I was hoping to write about the logistics of moving and painting parties, but we just had a huge setback with our home purchase. Last Monday we did our walk-through and it went well. There were some minor things that needed to be fixed before we closed, but we were happy with what we got. I was getting excited and my husband seemed pretty happy with the place.
And then it happened…
Our closing has been delayed
While we were driving to Lowe’s to get our painting supplies, my husband got a call and learned that our closing date has been pushed back. Apparently someone in the office dropped the ball and an inspection that needed to happen didn’t, so we can’t close. The new closing date is estimated to be in January 2010!
Having gotten that news less than 48 hours from closing, and just before a major holiday, we’ve been scrambling. Besides throwing off the entire schedule for the move, we now have some financial issues to deal with. We’re supposed to be out of our apartment by December 1st.
If we want to stay, our leasing office will be more than happy to accommodate, but the rate our rent will increase (beyond our month-to-month agreement). This is outside of our budget, and represents a huge financial burden.
Since we first learned about this mess, we’ve been trying to work out a deal. In short, we want our rent and other expenses covered until the closing since it was the builder’s fault. The other options that we asked about (including taking up occupancy before closing) apparently aren’t feasible, so we’re hopeful they’ll play ball.
Of course, we’re not the only ones facing setbacks, so I wanted to review what can be done get your finances back on track when you hit a bump in the road. If you have anything to add, please share your thoughts in the comments.
Assess the damage
It’s easy to get distracted by anything and everything when you get blindsided like this. For us, we’ve tried to keep our to do list as small as possible while we worked through the problems. To do this, we’ve focused on three things to fix the mess we’re in. Boiling things down like this has has really helped us with our sanity.
- Housing: We have a few options with housing right now. We can stay in our current apartment and pay a huge amount for rent. Alternatively, we can stay with friends until we get our housing situation squared away. I don’t mind staying a week with friends, but hunting for a house will take a bit of time, and we don’t want to overstay our welcome. Finally, we can look elsewhere for an apartment with a short term lease while we house hunt. The last option looks most feasible for us.
- Storage: We have items for a two bedroom apartment including a washer and dryer. Given what we have, a 10′ x 10′ unit will suit our storage needs. Instead of unpacking and repacking, we’re storing all the items we won’t need while we look for another place. That will also allow us to a get a smaller apartment, and see if we can simplify our lives even more.
- Long term: We’re in the middle of deciding whether to hunt for some new places to buy or rent. We don’t want to rush thing, though, so (as I noted above) we’re first looking into a cheaper and smaller apartment with a short term lease.
I’ve found that I’m far more more productive if I set smaller goals like this. We took a tally of the money that would be needed for our options and we’ll be making decisions as we move along this process.
Keep your financial cushion
If you find yourself relying on your emergency fund during tough times, you should try to make it last as long as possible. While some people may be tempted to keep their lifestyle the same while they’re living off their savings, it’s smarter to cut back on things, at least until you get back on your feet.
I’d also suggest looking for ways to generated extra income with either a side job, yard sale, or a passive income stream. My income from freelance writing is going entirely toward savings until we have this sorted out.
We don’t want to dip into our emergency fund for this situation, as we want a cushion for when we do finally become homeowners. Dipping too deeply into your savings to buy a home puts you in a dangerous predicament.
We’ve tucked away our money (closing costs and emergency fund) in a high yields savings account where we won’t be tempted to spend it. Creating small barriers like this can help you to avoid spending your emergency funds so you’ll have a solid financial cushion for when you do have an emergency.
Refocus your efforts
Sometimes you can use setbacks and rejections as motivation to move ahead and succeed. We’re using the to-do list that I wrote about above as a guideline for getting through this. Our plan is to just make the best of things, and we’ve already noticed some nice new properties that have become available in the last few months.
We’re thinking positive, thanks in large part to support that we’ve received. I think it will work out alright in the end. Who knows, this could all be a blessing in disguise. We might hear from the builder before this article is published, in which case I’ll post an update in the comments.
What would you do?
Have you ever been in a similar predicament? If so, do you have any advice for us? How did you work through it? More generally, how have you dealt with financial setbacks?
9 Responses to “Handling Financial Setbacks”
Laura, I’m glad you have gotten some feedback. Fingers crossed that they will work with you, as it IS their fault!
I’ve been stuck between two homes before, and it sucked a lot!
Got in a housing jam, moved in with relatives, spread house contents into 6 or 7 basements, until it was solved.
john DeFlumeri Jr
Thanks for the tips. We received a call this evening that seems to indicate they are willing to work with us. I’m not one for playing games, so I’m not holding my breath. Either way, we’re making a final decision Thursday and just moving on.
It seems to me that, since you are looking at a maximum of 8 weeks on the exorbitant month-to-month rental rate, it could be better to do that rather than incur the expense of storage and moving AND walking away from any non-recoverable closing costs (inspections, appraisal, application fees, etc.) on the orginal house. Unless you really don’t want that house now, it seems you’d be better off sitting tight and going through with the purchase in January.
At the very least, be sure to quantify the cost of moving and abandoning the purchase and weigh it against the extra rent you pay if you stay put past December 1.
There are the lower status motels that rent by the week or month. Wouldn’t want to do really long term there but it will do in a pinch.
@Laura: Finding a short-term rental may be harder than you thing. Another option could be something like an Extended Stay of America hotel.
@Marc: My last apartment (and current one too) both have a 60-day notice… and when I was job hunting (and expecting to move) there was no choice but to pay rent for two apartments for two months when I accepted my job. Sucked. It’s simply a money-grab from apartments these days, and they know it.
This might be one of those moments where lemons could be turned into lemonade.
Though I’m sure there are other work and personal commitments that you might have there, this might be a time to take an adventure. Visit family for an extended period over the holidays. Take a roadtrip and stay with friends all over the place.
If you look at the upside, you have everything that you own packed up and you are in a transition stage. As with changing jobs, this transition stage is where a lot of living can happen with limited barriers. I would suggest putting your stuff in a cheap storage locker and getting out some.
On a side note, I hope that this post is a reminder to your readers that you can never be too cautious with life changes. I have been caught many times paying rent at more than one place or having no place at all because I didn’t plan ahead. In your case, you probably should have planned ahead of time to have at least a month overlap between owning your house and renting. That way a move isn’t rushed and you aren’t buying paint supplies for a house you do not own yet.
To those that might think that idea is not financially responsible and couldn’t fit into a budget, I say that it is not a budgeted expense but one that you should save for. Like the home downpayment, the total costs of the move should have been saved for as well.
Finally, what I have done in similar situations is go to my credit union and take out a low interest loan to cover expenses with a cushion in case more goes wrong. That way the financial risks during this time could be mitigated over a longer period of time as opposed to right now. Plus you can pay it down at your own pace.
Laura – Know that in the end, everything will work out for the best, and you will find an even better home!
Why not pay your friends the amount you would have paid in rent to live? I’m sure first your friends wouldn’t mind you guys crashing for a week, and they will probably decline your monetary aspect. Instead, INSIST on it, and they will oblige and feel that much better too.
Not sure where you guys live,perhaps you can look up some month to month rentals on craigslist? I’m in Atlanta and they have cheap housing in nice neighborhoods. Good luck!