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Author: mitzuko Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127539  
Subject: 1st time buyer dazed and confused Date: 12/12/2000 11:42 AM
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I have been looking for a house, but not hard as I wanted more down payment saved. However, my landlord has just informed me he is selling. I don't want to buy his place (okay to rent, but I wouldn't want to buy). I don't want to move to another rental as that would entail moving expenses twice (I plan on buying within 6 mos). So, that leaves me needing a house now. I live in a small town with little on the market.

My choices are basically between 2 houses. One is 135K the other 150K. 135K would need work (updating, expanding certain rooms) and I don't love it. (I do love the land it's on) The 150 is already remodeled, has quite a few amenities and I like it. I have pre-approval for 130, haven't tried for more.

Now, my questions: The 150 would be a stretch if I decided to stay at home later. I have 19K saved of which I figure 15K for downpayment. I have about 9K in mutual funds (if they haven't tanked more!) and I can borrow up to 26K from 401K. Should I cash in MFs and get 401K loan to up downpayment amount; lowering house payment? Is it better to buy cheaper house, remodel? Is it better to put down what I have currently saved, then if necessary later on, refinance to lower payment?
Shall I track down the Maytag man and request the biggest box?
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Author: tsouth Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15693 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/12/2000 1:33 PM
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Should I cash in MFs and get 401K loan to up downpayment amount; lowering house payment? Is it better to buy cheaper house, remodel? Is it better to put down what I have currently saved, then if necessary later on, refinance to lower payment?
..........................

I wouldn't recommend using the 401k loan because if you ever left or lost your job, you would have to pay the loan back immediately or face a tax hit.

On the house choice, a lot depends on your willingness and ability to remodel a house. From someone who has lived in a house the last year and a half with constant minor remodelling going on, I can say that you definitely have to have patience and/or money. But going this route has given us a great house for a lot less cash. And I will be able to be a SAHM in the future because we went with a house we could afford.

Best of Luck,

Teresa


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Author: millerpim Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15696 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/12/2000 1:59 PM
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Well, everybody is different. Take me, for example. I wouldn't buy a house that was completely remodeled because it wouldn't reflect my personality, and, quite frankly, I enjoy doing remodeling. It does give you more house for the money. And it increases your resale ability.

If you remodel it yourself, you can do it on your own schedule, as little or as much as you like. My monthly remodeling expenses run about $300 to $500 or so, which is affordable to me. This way, I can do monthly projects that would cost me $2,500 to $3,000 if I hired someone and greatly enhance my equity along the way.

If you like the location of the house that needs remodeling, I would buy that one. You might get tired of a "perfect" house in the wrong location and it might be harder to sell down the road. You can always fix up a property. It's a real pain to move it.

elizabeth

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Author: realtorf Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15701 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/12/2000 6:00 PM
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Which house will increase in value more quickly? How long will you live there? Do you want land and a house or a house and land! will you qualify for 150k? Can you afford the repairs?

Some of these answers may help you decide.....and of course $$$$casts the bigger vote!
good luck
.b

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Author: TMFRunkle Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15705 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/12/2000 9:32 PM
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Now, my questions: The 150 would be a stretch if I decided to stay at home later. I have 19K saved of which I figure 15K for downpayment. I have about 9K in mutual funds (if they
haven't tanked more!) and I can borrow up to 26K from 401K. Should I cash in MFs and get 401K loan to up downpayment amount; lowering house payment? Is it better to buy
cheaper house, remodel? Is it better to put down what I have currently saved, then if necessary later on, refinance to lower payment?
Shall I track down the Maytag man and request the biggest box?


With the market being as down as much as it is, I would hesitate pulling money out to buy a house if I could avoid it. Remodeling would cost too, and I think I'd have to take a look at if I could afford this too. Is the 130K house in shape that you could live in it, and remodel it over time? If so, you might be able to remodel it in a fairly painless manner. Another question, could you get back in increased worth the amount you spend on remodeling?

These are just random disconnected thoughts that came to my head.

George

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Author: mitzuko Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15711 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/12/2000 10:54 PM
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Hmmmmm.......some good points. I understand about remodeling reflecting personality. This 150 house IS very close to what we like. The 130 would need quite a bit of remodeling, and yes, we could live in it in meanwhile. Of course, one factor which I'm thinking and really shouldn't, but......the 150 house has wonderful back yard, pool, grape arbor. And I haven't settled on wedding location......:) I do believe the 150 would retain/increase value over the other one. Slightly better street, newer, nicer style, has 1.5 acre whereas the 130 has 2.4 (lot of mowing!), etc. Of course, I may be trying to justify! I hate moving so I'd stay at least ten years if not forever. Both have plenty of room now and to grow. I think you are right and I won't touch 401K or MF (I'd lose twice on those!). I'll stick with the 15K whichever way it goes. Does anyone know if the MF counts towards the 2 month reserve?

OH and the 150 does already have a veggie garden, so at least I'll have something to eat :)

Talk to you soon when I begin the mortgage trudge.

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Author: Eliot1C Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15719 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/13/2000 10:17 AM
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One quick question, kind of on a tangent - do you absolutely HAVE to move when the landlord sells? Do you have a lease?

Depending on the answer to this question, as well as where you live and the state/local laws governing rental housing, you may have more protections than you think, which may give you a little bit more leeway in terms of whether or not you need to rush out and buy a house right away.

