Stacking Benjamins Interview: Taylor's First Home Purchase Did Not Go As Planned [REPLAY]
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Hey everyone, Mr. John Luskin and I are taking a short break this week and we're heading to a conference out in beautiful Orlando, Florida with 2,000 other money nerds from around the country. I'll be speaking on Saturday, which will be my first for this conference, and then I'm racing home as fast as possible because my wife is due with her second boy and let's just say Orlando is nowhere near home, so I got to get my butt back.

But while we're away this week, I thought we would replay one of our most downloaded episodes from last year, which was an interview I did on one of the top personal finance podcasts in iTunes called Stacking Benjamins. In this interview, I share the story of my wife and I buying our first home several years ago. The home ended up being defective. We entered a three-year lawsuit. We

We almost lost our life savings. We're having a baby through all of this. And somehow, someway, we came out the other end relatively unscathed. It was a really, really challenging time in our life, but we learned a lot. And it's fun and helpful for me to look back and reflect on this time. But we made some mistakes, and hopefully you can learn from some of those mistakes that we made.

And hopefully the story is entertaining as well. But if you didn't catch it last year, please give it a listen. If you have listened to it already, give it a second listen and maybe you'll catch something new and learn something new. So thank you all for your continued support. We really, really appreciate you. We will be back with you in two weeks. And with that, here is my interview on Stacking Benjamins with Joe Salcihai.

Taylor Schulte is a certified financial planner in San Diego. San Diego. And he has a great podcast called Stay Wealthy San Diego. And he also is a co-founder of a firm called Define Financial in San Diego. And he's got...

Maybe, maybe one of the most grueling stories about moving into a brand new house that we've heard. Of course, we did hear one Shannon Allen on recently talking about inadvertently sending her money to a hacker. Remember that one? Sending her down payment money. Luckily, Taylor got past the down payment, moved into the house, but we'll let him tell the story from there. Coming down to the basement, Taylor Schulte. ♪

And coming down the stairs, Taylor Schulte. Have a seat, man. How are you? I'm doing well, Joe. Thanks so much for having me. Well, very happy to have you here in the basement. It's about time you got here, by the way. You've got a story for us, man, that I'm, well, I guess excited to tell makes it sound like I'm really happy to tell this story. This is kind of not really a happy story, but life for you is

This story begins in 2013, if I'm not mistaken. Correct. And you had saved a bunch of money for a house. How much money had you and your spouse saved? We worked our butts off in our 20s and we saved up a down payment of about $150,000. And you're a financial planner, certified financial planner. So you're a guy that probably planned and overplanned and overplanned this house.

We did. And not only am I a certified financial planner, but my wife is a planner at heart. And I mean, she is incredible at planning things out and she's an organizer. You know, we had things dialed into the tea with this thing. So it really caught us off guard. Well, don't say that yet. We don't want to give away what's about to happen.

But initially, life was pretty good. I mean, it sounds like you found what you thought was your dream house. Tell me about the house. Yeah, we did. Yeah, it's a beautiful house in a beautiful up-and-coming neighborhood. And I think it was built in the 30s in San Diego. And, you know, all the old people were moving out and the young people were moving in and lots of families. And our house was a complete teardown. So a contractor came in, tore down the entire house, the foundation and everything.

and he built a brand new home. And it was a really beautiful home. We fell in love with it. Again, I mean, we saved up a good chunk of money and we thought this was it. We thought, you know what, let's do this. Let's make it happen. And we hadn't started a family yet. And so we had our eyes set on starting a family in this home. And yeah, obviously things took a turn. So you were gonna be, you were the first resident of this house. You were the first owner, the original owner. We were the first owner of the new build, yes. So-

So you sign on the dotted line, you saved this six figure big down payment. You go through everything, right? I mean, you had people inspect the house. Yeah. Let's remind everyone too. I'm in San Diego, Southern California, $150,000 is a big number. I mean, there are houses that you can buy in this country for $150,000. So, you know, people listening, don't be alarmed. That's normal for Southern California. Unfortunately, that's what we're dealing with out here.

