in college with a difficult, trying curriculum to get a degree in Civil Engineering, you were being paid $50K per year, and incompetent idiots were making $75K per year. Yes, incompetent idiots, if they didn’t show up for work for several days and got fired, the following week they would just get a different job, then if they messed something up and got fired, the next week they would get a different job. Idiots would just take each others place at the companies in Dickinson.

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  2. You are mostly correct, I was paid my hourly rate over 40, but it wasn’t enough to get ahead in this town and my base salary was $55k yearly after 6 years, others in my company actually had it worse.

    The cruelty of it, was that I made many sacrifices of time and fun throughout college and my time in Dickinson to get ahead in life and career…only to find out I barely got by and definitely fell way behind compared to my peers in other areas…people that had the same degrees, experience, and bought the same vehicles and homes that I did. My only crime was trying to be normal in Dickinson

    My company threw me away like garbage once they got their use out of me at the end of it, nobody cared.

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    1. In reply to Rusty Shackleford,

      I spent a tremendous amount of time after school, in high school, studying and doing homework, usually until 10:00 p.m.-11:00 p.m., seven hours in school, then seven hours after school. Calculus could take a couple of hours, AP English reading and writing could take a couple of hours, Latin or French an hour plus, Physics an hour plus. I graduated 1st in my high school class, but I wasn’t trying to, it was not my goal at all, I was just trying to do as well as I could.

      In the first college that I went to, where I took my General Education classes and pre-engineering classes for three years, it was nearly the same as high school for me. I spent about four non-consecutive hours in classes each day, and about seven consecutive hours outside of class studying and doing assignments each day, up until about 11:00 p.m. each day. There were many distractions at this small college, but at the time I didn’t resent these distractions very much, they were entertaining.

      By the time I was 21 years old, I transferred to the University of Florida, where I absolutely did not want to be. At the time UF had about 30,000 students. It was very cheap in-state tuition for me, though it was the most difficult and most prestigious university to get into in Florida. At UF, from the minute freshmen arrive on campus, there is a determined effort by faculty to weed-out weak people, even though everyone there graduated in the upper tier of their high school class. For freshmen and sophomore year, it’s auditorium classes with 300-500 people, no questions allowed, class admin handled by upper-level undergraduates who are not necessarily good people.

      Probably 25% of UF students were eliminated freshmen year. Probably another 15% were eliminated sophomore year. In junior year when UF students are usually in their chosen degree/major program, accountant, architecture, archeology, engineering, nursing majors were still deliberately being eliminated by faculty for weakness. By junior year at UF, these were all smart people to have gotten this far, but they were still being “weeded-out”.

      When I got to UF, I didn’t want to be there, plus the UF faculty Did Not Want Students To Be There. The faculty had to get rid of students because they didn’t have the resources to teach that many students in the very final courses, nor did they want that many students graduating into that professional field each semester, nor that many students applying to graduate school each semester. The faculty was trying to make the graduates in mechanical engineering, aerospace engineering, electrical engineering, nuclear engineering, a very exclusive group of about 40-70 students each semester.

      By the time I was 21, I was so tired of studying, so tired of doing homework, so tired of doing tedious time-consuming calculations, I couldn’t stand it any longer. Plus, the engineering faculty was still trying to get rid of people. I had about four non-consecutive hours of classes each day, but it was a long bike ride to get to each of the different buildings on campus. I spent about eight hours studying and doing homework each day outside of class, but I really needed to spend about ten hours each day. I made very bad grades, I did worse than just getting by, I had to take several courses more than once.

      In general, for each class, whether it was statics, dynamics, materials, mechanics of materials, vibrations, fluids, thermodynamics, heat transfer, electrical engineering, there would be four exams each semester. Each exam period would be 2 hours. Each exam would have four problems, that means you have 30 minutes to complete each problem. For me, each of these four problems would normally take me at least an hour to complete. There was no way that I was going to be able to complete all four problems. So even if I completed three problems completely correctly, the most I could score was 75%, it was upsetting, disheartening, and it was meant to “weed people out”.

      Quite often, though engineering problems can be very complicated to correctly calculate through to completion, the professor would pose the problem in such a manner as to make it a puzzle, inside of a riddle, inside of a trick, so that you couldn’t even understand the problem for about five minutes of trying to decipher it, further ensuring that there was no way you were going to have enough time to complete the exam.

      Many, many classmates continued to quit after four or five years of college, not because they weren’t smart enough, not because they weren’t good at engineering, they just could not make it through this deliberate attempt to make engineering classes much more difficult than they needed to be. For my last two years of engineering college, often I would get far behind, and spend 2:00 p.m. through to 7:00 a.m. the following morning, seventeen hours straight, studying to try to somehow pass an exam by some miracle. I did this over and over again for two years, struggling, and barely being able to continue.

      I graduated, but I was so disgusted and miserable, that I did not attend the graduation ceremony at UF to receive my diploma. To my knowledge, about half of the mechanical engineering graduates did not attend their graduation ceremony at UF. Some told the head of the department, I will never, ever, donate any money to the UF alumni foundation after what I had to go through.

      When I began working as an engineer, in one of my first jobs, I was on a low annual salary, and I was supposed to work from 8:00 a.m. to 5:00 p.m. But many times, through no fault of my own, when my work was completed by 3:00 p.m., there would be a change made, and in order to have everything re-done and re-calculated by the following morning, I would have to stay at work until 7:00 p.m.- 9:00 p.m. It was very much like going to college to be an engineer, you are aware that other people are socializing at happy-hour, having dinner, going to bed, while you are missing all of that, and still working, but now you are aware that you are also paid less than all of these other people too.

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  3. Those are interesting details of a cash real estate transaction in the US.

    In the European country I am resident in, all property sales must be processed by a notary (public lawyer), even if the transaction is direct cash buyer to seller. Otherwise they are legally null and void.

    The notary will of course charge a fee (to the buyer) of about 1.7% of the sale price, and report the transaction to the tax authorities, which will in turn levy a “stamp duty” (a purchase tax) of 5% of the selling price on the buyer.

    The seller has to pay tax on any profit made on the sale at their personal rate, unless they have lived in the place themselves for more than 10 years.

    Bottom line: The government and its agents in this non-US country take a fat cut out of real estate transactions even if they are cash only.

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    1. In reply to M Rovers,

      In the most simple of cash real estate purchases in the U.S., with no real estate agent involved, and no bank involved, both the seller and the buyer can agree ahead of time that no property boundary survey will be done, no professional appraisal of value will be done, no professional home inspection will be done.

      However, it is safest for the buyer to request to receive a “Warranty Deed” for the property, issued by a “Title Company”, that is a Guarantee that there are no liens whatsoever on the property such as loans, mortgages, court judgement liens, and so forth. Ownership of the property is conveyed from the seller to the buyer via the “Warranty Deed” prepared by the Title Company once they have performed an expert search of property records to verify that there are not liens on the property, nor disputed Deed or ownership of the property.

      The Warranty Deed is then recorded by the County Tax Assessors Office, and from that point on, the new owner is responsible for paying the yearly assessed property taxes. If property taxes go unpaid for more than 3 years, the property will be confiscated by the County and sold at public auction for non-payment of taxes.

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