Put Your Money Where Your Mouth Is Converting Dollars to Euros

OK, we chose a property and have a preliminary deal. Now, soon, we need to have enough euros to pay for it. That’s making all of this more real. And a bit scary. We need to liquidate some assets and convert the dollars to euros.

The Good News

As Anne has mentioned, one of the major factors driving us to act now on the Italy adventure now was the USD/EUR exchange rate. From the high level of $1.60 per €1.00 in 2008, it bounced around in the $1.30 to $1.50 range through mid-2014.

Euro vs US dollar graph
USD per EUR history Click image to enlarge

Then it started to fall. Dramatically. By the spring of 2015 it was at just over $1.05 per €1.00. (That was a 30% increase in our buying power in about 9 months.) It’s traded in the $1.05 to $1.15 range over the last year.

That’s fairly narrow range, but still enough to push the dollar price of a property up or down 10%. So, when to act and make the conversion? Some “experts” were predicting parity, $1.00 for €1.00.

The Bad News

After my exploratory trip last year, I started trying to figure out how to turn our valuable dollars into cheap euros. And what to do with them after I converted them. (My mattress was already in use.)

It turns out that holding them isn’t a problem. I talked through the problem with our financial guy, and he told me we could just hold them in a US-based investment account. No need to go to the Cayman Islands — though that would give the whole adventure an air of high finance and intrigue.

So let’s figure out how to actually convert our dollars.

dollars and euro exchangeNot a problem, right? In the Internet world, you’d think that currency conversion would be fast and cheap. Just send a few bytes down the wire, get a few back, and I’ve got euros in the bank.

Not if you believe what you find when you start researching the methods and costs of conversion. The water is murky

Let’s go to the bank. No. All the sites, books, and articles tell you to avoid your bank. They’ll charge a 2-3% fee, which adds up on a few hundred thousand dollars. A lot of money per byte. Sorry, BMO Harris.

From these same sites, I discover these specialty foreign currency exchange firms. The best ones seem to be in the UK and they tout that they are regulated, so the transaction is safe. They charge 1%. Better, but still a lot for just pushing a button.

Recently, another option, the Uber of foreign currency, has appeared. It’s called Transferwise and they facilitate peer-to-peer exchanges: someone in Europe has euros and they want dollars. I want euros. So we swap. Transferwise takes 0.5%.

So I’ve gotten the cost down, but I’ve introduced more risk. Is this for real? I might try it with $1,000, but it seems too speculative to use for a house purchase.

The Good News

Now, with only a week or two to act and make the conversion, I ask my financial guy to look again at this whole process. Bingo! After a few calls, he discovers the answer, one I didn’t find online, but one that seems obvious in retrospect.

Fidelity. This large investment firm would make the trade for 0.3%, at the same mid-market rate a large business would get — $1.105, in our case. (The “mid-market rate” is the mean of the current bid/ask spread.)

The final piece was pulling out the dollars to convert. Like some sign from above, the US stock market jumps 1.5% in one day, to a fraction of a percent below the all-time high. The euro is at $1.10, not the low but close enough. So we did it.

Now we’re the proud owners of a few hundred thousand euros. I feel more Italian already.

Chart source: https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/eurofxref-graph-usd.en.htmlImage source: www.pixabay.com License: CC0 Public domain. Free for commercial use. No attribution required.

An Italian “Negotiation”

After we had seen the Casa Ideale property a second time, we felt that it was our top choice, though in our talks with Kevin and in our heads we were still considering the house near Pergola (Casa Col di Luce). We loved that house and property. Our concern there was purely location: could we get integrated at all in the local life from that location? We asked the seller’s agent to “sell” us on the area and its opportunities for us.

After more thinking, and no response to our request, we decided to proceed with the Ideale property. So it was time to try and reach a reasonable deal.

Arm wrestling to suggest negotiationThe “negotiation” to reach a preliminary purchase agreement proceeded differently than I expected. Despite being aware of the significant differences in the way the home search process works in Italy versus the US (see this post), I guess I thought negotiation on a price and terms would be a back and forth between us as the buyers and the seller, with the real estate agent, Kevin, in the middle.

Recall that there is only one agent involved here on the Ideale property. Kevin has the property listing, or the right to offer it the market and he has us, as potential buyers. (Neither of these relationships is exclusive.) This “dual agency”, with only agent involved who has brought buyer and seller together, is not legal in many parts of the US. But because of the structure of the Italian system, I think it’s the norm.

The property is listed for €79,500 on Kevin’s site. (I don’t know if this property is listed on other sites, but in the cases where I’ve seen the same property listed on multiple sites the price was always the same on all.) As part of the total project cost projection Kevin had given us, he said that he thought we could get the property for €62K-€65K.