You may not want to take this tack at all, but a little legal advice might be in order.

Just a thought...

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Author: JDOyster Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15730 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/13/2000 3:17 PM
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the 150 house has wonderful back yard, pool, grape arbor.

A pool can be a nuisance and are expensive to maintain. Also, a pool can be dangerous to toddlers...something to think about if kidlets are in your present or future.

Just a thought.

JDOyster

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Author: hwkncat Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15748 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/14/2000 4:38 AM
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**A pool can be a nuisance and are expensive to maintain. Also, a pool can be dangerous
to toddlers...something to think about if kidlets are in your present or future.**

I have ruled out pools in any homes I am looking at due to the liability factor, the decreased home value, and the probable increased insurance rates. The last thing I need is someone's child drowning on my property.

hwkncat

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Author: mitzuko Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15758 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/14/2000 1:15 PM
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I have thought about the kiddie/pool issue. I do want a pool regardless of which house I buy. However, we have already figured in an immediate cost would be to fence the yard and seperately fence the pool. Sure it won't look at nice, but I'd rather be safe. I didn't know the pool would detract from house value in resell. But, I intend to live in house for a very long time and I'm looking for what will make me happy. And in the south Texas summer, a pool would be wonderful!

Now for more difficulties....... Just as I have decided against cheaper house (just don't like it). A house I bid on last month is up again. The owner didn't negotiate price at all before, now he's willing. However, his starting price is 135K which is higher than I'd like to start at. The house is 2700 sf, on about 3 acres. BUT, it needs updating badly. Which is okay, but price is steep. For almost the same price I can get newer, nicer, but smaller. Although, when finished the older, bigger could be a showplace.

Any suggestions on how to compare houses? Neighbors similar, same school district.


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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15763 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/14/2000 3:04 PM
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Long Post Alert

mitzuko: "Now for more difficulties....... Just as I have decided against cheaper house (just don't like it). A house I bid on last month is up again. The owner didn't negotiate price at all before, now he's willing. However, his starting price is 135K which is higher than I'd like to start at. The house is 2700 sf, on about 3 acres. BUT, it needs updating badly. Which is okay, but price is steep. For almost the same price I can get newer, nicer, but smaller. Although, when finished the older, bigger could be a showplace."

You may not like to hear this, but I cannot tell from any of your posts how you are valuing the land involved WRT to these different house. You say this one is about 3 acres; IIRC, the other two house involved smaller properties, something like 1 acre versus 1.5 acres.

At some level, the amount of land is always valued into the deal; at some other level, the amount of land involved starts to be an important portion of the value of the property. In fact, sometimes properties like this one that you described are advertised as being sold for "land value" with teardown, or "land value and livable until you build".

Obviously, I do not know the values for your area, but what would three vacnt acres in this location be worth?
If the answer is 125k, then the current owner has little reason to bargain down from 135k if the house is livable, even if it might otherwise require substantial upgrading; afterall, you are only paying 10k for the house.

And to make it worse, you may well be competing against someone who wants to subdivide the land and create more lots. For example, let's assume that most homes in the neighborhood sit on 1 to 1.5 acres AND the the legal requirement for a lot is that it cannot be less than 40,000 SF (slightly less than 1 acre, which is 43,560 SF). In this scenario, somebody with a 1.5 acre lot will get a small premium for the exta land but there is not a huge upside because the lot cannot be further subdivided. Conversely, someone witha 3 acre lot may well draw interest from builders who know that they could buy this lot (and old home), tear down the old home, subdivide into three lots and then build three homes for sale to the public. There is alot more upside to the original seller in this scenario and many times the builder/developer is willing to pay more for the lot (and old home) then someone who is looking to renovate the old home and live on a 3-acre lot.

Hoe this helps. Regards, JAFO





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Author: mitzuko Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15773 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/15/2000 11:55 AM
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Good point JAFO. Hadn't thought of the land in that regard. The 3 acre is in such a way it could not be subdivided. The majority of it runs behind the house and the houses to each side with no outlet. The 1.5 acre, however, could. the rear of it faces another street so it could be cut in 1/2 and sold. Although there is a 16x40 RV barn that would have to be torn down. The only use I can think of for the 3 acre beyond house is either guest house or barnyard fun.

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15778 of 127539
Subject: Re: 1st time buyer dazed and confused Date: 12/15/2000 2:13 PM
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mitzuko: "Good point JAFO. Hadn't thought of the land in that regard. The 3 acre is in such a way it could not be subdivided. The majority of it runs behind the house and the houses to each side with no outlet. The 1.5 acre, however, could. the rear of it faces another street so it could be cut in 1/2 and sold. Although there is a 16x40 RV barn that would have to be torn down. The only use I can think of for the 3 acre beyond house is either guest house or barnyard fun."

Thanks.

You have not spent enough time around developers, I see.

Depending on the configuration of the 3 acres, even as you describe it (assuming that the current house is demolished), what about either a private drive (common or with REA) or public street ending in a small cul-de-sac surrounded by 3-4 lots with homes. Another possibility is key (or flag) lots, if not prohibbited by local zoning. Depending upon minimum lot size requirements, I suspect that there probably is a way to subdivide.

Regards, JAFO

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