For several years I found that this topic was too “controversial” to bring up in a professional or even in a personal setting sometimes in Oklahoma. With so much of our industry being based around the energy sector I found that people just really didn’t want to talk about this. To be frank, this rhetoric seemed to be coming out of the far left, and we are a very (perhaps the most) conservative state. However, over the last few years it seems that Oklahomans regardless of political ideology have found themselves becoming more and more afraid that this storyline that came from the liberal media might actually have a leg to stand on – but ironically a less stable ground for that leg to stand and build homes on.
As I am no expert on seismology, or plate tectonics, or energy that isn’t coffee, I will refrain from too much speculation on what exactly is happening. With that said, I do know that I have been hearing on a regular basis in the Real Estate industry that we have a problem on our hands, and that insurance companies are declaring these quakes to be man-made and thus homeowners are likely to have no options of insurability against them… Most of my friends, family, clients (who are also my friends) seem to avoid politics and their dirty influences altogether – but potentially facing foundation problems that they won’t be insurable might be something worth at least having a conversation about. Having been a part of renovating and buying/selling houses over the last few years I can say that one of the big ticket items that has caused a lot of people to spend money that they aren’t able to get back on resale is foundation repair – buyers assume that the house wouldn’t be sinking into the earth, but maybe that will be changing in Oklahoma…
Again, I am not intending to lead a revolution, but the lack of a meaningful conversation has caused me to ask what I’m going to do when my home has damage, or whether or not this could affect my job security. I feel like the risk of tornadoes is plenty to worry about, and many homes are adding tornado shelters, so I’d really prefer that we not have to deal with earthquakes if we don’t have to… Since I’m not the expert on earthquakes maybe I’ll just keep trying to read and converse with others about what should happen, but I am not sure that most of us can afford to wait much longer on this conversation about needed changes to begin. If you know something that I don’t know about this please do fill me in.
Late on a Saturday evening in November 2011, Sandra Ladra was reclining in a chair in her living room in Prague, Oklahoma, watching television with her family. Suddenly, the house started to shake, and rocks began to fall off her stone-faced fireplace, onto the floor and into Ladra’s lap, onto her legs, and causing significant injuries that required immediate medical treatment.
The first tremor that shook Ladra’s home was a magnitude-5.0 earthquake, an unusual event in what used to be a relatively calm state, seismically speaking. Two more struck the area over the next two days. More noteworthy, though, are her claims that the events were manmade. In a petition filed in the Lincoln County District Court, she alleges that the earthquake was the direct result of the actions of two energy companies, New Dominion and Spress Oil Company, that had injected wastewater fluids deep underground in the area.
Ladra’s claim is not as preposterous as it may seem. Scientists have recognized since the 1960s that humans can cause earthquakes by injecting fluids at high pressure into the ground. This was first established near Denver, Colorado, at the federal chemical weapons manufacturing facility known as the Rocky Mountain Arsenal. Faced with the thorny issue of how to get rid of the arsenal’s chemical waste, the U.S. Army drilled a 12,044-feet-deep disposal well and began routinely injecting wastewater into it in March 1962.
Less than seven weeks later, earthquakes were reported in the area, a region that had last felt an earthquake in 1882. Although the Army initially denied any link, when geologist David Evans demonstrated a strong correlation between the Arsenal’s average injection rate and the frequency of earthquakes, the Army agreed to halt its injections.
Since then direct measurements, hydrologic modeling, and other studies have shown that earthquakes like those at the Rocky Mountain Arsenal occur when injection increases the fluid pressure in the pores and fractures of rocks or soil. By reducing the frictional force that resists fault slip, the increased pore pressure can lubricate preexisting faults. This increase alters the ambient stress level, potentially triggering earthquakes on favorably oriented faults.
Although injection-induced earthquakes have become commonplace across broad swaths of the central and eastern U.S over the last few years, building codes—and the national seismic hazard maps used to update them—don’t currently take this increased hazard into account. Meanwhile, nagging questions—such as how to definitively diagnose an induced earthquake, whether manmade quakes will continue to increase in size, and how to judge whether mitigation measures are effective—have regulators, industry, and the public on shaky ground.
Surge in Seismicity
The quake that shook Ladra’s home is one example of the dramatic increase in seismicity that began across the central and eastern U.S. in 2001. Once considered geologically stable, the midcontinent has grown increasingly feisty, recording an 11-fold increase in the number of quakes between 2008 and 2011 compared with the previous 31 years, according to a study published in Geologyin 2013.
The increase has been especially dramatic in Oklahoma, which in 2014 recorded 585 earthquakes of magnitude 3.0 or greater—more than in the previous 35 years combined. “The increase in seismicity is huge relative to the past,” says Randy Keller, who retired in December after serving for seven years as the director of the Oklahoma Geological Survey (OGS).
Yesterday, Oklahoma finally acknowledged that the uptick in earthquakes is likely due to wastewater disposal. “The Oklahoma Geological Survey has determined that the majority of recent earthquakes in central and north-central Oklahoma are very likely triggered by the injection of produced water in disposal wells,” the state reported on a new website. While the admission is an about-face for the government, which had previously questioned any link between the two, it doesn’t coincide with any new regulations intended to stop the earthquakes or improve building codes to cope with the tremors. For now, residents of Oklahoma may be just as vulnerable as they have been.
*This live-updated map shows all earthquakes magnitude 2.5 and greater for the last 30 days.