Kevin asked me what we wanted to offer. My first thought was that I didn’t want to offend the seller, who I thought was one of the adjacent landowners. That would be getting started in the community on a very bad foot. Kevin told me it was someone else, and he really wanted to sell. It was an Italian who had bought the property intending to build a house for his daughter. She had no interest, so he thought he might make a quick buck selling to some foreigners.

As a starting number, I suggested €50K. Kevin told me he thought we’d meet near the middle and suggested €48K, so I agreed. I figured we’d hear back with a counter offer and we’d go from there.

When I talked to Kevin the next day, rather than asking for a counter, he said he had a deal at €62K. Did we want it? He had told the seller we didn’t want to go beyond €60K and had reached a somewhat complicated deal at €62K. So, after our original offer of €48K, our next step was to say yes or no to this deal at €62K. Nice and neat, right where we wanted to end up. I’m glad we followed his advise on our first bid.

Signing the preliminary agreement and any payment of deposit would happen after we checked some basics. In addition to the survey, land title, and related issues, we needed to have a “positive opinion” from the town planning official that we could build what we wanted on the property. Not a final approval, which would take some months, so this introduced a little twist: might we end up with a plot of land that couldn’t be built on?

Kevin assured us that approval had been given for a house on the property, just not one at the 20% larger size and with a pool. But even the larger house was still at or below the limit for the size of the house that should be allowed under the rules.

Risk and reward. After sorting through the proposed transaction, Anne and I decided it made sense to go forward. Now what?

Image source: www.pixabay.com License: CC0 Public domain. Free for commercial use. No attribution required.

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House Hunting in Le Marche – Day 3

There were a couple of houses we were interested in that were listed by another agent, Richard, so on Day 3 we went to see them.

La Perla Segreta (The Secret Pearl)

La Perla SegredaOne of the nice features of this house was that it was walking distance to the town of Mogliani, while still being very private. It was a good-sized house, with five bedrooms and five baths and a pool. It also had 80 olive trees and a small vineyard, a plus from my point of view.

But it didn’t show well, as it was totally overgrown and it would be quite a big project to clear the property. But its biggest unfixable drawback was that the living room was rather small and was down a long, narrow hall on the opposite end of the house from the kitchen. We quickly decided to pass on this one.

Casa Tranquilla

Case Tranquilla, Le MarcheCasa Tranquilla sits below the town of Penna San Giovanni, but still high enough to have panoramic views of the whole valley. We were met by the owners Trud and Udo and their two dogs as we drove up the driveway, and they showed us around both the main house and the apartment in back, as well as the extensive grounds (about 7.5 acres).

Casa Tranquilla poolThe house itself was a charming country cottage that had been thoughtfully restored to maintain its character and vintage details. It had a wonderful loggia in front, where I could picture enjoying all our meals in good weather. Inside, the floor plan was a bit quirky and chopped up. The master suite was on the ground floor and there was another bedroom upstairs, but without a bath. The upstairs hallway had a door leading to the apartment, which could be closed off or left open and integrated into the main house. The apartment itself was great, and provided a Casa Tranquilla interiornice rental income in summer for Trudi and Udo. It had a bedroom, bathroom, kitchen and living room, plus a large, partially covered terrazza with incredible views.

The property was awesome. Besides the pool and the views, it had lots of olive and fruit trees as well as a bocce court. There was also a barn in back, where Udo had his art studio and workshop.

It was hard not to love this place, but we decided the inside space was too awkward and didn’t have the right rooms in the right places, so it probably wouldn’t work for us.

Casa Ideale (Redux)

After we returned from seeing these two houses, we decided to go back to Casa Ideale (the ruin) to have another look at the property and discuss whether the option of building a new house was something we would really consider taking on.

The neighboring farmer had blocked the lane with his truck so we had to stop short of the property and trudge through the fields to get there. But what a view.

Ideale_view1      View from Casa Ideale, Marche

We discussed the size of the house we could build, how and where it might be sited to take advantage of the views, where the pool would go, etc. Most importantly, could we actually pull off building a house in Italy while living in Chicago. This would have been a non-starter if it were not for the fact that Kevin, in addition to being a real estate agent, also worked as a general contractor, overseeing restoration projects. He had a team of architects, builders and other tradespeople who could do this for us, and he would be in constant communication with us to give us progress updates and get our feedback. We were intrigued with the notion of building something to our own specifications and not having to live with awkward floor plans or someone else’s taste in interior finishes.

We also felt it was a plus that the property was close to two towns: Colmurano and Urbisaglia. We really want to get involved in local life, so this was important to us.