Yeah. Yeah. You're saying you're not buying the biggest house on the block with your $150,000. Absolutely not. No. And, and yeah, but it is a lot of money and yeah, we, we did, we went through the, you know, the normal things that you do when you buy a house and we got an inspector and, you know, that was one of the recommendations from our realtor was to get an inspection done on the house. And like most people do,

We hired a general inspector to walk through the house and do his due diligence and just make sure everything was looking right. Did you walk through the house with him or her, Taylor? My wife and I would probably walk through the house a dozen times at least on our own. But again, it was a brand new house. So I mean, everything just looked perfect and beautiful. And the inspector's words were this. When he finished his inspection, his words were, I would purchase this house. And like, if that doesn't make you

feel comforted? I don't know what does. Yeah, right. Nope. So clean bill of health and the inspector brand new house. You guys move in then? Yeah, we moved in right after escrow closed. And how long was it before you noticed that Houston, we have a problem?

Yeah. So we had a small crack in the stairwell within just the first month or two. That small, you know, maybe it was, I don't know, a few inches eventually turned into, gosh, I don't know, 10 or 12. So we just started watching this crack grow and grow and grow.

We started to notice some of the wood floors warping and splitting and cracking. Eventually, our front door dropped like an inch. We had to cut a piece off the bottom of the door and glue it to the top of the door just to fill the gap at the top. So things were moving, and we definitely knew something was not right. Your house was moving. Yeah.

Your house was trying to take off on you. Go two separate ways, it sounds like. The house was moving, yep. I mean, you think about that. I mean, what's your recourse? What's the first thing that you thought to do? We actually had some really good advice from a friend when we were buying this house. And he said, you know, in the contract, you should put some language in there that gives you a warranty against the builder. You know, the standard contract doesn't include a warranty, especially on our house. It was coded as a remodel.

And so we had at the very last minute, we put in some language there that gave us a one-year builder's warranty if any defects arose during that first year. So we kindly wrote an email to the builder. He actually, believe it or not, this guy lives in our neighborhood. So he was just a few blocks down the road. Yeah, we wrote him a nice email and just said, hey, we're noticing some things. Would you mind coming over and checking him out? I got a 12-foot hole in my stairwell.

Just something little. Yeah, no big deal. Actually, it did start out with some really little stuff. And he did come over and he did try and address things. And eventually he just disappeared. Didn't answer phone calls, didn't answer emails anymore. And that was obviously a sign that things were going south as well. But was it going south just at your house or his whole business was going south? Oh.

Oh, geez. I don't know if I could speak for his whole business. He definitely was one of these house flipper guys that was trying to make a business out of it. I can't say that he has a great reputation in town, but I don't know enough about his business. I like what you did there though, with getting some good advice about having that clause put in your contract, because most people wouldn't think to do that. I think that's a good move. Obviously without that, things wouldn't have ended up as good as they did in the end. Yeah. A lot of really new

build, you have construction defect language. Well, when it's coded as a remodel, the same law doesn't apply. And so when we actually got to the legal portion of this story, we were able to sue him for breach of contract, not construction defect. So just that little language that, again, we just wrote it in there. It was nothing an attorney had to do, allowed us to go after him for breach of contract, which really was a saving grace for us. And what

about the idea of making it a remodel? It seems like when you tear the whole thing down and start from the beginning, it doesn't seem like much of a, I mean, it seems like a pretty extensive remodel. Yeah.

Yeah. So, you know, I don't know enough about building homes and how that all works, but you've heard the story before they take down everything, but one wall, they get the city to come in and code it as a remodel. And then they remove that last wall and they start from scratch. So, you know, it's a loophole in the system that, uh, I don't know enough about, but it's kind of unfortunate. Do you feel like, well, I'm going to ask you those types of questions after we tell everybody the rest of the story. So the guy disappears, right?