This surge in seismicity has been accompanied by a spike in the number of injection wells and the corresponding amount of wastewater disposed via those wells. According to the Railroad Commission of Texas, underground wastewater injection in Texas increased from 46 million barrels in 2005 to nearly 3.5 billion barrels in 2011. Much of that fluid has been injected in the Dallas area, where prior to 2008, only one possible earthquake large enough to be noticed by people had occurred in recorded history. Since 2008, the U.S. Geological Survey (USGS) has documented over 120 quakes in the area.
The increase in injection wells is due in large part to the rapid expansion of the shale-gas industry, which has unlocked vast new supplies of natural gas and oil that would otherwise be trapped in impermeable shale formations. The oil and gas is released by a process known as fracking, which injects a mix of water, chemicals, and sand at high enough pressure to fracture the surrounding rock, forming cracks through which the hydrocarbons, mixed with large volumes of fluid, can flow. The resulting mixture is pumped to the surface, where the hydrocarbons are separated out, leaving behind billions of gallons of wastewater, much of which is injected back underground.
Many scientists, including Keller, believe there is a correlation between the two increases. “It’s hard to look at where the earthquakes are, and where the injection wells are, and not conclude there’s got to be some connection,” he says. Rex Buchanan, interim director of the Kansas Geological Survey (KGS), agrees there’s a correlation for most of the recent tremors in his state. “Certainly we’re seeing a huge spike in earthquakes in an area where we’ve also got big disposal wells,” he says. But there have been other earthquakes whose cause “we’re just not sure about,” Buchanan says.
Diagnosing an Earthquake
Buchanan’s uncertainty stems in part from the fact that determining whether a specific earthquake was natural or induced by human activity is highly controversial. Yet this is the fundamental scientific question at the core of Ladra’s lawsuit and dozens of similar cases that have been filed across the heartland over the last few years. Beyond assessing legal liability, this determination is also important for assessing potential seismic hazard as well as for developing effective methods of mitigation.
One reason it’s difficult to assess whether a given earthquake was human-induced is that both types of earthquakes look similar on seismograms; they can’t be distinguished by casual observation. A second is that manmade earthquakes are unusual events; only about 0.1 percent of injection wells in the U.S. have been linked to induced earthquakes large enough to be felt, according to Arthur McGarr, a geologist at the USGS Earthquake Science Center. Finally, scientists have comparatively few unambiguous examples of induced earthquakes. That makes it difficult to create a yardstick against which potential “suspects” can be compared. Like a team of doctors attempting to diagnose a rare disease, scientists must examine all the “symptoms” of an earthquake to make the best possible pronouncement.
To accomplish this, two University of Texas seismologists developed a checklist of seven “yes” and “no” questions that focus on four key characteristics: the area’s background seismicity, the proximity of an earthquake to an active injection well, the timing of the seismicity relative to the onset of injection, and the injection practices. Ultimately, “if an injection activity and an earthquake sequence correlate in space and time, with no known previous earthquake activity in the area, the earthquakes were likely induced,” wrote McGarr and co-authors inScience earlier this year.
*waste arrives by tanker truck at a wastewater disposal facility near Platteville, Colorado.
These criteria, however, remain open to interpretation, as the Prague example illustrates. Ladra’s petition cites three scientific studies that have linked the increase in seismicity in central Oklahoma to wastewater injection operations. ACornell University-led study, which specifically examined the earthquake in which Ladra claims she was injured, concluded that event began within about 200 meters of active injection wells—closely correlating in space—and was therefore induced.
In a March 2013 written statement, the OGS had concluded that this earthquake was the result of natural causes, as were two subsequent tremors that shook Prague over the next few days. The second earthquake, a magnitude-5.7 event that struck less than 24 hours later, was the largest earthquake ever recorded in Oklahoma.
The controversy hinged on several of the “symptoms,” including the timing of the seismicity. Prior to the Prague sequence, scientists believed that a lag time of weeks to months between the initiation of injection and the onset of seismicity was typical. But in Prague, the fluid injection has been occurring for nearly 20 years. The OGS therefore concluded that there was no clear temporal correlation. By contrast, the Cornell researchers decided that the diagnostic time scale of induced seismicity needs to be reconsidered.
Another key issue that has been raised by the OGS is that of background seismicity. Oklahoma has experienced relatively large earthquakes in the past, including a magnitude-5.0 event that occurred in 1952 and more than 10 earthquakes of magnitude 4.0 or greater since then, so the Prague sequence was hardly the first bout of shaking in the region.
The uncertainty associated with both these characteristics places the Prague earthquakes in an uncomfortable middle ground between earthquakes that are “clearly not induced” and “clearly induced” on the University of Texas checklist, making a definitive diagnosis unlikely. Meanwhile, the increasing frequency of earthquakes across the midcontinent and the significant size of the Prague earthquakes are causing scientists to rethink the region’s potential seismic hazard.
Is the Public at Risk?
Earthquake hazard is a function of multiple factors, including event magnitude and depth, recurrence interval, and the material through which the seismic waves propagate. These data are incorporated into calculations the USGS uses to generate the National Seismic Hazard Maps.
Updated every six years, these maps indicate the potential for severe ground shaking across the country over a 50-year period and are used to set design standards for earthquake-resistant construction. The maps influence decisions about building codes, insurance rates, and disaster management strategies, with a combined estimated economic impact totaling hundreds of billions of dollars per year.