We had a lot to think about, and our decision was made all the more confusing by the fact that we were comparing apples, oranges and grapefruits when it came to what property to buy. We had two fully finished houses in contention, a couple of partially reconstructed houses and a ruin.

That night we had a long discussion over dinner, helped along by a couple of bottles of local wine.

Images: Copyright Our Big Italian Adventure

House Hunting in Le Marche – Day 2

We had only five properties to see on Day 2, but one of them was about an hour away from the others, so it was still going to be a full day of house hunting.

Casa Duetto

Casa Duetto in Le Marche

First we saw the close in houses, starting with Casa Duetto, a small compound of two buildings and a pool on 9.3 acres, with awesome views of snow-capped mountains. The smaller building, a 70 sq. meter cottage, was a perfect little guest house for 1-2 people. The only bad thing was the spiral staircase up to the 2nd floor. I couldn’t picture my older sister climbing that every night to get to her bedroom.

The key issue with the main house was you had to walk down a steep set of stone steps to get to the front door, as the house was built on a hillside. I would not look forward to schlepping my groceries down icey stairs in the dead of winter. Ed’s knees hurt just thinking of those steps. Plus, since it was built into the hillside, it was quite dark inside.

Casa Blu

Casa Blu, Le Marche

Kevin had nicknamed this house Casa Blu (Blue) since the doors, shutters and trim were all painted blue. At 350,000 Euro it was on the less expensive end of the spectrum, but it did need some work and we weren’t too wild about the mismatched IKEA kitchen and the power lines that were in view. Probably not a contender.

Casa Casale

Casa Casale, Le Marche

This was also a two building compound on a nice 2.5 acre property, but it needed a lot of upgrading, which would take the cost up to around 525 Euro. Emma didn’t like it at all and went so far as to say it was haunted. I guess that’s a no.

Casa Ideale

Casa Ideale, Le Marche, Italy

This was actually just a ruin on a little less than an acre of land. Literally a ruin: one wall and a pile of rubble. The owner already had provisional approval to build a 160 sq. meter house on the property. We wanted something bigger, with at least three bedrooms and an office/den and 2-3 baths. Kevin said we could build up to 190 sq. meters, based on the size of the original farmhouse. We were intrigued by this possibility because we could design the space the way we wanted and build with energy-efficient materials. Even with a rough plan of a house, Emma was having trouble visualizing what it would look like, and she was more in favor of getting a house that was already done, like Casa Ben Pensata or Casa Immersa from yesterday

Casa Col di Luce

Casa Col di Luce was the house that was an hour northwest of the others, near the town of Pergola.
We loved it immediately. It had a beautiful, 8 acre property with a gorgeous pool and knock-out views. The side of the house facing the pool had a shady loggia, and the interior of the house had just the right amount of space and just the right rooms. Everything was meticulously cared for. This was it, we thought! We had just had one question: what was around here? We had driven an hour and were not familiar with this area. Kevin was only able to say it was not as good a location as the other houses in terms of being near restaurants, shopping and things to do. That gave us pause. We would not like to move here and sit by ourselves in our house, no matter how lovely.

restored farmhouse with pool near Pergola Italy

Images: Copyright Our Big Italian Adventure

House Hunting in Le Marche – Day 1

There’s a good reason the region of Le Marche is not overrun by tourists and expats (at least not to the extent that Tuscany and Umbria are): it’s not near anything and there are no major cities here. The biggest city is the region’s capital, Ancona, and that’s not on anyone’s bucket list of places to go in Italy.

There’s an airport in Ancona which you can fly into if you are coming from elsewhere in Europe, and the Ryan Air flight from London’s Stansted airport directly to Ancona has increased the number of British vacationers and second home owners in Le Marche.

Le Marche townBut if you are coming from Chicago, the most obvious thing to do is take a direct flight to Rome and drive the three-ish hours to Le Marche. And that’s what we did this trip. Fortunately our arrival was less eventful than Ed’s a year ago. (He had rented his car, stopped at a mall outside of Rome to buy a Sim card for his phone. While he was inside, his car was broken into and his suitcase stolen. Luckily he had his backpack with computer and passport with him. But still, not a great way to start a trip).

Anyway, we rented our little red Jeep Renegade, found our way out of the airport and headed north to Le Marche.

Last year when Ed came he stayed at a little Agriturismo called L’Olmo di Casigliano. Giuliana, the owner, had been very helpful to Ed in getting his stolen meds replaced, so we stayed with her again. What a beautiful and serene setting.  Giuliana settled us in our rooms and we drove over to the town of San Ginesio for dinner at a little trattoria in the main piazza.

Kevin, our real estate agent, picked us up at 9:00 the next morning and we started our house hunt. The first house was a cute old farmhouse near Colmurano with a pool and a great view, called Casa Immersa. (Kevin gives all his listings names as a memory aid for house hunters).

