posted on January 7, 2001 08:33:02 AM new
My AW buddies have never let me down when it comes to good advice, so I'm going to ask for some more. One of these days you guys are going to start charging me!
Here's the scenario: we bought a house two years ago in a development which surrounds a lake. Our house is 6 years old, and is across the street from the lake, but we have a beautiful view. Regardless, we've always wanted to be on the lake (it would be in our back yard). A house has come up for sale across the street and we have been toying with the idea of buying it. The sellers are desperate to sell, and we think we might be able to get them down on their price (the "lakeside" houses are more pricey than the others). Our house is a very nice house and I feel it would sell quickly. I think we would make a decent profit because when we bought our house the sellers were anxious to sell and we got a great price. We have a GM Plant in town and people are relocating in and out of town constantly.
Our dilema is, of course, how do you juggle the buying of one house and selling of another without being stuck with two house payments for heaven knows HOW long? Is there a trick to this? Sometimes I don't see the obvious. If there are any real estate gurus out there, could I get your thoughts?
posted on January 7, 2001 09:53:57 AM new
We'll call your current house "House A" and the other one "House B".
Some realtors have a guaranteed-sale program wherein they pick up the mortgage payments if House A isn't sold by a certain date. I've only seen this offered for relocations, however, and since you'd be "relocating" across the street, you may not be eligible
Negotiate your purchase and sale agreement ("P&S" ) carefully. House B's current owners are truly desperate to sell, they may be so enthusiastic about a bird-in-hand that they'll delay the closing for as much as 90 days. You can also set the closing date on House B conditioned on the closing date on House A, with a reasonable time limit. This can buy you valuable time.
Does House B need any significant rehab? If you can justify $5K of structural work - new roof, bathroom, storm windows, HVAC, insulation, even major appliances - you can qualify for an FHA 203(k) loan, which allows you to build those costs into your mortgage. But most important for you, you can also build up to 3 months mortgage payments in, so you don't have to make any payments for those months. This is by far the very best way to finance rehab work. Down payment is only 3-5%.
You might also consider offering House A for rent on a month-to-month basis while you've got it listed for sale. Your mortgage payment will be at least partially covered by the rent, you'll be able to deduct any costs associated with renting it (e.g. realtor fees) and its upkeep while it's listed for sale, and even if it just SITS there vacant, you can count the rent you could've collected but didn't as a loss.
I'd probably consider a combination of the last three possibilities.
[ edited by HartCottageQuilts on Jan 7, 2001 09:55 AM ]
posted on January 7, 2001 10:01:29 AM new
Wow, HCQ, how'd you get so smart? Thanks a bunch!
House B was built in 1975, so who knows what might need fixing. We have a showing scheduled for Thursday night, so we haven't seen the inside yet. We only know what the flyer says. We will need to put up a chain link fence for dogs and grandson. Don't know what else it will need. I think we'll know more on Thursday after we see it. We will have to really love this place to even entertain this idea. We had a $30,000 down payment for House A, and got it for $112,000, but hubby wanted a 20 year loan. Hence, we have a large house payment. House B is listed at $157,000 but they are now saying they will take any reasonable offer. Quite frankly, we don't want to offer more than about $120,000. Think they'll toss us out on our ear?
[ edited by Muriel on Jan 7, 2001 10:08 AM ]
posted on January 7, 2001 01:46:26 PM new
Smart? LOL Just resourceful. Comes from lots of practice turning scraps into a quilt, I guess
If you like what you see, I'd get a certified house inspector/appraiser over there to take a look around. An inspection can be a powerful negotiating tool, and you'll need one anyway for your mortgage. (You might check with your prospective lender and see if they can recommend anybody.) It'll also give you a better idea of what a reasonable offer would be.