When the latest version of the maps was released in July, the USGS intentionally excluded the hazard from manmade earthquakes. Part of the reason was the timing, according to Nicolas Luco, a research structural engineer at the USGS. The maps are released on a schedule that dovetails with building code revisions, so they couldn’t delay the charts even though the induced seismicity update wasn’t ready, he says.
Such changes, however, may take years to implement. Luco notes that the building code revisions based upon the previous version of the USGS hazard maps, released in 2008, just became law in California in 2014, a six-year lag in one of the most seismically-threatened states in the country.
Instead, the USGS is currently developing a separate procedure, which they call a hazard model, to account for the hazard associated with induced seismicity. The new model may raise the earthquake hazard level substantially in some parts of the U.S. where it has previously been quite low, according to McGarr. But there are still open questions about how to account for induced seismicity in maps of earthquake shaking and in building codes, Luco says.
McGarr believes that the new hazard calculations will result in more rigorous building codes for earthquake-resistant construction and that adhering to these changes will affect the construction as well as the oil, gas, and wastewater injection industries. “Unlike natural earthquakes, induced earthquakes are caused by man, not nature, and so the oil and gas industry may be required to provide at least some of the funds needed to accommodate the revised building codes,” he says.
But Luco says it may not make sense to incorporate the induced seismicity hazard, which can change from year to year, into building codes that are updated every six years. Over-engineering is also a concern due to the transient nature of induced seismicity. “Engineering to a standard of earthquake hazard that could go away, that drives up cost,” says Justin Rubinstein, a seismologist with the USGS Earthquake Science Center. A further complication, according to Luco, is that building code changes only govern new construction, so they don’t upgrade vulnerable existing structures, for which retrofit is generally not mandatory.
The occurrence of induced earthquakes clearly compounds the risk to the public. “The risk is higher. The question is, how much higher?” Luco asks. Building codes are designed to limit the risk of casualties associated with building collapse—“and that usually means bigger earthquakes,” he says. So the critical question, according to Luco, is, “Can we can get a really large induced earthquake that could cause building collapses?”
Others are wondering the same thing. “Is it all leading up to a bigger one?” asks Keller, former director of the OGS. “I don’t think it’s clear that it is, but it’s not clear that it isn’t, either,” he says. Recalling a magnitude-4.8 tremor that shook southern Kansas in November, KGS’ Buchanan agrees. “I don’t think there’s any reason to believe that these things are going to magically stop at that magnitude,” he says.
Coping with Quakes
After assessing how much the risk to the public has increased, our society must decide upon the best way to cope with human-induced earthquakes. A common regulatory approach, one which Oklahoma has adopted, has been to implement “traffic light” control systems. Normal injection can proceed under a green light, but if induced earthquakes begin to occur, the light changes to yellow, at which point the operator must reduce the volume, rate of injection, or both to avoid triggering larger events. If larger earthquakes strike, the light turns red, and further injection is prohibited. Such systems have recently been implemented in Oklahoma, Colorado, and Texas.
But how will we know if these systems are effective? The largest Rocky Mountain Arsenal-related earthquakes, three events between magnitudes 5.0 and 5.5, all occurred more than a year after injection had ceased, so it’s unclear for how long the systems should be evaluated. Their long-term effectiveness is also uncertain because the ability to control the seismic hazard decreases over time as the pore pressure effects move away from the well, according to Shemin Ge, a hydrogeologist at the University of Colorado, Boulder.
Traffic light systems also rely on robust seismic monitoring networks that can detect the initial, very small injection-induced earthquakes, according to Ge. To identify hazards while there is still sufficient time to take corrective action, it’s ideal to identify events of magnitude 2.0 or less, wrote McGarr and his co-authors in Science. However, the current detection threshold across much of the contiguous U.S. is magnitude 3.0, he says.
Kansas is about to implement a mitigation approach that focuses on reducing injection in multiple wells across areas believed to be underlain by faults, rather than focusing on individual wells, according to Buchanan. He already acknowledges that it will be difficult to assess the success of this new approach because in the past, the KGS has observed reductions in earthquake activity when no action has been taken. “How do you tease apart what works and what doesn’t when you get all this variability in the system?” he asks.
This climate of uncertainty leaves regulators, industry, and the public on shaky ground. As Ladra’s case progresses, the judicial system will decide if two energy companies are to blame for the quake that damaged her home. But it’s our society that must ultimately decide how, and even if, we should cope with manmade quakes, and what level of risk we’re willing to accept.
Oh Noooo! Wes Moore is someone who I’ve admired for a while, and he will be in Norman, Oklahoma tomorrow!!! However I will have to miss this talk due to a prior obligation to attend a cross-industry event for Real Estate called OwnOK (which I am also very excited about!). Wes will be speaking on Thursday, February 12th at 1:30 p.m., in Meacham Auditorium (which is located on Asp. in the Student Union of OU’s campus). Intellectual conversations are often hijacked by political agendas, and thus not many people can speak to the greater population of our society. Mr. Moore is someone who has proven to be a thoughtful, interesting, and a patriot. If you are capable I encourage you to go to this event tomorrow.
Here’s a powerful TED Talk from Wes on how to speak to veterans about war:
Army Combat Veteran, National Best-Selling Author and Social Entrepreneur WES MOORE to speak on campus
The Jeannine Rainbolt College of Education’s Cathey Simmons Humphreys Distinguished Education Lecture Series featuring Wes Moore will be Thursday, Feb. 12 at 1:30 p.m. in Meacham Auditorium, Oklahoma Memorial Union, 900 Asp Ave., Norman, Okla. A reception will follow.
