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should I buy a home?

Posted by conchitaFL (My Page) on
Mon, Jul 18, 11 at 11:58

I'd like some unbiased input on whether or not I should consider purchasing a home. Here's my situation--single female, early 50s, self-employed. Back in the 90s I had a catastrophic medical situation which wiped me out financially and left me with a boatload of medical debt. I managed to avoid bankruptcy and paid it all off, although that took a long, long time.

Now I'm totally debt free, earn an average of 80K a year (although I admit that these days nobody can say how long that will last), and have managed in the past couple of years to build back up to about 100K in savings.

Normally I would not even consider buying, but would continue to put everything I can into savings. However, in the area where I live, in the current market, I'm wondering if I shouldn't start following foreclosures. The market here is very, very bad. There was a huge amount of frenzy investment buying and the crash has been proportionate.

I went with a friend the other day who was looking for a place to buy and there is one townhouse development where we looked at a foreclosure that had been badly upgraded, but was all done, really except paint and a couple of the appliances. It was listed for 79K but had just sold for 35K. (That was a Homepath listing--other foreclosures don't go quite so low, but low enough.)

Assessed value in that complex is in the low 70s. I'm thinking that if I could find another that I could get for 55K or less, assuming it didn't need major repairs, it might be a good idea to buy it. I should mention that everything in the complex needs some bath work, mostly just tub replacement and resulting work, which I think I could get done for approx 5K. Outside of mortgage I estimate total monthly cost for HOA, insurance, etc. at $264. There is a new sewer assessment, but that's only 1K, so not onerous.

I currently pay $900 in rent and I don't think I can save much on that if I continue to rent in this area. More importantly, if the owner of my current rental decides to put it on the market (not unlikely), it's very hard to find a rental in this area these days which is not also for sale. I realize that I would be able to stay out a lease if it sold out from under me, but the prospect of moving every year or two as it happens in the places I move to isn't appealing.

Thoughts?


Follow-Up Postings:

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RE: should I buy a home?

Outside of mortgage I estimate total monthly cost for HOA, insurance, etc. at $264

Oh, and that includes taxes, too.


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RE: should I buy a home?

You are in a very good position to buy. You have cash on hand, a solid income, and interest rates are still low. If you intend to stay in the area long-term, then owning is a good idea.

With that said, I would stay away from condos and townhomes with lots of foreclosures. The reason is simple. The vast majority of common expenses are "fixed" and don't depend on how many owners there are. So, if 100 people pay $264/month and suddenly 50 of aren't paying because they are being foreclosed on, then the remaining 50 people are eventually going to get hit with that unpaid balance. Your dues could skyrocket and easily end up being more than your mortgage payment.

Also, there is NO RUSH to buy in florida. As you see, there are TONS of properties available. Most of the state is overbuilt and it is going to take a while for all that excess inventory to be sold. You can take your time looking for bargains and find a place you love.


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RE: should I buy a home?

Thanks, billl. Yes, I completely agree with you. I should maybe have explained that this is a very large complex, with about 400 units, so there can be several foreclosures without it having a big impact on the overall situation.

I would have been tempted by another place I had gone to see when they were being built in 2007 (in the low 200s then), where I could get a nicer, larger, never lived in with a garage (no garage where I'm looking) for about 50K, except that it is foreclosure city there and I don't know how the others living there are able to foot the bills for the maintenance.

Thanks again for your response. I appreciate it.


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RE: should I buy a home?

Oops, sorry. Writersblock is a neighbor and I was logged in her computer while we were looking at some listings. That was me, not her.


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RE: should I buy a home?

I think investing in a home is a good idea, if you make a very large down payment or pay cash for it. We had an incident in our family where a couple was building a home when the husband died. The widow wasn't sure if she should finish the home or hang onto her money. The lawyer told her the money was safer invested in the home, if she was sued and lost, she could loose her money. No one can take the home from her except the mortgage company or the IRS.


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RE: should I buy a home?

Conchita, you sound very sensible. When you select the house you want to buy, please get it inspected by an independent, certified home inspector. Do it even if you are buying a house that is new (has never been lived in) or newly renovated. You don't want to be hit with unexpected repairs after you buy.

As always, I agree with Billl. There is no rush; you can take your time and get the perfect house (and perfect interest rate). Do not put all of your savings into the house; you will need your savings to build your retirement fund.


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RE: should I buy a home?

Thanks, vala55 and colorcrazy. I have a pretty definite idea of how much house I can afford and my plan would be to try to get a 15 year mortgage if I can (on such a small amount the difference in monthly payment between a 30 and a 15 is pretty minimal) and then, as long as I'm earning the same amount, to allocate the same amount towards housing costs that I pay now, which would allow me to pay it off in six or seven years while still saving at the same rate as now. Of course at first the extra would go to paying back my savings for the money I "borrowed" for the down payment.

Yes, I completely intend to get a home inspection and especially a roof inspection, thanks. That's a wise suggestion.


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RE: should I buy a home?

