Are we nuts to sell and buy right now...

wonka27November 11, 2008

My wife and I have a small ranch home. We dumped a bunch of cash into a very nice kitchen remodel, bathroom remodel, and new C/A unit for the size of the house. There are other things that should be carpet, interior doors (some have been changed in our remodel, others are older and different), clean up some landscaping, etc. I've been pretty active in watching houses go up and down off the MLS site, along with checking sale prices on the county website. I know we stand to loose money if we sell...probably a good chunk of it until you factor in realtor fees, etc.

We are considering buying new construction. Builders in the area are slashing prices and offering substantial upgrade allowances. The small subdivision we are interested in would put us in the best school district in the area (our son is an infant...but it isn't too early to think about this) and the location is excellent. Additionally, through preliminary emails, the sales coordinator for the development pretty much said everything is negotiable right now, even price. They even have a few spec homes sitting around, and are offering a $15K closing credit to be used toward a down payment on those homes. Their homes are priced pretty much in line with other developments around.

Knowing we will lose on the selling, is it rational to think selling at a loss is ok if the right deal can be made where we can recoup those losses through help at closing, price reduction, and upgrade possiblities? I just really need others to banter the idea around with...


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I would. One washes the other and you get good schools and a new house.


    Bookmark   November 11, 2008 at 11:12PM
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I did this exact same thing. We sold our smallish 2 bedroom ranch house about 3 months ago at a loss (from what we paid in 05). We still came out with enough cash for a nice down payment on a larger home in a great area and better schools. It's a short sale and our offer was accepted by the bank, at a great price. Hopefully we will be closing in the next 20-30 days.

A few words of advise: unless you have plenty of cash (for two mortgages, bad idea) on hand don't look too hard at another place until you have a solid buyer for your current house. Also be willing to move out and rent if necessary when you are between houses. Otherwise, you may feel pressured to rush and find a place that isn't exactly what you want.

Good Luck!

    Bookmark   November 12, 2008 at 12:26AM
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You'll need to finish up repairs, etc. to the present house before putting it on the market. Talk to a couple of realtors first for an idea on how much to do and on what your house may bring. I'm afraid your remodeling is too recent for you to recoup those expenses -- anyway, get an idea of price.

See what kind of mortgage you qualify for too. Only then will you have a firm idea of what you can afford for the new home.

Because of all your recent remodeling, you might be ahead if you can afford to keep the present house as a rental. Look hard at what you have into the house vs. what realtors believe you can get for it. Also think about the tax situations in each locale. Your baby won't be taking advantage of the better schools for four or five years.

Are the new developments pretty much sold out? Will there be more new homes coming on the market when you might be looking to sell your 'new' one? (New will bring down pricing on 'old' in the same area.) What's the foreclosure situation there?

    Bookmark   November 12, 2008 at 7:49AM
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Thank you for all the great comments. I do appreciate them.

moore101 - I understand what you are saying about having a buyer. It certainly makes sense. This builder, however, is willing to do home sale contingency. So unless I am mistaken, we are covered there. I'm sure it would be heartbreaking to build a new home and not get it because the old wouldn't sell, however, at least we would be financially covered.

chisue - I think the major thing we should really consider doing are those interior doors. The mismatch does not work well together. I was kind of hoping the carpet could be left alone...maybe even offer a closing credit up front for the new buyer. It wouldn't be a big deal to do, except it would require us to basically move out of our house to get the carpet laid!

The rental idea has been presented to me by my co-worker, but I don't know if I'm interested. First, we do have a HEL, which ups our monthly payment out of line with any rental income that would be possible. Also, I just don't know if I want the hassle.

The development we are looking at has been building about a year, with three occupancies, three sold and being built and 6 spec homes. They seem fairly desparate right now and that is why we are possibly looking to take advantage on the buy side of things.

    Bookmark   November 12, 2008 at 9:07AM
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If the developer is desperate, are you sure you want to sign on? Is this a 12-house development or larger? If you would build, he could fold before completing your house (and others). You could be living in a no man's land. If you would buy one of the spec houses and have problems with it, who would you turn to for fixes if the builder is bankrupt?

Since you say you have a home equity loan, I'd really want to get mortgage info before proceding. I'm assuming the new house will cost more than you will get for the present one. Can you afford to lose on the old and pay more for the new? Tell me again why that's a good idea. Also remember that 'new' is worth more only until it's sold -- when it ceases to be seen as 'new' to buyers. Wherever existing homes are up against new ones, the 'old' house has to discount to sell --even if it is less than a year old and has upgrades galore!

You will probably need to replace the carpeting as well as the doors before selling. Most buyers have no imagination; they get a poor first impression of a house and walk. If the developer is having a hard time moving new houses, expect that buyers will want turn-key, move-in perfection in your house. A realtor could tell you if you need to replace the carpeting; maybe just clean it? If you decide to rent, cleaning may be enough.

    Bookmark   November 12, 2008 at 10:40AM
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If your developer is in shaky financial position, ask yourself what will happen if he goes bankrupt in the middle of waiting for your current home to sell.

What will your position be financially if you buy the new home and the prices in your area continues to drop? Can you manage being underwater with the new mortgage for several years?

Good luck to you as you make your decision.

    Bookmark   November 12, 2008 at 6:55PM
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I dont think you're nuts, but I think to get yourself in the best possible position for negotiating, you should have a buyer for your house before you even talk to the builder about building or buying one of his homes. If you are in a position to make a move immediately, they will negotiate more on their end which will help absorb some of the loss on your end.

    Bookmark   November 13, 2008 at 8:43AM
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Having bought a home from a developer that went belly-up soon after, all I can say is BE CAREFUL! We had flooding issues, and the local building inspectors were of the Good Ole Boy network and basically told me that if they did their job, they'd be really busy. So we never got our flooding issues resolved. Luckily it was just the yard and not the house itself; however it did make our yard unusable. That was 10 years ago, and I would still advise CAUTION with developers, especially now.

Fast forward to today, and we are in a new to us older home and still waiting for our previous new but now 10 years old one to sell. It's been on the market since Labor Day and basically nobody is looking in our area. There have been a few sales, but with developers offering so many incentives and new homes being built so close to our home, most people are choosing the new home with their own upgrades and options- it gives them a sense of personalization. Luckily we can afford both mortgages but it sucks to be paying for a house in which we are not living. But I do count my blessings in that DH and I are both stably employed so we are OK. Many people are not OK.

Research your selling and buying opportunities separately and carefully. Right now, it's easy to buy but selling can be difficult. I'd personally wait to move right now, unless you sold first or had a contingency, unless you HAD to move like we did (2+ hour commute each way to new job reduced to 45 minutes).

I disagree that having your current home sold is a negotiating point in your favor. The seller may look at your situation as you MUST buy now and not negotiate in your favor. since you'll have to move once your house is sold. I think it's tricky especially if 1) you don't HAVE to move and 2) you can't afford 2 mortgages.

    Bookmark   November 18, 2008 at 9:34PM
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Why would anyone sell at a loss unless they have to move? I'd wait it out, don't put anymore than you have to into the existing house, and there will still be deals on the other side. And, when you're talking about losing money, are you adding in the realtor's commission (I think you need one, but it is an expensve), plus all the closing costs, mortgage costs, etc. With this economy, I'd stay put. Plus, if the builder is selling low, how do you know the quality if there? Have they cut corners on materials and installation?

    Bookmark   December 1, 2008 at 3:05PM
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