There is a website that I was introduced to not very long ago called “The Art of Manliness”, and it turns out that I like it more than I thought I would. I figured that it would be a site written about how to convince yourself that you’re tougher, and cooler than everyone else. It’s actually rather thoughtful, and it’s focus is to teach men how to live strategically, and purposefully – which I think is great in a world where men often seem overly insular. With that said, this article is not specifically written with men in mind. It’s actually written by a couple named Kate and Brett McKay
This article is about what it takes to buy a house from a layman’s perspective. One of the key portions of the article is when it talks about the advantages and costs of using a buyer’s agent (allowing a Realtor® to help you find and buy a house). There are a 2 main points about this that I would like for people to understand: Realtors® are paid by the seller normally, Looking for and investigating a house on your own can be tedious. Having an advocate who understands the market can be a very good thing, especially if you don’t already know a lot about the industry and have a lot of spare time. This article was written by someone who is not a Real Estate professional, and for that reason I thought it was worth sharing. The article is very honest and straightforward. Please feel free to like, comment, or share – it’s always more fun to have a conversation when there are other people talking too 🙂
If you think that you might be ready to start looking for a house the first thing that you need to do is get your finances in order. There is a mortgage calculator at the top of this page (unless if you are on a mobile device, and then it will be found at the bottom of the page), so feel free to start there and play for a minute. Then you should talk to a lender – talking to a lender is your very first real step. Ok, I’ll stop, but I do encourage you to read this article.
Roadmap to Buying Your First Home | The Art of Manliness
by Brett & Kate Mckay
Almost two years ago, I became a homeowner.
I had no idea what I was getting myself into when Kate and I decided we were ready to buy a home. I naively thought there wouldn’t be much to it. Visit some open houses, talk to the bank, sign some papers, and boom, I’d have a piece of the American Dream.
Boy, was I wrong.
Buying a home is a complicated, multi-step process. Down the road we plan to devote entire posts to many of the steps along the way. Today, however, we’ve set out to provide you with the big picture of what to expect when buying your first home. It’s basically the roadmap I wish I had when I was neck-deep in the process.
It should be noted that each state (and country) has vastly different laws regarding real estate. This is a rough idea of the process, but especially when it gets to working with realtors, making offers, and the closing process, things can look quite different. Research you own state’s or country’s processes.
Determine If Buying Is Right for You
Before you start attending open houses and munching on free cucumber sandwiches, you need to figure out if buying a home is even the right move for you. It’s a big decision that comes with huge time and financial commitments. When figuring out whether buying makes sense right now in your life, take into account your finances as well as your future plans. For help in thinking through the pros and cons, check out our guide on whether you should buy a home or rent.
Get Your Financial House in Order
Once you decide to move forward, it’s time to get your financial house in order to prepare for buying a physical one. Here are some things to consider doing:
Start saving for a down payment. If you haven’t already, start saving for a down payment on your mortgage. Most traditional mortgage brokers require that you have at least a 20% down payment to qualify for a mortgage. Even if you’re able to secure a Federal Housing Administration loan (FHA loan – for first-time home buyers only), you’ll still need to have at least a 3.5% down payment (some loans will require a 5% down payment. For a $250,000 mortgage, that means you’ll need at least $8,500 in the bank, and that doesn’t include all the other costs that go along with buying a home, as we’ll find out later. That’s nothing to sniff at. Start saving today.
Get a copy of your credit report and credit scores. When a bank decides whether to loan you money for a home, one of the things it’s going to look at is your history as a borrower. They want to know that they can trust you to pay back this massive amount of money they’re about to give you. To determine whether you’re creditworthy, the bank or mortgage broker is going to look at your credit report and credit score. Before the banks pull your report and score, it’s a good idea to take a look at them yourself to ensure that there aren’t any errors that could hurt your chances for securing a mortgage. Errors to look for include accounts that don’t belong to you, wrong addresses, incorrect payment status, and remedied delinquencies not reported as such. If you find any errors, take action to correct them as quickly as possible as they can sometimes take a long time (and be nigh near impossible) to fix.
If you don’t have any errors on your credit report, but your credit score isn’t that hot, start taking steps to improve it like paying your bills on time and reducing the amount of debt you owe.
Gather financial documents. When you apply for a home mortgage, your financial life is going to be put under a microscope. You’ll have to provide enough documentation to prove that you’re financially capable of paying back a large loan. I wish I had done this step earlier in the process and not waited until I was actually applying for a loan. Despite having most of my financial documents digitized, it was still a chore corralling them together. Below are the documents you’ll likely need when applying for a mortgage:
W2 statements (or 1099 income statements) for the last two years
Federal tax returns for the last two years
Bank statements for the last few months
Recent pay stubs and proof of other income
Proof of investment income
Get pre-qualified for a loan. Call up your bank and ask to get pre-qualified for a loan. When you get pre-qualified for a loan a bank takes a cursory look at your financial status and tells you whether you’d be able to qualify, and if so, roughly how much of a mortgage you can get. This can give you a rough idea of how much house you can afford when you’re out looking. Getting pre-qualified is quick and easy. You can usually do it over the phone or even online. One important thing to understand is that getting pre-qualified for a loan doesn’t guarantee that you’ll actually get a mortgage for the amount the bank pre-qualifies you for. That number can change as the mortgage broker takes a deeper look at your finances. Again, it’s a rough estimate.