With condo prices that low, it seems that a lot more people could afford owning one. I would be afraid of buying one, just to find out that there were neighbor's from hell, or something. See link below.

Here is a link that might be useful: Search results on HOA at Apartment Living Forum


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RE: should I buy a home?

Hi, chemocurl. Yes, that's a valid concern, but I've been living in condo/townhouse situations for many years now, and to me as a single woman with a busy schedule the tradeoff of having someone to take care of exterior/structural stuff is worth it.

Luckily, this is a very seasonal area, so for most of the year there aren't so many neighbors around. And I definitely have budgeted for another layer of drywall and some green glue on party walls. :)


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RE: should I buy a home?

Biiil-"I would stay away from condos and townhomes with lots of foreclosures. The reason is simple. The vast majority of common expenses are "fixed" and don't depend on how many owners there are. So, if 100 people pay $264/month and suddenly 50 of aren't paying because they are being foreclosed on, then the remaining 50 people are eventually going to get hit with that unpaid balance. Your dues could skyrocket and easily end up being more than your mortgage payment."

Biiil is right. Don't get stuck in a condo you can't get rid of. A friend of mine inherited a condo in Myrtle Beach and ended up selling it. It was mostly seniors (good) but she had a tough time renting it out. The renters she got weren't reliable and there was a rule against weekly rentals (6 month minimum).

She ended up letting it go at 65k below her asking (appraised) price.


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RE: should I buy a home?

Thanks, dreamgarden. Believe me, I'm only looking at places where if I can stay for 6 or 7 years, I could then donate the unit to charity if I had to and not be too much behind where I'd be without having done it at all.

>65k below her asking (appraised) price

That's more than the total price I'm willing to pay. :)


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RE: should I buy a home?

I suggest you strongly consider paying cash for the condo. It'll make your offer more attractive the seller, allow for a quick closing, and still leave you with half a year's income in the bank. Why pay a few thousand dollars in closing costs and then a bunch of interest to the bank, even if it is "just" for 6 or 7 years?


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RE: should I buy a home?

Yes, there's a big part of me that feels that way too, weedyacres. But in the current economy I'm not so sure about my income level for the short term future. I hate the thought of a mortgage, but if I have one I can always pay it off if my income stays where it is, whereas if I pay cash and things go sour, I'm not so sure that 6 months income is a big enough cushion in this economy. I know too many people who've been out of work for more than a year, despite being willing to clerk at a convenience store, be a security guard or whatever they could get.

One reason real estate is so inexpensive here is that there are fewer and fewer people to buy it, as more and more businesses close. When you head out to a store or restaurant, you never know these days if it's still going to be there today.


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RE: drat!

Darn it, I did it again. I've got to start bringing my ipad and stop using writersblock's computer when I'm over here, but Trulia works so much better on the computer than using the app.


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RE: should I buy a home?

I would be careful about buying a condo if you want to sell it in 6 or 7 years. Suze Orman says that the housing market is going to stay like this until 2023. If you want to stay there permanently, then it sounds like you could get a good deal, but those fees really do add up if the other units are empty. Could you find a tiny house instead? I bought my cottage in 1998 for $89,500. It's only 567 square feet but the lot is 7,400. I have seen foreclosure homes 45 mins. from here for $40,000! It's just not easy to sell. That's the catch. I tried to sell my house twice and kept it because I didn't want to go below $180,000. You sound like you are very disciplined financially. You also sound concerned that you could lose your job. I would listen to your intuition. Many of my customers mentioned to me they could lose their jobs and then they were laid off. These are intense times, especially in FL. I have cut my expenses down to $1,000. a month and switched from owning a small business to farming my land. This economy has changed everything. I am fortunate that I can do this, but I really watch it. I ride my bicycle everywhere, live very simply, and my lifestyle is totally different now than it used to be. Staying debt free and maintaining a year's living expenses is my top priority.


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RE: should I buy a home?

I too wouldn't buy a condo but I would buy a small house. perhaps a 2 bedroom where if push comes to shove you can rent out that extra room for a while. The reason I say buy is you future retirement. Your income will drop them and it's much cheaper to live in a paid off home.

Now that we are retired my husband and I live quite comfortably on $40,000 a year combined income in our paid for house. Our expenses to live here are our taxes, upkeep on the house,heat and hydro and insurance which amounts to $500to $600 a month. A lot less than you pay for rent. That extra money is nice when your income is lower.

We still have the equity in our house, which is a savings plan in itself. When you are just paying rent that money is gone but you actually get something if you buy a house


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RE: should I buy a home?

Conchita, you have a terrific attitude, and appear to have a lot of financial discipline and self-control, which is so much in your favor.

Buying seems like a good idea for you. However, I would stay away from condos for two reasons. First, as others have said, you can't control any of the costs since they are imposed by others. Second, condos typically are harder, and take longer, to sell than single family homes. If you had to sell because the HOA costs went up too much, you'd have a very hard time.

Find a single family in decent shape that fits your budget (maybe buy a home warranty?), spend some time identifying a reputable handyman, and you might be better off than a condo.


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