up in the middle of the night in a cold sweat and thinking: Weâre sinking $200,000 into what ? Finallyâthis is the tricky partâheâll want assurance that the finished house will be worth what it cost to restore it, or more precisely, worth the value of the outstanding loans.
For us this was no sure thing. Weâd purchased the house with a $200,000 mortgage. The architects estimated that renovation would cost $250,000 if nothing went wrong. Comparable houses in the neighborhood (Nedâs, for example) typically sold at the time for far less than $450,000. Luckily, one gut rehab in the vicinity had been completed and sold prior to our arrivalâanother Queen Anne a block away. Initially, we were told, the owner had put it on the market for $650,000. One hopes this didnât represent the actual amount of money invested in the property, because there had been no takers. The owner had been obliged to reduce the price sharply, eventually striking a deal at $456,000. Allowances having been made for differences in size and finishes, that figure established the upper limit of the financing we could obtain for the Barn House.
This is a point worth enlarging on. In fixing up an old city house, the chief lending constraint wasnât so much what you could afford personally (although naturally that entered into it), but rather what the neighborhood would support. Trouble was, a city house commonly was such a shuddering wreck that the obtainable funds undershot what was needed by a hilarious margin. The Barn House required reconstruction of the most fundamental sortâI-beams! Roof! Walls! We had of course included the more conspicuous repairs in our cost estimates, butâI blush to confess itâweâd left other items out. For example, Iâd have been hard put to come up with a persuasive riposte had some keen-eyed loan officer sat down with me and asked: So, this houseâwere you thinking of having doors? The numb fact was that the money we expected to have at our disposal wouldnât suffice to complete the job, and we were gambling that more would magically materialize at timely intervals en route. Anyone who embarked on a large-scale city rehab in those days can no doubt tell a comparable tale. The bank, one suspects, wasnât entirely oblivious to the implacable fiscal facts and, notwithstanding its appetite for documents, simply took a great deal on faith. I know we did (or anyway I didâI hadnât explained to Mary in detail about the loose ends in the budget). One had the sensation throughout the projectâand bear in mind, this was above and beyond the usual concerns about tradesmanly competence and schedule slippage and so onâof careening down a mountain road in a car without brakes, having no definite notion of what lay ahead and no certainty of success, knowing only that, the frantic descent having commenced, there was no alternative but to continueâand this in a race that went on for years.
We encountered one unexpected obstacle early onâthe matter of insurance. The bank wanted to see a copy of a valid hazard insurance policy with a liability limit of at least $1 million. What heart-stopping disaster would run to that kind of money I didnât care to contemplate, but the amount wasnât the issue. Rather, it was this: Our regular carrier refused to insure a house that was unoccupied. We explained that we couldnât occupy the house; we were renovating it. This concept proved difficult for the agent to grasp. His was a suburban company; his idea of home renovation was recarpeting the guest room. A house so far gone that you couldnât live in it while working on it was beyond his comprehension. We had several exasperating conversations; it was like explaining quantum mechanics to a sheep. We hunted around and found another carrier. The carrier sent out an inspector. More problems. The company would only insure the house if we replaced