What happens then? We figured we've got to do something here, right? We can't just do nothing. And so we asked around and we found an attorney. An attorney came in and took a look at the situation. And the first thing, again, we're not mean people and we don't want anything other than just our house fixed. And so we started off with a letter from the attorney to see if we could light a fire under this guy's butt and see where this thing would go. And that's called a demand letter, right? A demand

letter. Yeah. I think that is the legal term for it. Yeah. Okay. So you write him a letter, led a fire and you still hear nothing? You know, I think he did chirp up, you know, we had suggested mediation to settle this thing and we eventually did go to mediation, which he walked out of. So that was, you know, another costly event that resulted in nothing at all. Wait a minute. I want to

There's a story right there. He walked out of the mediation. So you're sitting across the table from him and he just gets up and walks away.

So we spent thousands of dollars to have our attorney there to hire the mediator. I think we spent, you know, six hours of a work day in the mediator's office. And after all that, he just decided there's no way we're going to come to an agreement. And, uh, and he bailed. Were you sitting across from him when he got up and left? They actually had us in separate rooms. So the mediator kind of goes back and forth trying to, you know, mediate the situation. And, uh,

Yeah, I just got to a point where they said, yeah, he's out of here. He left. He left. He's gone. You must have looked at your spouse like, what the hell? It was pretty frustrating. There's a lot of frustrating moments. I mean, it is not an easy ride. It's really unfortunate, too, you think about the legal system and recourse we have as consumers, and they do not make it simple.

in our heads, we thought, sure, we'll go to mediation, spend a few thousand bucks. And, you know, we're reasonable people. We'll come to a conclusion here, but it's just, it's not that simple. So at this point, then you have to sue him, I'm assuming. Now you have to go to court. We've got to go down that legal path. Again, you got to jump through a bunch of hoops before you actually go to court. But yeah, we had no choice but to start to head down that path. What happened

to your house at this point, Taylor, are you, have you already fixed it on your own and now you're already have to leave it in the state it's in so that you can still get paid? I mean, I don't know how that works. Yeah. It was our advice to do nothing until this whole thing shook out. And that's, that's the unfortunate part too, is like, you know, your house is supposed to be a place where you feel comfortable and safe and unwind after a long day. And for us, I mean, man, every time we came home from work, it was just

this black cloud, this, you know, stressful situation and, you know, more money, more bills in the mail. And it just, it's just really unfortunate to have to live in this house during this entire time period. You take him to court. He walked out of mediation. Did he show up at court?

So before court, you're deposed, right? There's something called a deposition. And he didn't show up for his deposition either, which I don't know how you get away with that. That's a bad sign, though. Long story short, his LLC ended up getting suspended. And when your LLC, and this is another saving grace, when your LLC is suspended, your attorney can't represent you in court. So when the day came for us to go to court, it was a one-sided court case. It was us giving our side of the story with nobody to defend it.

So his attorney couldn't be there. He couldn't be there. The judge heard our story. Obviously, you know, we're a nice young couple that bought a house and got completely taken advantage of. And yeah, the judge ordered us a judgment and the judgment piece of paper saying, here's how much money is owed to you, but good luck collecting on it. That's what I was going to say. Most people think that this is the end of the story, right? You get the judgment.

high five each other. We live happily ever after. Get our house back. Like you said, you're not mean people. Just now your life is going to go on. That's not the case. That is not the case. Yeah. Judgment is just a piece of paper. A judgment also means you have to go hire a new attorney called a collections attorney who will help you try and collect on this judgment. So

So this is just such a train wreck in slow motion. What year is this now? Probably 2015, 2016. You've had now three years, two and a half, three years of this so far. Yeah, complete nightmare. What are your legal fees looking like three years in? Do you remember that number? Yeah, so before we hired the collection attorney, we probably spent about $45,000 in legal fees. Wow. Wow.

