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Buying a house in LA

Buying a House as an Expat in LA
Moving to LA, Posts

Buying a house in LA as an expat

You secured your lease, life is going along swimmingly but you think it’s time to lay down some roots.  Here’s a guide to buying a house in LA as an expat.

LA rent is not cheap.  Essentially, unlike in Australia, LA rent is the same as the owner’s mortgage payments plus property tax. In other words, you’re not getting a bargain and all you’re doing is helping them pay off their mortgage.

We loved the house we first signed up to but after a while it got too small for us. So I started looking around, even extending our search outside the 90210 postcode, and was shocked to find there was nothing around. Even increasing our budget by $2,000 didn’t get us what we were looking for in upgrading our humble abode.

Buying a house in LA

I started scouring websites looking for houses. My dream was a mid-century modern in the hills already done (or minor jobs to be done) with a pool and view.

The next thing I needed to do was see who would lend me the money.

I worked on a budget of our current rent figuring we had a decent buy price to get a house with everything we wanted.  Cheaper than rent plus it’s ours!

Armed with this I went to our bank, Citibank, to see what they could offer me.

With a 20% deposit and a very good credit rating we could get the money we need.  Excellent.

Credit rating

Credit rating in this country is a whole ‘nother beast of a topic.  But, in short, ours wasn’t very good or excellent; it was just good.

In a nutshell, from what I could gather it’s because of the way we manage our credit cards.  You see our limit is a limit we use each month that I’ve budgeted to pay off each month.  I don’t want a higher limit because we’ll use it, we’ll spend it and eat into our savings bucket. I’m happy and comfortable with what we have. But that means we actually use the credit limit we’re given.  That’s what it’s there for right? Wrong.

The powers that be in Credit rating land think we’re a red flag because we use the credit made available to us via our credit card. They don’t look at the fact that I pay it off each month (every fortnight actually).  I made a $10k purchase on my credit card (think of all the points!) and then paid it off once I was done so I could carry on charging my stuff to it.  But you could see in that month our credit rating drop down. I mean seriously, don’t they look at the next transaction, the one where we paid it off (and I’m talking that day people that day). Stupid.

You really think I’d learn my lesson.  Please learn for me.

No loan from CitiBank #fail

So, even though we showed that we paid our rent on time every month for two plus years, we had the deposit and money to spare in the bank, based solely on our credit rating CitiBank was a no go.

I threatened to move my accounts but haven’t bothered because it’s too convenient having a branch down the road.  But they don’t know that!

I speak of them with disdain instead of admiration now though.

Finding my dream LA house

After months of searching for my perfect Mid-century modern home it became clear that most of them are fixi-ups. Now, to be clear, this is our “rent replacement house” not our “forever house”. Being a rent replacement house I didn’t want a fix-up job, one where we’d have to take six months renovating it.  Defeats the purpose.

Securing a Realtor

You can scour the websites and research houses yourself but if you engage a Realtor early on in the piece they can start looking for places for you.

You see they have broker open houses and access to a clumsy but very good tool known as the MLS.  Just by entering the parameters you want in a search engine you can get houses sent to you weekly.  And, if they see a house while they’re looking, they can arrange for you to see it.  It can take a lot of time out of the hunting process.

Buying a house as an Expat

It can be done, buying a house in LA as an Expat.  But, you just need to be aware of a couple of things.

  1. The visa. Each Bank deals with different visas in different ways. Then depending on that there may or may not be different conditions.  As an E3 visa holder we were able to borrow money like a “normal” American.
  2. Deposit.  Some of the lenders I spoke to insisted on 30% because of our expat/visa status.  We did find a bank willing to give us a loan based on 20% though so do shop around.

Mortgage Broker

One of the people you need to secure, as well as a Realtor, is a Mortgage Broker.  There are mortgage brokers who represent several banks (as they are in Australia) but beware many Mortgage Brokers I spoke to represent only the one bank. From what I gather these guys are sole operators but work with a bank. You don’t have to pay them they must get a commission from the Bank.  So it’s a bit different and a bit strange because they’re not actually shopping the market looking for the best deal for you, they’re just offering you a Mortgage.

You can also go into your local branch and ask to apply for a loan as we do in Australia.  And, there are online guys which I would say be wary of.  I started filling forms in for Quicken Loans but then when I got to the last screen cancelled out yet I got calls from all these lenders/brokers and still get the occasional email from them (got one today in fact). Not happy Jan.

