April 05, 2010,
S.D. asks from Indianapolis, IN on April 04, 2010
Breaking Even or Taking a Loss on Our House to Get the Next One We Want?
A house we've had our eye on for 6 months just went back on the market after accepting an offer and then having that offer fall through because of financing. So, we REALLY like this house. It's a foreclosure and we think we could get it pretty cheap (like even $100k under it's assumed value). Do you think it's worth lowering our price so that we'd just break even or even lose a little on the sale if it means we can almost double our space and get into a great neighborhood?
Another side question...Do you consider the cost of a new high-efficiency furnace (though the old was was working just fine, it was like 50 years old and TOTALLY not efficient), and waterproofing the basement (something that had to be done), into the value of your house? For example, we bought the house for $118k, added a $4,000 furnace and spent $6500 waterproofing. Are we losing money on the deal if we don't get at least $128k? And that doesn't even take appreciation into account...
So What Happened?™
Thanks for most of the answers:) I'm surprised by one. Why do you assume we can't afford the next house?! We'd be offered the same as what ours is worth and getting a kick-ass lower mortgage rate. It won't affect our finances at all and it won't hurt any more or less if my husband loses his job.
As for unforseen upkeep costs, isn't that always a chance in buying a house? This house is getting old, needs new plumbing soon, a septic empty, there are ALWAYS things to do. Who buys a house expecting to live happily ever after without having to spend money to fix things?!
How, exactly, is a house a liability and not an asset? Are you saying all houses are not assets? Should we all be throwing our money away on rent?
I don't know why you're so bitter, but you really didn't need to take it out on me. I just wondered what people's opinions were on selling low to buy low...
M.M. answers from Dallas on April 04, 2010
Absolutely! Don't let money keep you from what you really want. Which would you regret more? Staying where your at to 'make' money on your house or getting the house you really, really want. Good luck!
3 moms found this helpful
V.T. answers from Dallas on April 04, 2010
You should take the new furnace and the waterproofing into account when valuing your home and also when you value it for sale. That being said, if you are in the position to break even or even take a loss in order to get what you want, do it. You will be happier in the long run. You should just sit down and figure just how much of a loss you are willing to take. When my husband and I sold our home in Virginia, we assumed we would have to take a loss on it because of the market. We figured out how much that loss could be and price our home accordingly. It was a great decision and we are much happier for selling and getting rid of something we liked and getting something we love.
2 moms found this helpful
M.P. answers from Portland on April 04, 2010
I think it's very reasonable to take a small loss if you have to to have the house you love which also makes other improvements for you as well, better neighborhood, more space. As Victoria T. suggested figure out how much of a loss you're willing to take/can afford. We sold our house at a $10,000 loss because we could pay that amount to pay off the second mortgage.
The furnace and water proofing do increase the house's value even in today's market. Ask your realtor. If you don't already have a realtor you may be able to get the house for less by using the same realtor. We also did this when we bought the house. We put our house on the market at the same time we told her what we wanted in a house to purchase.
Yes, find a way to get that house!
1 mom found this helpful
K.C. answers from Evansville on April 05, 2010
I would take a loss in a heartbeat (assuming you can afford it) to purchase a house that you will instantly have $100K equity. Think of the loss as an investment with the investment being the nicer house and equity. It would be a completely different scenario if you were taking a loss on your house to downgrade or buy something at appraised value.
If you love the house and can afford it.... then it is definitely worth it regardless of the sale price. I would assume you plan on staying there for awhile....
You also need to keep in mind that it is a buyer's market, not a seller's market right now. Which means that if you think you are getting a great deal on the new house - somebody else wants to be getting a great deal on buying your house. The economy is picking up, but you can't expect to get exactly what you put into the house right now. I think it would be awesome to even break even, and that means you have been living in the house the past years for free. (or cost of interest)
1 mom found this helpful
P.M. answers from Portland on April 04, 2010
You're taking a hit on your house, but the owners of the house you want are taking a hit, too. That rather evens the money end of it, yes? Even if you come out a few thousand behind, you'll still have the house you want in the neighborhood you want. So you could simply think of the loss as a down payment on greater quality of life.
Consider how you'll feel if this opportunity slips away. Then make your decision.
S.Y. answers from Dayton on April 05, 2010
We sold way under the purchase price of the home we bought almost 7 years ago. If you can do it, take the loss, you are gaining in the long run.
D.K. answers from Indianapolis on April 05, 2010
ABSOLUTELY you figure those things into the value of the house. In addition, it will cut down on your monthly costs in terms of maintenance, heating, etc.
As far as the cost goes, you need to understand that property values and the housing market goes on a four cycle process. As of now, we are in the cycle where property values that had gone down are now going back up. Therefore, look at what the value of the house was 5 & 10 years ago (if it's that old) and try to determine what the value of the house will be once the housing prices are back up. If you don't know, ask your realtor to help you figure this out. If you're doing this on your own, let me know. I've done some investing in the past.
Certainly NOW is the time to buy and there is much to choose from and housing prices are still down. Hope this helps.
L.M. answers from New York on April 04, 2010
I'll answer the second question first, yes making major improvements to your house increases it's value.
Now for your next question, it's very difficult to answer because we don't know the whole picture. Ok, you really like this house that came on the market, if it's under $100k of it's assumed value, is the assumed value $150k, $300k? The bottom line is can you afford it?
