EersSkins05 Posted January 9, 2009 Share Posted January 9, 2009 Ok, so last night I walk in and my wife is looking up houses in our area on the website of the realtor we used to buy our current house 3 years ago. She starts showing me house after house that are all SIGNIFICANTLY nicer than the one we presently live in, and they all cost between 10 and 20k less than we paid for the one we live in here in the eastern panhandle of West Virginia. As I said, we bought this house about 3 years ago and used a first-time homebuyer program through West Virginia Housing that got us a 5.4% fixed 30-year loan. At the time of sale, it was appraised at approximately $20k more than we paid for it. We haven't had an appraisal done since then, but obviously the market has plummeted downwards in the last three years and I suspect that an appraised value now would probably still be more than we presently owe for a payoff on the house, but the hope is that the payoff would be the sale price on the house. Now here's my question: the wife wants to explore trying to sell the house we're in, trying to get the payoff value for what we owe on it, then move into one of these other, better, newer, more spacious houses that are worth now what our present house was worth three years ago. Our credit is pretty good and I saw this morning that 30 year fixed loans have dropped to just over 5%. My argument to her was that we'd basically be pissing away 3 years of payments towards the equity in our present home without waiting for the property values to go back up to get more bang for our buck. (The classic "buying high, selling low" problem.) Plus we'd almost assuredly have to raise the cash for a down-payment on the new place, and that's easier said than done. Her argument was that if we move into one of these significantly nicer places, the property values will go back up anyway, and we'll be in a nicer house and enjoy the appreciation of value in THAT house, rather than our current one. (She's hoping for eventual "buy low, sell high.") Are there any housing experts (or people who know this sort of thing anyway) who can tell me whether or not any of this would make sense? (Thanks in advance.) Link to comment Share on other sites More sharing options...
artmonkforHOF Posted January 9, 2009 Share Posted January 9, 2009 Don't do it you will get screwed. You might have done some number crunching already, saying yours will sell for X and the one you want to buy is X+y and therefore you would only need y amount of extra money to make the deal work. Here's the problem: what you sell your house for will NOT be the amount of money you put towards your next home. You will have to pay comission to the real estate agent, land transfer tax, lawyers fees and your agent might recommend some upgrades that will cost you even before you sell (i.e paint, carpet etc) and there might be some issues that pop up in a home inspection that you would have to fix/remedy. A friend of mine tried this a few years ago and by the time everything was done and paid for, he ended up only getting about 75% of the value out of his old home to use towards the new one. Wait for the market to go up again, as it sounds like you might have a hard time selling your place for the price you want. Link to comment Share on other sites More sharing options...
TimmySmith Posted January 9, 2009 Share Posted January 9, 2009 Right now it's sell low, buy low. I agree with your wife. Basically if you wait for your house to increase (and it may never increase) then all the houses will increase. You will be in the same boat either way. Base your decision more on why you need to move, as opposed to house prices. Get prequalified. Then sell your house first, before you buy another. Link to comment Share on other sites More sharing options...
Winning Season Please! Posted January 9, 2009 Share Posted January 9, 2009 If I understand correct you owe more than your house is worth. If you sell and get the bank to accept lower than what you owe it is called a "short sale" and it will screw your credit. You will NOT be able to buy a house for a couple of years because of this. Plus you need downpayment now and unless you have money stashed away you won't get it from the sale of your house. Stay where you are at and ride it out. Link to comment Share on other sites More sharing options...
CalSkinsFan Posted January 9, 2009 Share Posted January 9, 2009 I bought my first place a month ago. I was able to to take advantage of a first time buyers program as well (was locked in right before the funds dried up). I'm no expert, but from my understanding without that kind of program you would need at a minimum 10% down, most likely 20% to even qualify for a new mortgage. Three years ago was pretty much the height of the market, so even if you bought under market value at the time, it's doubtful whether you would get equal value back. You would likely have to come up with any difference in cash to get out of your current mortgage. You would have to get new appraisal to find out, about $300-400. Also, you may also need to pay buyers closing closts (in addition to yours) just to get your place sold in this market (I had about 75% of mine paid by seller). So, unless you have a good bit of cash on hand, you are probably better off staying where you are for another year or two. :2cents: Link to comment Share on other sites More sharing options...
Winning Season Please! Posted January 9, 2009 Share Posted January 9, 2009 i'm no expert, but from my understanding without that kind of program you would need at a minimum 10% down, most likely 20% to even qualify for a new mortgage. 3.5% Link to comment Share on other sites More sharing options...
EersSkins05 Posted January 9, 2009 Author Share Posted January 9, 2009 Thanks for the advice, all. Like I said, I haven't had our current house appraised, so I can't tell you whether or not the appraisal value will meet our remaining loan obligation. (I'm guessing we'd be right around it.) But it sounds from the consensus that unless I can get at least about 10% more out of the house than I owe (or if I was able to come up with the cash to handle closing costs, down payments, etc. on the potential NEW place), I should just sit tight. Link to comment Share on other sites More sharing options...
TMK9973 Posted January 9, 2009 Share Posted January 9, 2009 Your wife is right in the sense that it's not a bad time to trade up. Meaning a nicer house in a nicer community has a better upside that the house you are in now. If the market recovers - Which house will be worth more? however -As other posters have pointed out -You need to factor in many other things. Even if your house is worth the same as you owe, you have commission (6%), closing costs (3%), moving expenses, etc... Also - If you did a 1st time home buyers program, have you checked the rules on when you can sell. Some of them say you owe if you move out before a certain amount of time. now - if You want to do this, and decide it might be worth (Even if it costs you some now, it still could be worth it) you have room to negotiate. If you plan to use the same realtor for both selling and buying ask them to charge less commission. When buying ask the seller to cover the closing costs. Many factors to consider. Link to comment Share on other sites More sharing options...
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