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Buying From the Bank

Photography by Patrick O’Connor

(page 1 of 2)

I didn’t set out to buy a house in foreclosure. After moving to Providence last year, I was simply looking for a home. But within a short time, I found myself in negotiations with a bank, not a homeowner. It wasn’t a difficult process, thanks in large part to a great realtor, although it was a long one—three months passed between the day I made an offer and the first night I spent there with my family.

Those months were spent staying in friends’ guest rooms, hunting for discount furniture and patting myself on the back. Buying a foreclosed home carries a certain cachet, you see. I’d tell people and they’d look at me as if I was more astute than they’d first assumed, possibly even some sort of real estate shark.

Of course I’m anything but. I completely failed to time the market; it’s continued to sink since I closed last summer. While my area has proven slightly more resistant to plummeting prices than some other parts of the state, there’s a chance I, like many thousands of others, will be underwater by the end of the year. I committed several real estate faux pas, such as buying close to busy businesses with late hours, and buying a single-family surrounded by multis, instead of the other way around. I looked at only a few houses, and failed to drive as hard a bargain as I should have. I wanted it and wanted it right away, which isn’t the way to keep a cool business head.

And I can say that even the place’s failings have had advantages, for me at least. The owner of one business across the street keeps an eye on the property and sends his sons over to help with heavy lifting. The small footprint means less time cleaning and lower heating bills; the urban setting means being able to walk everywhere. And the sight of my little brown cottage, set amongst the taller houses around it, always makes me feel like I’m coming home to someplace cozy, my own log cabin in the urban woods.

All this would have seemed so foreign more than a year ago when, following job interviews in Providence, I would sit up late in the quiet house in the quiet little town I lived in, succumbing to obsessive search binges on riliving.com. I was trying to balance decent public schools with the length of the commute to my new workplace, and there didn’t seem to be much in Rhode Island I could afford. But although it left me bleary-eyed and anxious, I couldn’t stop. When I’d find myself mooning over multi-million-dollar estates in Jamestown, I’d know it was time to turn off the computer and go to bed.

Back then, we were near the beginning of a cycle that has loaded the state’s real estate inventory with foreclosed homes. My house was part of that. While I was filling out job applications in the fall of 2007, the bank was in the process of claiming it from the previous owner. He’d purchased it back in the heady days of 2005, then refinanced and spent a couple of years remodeling, doing most of the work himself. He put it back on the market for double what he’d paid, more than $300,000, but there were no takers. He moved out and rented it, hoping to ride out the downturn. Then disaster struck: After a few months, the family that moved in couldn’t make rent. By the time he evicted them, he was behind on his payments. It was too late.

By early 2008, when I accepted a job offer, the house was empty and cold. Way too cold. Something stupid had happened: The heat had been turned off, but no one had winterized the place. Throughout Providence, copper was being stolen from vacant buildings. But in this one, the copper pipes simply froze.

As the weather thawed that year, Providence Water Company noticed an anomaly. The house was consuming huge amounts of water through pipes that had burst in more than a dozen places. By the time it got turned off, the deluge had brought down large portions of the ceilings. The wooden floors had warped, and most of the light fixtures had shorted out. Mold had started to grow.

The first time I spotted it on riliving.com, it was out of my price range despite the mess (and described as a “great value for investor willing to do work”). It was also listed as being in a fairly undesirable neighborhood. I didn’t bother following up.

As the real estate market, like the spring weather, started to go south, I called a realtor who’d been recommended to me, Gemma Fabris at Coldwell Banker. She talked about long-term investments, neighborhoods with staying power and finding an environment that would suit me (apparently the East Greenwich suburbs probably wouldn’t), then sent me out to scope my first houses, all on or near Providence’s East Side. At first blush, a cute little cottage in Oak Hill was the easy winner. But when I looked at the numbers more closely, I realized it was a stretch. My mortgage broker said I would qualify for the loan, but the more I thought about the monthly payments, the more uncomfortable I became.

Another house, a two-family close by, was nearly the same price but seemed like a better deal given the potential for ren-tal income. But the thought of the upkeep had me worried, and it needed a little work. Not as much as the three-family down in Fox Point that had clearly been used as a slum student rental. A big old house a little too close to the highway, it featured stand-alone gas heaters bolted to the floor in one room of each apartment, ancient windows and dramatic paint colors that didn’t make up for the cold drafts. Only with a large pool of students to draw from could a landlord have gotten away with it. It would need a good $100,000 in work, and tenants willing to rent parking spaces elsewhere. No way.

At a small cottage in Mount Pleasant, dogs in the yard next door barked incessantly, not surprising given that no one seemed to pick up after them. Another house nearby had a cute backyard but a cramped, outdated kitchen and very little natural light. Nothing was less than $200,000, my upper limit.

Then the price on a tiny three-bedroom dropped for the second time in a month, and my realtor met me there to look inside. When we entered, I realized it was the place I’d seen on the Internet a few months before; the location was for some reason listed wrongly. In fact, it was in a fairly nice neighborhood, not overly pretty but convenient and lively. The floor was covered in ceiling plaster and there was a pervasive smell of mildew, but it was bright and sunny with new windows, a new furnace, and a newly remodeled kitchen with funky leopard-like marble counters.