Losing money on house sale.

Discussion in 'Real Estate' started by mtowncyclone13, Jul 21, 2015.

  1. mtowncyclone13

    mtowncyclone13 Well-Known Member
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    We are considering buying a larger home.

    The problem is we bought at the peak of the market in 2007 and in Marshalltown values have not gone up at all. In fact many houses are selling for less than the owners paid for them, even in 2015.

    Would you sell your house for less than you bought it for, not including all the upgrades you out into it? We would be looking at a straight loss of about 10k plus the "loss" of all the money we spent on upgrades, totalling about 15k. So 25k overall.

    We don't need that money but I don't want to lose it either (who would?!). Would you consider selling or just hold steady?
     
  2. roundball

    roundball Well-Known Member

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    Is not living in Marshalltown an option?
     
  3. ISUAlum2002

    ISUAlum2002 Well-Known Member

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    I'm guessing it's not a great rental market in M-Town, so renting it out while you go purchase another home isn't an option. I'd probably just stick it out.....unless I was really needing to move due to work or something, I'd ride it out.
     
  4. twojman

    twojman Well-Known Member

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    I am with this guy. Is the larger home a need or a want? Do you have enough for 20% down on a different house?
     
  5. Clonehomer

    Clonehomer Well-Known Member

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    Really the market isn't likely to get much better anytime soon, especially in Marshaltown. So if you wait it out, how long will you have to wait? And more importantly, are you getting a discount on the bigger house that you won't get when the market does improve?
     
  6. roundball

    roundball Well-Known Member

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    You aren't really "losing" money if you've owned since 2007, since I'm guessing you've built enough equity in that time to absorb the difference in what you bought it for and what you'll be able to sell it for.

    Other things to consider: whether you can get a better interest rate now (you probably can), whether you can avoid PMI by putting 20%+ down, how long you'd plan to stay in your bigger home, etc.

    Either way, if I owned a house in Marshalltown (a stagnant town at best) and was already having trouble selling it with interest rates at near-historic lows, I'd certainly be wary of buying an even larger, more expensive house.
     
  7. Rabbuk

    Rabbuk Well-Known Member

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    Turns out people don't want to live in redneck hell.
     
  8. mtowncyclone13

    mtowncyclone13 Well-Known Member
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    I have enough to put 30% down on the new house.

    Marshalltown isn't that bad. I too had the same thoughts as many of you but there is a group of dedicated and educated people working to make things better.

    I would rather spend 200k on a house here than 250l in Ankeny and commute.
     
  9. chadly82

    chadly82 Well-Known Member

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    If you don't need the money you can give it to me....I wouldn't sell but that's just me. How many other areas of your life would you take 25k and just say meh no big deal? To be honest too many people lose money in real estate by either refinancing too many times or moving too many times. Just my advice but theres no way id sell at this point!
     
  10. cycloneworld

    cycloneworld Facebook Knows All

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    Going this route, would the loss be out of pocket or equity? I'd also ride it out unless you NEED a bigger house. It's a seller's market in the DSM metro (not sure about Marshalltown) so you'd be buying once again at a potential peak. That alone would make me wait.
     
  11. SCNCY

    SCNCY Well-Known Member

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    If you need the space, why not just build an addition to your current house?

    But like others have said, if you want to move just because you want a bigger house, I would wait until a better market.
     
  12. mtowncyclone13

    mtowncyclone13 Well-Known Member
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    #12 mtowncyclone13, Jul 22, 2015
    Last edited: Jul 22, 2015
    Basically I put down 30k when I bought a house right after college at the height of the market.

    The balance of my current mortgage is about 80k. If I sell my current house I'll still walk away with 25k in my pocket after the agent commission (to help the new down payment - of which I already have about 45k set aside for).

    The market here is less than what I paid for the property in 2007 so I'd be losing equity but not straight cash. If I had been renting I would have spent about $75k in the time I've lived in my house so it's not like I'm doing horribly. The one thing I learned from all this is that putting down a lot of cash really helps out the situation.

    We haven't invested a dime into the property since about a year ago after we realized nothing would help the value grow. I am leery to add on or spend anymore money for a few reasons.

    One - the way our attached garage sits we can never expand it. I'm not sure how much we want to add on if the garage can never increase in size.

    Two - We discussed adding on but our agent suggested we don't because the increased value wouldn't be supported in the neighborhood. Hard to sell a 175k home on a block full of 125k homes.

    Three - the house we are thinking about is large enough for us to grow into and it has all of the things on our want list. It is valued high enough that we are okay putting in 25-30k of work because we would plan to live there forever. We can afford a brand new house but I'd rather continue saving for retirement and the kids' college than be house-poor.

    Our goal is to have the new mortgage be the same amount of principal as the current mortgage. That means a hefty down payment but it won't affect our day-to-day living. We pay about $1,000/month now and the new house would be about $1,100/month after the increased taxes and insurance are taken into consideration.
     
  13. clone52

    clone52 Well-Known Member

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    If you are buying a 200K house and putting 30% down, on a 30 year fixed loan, if you get a 3.75% rate now, you'd pay about 94K interest in those 30 years. If you wait and interest rates go up, you'd pay 115K at a 4.5% rate and 130K if you get a 5% rate.
     
  14. cycloneworld

    cycloneworld Facebook Knows All

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    True but you are still losing $25k. Whether you have to write a check for it at closing or if you put more down.

    If it were me, I'd hang on for a while longer if you don't need the bigger house immediately. Or put your house on the market now and see what it might go for.
     
  15. IsUaClone2

    IsUaClone2 Well-Known Member

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    Typically my assumption is that the market moves the same on 80% of the houses in a market. The lowest and highest 10% don't react in the same time frame. I'd also assume that when you bought in 2007, the house you are considering was valued higher than it is now. Thus the gain or loss remains proportional in that if you were to have a gain on sale of your present house, the price of your new house would be larger effectively off-setting your gain. Accordingly, I'd make the move. Your present house makes a good starter home and there should always be a market for it. It sounds like the house you are considering would make a better family home and serve you better.

    The real key to real estate markets is to have growing communities.
     
  16. Rather

    Rather Active Member

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    The $25k is a sunk cost and shouldn't be considered at all. The things that should be considered are current/ future finances and current/future home.
     
  17. ArgentCy

    ArgentCy Well-Known Member

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    I've seen a lot of home sales in a market that is probably fairly similar to Marshalltown. The prices don't move much as there is never a time where demand outstrips the supply (ie real growth). The market has been good this year with lots of homes selling but not a real noticeable price increase. I don't know about the county but around here homes outside the city limits with larger site or acreages have held their values much better than in the city limits. Although, I believe that might have to do with 1/3 higher property taxes in the city.

    Overall, I think the general real estate market could/should peak later this year as interest rates start rising. I would be leary of overleveraging your investment in a house.
     
  18. 1100011CS

    1100011CS Well-Known Member

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    Did you move to Marshalltown?
     
  19. mtowncyclone13

    mtowncyclone13 Well-Known Member
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    So should we buy now with lower interest rates or wait? I don't think our current homes' value will increase much and if the market moves enough to raise my value there is no doubt the house we'd like t buy would go up as well.
     
  20. pulse

    pulse Well-Known Member

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    Sounds like you want to move. GTFO and buy the house you want to live in.
     

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