The 203(k) process is tedious and takes longer to close (that delay is of course to your advantage). But if you can keep your ebay biz reasonably organized, you can do a 203(k). Here's what you can include:
Repair or replacement of structural damage, chimney repair, additions to the structure, installation of an additional bath(s), skylights, finished attics and/or basements, repair of termite damage and the treatment against termites or other insect infestation, etc.)
Rremodeling bathrooms and kitchens, including permanently installed appliances, i.e., built-in range and/or oven, range hood, microwave, dishwasher);
Resolving health and safety hazards (including the resolution of defective paint surfaces or lead-based paint problems on homes built prior to 1978;
New exterior siding, adding a second story to the home, covered porch, stair railings, attached carport;
Reconditioning or replacement of plumbing (including connecting to public water and/or sewer system), heating, air conditioning and electrical systems, interior whirlpool bathtubs;
Well and/or Septic System;
Roofing, gutters and downspouts;
Flooring, tiling and carpeting;
Energy conservation improvements (e.g., new double pane windows, steel insulated exterior doors, insulation, solar domestic hot water systems, caulking and weather-stripping, etc.);
Major landscape work and site improvement, patios, decks and terraces
Why is hubby set on a 20year mortgage, when he could take that $30K and invest it someplace else??
[ edited by HartCottageQuilts on Jan 7, 2001 01:48 PM ]
posted on January 7, 2001 02:30:39 PM new
Muriel Most real estate agents prefer that their buyers sell their first home (or have a contract on it)before they buy another. It makes an easier sale from an agent's point of view. However, if you're worried that your house won't sell quickly and don't want two mortgage payments, you can get your lawyer to add a contingency clause to your contract making the purchase of the other home contingent on the sale of your house.
posted on January 7, 2001 04:05:26 PM new
Speaking of attorneys, this is weird. I used to work for a very large law firm before moving to "small town America". When we closed on our house, we brought our attorney with us to the closing - which is standard procedure, as far as I'm concerned. So we walked into the closing, we all introduced ourselves, and the loan officer in "small town America" says "Who is this?". I said "This is our attorney". And she looked totally baffled. Apparently taking an attorney to a closing in this town in unheard of. You are just supposed to let the chips fall where they may, and hope nothing goes wrong when it comes time to re-sell! As it turned out, the legal description on the title work and on the deed didn't match, and they wanted to proceed regardless. My attorney insisted on correcting the problem before moving forward, and that's what they did. The attorney who prepared the title work gave us a hard way to go, and it took about an hour longer than it should have, but there was no way we were going to close with this situation.
posted on January 7, 2001 04:09:01 PM new
Two neighbors desperate to sell and you propose to join them?
All of the wonderfully absurd ideas proposed by the quilt will have to be paid for regardless the advantegeous appearance of the loan situation.
The seller may not be willing to agree to all of the convenient for you delay of payment tactics.
If you want the house, buy it. Pay for both, become a landlord. Or sell it later. Rent it to the daughter (God help you).
You'll have to place your home into income producing property before you can deduct expenses associated with it, and it is not to your advantage to do that willy nilly because the basis for depreciation will be the last appraisal or sale amount and only of the portion of the place called improvements. So you'd like a new appraisal done close to the date which you chose for establishing the basis, or value for depreciation. Depreciation is where the bucks are in owning property and it's figured as a percentage of value established at the time of placement.
posted on January 8, 2001 02:36:56 PM new
Next time get your mortgage for as long as you can, as long as you do not have any pre-payment penalties in the contract - which are very rare to see now days anyway.
That way you can pay it off at a faster rate to save the interest charges, but if conditions change where it makes more sense to invest the money and get a better return than the interest saved you are free to do that. Also I you have an illsness or something come up you are under less pressure not being obligated to the higher payment.
Having an attorney along is fine IF the attorney knows real estate law. However I have been to closings where the attorney had to have everything explained to them step by step and the people were obviously paying a couple hundred an hour to educate the attorney in real estate closings, and you could see that he was not familiar enough to know if anything was amiss.