Emma immediately fell in love and was ready to buy the house right then and there. The price was right, but it had one major drawback: a tiny living room. Probably not a problem in good weather when we’d be spending our time outside in the loggia or by the pool. But a long, cold winter in these cramped quarters? Not ideal. There did seem to be a couple of ways to solve the problem, either by expanding the room or by breaking through a wall to a small den and opening up the space. Given the possibilities and the affordability of the house, we decided to keep it on the list.

Casa Immersa

house with pool in Le Marche

Next up was a restored farmhouse near San Ginesio called Casa Godetevi. It was a little bigger than the first one and fresher and brighter inside. It also had a pool and a nice view, but the really great thing was a covered pavilion / outdoor kitchen by the pool. We could see having great parties there in the summertime. Despite that cool feature, we just weren’t “feeling” this house.

Casa Godetevi

house with pool and view in Le Marche

The third house, Casa Eleganza,  was something a little different. It was a restored shell of a house on a nice piece of property with an outbuilding on the property that could be used as a studio or guest house.

Casa Eleganza

Italian house in Le Marche

The builder had done all the heavy lifting of re-building the basic structures, and it was up to the buyer to finish the house according to his own tastes and needs. The view wasn’t quite as good as the other two houses and this photo doesn’t do it justice at all, but this house exactly matched my vision of an “Italian” house, and I liked the idea of designing the interior ourselves. The only drawback: with all the costs of finishing it, the final product would be 25% more expensive than the other houses we had seen.

Villa Lupo

Casa Lupo near Morrovalle

Casa Lupo kitchen

The fourth house on the list is one which all three of us had been very excited about seeing, based on the description and photos on line. The owner of Villa Lupo had gone to great lengths to take excellent photos that really conveyed the lifestyle to be enjoyed in this house.  It had two living rooms, a modern kitchen and the bathrooms had been recently remodeled. It also lots of outdoor seating areas as well as olive and fruit trees, which is a key component of my Italian fantasy. But the pool was on the small side and Emma was turned off by how modern it was on the inside. It did not fit her idea of an Italian farmhouse. As I waxed on about the olive and fruit trees, she was drawing her finger across her throat to signal that this house was a no-go in her mind. And, it was at the high-end of our budget.

Casa Sorpesa

Casa Sorpresa, Le Marche
House #5 (Casa Sorpresa) was situated right on the road, didn’t have much in the way of landscaping or a pool, and the entryway was a bit awkward, as you walked right into the stairs as you entered the front door. But the inside had good space and all the rooms in all the right places, so we tried to decide if it had enough going for it to keep it on the list. Ultimately I couldn’t get past the fact that it had not one, but two, sets of utility poles running parallel to the property, which didn’t do much to enhance the view. We crossed it of the list.

It’s now getting late in the afternoon, and all the houses are starting to run together in our minds, but we still have two more to see today. Casa Ben Pensata was utterly charming and we fell in love immediately.  The house was compact, but well-designed. The living room was cozy but spacious and open feeling.  It was an “upside-down” house, with the main living area and master bedroom on the ground floor and the other bedrooms and loggia down a level. We really had only two issues: the master bath was on the other side of the foyer from the bedroom, and the plot was very small (only 1200 sq. mt). We felt we could address the first one, but the small plot was another story. Could we buy some land from the owner of the adjacent farm?

Casa Ben Pensata

farmhouse with pool

One more to go: another house that has been structurally restored but not finished inside. Kevin has named it Arcobalena (rainbow). It is right on a country road that probably only gets traffic from tractors. Like Casa Eleganza it has a outbuilding, though at the moment it’s filled with hay. And this house has a breathtaking view all the way to the snow-capped peaks of the Sibillini Mountains. The inside of the house is a blank slate to do whatever we like. But, like Casa Eleganza, this house will end up being at the top of our budget (or above it) when it’s complete.

Casa Arcobaleno

farmhouse to be restored in Le Marche

We’ve now seen seven houses and our heads are spinning. Emma is pushing hard for Casa Ben Pensata. Knowing we have a day and a half more of house hunting, Ed and I are trying to avoid getting too attached to any one option. Our assignment for the evening is to eliminate all but three of the houses we saw today. At dinner the three of us review the pros and cons of each house and agree to keep Casa Eleganza, Ben Pensata and Immersa (which Emma still likes) on the list.

First image source: Flickr/Il Conte di Luna from https://commons.m.wikimedia.org/wiki/File:Urbino-palazzo_e_borgo.jpg License: Creative Commons Attribution/Share Alike Generic 2.0, Other images: Copyright Our Big Italian Adventure