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!
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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.
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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!
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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)
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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.