Putting in an offer

I know you’re dying to know if I found my dream mid-century modern home with very little to do, a pool and a view.  In short: no. Out of left field we found a house in “the flats” which was brand new, had a beautiful floorplan and a pool.

We fell in love. We did a quick change in search looked at a number of new constructions in the area but decided this was the house for us.  It was New Year’s eve when we put an offer in and our Realtor was in Europe on holiday.

“Oh no, you absolutely must put the offer in now because there’s less chance of other active bidders at this time,” she said.

So we did.

In the US offers must be writing and you need to think carefully about contingencies at this time.  That’s where your Realtor becomes like gold.  If they’re good at what they do, with experience they come up with all the ideas and you just say yay or nay.

Not to bore you but the offer process is very boring. If you’re looking for a bargain (which we were) then there will be counter offers and counter offers before you either bow out or settle on a price–don’t forget contingencies.  For example, in one of the seller’s contingencies was reducing the settlement time. We were all for it too (we wanted to move into our house and stop paying rent) but we weren’t sure how long the mortgage would take to get through.  But that became a “thing”.

And then, some sellers will use your offer to go back to interested parties to say look, we’ve got an offer do you want to put one in too.  That’s where a quasi auction happens. (They don’t have auctions here; too complex a system I suppose to be able to deal with it but you’d think auctions otherwise would be quite successful).

Even if a house is under offer or under escrow anything can happen.  It’s not until all contingencies are dropped that they’re comfortable it’s all going to be OK.  So for them it’s a trust issue. Our agent had to put the seller at ease and let them know that we want to buy the house just as badly as he wants to sell the house and we’re doing everything in our power to make sure it happens.

Much like when you’re leasing a house, as I mention in that Blog, you need an agent who you’ve developed a good working relationship with that can go into bat for you and ensure the seller the purchase is secure.  And, as soon as you’re able to drop contingencies (like inspections and securing the money) then you’re up and running.

But, expats make Americans nervous so hook up with a Realtor that understands you and the situation. We were happy with our agent because she deals with Expats all the time and understands how the system works. A big part of it is knowing what to say.

Escrow

So here there is an Escrow agency that’s used to sort through the paperwork. They co-ordinate with the Bank, their agent and your agent to settle.  Not conveyancers or lawyers like in Australia.

On the day of settlement, you don’t actually sign the mortgage at your bank, you sign it all at the Escrow’s office.

Then once the documents are all signed at Escrow the house is yours! The agent will arrange with you to meet at your house with the keys and you’re in your very own new home.

Complex system

It’s a complex system here. As I always say everything in America is an industry designed for people to be able to make a living from. You don’t pay your agent to buy your house (the commission is split 50/50 and paid for by the seller) so use one.  It might well be the only free thing you get in the US!

You don’t get a say in who you use for Escrow but they’re arbitrary anyway so it doesn’t really matter. Actually seems strange but it’s true.

Why buy?

The way I figure it even if the property doesn’t increase in value my “rent equivalent” is paying off principal AND interest. And that money is going to me, not someone else.  Interest payments are tax deductible here although there is a cap on the mortgage amount so check first. Check with your tax accountant and please don’t take my advice as financial in any way, shape or form–you’d not only be a Wally too because I’m not qualified but seriously you need to work out if it works for you.

The property tax is a bitch but the year after we bought our tax bill was much less so we figured it balanced itself out.

You see, for now at least, interest from your principal home is tax deductible.  Barry bonus but those nutbags Trump calls his party are trying to limit the amount of tax that can be claimed so watch this space.  Sounds like a socialist thing to do in my humble opinion (and you know since moving here I’ve realised I am a socialist so it’s not a dig, just fact).

Apart from all of that we’re so happy to be in our own house. If we hadn’t have bought and ended up paying more for rent it would down-right depressing.

So if you’re sick of paying rent just know it can be done.  What have you got to lose?!

Good luck!

xx It Started in LA xx

Expat tales, Posts

Two-year itch: Confessions of an Expat junkie

It’s true I’m an Expat junkie.  The only problem is I’m not that good at it.  Sure, I’m good at saying “yes” and jumping in boots and all, I’m even good at moving and making the transition.  But then reality starts to hit and I get really bad at it.

I want to be out “on the road” but then I want to be settled at home.

That’s why I haven’t written for a while…

All I seem to be doing these days is apologising. And the apology seems to be for the same thing: not writing enough. Blogging is like having a pen-pal—you’re all gung ho at first then it gets harder and harder to find time to write.