Start Shopping for a Mortgage
One thing I wish Kate and I had done earlier in our home buying process was shopping for a mortgage. While we were pre-qualified, we didn’t start mortgage shopping until we actually found the home we wanted. There are a few advantages to starting the mortgage shopping process sooner rather than later, like negotiating a better mortgage rate or getting pre-approved (which is different than being pre-qualified – read on) for a loan. When it comes to picking a mortgage, we could write several posts about it (and we will in the future), but for now, let’s move on with the big-picture overview.
Where to get a mortgage.
Start your mortgage shopping with your personal bank or credit union. They often offer good rates for long-time customers. But don’t stop there. Hop online and use a web-based mortgage rate finder like Bankrate.com. You’ll find dozens of mortgage brokers to choose from. It’s worth considering local institutions as well versus just big banks. As with anything, they often provide a personal touch of service that you won’t find elsewhere. If you decide to work with a realtor, they’ll also often have good recommendations or lenders they routinely work with.
What type of mortgage is right for you?
You have several choices when it comes to picking out a mortgage. Each type has their pros and cons.
Fixed-rate vs. adjustable-rate loans. The most common type of mortgage is a fixed-rate mortgage. With a fixed-rate loan, the rate stays the same over the life of the loan. The big pro with fixed-rate loans is the peace of mind that comes with knowing that your monthly mortgage payments won’t fluctuate dramatically from year to year.
On the other hand, adjustable rate mortgages, or ARMs as they’re often called, have an interest rate that changes based on what happens to interest rates in the economy as a whole, which can be good or bad. If interest rates drop, your mortgage payment should drop. But if they go up, your payment can quickly get out of hand. ARMs are tempting for first-time home buyers because their initial rates are lower. And because monthly payments on ARMs are typically lower at the beginning of the life of the loan, they can also be easier to qualify for. The problem with ARMs is that you’re taking a big gamble. If interest rates go up, you may end up paying much more than if you had gone with a fixed-rate mortgage.
30-year vs. 15-year. This refers to the number of years it takes to pay off the mortgage. 30-year mortgages are the easiest to qualify for and are the most common. 15-year mortgages are much harder to qualify for and have higher monthly payments because you’re paying off the house in half the time. The obvious benefit is that you pay off the loan and build equity faster than you would with a 30-year mortgage. If you have a goal to pay off your home as quickly as possible, just get a 30-year mortgage and pay extra. Making just one extra payment per year on a 30-year mortgage can reduce the life of the loan by five years. If you ever have to cut back on mortgage payments, you won’t be stuck with the high minimum monthly payments that come with 15-year mortgages. Just make sure you get a 30-year mortgage that doesn’t have prepayment penalties.
Balloon mortgages. Stay away from them. The way they work is that you make small monthly payments for a fixed number of years — usually five to seven — and then you’re required to pay off the loan in one giant lump sum. Balloon mortgages got a lot of homeowners in financial trouble during our recent housing crisis. Folks who thought they’d be able to sell their homes before the lump sum came due were stuck in homes they couldn’t find a buyer for. Consequently, they couldn’t pay their mortgage, which in turn resulted in foreclosure and bankruptcy.
Look into FHA loans. An FHA loan is a home loan insured and backed by the federal government. FHA loans offer low down payments and lower interest rates than traditional home loans. They’re geared towards first-time homeowners who might not have cash to pay the full 20% on a down payment. To apply for a FHA loan, you’ll need to find a FHA-approved lender and meet a few requirements. There are some downsides to FHA loans. First, you’re required to purchase an upfront mortgage insurance premium of 1% of the total loan. You also pay a modest fee with each monthly payment for the life of the loan.Check out the Housing and Urban Development’s website for more info about applying for an FHA loan.
Get pre-approved for a loan.
Whether you go for a 30-year fixed or a 15-year ARM, your goal should be to get pre-approved for a loan. Pre-approval is a step above pre-qualification. According to theConsumer Financial Protection Agency, when you’re pre-approved for a loan, “the lender has evaluated your creditworthiness and has committed to extending you a loan up to a specified amount.” To get pre-approved, you’ll need to provide a lender with pay stubs and W2s and two to three months worth of bank statements. When a bank pre-approves you for a loan, they’ll issue you a letter that you can show sellers during the negotiation process. Buyers with pre-approval often have a leg up on buyers who don’t. Put yourself in the seller’s shoes. Who would you rather say yes to? The guy with a letter from the bank that says they’ll pay the full amount for the home or the guy who has nothing but his word that he’ll be able to afford the house.
Pre-approval isn’t a guarantee that you’ll get the loan in the end. There’s a chance that something will pop-up in the more thorough loan underwriting process that will cause the lender to change its mind. Think of pre-approval like getting engaged. It’s a commitment, but until you get married (i.e. actually get the mortgage) each party can still back out.
Start Looking at Houses
Watch HGTV. I never watched a minute of HGTV before we started thinking about buying a home. But as soon as we decided to start looking, I was watching House Hunters all the time. While the show is definitely staged, I actually found it to be helpful in getting an idea of what I wanted in a house and how the home buying process, in a very rough sense, worked. It can also help tamper your expectations, as you often find happy-go-lucky couples who just expect to instantly find their dream home and for everything to be perfect. Not how it works in real life. (Watch episodes online even if you don’t have cable.)
