WWYD?? House Purchase Options.
Some background: We sold our last house almost a year and a half ago, and have had all our 'house money' sitting in the bank since. We are currently renting and our lease is up at the end of March.
We moved to a new city for DH's job just over 6 months ago - he is as secure in his job as you can be in this economy (we don't think he's at risk, but who really knows??). My income has dropped dramatically since we moved - in fact I basically have had no income since we moved. I will probably start applying for jobs back in my old field soon, so I should start earning again - just probably half of the 6 figures I used to make. : (
DH makes a little over $100,000/ year.
We have been looking for homes in an east coast city which is still a fairly stable market, for over a year. If we don't move on something soon we will need to rent for another year, which is fine if not ideal.
We generally move homes every couple of years because we aggressively worked our way up the property ladder. We are now looking to settle somewhere for 5 + years.
Here are our choices:
1: The dream house. I don't think I've ever fallen in love with a house like I have with this one. It is tremendous. It is also a bit too big for us, but has rental possibilities for the dormer rooms.
Price is higher than we want to spend. The price has come down by about 15% in the 6 months it has been on the market, but it has been at the current price for 4 months with only one rejected offer. The offer they turned down came in a few months ago and was 10% below current list.
They have now moved out of the house, but have a strong emotional tie to the house (owned it for 26 years) and are liable to get offended by a low offer.
We would be prepared to make an offer about 25% off current list, but their agent says that they will be offended by an offer that low. Honestly we would be more comfortable mortage wise, if we got it 30% off list. Even this price is much more than option 2 and we would have a mortgage around $250,000 on this house.
The house needs some work (that's what we do, and how we built the equity in our other homes), and that is why it hasn't sold yet.
I think it has enormous upside potential - if we do the work and the market comes back, this house could be worth big bucks. A house like this one but was renovated sold a month ago for a couple of hundred thousand above the current list price. They just don't build them like that any more.
OPTION 2: Also in a fabulous location, this house is a shade smaller than I would like (slightly cramped bedrooms and not as much closet space as we are used to), but should be perfectly adequate. It is nothing like as exciting as the 'dream house', but is a nice, solid little house in a great location. Also needs some work.
Sold for more than it is listed for now in 2005 and sold again 25% higher a year later in 2006. I doubt it will go anything like that high any time soon - the person who paid that for it must be out of their mind. It doesn't have anywhere near the upside potential of the first house.
It currently listed just below the 2005 sales price, so 25% off peak, and I think we MAY be able to get it at 30% off current list so they can get it off their books. This would allow us to pay cash for the house, and still have a considerable amount left in the bank.
Nowhere in this city has seen this kind of a drop, so I think it would be a bargain.
OPTION 3: Keep renting for another year, and hope that the 'dream house' comes into budget or that another house which is just the right size, and also in the right location comes along.
If it makes a difference, we are in our 30s. No credit card debt, student loans, car loans, etc.
If we do option 2 (which is what we're leaning towards) and option 1 ends up selling for what we would have paid for it, I am going to be extremely disappointed. So which option would you do?
The higher priced, potential higher return dream home or the sensible but small house with much lower potantial upside, but a real 'deal'.
Or would you wait it out and see if the dream house comes down in price..... but then you're also trapped in another 12 month lease and could miss out on the deal.