So then you, but on your piece of paper, did it say that he was going to have to pay your legal fees? So legal fees are built into the total judgment amount. A certain percentage of legal fees are built in. So, you know, we got a judgment for $150,000 and legal fees were built into that.

But yeah, so we had already spent close to $50,000 already. So that judgment was already reduced in value. I'm wondering what the collection attorney sells you with this guy's track record already, the fact that his LLC isn't functioning correctly anymore. He must have told you at the beginning, this is going to be a nightmare. Yeah, I mean, the good collection attorneys won't take you on as a client unless they see a path to collecting things.

Fortunately, he actually found some assets in the LLC he thought we could collect on and he was willing to take us on. So it was actually a pretty painless process with the collections attorney. We did have to spend another, you know, 15, $20,000 of course, to go collect on this. And then we ended up collecting about $90,000 of the judgment. So, you know, I say we spent 60 to collect 90. Uh, it didn't really leave us with a whole lot to fix a broken home. No, no. So the reason we're talking today, that,

just finished. Yeah, that is over. We sold the house as is defects and all sold it. Um, we sold it to a nice lady. We disclosed everything. She knew what she was getting herself into. Yeah. Everything went really smoothly, but I also want to mention, you know, through all of this,

Everything that we went through, all the legal bills, everything, we're also trying to start a family during this time period. So, I mean, that was just an extra component to this entire story. Well, and you had told me before this, your spouse had also quit her job to work at a job that paid a lot less.

And at the same time, you've got this nightmare going on. Yeah, like I said, we worked our butts off in our 20s to kind of gear up for this event. And we saved up a good chunk of money and my wife left her big corporate job. And yeah, it was time to actually make the purchase. And at the same time, I was starting my business,

So we were dumping money into that. And again, I mean, everything penciled out on paper, but who plans to spend $60,000 on a lawsuit? And there's some things you just can't plan for. No, but there are some great financial planning lessons here. And I think we need to walk through those.

because I think there's some great ones. I mean, number one, the fact that like having contracts reviewed, right? Reviewing that contract and making sure that you had the path to go down, I think was a key to you winning. And you see people that don't do that, Taylor. Well, you and your business at Define Financial, I'm sure you see people that are like, oh yeah, I got this contract. I have no idea what it says. And so you end up referring them to an attorney to take a look at stuff. Yeah.

Yeah, you definitely need to know what you're signing. And I think having an attorney as you go through a home purchase process is a really good idea. I mean, it's hard because you're spending this large sum of money on this huge asset. And the last thing you want to do is go spend more money. It's really hard, but I mean, it is really important. I mean, I can't stress it enough. Well, at that point, that's another financial planning lesson. When you talk about spending more money on top of that asset, you're really ensuring that things go right with that asset. So

you know, you and I in financial planning talk about risk management decisions, right? I mean, at the end of the day, you're paying more to manage risk. That's correct. And, you know, like we had talked about,

If I was going to do anything different in buying this house, I would have gotten some additional inspections. That's exactly what I was going to ask. Yeah. Yeah. I would have paid an extra, you know, a couple, you know, two, $3,000 to get some additional inspections outside of a general inspection, a general inspector. They just look generally at the home and, you know, our house was a

all wood floors, I would have hired a wood floor inspector. I tell people if there's a pool in the backyard, get a pool inspector. If you're noticing some foundation issues or the neighborhood has a ton of clay soil, clay in the soil, you might consider hiring a foundation inspector to take a look. Yeah, that's good. And I hear a lot of people that skip the inspection altogether because they think it's expensive. And obviously, look at you had an inspector and look at what happened.

Yeah. Great stuff. Well, not great stuff. Great. I'm glad you finally have a happy ending, Taylor. Yeah. We are extremely happy to have this behind us. And I think I shared with you, like I said, we had a lot of fun in our 20s and we didn't really have a ton of adversity. Life was good. We were dinks, double income, no kids. We were traveling. We really just hadn't really faced anything like this. So to me, this is a really good slap in the

face to just remind us that life is not a straight line. There's things that are going to happen that you can't plan for. You're going to have some adversity. And to us, every single day we sat down, we looked at each other and we reminded ourselves that this is just a house. This is just a house. This is just money.