Attend open houses. Browse through the real estate section of your local newspaper and find some open houses to attend on the weekends. You can also find listings on popular real estate websites and apps like Zillow, Trulia, and Realtor.com. Your goal at these initial open houses is to just get an idea of what you like and don’t like in a home. For me, I found this casual reconnaissance to be immensely useful. For someone who had only lived in one home his entire life (my childhood home), I really didn’t have a good idea on the different types of layouts and amenities possible in a home. Seeing several homes in-person helped me develop my preference. Open houses are also useful for scouting out possible buyer’s agents (more on that later).
Make a list of features your ideal home has and make a list of deal breakers. Once you have an idea of what you like and don’t like in a home, sit down with your spouse and make a list of the features in your ideal home, as well as a list of your deal breakers. What are the things you must have, and what are the things that you absolutely won’t live with? Housing and Urban Development has a nice little PDF to help guide you through the process. Make sure you and your wife are on the same page before you get serious about looking. It will take some negotiation and compromise, but the effort will be well worth it.
Decide whether you want a realtor. During the casual browsing phase of home shopping, decide whether you want a buyer’s agent. Kate and I initially wanted to buy a home without a realtor, but quickly discovered that finding homes that fit our criteria was super time consuming. I was spending hours each week browsing homes online and setting up appointments to look at them. It started to get tedious, so we ended up hiring realtor Ray Nash to help us out. Ray was awesome. We told him our list of likes and dislikes in a home and the next day he created a customized database of homes to browse through. When a new house came on the market that met our criteria, he added it to the database so we could check it out. All we had to do was tell Ray which homes we wanted to look at in person and he set up the appointments to visit them. Ray saved us a boatload of time. It was also nice having someone hold our hand and guide us through a completely foreign process. As we moved towards actually closing on a home, Ray took care of setting up things like the appraisal and inspections as well as ensuring all the loose ends were tied up before closing day.
Now you might be asking, “Will I have to pay for the services of a buyer’s agent?” The answer to that is quite complex, but typically it’s the seller, and not the buyer who pays the commission for the buyer’s and the seller’s agent’s services. However, the buyer and seller can negotiate the price of the home so that the buyer, in effect, pays for the commission of his agent. For details on how real estate agents are paid click here.
Once you’ve found the home of your dreams, it’s time to make an offer. Before you do, know your “walk away” number — the price at which you’ll walk away from negotiations because it’s just too high. When crafting your offer, consider adding contingencies like having broken appliances repaired at the seller’s expense. You can even ask that the seller throw in a piece of furniture into the sale. Everything is negotiable!
Some things that can help you get a “yes” on your offer include being pre-approved for a mortgage and being flexible on the closing date. In our case, being flexible with the closing date helped us snag a deal. The guy we bought our home from hadn’t found a new place yet, so we offered to put off the closing date for an extra two months so he could find a new home. We still had a few months left on our apartment lease, so we weren’t in a rush. The other folks interested in buying the house needed to move in ASAP. Flexibility won the day.
When you make an offer, the possible answers are yes, no, or a counteroffer. Don’t expect to get a “yes” on your first offer. Unless you’ve put up a severely lowball offer, the buyer will likely return with a counteroffer. You can either accept it or give another counter. If the seller decides to end negotiations with you, lick your wounds and move on to the next house.
Get the Purchase Contract
Once you get a verbal “yes” from a seller, the next step is writing up a purchase contract. The purchase contract essentially puts everything you negotiated verbally into writing. The typical clauses you see in a purchase contract include the following:
Legal description of the property, including zoning information
Purchase price and terms of the sale
Down payment to be held in escrow, and future payment structure
Closing date — when the deed will change hands
Any items included in the sale, such as appliances and furniture
Disclosure of lead paint (lead-based paint disclosure form for buildings built before 1978) and other defects
Home warranties and warranties on appliances
Commissions, if any
Your purchase contract will likely have contingencies that could void the contract if they’re not met. Common contingencies include passing the home inspection, the appraisal meeting the selling price, loan approval, and the title being free and clear.
Get Home Inspected and Appraised
After you’ve signed a purchase contract, your next step is to get the home inspected and appraised. As a buyer, you’re responsible for these costs, so have your checkbook handy. If you have a buyer’s agent, he or she will usually take care of setting up the inspections and appraisal for you.
We had two inspections done on our house. The first was a termite inspection to ensure that we 1) didn’t have termites, and 2) didn’t have any termite damage. The second inspection was a general inspection performed by a certified home inspector. This is a pretty thorough inspection. He’ll check the condition of the house’s heating and cooling systems, electrical systems, plumbing, as well as the structural components of the home like the foundation, walls, and roof. He’ll then create a detailed report that includes things you should be concerned about. It’s good to be at the house during the inspection so you can follow the inspector around and ask questions that you might have. If the inspector finds any serious faults with the home, you’ll need to decide whether to re-negotiate with the seller or just walk away.
The mortgage broker will typically provide a list of approved appraisers that you can call to set up an appointment with. The mortgage broker wants to make sure that the home is actually worth what they’re lending to you. If the appraiser reports that the value of the home is less than the contracted price, your lender will likely not give you the loan. They don’t want to fund something that’s worth less than the amount of the loan. The appraisal contingency will allow you to either 1) renegotiate with the seller for a lower price or 2) walk away from the loan.