Other things to consider is realator commission fees and closing cost. Moving costs. Very often houses that are being foreclosed on need repairs, and there's no negotiating these in a foreclosure situation.
So the answer to your question is yes loosing some money to put yourself into a house that you really like and meets your family's needs is worth it. But you need to look at the whole picture and determine how much is it worth?
Good luck with your decission.
E.W. answers from Cleveland on April 05, 2010
I'm so surprised by most of these answers. I thought I had bought the "right house". It looked great. Here 10 years alter and we have been surprised by the problems this house has. NEVER let emotions drive your decisions on something this expensive. I went from a 1001 square foot house to a 2600 sq ft house in a great neighborhood. I wish I could go back to my old house. Bigger isn't always better. And a house is not an asset it is a liability. YOu need to talk to a financial advisor NOT a realtor to see if this is a good move for your family. If there is a loss of job or an illness it could really hurt your family. Talk to a financial expert please.
P.R. answers from Cincinnati on April 05, 2010
I just wanted to say that my experience in the business is that even though you had to spend money to maintain your home, you should not expect to recoup that money. I always advised clients that if they wanted to make improvements to their homes, they should do it for their enjoyment or use, but not because they expected it to make a difference when it came to selling it. The appraiser does their appraisal based on what other things in the area have sold for. The only access they have to what the other places looked like is what is listed in the details of the house online, so even if yours has better appliances or ceramic flooring instead of vinyl, he is not going to be in the other houses to say, "Oh yeah, this house is way better than the one next door that sold last month." They can add in adjustments, but that doesn't mean that the financing bank will accept those adjustments. Specifically the two items you mentioned I would consider maintenance items and not improvements.
And, regarding value, my daddy always told me, "Something is only worth what someone else is willing to pay for it." So, if you price the house to sell, then that's what it's worth. You can ask more because you think it's worth more. But if no one buys it at that price, then it really doesn't matter what you think it's worth, unless you're willing to wait for the buyer who agrees. If being in the other home means that much to you, lower the price on your current home so that it will sell.
T.O. answers from Chicago on April 04, 2010
I think it is worth it. My husband would disagree. We are considering putting our house up for sale soon. He feels we should only move if we "make money" on the house that neither of us want to be in any longer. I feel if we take a small loss it is worth it to get into the house we will hopefully "grow old" in. It sounds like you really want the great neighboorhood and to have a larger house...I think it is 100% worth it if you can afford it. Good Luck!
H.C. answers from Phoenix on April 04, 2010
Certian things are considered maintanence and certain things are upgrades and you can add to the price of your house. I am not an expert but I realized that when we put $70,000 into our house (new flooring, paiting, new countertops, new toilets, new water heater, shutters.......etc....) and only certain things were considered. Ask a realtor or your realtor. Adding something is probably something you can add to price, redoing or fixing something is probably not.
As far as breaking even or loosing a little to get what you want. Yes it's okay as long as you do it the right way. We lost alot on our house when we sold it 2 years ago, I could have bought a small house for what we paid to get out of it BUT THAT IS THE RIGHT THING TO DO. We paid the difference, we did not short sale or foreclose on it. So many people are walking away from their houses to get another one just because they can and it's killing our economy. I know their are some cases where it is legit why they are walking away however, I am just soured because I know people that have just walked away and had no money problems. I wish you the best and hope you get that house and don't loose too much on your current home! Best of luck! :)
M.C. answers from Cleveland on April 05, 2010
If you can afford to lower your price, I would definitely do it if it means doubling your space and getting into a great neighborhood. It sounds like this is the house you really want so go for it. I think the improvements you did to your current house make it more attractive to homebuyers, but don't necessarily add $1/$1 to the asking price of your house. Maybe a good estimate would be 50% of the cost. These are items that you also got to enjoy while you were living there.
Good luck :)
M.H. answers from Atlanta on April 04, 2010
I almost cried when my husband accepted an offer on our house in NC that was a lot lower, several thousand, than what we listed. We had our eye on a house that one of our fellow church members wanted to sell but hadn't listed and it was in a neighborhood we wanted and a lot better house. The one we were in was convenient to work but I hated the behavior of the kids in the neighborhood. We had only been in the house 6 months.
Moving ahead...We bought the house that we loved, in an area we loved, and the kids had a ball. We even bought horses. When my parents got sick and we had to move AGAIN...the house we were in had been enveloped into the expanded multilist of a neighboring large city and the value jumped. I put an ad in the paper, got 40 calls the first week, two full priced offers and sold it for $95,000 more than what we had purchased it for two years earlier...almost doubling the price.
YOU NEVER KNOW....go with your gut on where you should be. Money is important but not that important. Life is too short if you have the opportunity to enjoy where you live. In this current economy, it sounds like you are in great shape.
M.E. answers from San Francisco on April 04, 2010
I'm crying because you can buy a house in a nice neighborhood for under $200,000. I think a helpful thing to remember is that you've been living in your house for whatever period of time and you may actually recoup all of your money. If you had paid rent the money would have gone to nothing. Being in the Bay Area of California, the difference between 128K and 118K seems so minor. Here, a nice house in a nice neighborhood is a million plus.