It's not our health or, you know, God forbid anything worse than that. That's really what kind of got us through this whole thing. What is it as a financial planner though? What does that say? If you can't plan for everything, I guess that speaks to keeping some money flexible. Yeah. I mean, cash is King and it is, I mean, the first thing that we tell people is

have an emergency cash savings account. You know, rule of thumb is three to six months, but if you want to be more conservative, we have clients that hold, you know, nine to 12 months of living expenses in cash. And that really helps you out when you go through times, times like this. Yeah. Cause had you not had, now that I think through this too, had you not had the $60,000 of wherewithal to pay those attorneys on an ongoing basis, this might not have ended up

as well somewhat pretty as it did i'll be completely honest we were not completely prepared for sixty thousand dollars in legal bills there were points in time where we had to carry credit card debt to get through this um again my wife left her high paying job i'm starting a business

I'm a little more risky of an investor anyways. So I wasn't carrying that nine to 12 months in cash. And you know, this thing caught us off guard. And, you know, again, you can be the best planner in the world and think you have everything dialed in on paper, but there's a lot of things you can't plan for. And this is definitely a good life lesson for, for both of us. Wow. Love. There's a ton of lessons there. I'm so happy that you told us a story, Taylor, tell us a little bit. I would be remiss if I didn't talk about your podcast because

because, you know, we got to talk about your podcast, about how awesome it is. Stay Wealthy San Diego. Tell me about it. Yeah, you know, I'm a native San Diegan, which, believe it or not, it's actually pretty rare. We have a pretty transient city. And I'm just fascinated by the world of business and entrepreneurship. And we have so many

cool companies here that have been around forever and some that are starting up. And so the Stay Wealthy San Diego podcast, I interview local entrepreneurs, business owners, innovators, and leaders and have them share their story with the community. It's been a really, really fun platform. I've met a lot of great people and yeah, I'm really having a lot of fun with it. I was listening to the last one just before you came down to the basement, actually, while you're upstairs talking to mom, Grace and LaFrenz.

And, uh, interesting story. It's funny, you know, I'm in Texarkana and a lot of lessons for me. You don't have to be in San Diego to like your podcast. No, absolutely. Yeah. Grayson's got a national presence. Uh, Pat Flynn was on the podcast. One of the largest fee only wealth management firms was on the podcast.

So there's a lot of great people and great information on the podcast. You don't have to be a native San Diegan, that's for sure. And then what the heck's going on at Define Financial, your financial planning company? Yeah, we're a fee-only financial planning firm. We're headquartered out here in San Diego. We specialize in working with retirees and a group of folks we call Henrys. And the acronym Henry stands for

high earner, not rich yet. So these are folks in their thirties and forties, and they're generating a really healthy six figure income, but you know, they don't have that a million dollars in the bank just yet. So we like to take them on early and, and help them grow, help them get there. It's, it's like the, uh, the person in the, I'm a baseball fan. It's like the minor leaguer, right? Somebody shows a lot of potential coming up through the

through the system. Yep. And they're often neglected and they don't have anywhere to go. And everybody's asking them how much money they have. And, you know, they kind of come in with their guard up, but, uh, you know, we enjoy helping them make those smart decisions with their money today and letting those compound over the next 20, 30, 40 years. Awesome. And we'll link to the show, stay wealthy San Diego and to define financial in our show notes at stacking Benjamins.com man. Great talking to you. Congratulations on getting this thing behind you.

Joe, thank you. I wish I was in the basement under better circumstances, but I appreciate you letting me vent a little bit. And thanks for sharing my story. I really appreciate it. At least you're here. Now time for cookies. Thanks again, Joe.