Shop for Homeowner’s Insurance
Assuming the inspection and appraisal came out fine, the next thing you’ll want to do is shop around for homeowner’s insurance. Your mortgage broker requires it before they’ll finalize your loan approval. Buying home insurance isn’t that hard. I asked my friends and family which insurance companies they used, called them all to get a quote, and went with the best deal. The cost of homeowner’s insurance (as well as property taxes) is typically rolled into your mortgage payment. The mortgage lender puts that money in an escrow account and pays the cost of homeowner’s insurance themselves.
Finalize Loan Approval
In the few weeks leading up to the closing date, your mortgage broker will be underwriting your mortgage application. The underwriter will likely ask for more documents or they’ll have questions about the documents you’ve already provided. Because I’m self-employed the underwriter had a lot of questions for me. I had to make several trips to their office with stacks of financial documents. Just roll with the punches.
After weeks or maybe months of work, the big day has arrived: Closing Day. Closings typically take place at a title company’s office. Depending on the complexity of the sale, closing usually takes about an hour and a half. Because you’re a buyer, you’re going to have a huge stack of papers to sign and initial, so make sure to warm up those finger muscles. To ensure that the closing goes off without a hitch, make sure to bring the following items:
A certified or cashier’s check. Federal law requires that you be told the exact amount of the check you need to bring to closing at least one day before settlement. You will have to pay the down payment, plus the closing costs — usually 3 to 5 percent of your home purchase price minus your earnest money deposit. The closing agent will tell you whether you need one check or two and to whom they should be payable. Do not bring personal checks or cash.
Proof of insurance. The closing agent needs to see proof you have the insurance in effect on closing day. Your lender likely has a copy of your proof of insurance, but bring an extra copy just in case.
Photo ID. The closing agent needs to know you are who you say you are. A driver’s license or current passport will do the trick.
Your agent or attorney. Especially if you are a first-time buyer, you should have someone with you who understands the process and represents your interests. In some states, you’re required to have an attorney present. Check your local laws to find out if that’s the case for you.
Purchase and Sales Contract. Just in case you need to double-check a detail against closing costs.
Congratulations! You’re a Homeowner
Once you’ve signed the last document and the closing agent has dropped the keys in your hand, you’re officially a homeowner. Congratulations! Go out and celebrate with a big juicy steak. As soon as you’re done, though, it’s time to start thinking about moving in. But that’s a subject for another post.
I recently posted a short blurb about my trip to Egypt with my good friend Gavin. I was the tag along since this was his fourth trip attempting to connect with locals who have been forgotten, as well as those of great stature. Being a minister Gavin had a vision for connecting with people of the Egyptian “Coptic” Church (Coptic just mean Egyptian), but we connected with Christians and non-Christians alike. Meeting people who have little to no notoriety was honestly just as exciting to me as meeting the Coptic Pope. I don’t say that to diminish how exciting it was to meet someone like Pope Tawadros, I was just that excited to connect with all of these people with amazing stories. We did accomplish the goal of connecting with people of many different stripes, much more than I’d have ever guessed we might. This website is mostly intended to provide knowledge about Real Estate, more specifically about Real Estate in central Oklahoma. However, whether it is a perceived to be good business decision or not to insert more human stories on this site I can’t help myself. I decided to start working in Real Estate because it excites me to get to engage and help people with where they will raise their children, or live their golden years. This job is very personal for me, and so I have decided that from time to time I will share personal stories of my own, or of others.
In an attempt not to ramble I’ll tell you about a few of the high points on our adventure. Gavin had patience with me in letting me go do a few touristy things at the beginning of the trip. With all of the attention from protests over the last few years I had to go see Tahrir Square. I just wanted to people watch as long as possible. There was a lot of graffiti / “street art” which I’m very excited to show to my cousin Stephen. You’re going to love it buddy!
Oh, and of course I had to make the signature visit to the pyramids!
I had the chance to do almost everything that I set out to do, but I left a few things that were high on my list incomplete, which will make a return visit all the more exciting! We did of course go see the markets, churches and mosques.
In one of our first few days we had the chance to meet the Coptic Pope! I knew that Gavin had done this before after visiting some of the churches that had been burned about a year and a half ago during protests by the Muslim Brotherhood, but I didn’t expect that we’d be so lucky again. We were, but the Pope didn’t have as much time for us as he had last time. He was meeting with some officials and dignitaries from other countries, so instead of going into his office and talking for 15 minutes we were given a chance to speak outside of his office for a few minutes, and given a handful of candy, and I managed to drop a piece on his foot and when I bent down to pick it up there was an audible gasp… Hey, I don’t waste candy you guys. While we were there we noticed that when people attempted to enter the compound containing the office of the Coptic Pope they had to show the guards their cross tattoo that they were probably given as a young child, or as a baby.
One of the most surprising things about the whole trip was the number of Christians in the area, and the general feeling of warmth between most people despite their faiths. Of course we know that not everyone feels so chummy – we visited churches that had been burned in Suez that were still waiting to be repaired. The churches in the more touristy areas had already been repaired, but some of them are still left in ruins but protected by members of the military.
Here is a short segment that 60 Minutes produced last year about the Coptic Church:
So other than visiting the Coptic Church’s Headquarters we also visited some of the churches in Suez (of the Suez Canal fame) that had been burned about a year and a half ago. Trying to describe this experience feels a little bit more difficult than I thought it might be… Seeing an organization full of love survive such ferocious hatred is genuinely transformative on the inside – I don’t know how seeing this could not change someone.