Well this time the reason I haven’t written is that I think I’ve lost my mojo. I hate being negative so like I tell the kids, “if you can’t say anything nice then don’t say it at all.” So radio silence.

Life in LA hasn’t been that bad it just hasn’t been that great. Truth be told it has nothing to do with LA and more to do with me.

Our two-year visa was nearly expired so we had to leave the US and reapply for new ones.

Another two years

There was no way we were going home after two years—after all the time it took us to get settled we need to stay at least another year.   We only lived in Shanghai for two years and we left there kicking and screaming so if we can stay then we definitely should try.

So we went back to Australia to re-apply for our visas.  I really didn’t want to go back to Australia—it was too soon. I wanted to go to see mum in Wales or check out Canada to get our visas but Mr H insisted we head home to Australia. I couldn’t argue with him: there are no holidays here at the end of year (once school starts back after summer) and we plan to travel during summer so this was the only chance we had to head home. So home we went.

I don’t know if I had it in my head that it would make me homesick but I just knew it would stuff me up. And it has damn it.

I wasn’t going to write about it. Then I thought I should. Then I didn’t know where to start. Have I really lost my way? Days and days doing everything I could to avoid blogging.

One foot in each continent

Imagine this. Get a map of the world. Here’s one.

There's a lot of land (& sea) between LA & Sydney depending on which way you look at it.

There’s a lot of land (& sea) between LA & Sydney depending on which way you look at it.

 

See there’s one pin on the US and one pin on Australia? Yep, that’s me: I’ve got one foot in each country. I’m trying to keep one foot in Sydney while trying to balance on the other foot in LA.

We agree we want to stay on and continue the adventure: Mr H is enjoying work and the kids are doing well at school; I even have a work permit now. But why can’t we let go of life in Sydney? Part of it is the fact that we moved for a new job in a different country that’s not really a posting: this is it. If we head back to Australia it’s resigning from Hollywood and securing a new job and staying there.

Your future’s where you might not necessarily want to be

We know our future is here—at least for the next few years—so why is it so hard to accept? Will our world come crashing down? I doubt it. Will we lose our friends back home? Hardly likely. Well then, why the doom and gloom and moping around? Why is it so hard?

Well we’re back to that problem of feeling unsettled—unsettled when we should totally be feeling settled. I’m not talking about feeling unsettled with friends but come back to the house—a home.

I’m a Cancerian so to feel like I’m not in my “own” house unnerves me. When we lived in Shanghai we knew we could be moved at any time, and we had the ‘expat’ package to make up for it—that and our fabulous apartment on the Bund right in the hustle and bustle of downtown Pudong, Shanghai (but close to creature expat comforts like the Shangri-la Hotel and City Shop).

But like I said we’re not about to get moved—unless we decide to move. Why did I feel more settled in Shanghai? Is it because we were in a salubrious apartment that was possibly the nicest place I am ever going to live in?  Is it because two years wasn’t long enough for us to feel unsettled?

Do you buy a house in your new country?

So that brings me back to buying a house here. It makes sense doesn’t it? It’s the great Australian dream—why pay someone else’s mortgage when you can pay off your own?

But buying a house isn’t really the problem. No, commitment is. Sure we’re committed to staying but actually using our (hoarded) money in Australia is a bigger step than I thought. Add to that the complication that taking that money out of Australia and moving it to the US means it’s not there to use to renovate our house before we head home. Uh-huh. That there is your problem.

Sounds like choices have to be made—buy a house here and feel settled or keep renting and use our money in Australia to eventually renovate our house (with plans and council approval waiting for us).   Reluctant to let go but wanting to establish some roots.

Yep, it sounds like I can’t have my cake and eat it too. Still I guess I am in LA—land of Kale & Quinoa—I shouldn’t be thinking about eating cake.

Will keep you posted but instead of feeling better, writing this post has just depressed me even more: I want to eat cake!

What does your Expat life look like? Are you on edge to see when/if you’ll be moved? Have you made the decision to move away like we have and are in limbo? Have you taken the bull by the horns and established yourself, bought your own home? Or are you somewhere in between your old home and your new one? I’d love to hear about it.

xx it Started in LA xx

Oh and by the way in case you’re a knight in shining armour or a mortgage broker who will let me use my Australian house as security deposit please get in touch with me, I’m really really worth it and I’ll be so so grateful ;-).

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