BURNED CHURCHES OF SUEZ
You’ve probably heard of the Suez Canal, but you probably don’t actually know anything about it. That’s how I was before visiting Suez, and I find that to be the case for most things until you visit them. There is a lot that I could say about this trip, but meeting the people of the garbage village of “Zabbaleen”, and seeing the burned churches in Suez are probably the 2 most impressionable moments for me. A lot of churches were burned in early 2013 in Egypt by a small extremist minority, mostly affiliated with the Muslim Brotherhood. I think these pictures will speak for themselves…
GARBAGE VILLAGE OF “ZABBALEEN”
The 60 Minutes report includes the cave churches at Mokattam (Which is supposed to be the site of a miracle performed by Jesus, that seems to be somewhat specific to the Coptic faith), which are located right next to Zabbaleen. Zabbaleen is a “garbage village”, where somewhere between 50 and 80 thousand people live and work in trash all day, every day… This part of our trip is the main storyline I intend to share, so I’ll actually be writing about that and posting it in the next few days. We spent 2 days connecting with people who have little more than family and faith in their lives, and yet most of them seemed to often be enormously happy. That doesn’t mean that they wouldn’t appreciate some improvements in their communities, or have the taking over of their industry by multinational companies halted somehow, but they did seem to enjoy their day to day lives, maybe even more than I often enjoy my own…
We had the chance to meet a few characters who I wouldn’t have imagined would’ve been a part of my life even a few weeks ago. One of these people is Adham, who lived and went to school in Manhattan, New York for 2 years, but was forced to leave and return to the garbage village after he had trouble getting his visa (not a credit card) renewed to continue his studies… So, I’ll leave you with the following thought and the following video. I have had the chance to meet people from around the world, and I’ve often been very quick to make assumptions about others and their ways of life. I can’t stop thinking however, that the only way to better understand others is to show up. If someone is in a minority of the greater population it might be wise to ask them what it’s like, at least from my experience it has proven to be enormously rewarding. If it wouldn’t have been for taking a chance to walk into Zabbaleen without a translator, because my friend Gavin is a crazy person, I would’ve never met Adham, Tutu, or any of the other people who I’ve newly found a crazy love for. There are things that my new friends surely would love to change about their lives if they could, but one amazing thing about my trip was seeing much of their contentment. Until we realize that our lives will never be perfect we’ll probably never be able to actually enjoy the blessings of life that we do have.
Buying a new home, or fixing your current home won’t fix all of your problems, but maybe it can be a great reset button to live differently. I don’t say this because I have it all figured out, but merely because I’ve been shown that there can be a better way for me to live my own life. With all of that now on the table, I encourage you to find and watch the movie “Garbage Dreams”, about my friend Adham and his community.
Oh, and people have been asking me how I took the jumping over the pyramids picture, and I’m happy to share. I had my taxi driver do a slow motion video, and I paused and screenshot my phone when the timing was right 😉
I started this page without an intention of pushing an ideological perspective, but I don’t want to avoid talking about what it means to live life to it’s fullest whether “here” or “there”. I just returned from a trip to Cairo, Egypt, and I saw people who lived very differently from one another while I was there. I had the chance to meet the Pope of Coptic Church, as well as people who have had their churches burned. I also had the chance to meet some of the people from Zabbaleen (which means garbage people), who live in a literal city off the side of Cairo as the waste management system for the greater city of Cairo. Before I went to Egypt my understanding was the people in Egypt were pretty much just all Muslim, and I might as well have assumed that they were all “radical”, and hated Christians. Well, not everyone in Egypt is a Muslim, and the vast majority of them are very tolerant of Christians! The tolerance statement I can mostly speak for in the city of Cairo, as most metropolitan areas require some copacetic social structures by the people. Life in Egypt was far more diverse than I would’ve expected… We had the chance to see what it looked like when extremism poked it’s head out in Cairo and Suez – the majority of people were infuriated by the burning of churches.
I decided that since I started this website to talk about how to live intentionally, even though much of that is based in my knowledge of Real Estate, I think it’s important that we talk about how we can live intentionally with what we already have – I have to work on this everyday.
If you’d like to watch the 60 Minutes segment about the Coptic Church that was made after the churches were burned in 2013 here it is:
Below is a picture that I posted on Instagram to quickly sum up my trip, but I plan to post a little bit more about this in the future. Thank you for reading, and I always love feedback.
I’m Home!!! For the last week I’ve been in Egypt connecting with people of all stripes. Thanks to my buddy Gavin, I was able to meet the Coptic Pope (look up the 60 minutes segment on the Coptic Church if you have a few minutes), meet with church groups whose churches were burned down in Suez, and connect with people in Zabbaleen (the trash city of Cairo). Each of these experiences was enormously impactful, but seeing the resilience of a group of people who were violently attacked and seem to move forward with grace was unbelievable. They lived everyday intentionally. And to also see a group of people whose livelihood is to live amongst, and work in trash sorting really called me to change how I approach what I classify as a necessity, rather than a want. I love being able to work with people to find homes to live in, I only wish that each time before we started the process that we could have dinner with the people of Zabbaleen, or a church group from Suez to better sort our priorities and goals. What if we could find ways in our own lives to make our homes more welcoming to those in need? I found that the Pope, the people of Zabbaleen and Suez, and myself all spoke a common language – we all understood an ear to ear smile and a belly laugh. Have a good day my friends, and don’t forget to smile – someone probably needs that beautiful smile 🙂