U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Real Estate
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 11-26-2020, 10:02 PM
 
Location: Oak Bowery
2,323 posts, read 1,153,512 times
Reputation: 7083

Advertisements

Hiya smart people. Looking for input here on my best options.

I retired in September. We have planned to relocate and obtained land in the new location after an extensive search. We’ve selected a plan, a builder, etc. Next month, I’ll travel there to meet with the builder and select an exact location on the land for the house.

We’re in a hot housing market and our home is one of the least expensive, detached homes in our area. The comps seem to value our home at around $330k. We remodeled our home about five years ago and it’s in pretty good shape.

I took a long-term substitute teaching position to help out a friend who runs a local elementary school. My assignment ends in Feb. My wife just accepted a new job working from home. Household monthly income is well over $10k , we have no debt. Credit scores are each in the 800’s.

I expect the new home to cost around $350k or so. The builder will have better numbers when we meet in Dec. We built our cash up over the last few years and I’ve got around $170k in cash.

I haven’t built a home from scratch in almost 40 years. The builder doesn’t require anything other than confirmation that we have the funds.

What are my options and risks to get the new home started? I don’t want to lose 2-3 months of building time while this house sells.

I could come up with the balance but the capital gains would be a bit painful.

I seem to recall that one of the covid relief bills allows someone to withdraw and repay over the next three years up to $100k from their IRA without penalty. The accounting & filings will be involved but that’s an easy way to grab $200k.

Yes, we’ll sell the house but the timing could be tricky. I think working with an agent in mid to late Jan makes sense to complete any tasks/repairs to list by mid Feb. I think it’ll sell fast but, I can’t predict the future. In a perfect world, we’d close in mid-March and move into a rental in the new location while the new house is completed. This ain’t a perfect world. Lol If it helps, we’re in Phoenix, 85048. If you look on Zillow, there’s exactly one detached home for sale between $300k and $325k. It’s at $318k and is 350 sq ft smaller than ours.

We could take out an equity line of credit on our current house. 80% of $300k is $240k. We can use our cash and draw from the line of credit as necessary. Pay off the credit line when the current home sells.

Suck it up and get a construction/mortgage loan. Take a slightly higher rate for lower closing costs. Time-consuming. Mortgage companies are flooded at the moment.

Any other options than I may have missed? Thank you for your input.
Rate this post positively Reply With Quote Quick reply to this message

 
Old 11-27-2020, 07:21 AM
 
Location: Texas
3,578 posts, read 1,655,595 times
Reputation: 4072
Why not get a construction loan? Pay it off after house sells.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 11-27-2020, 08:12 AM
 
Location: Oak Bowery
2,323 posts, read 1,153,512 times
Reputation: 7083
Quote:
Originally Posted by cp102 View Post
Why not get a construction loan? Pay it off after house sells.
Thank you! That’s an option noted above. I’m also open to options that I may not have considered.

I am also looking at some of the more popular iBuyers ie Opendoor and Zillow. Zillow won’t make an offer until we’re with 90 days of closing and that’s only a few days away. OD’s estimate was on the high side of my own comps. We’ll do a video walkthrough tomorrow which will allow them to sharpen their pencil. I’ll leave a little on the table for peace of mind and a scheduled close but, we’re not desperate either.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 11-27-2020, 09:57 AM
 
Location: Phoenix, AZ
4,132 posts, read 2,262,698 times
Reputation: 11156
Avoid the iBuyers. They are scammers preying on desperate sellers and will offer you considerably less than your house is worth no matter how nice it is. Whatever estimates they are giving you now are BS. You'll find that out when it's crunch time. "Oh no, things have changed, we can't pay you that amount any more, here's are current offer." You'll see.

You should be less concerned with what a nearby house is selling for and more concerned with what nearby houses have sold for in the last 6 months. Sold houses are where comps come from.

Nobody can predict or even guess what will happen when you actually put your home up for sale.

When I put my old house up for sale in April the real estate pundits were already predicting gloom and doom for the real estate industry because of Covid19. I was concerned that I it would take a long time to sell. Surprise, surprise. I was in contract in a week for a satisfactory price.

Your advantage is that you have enough assets that can be liquidated to cover the cost of your new home, even at a tax cost. If you have to use them to avoid hassling with lenders and their schedules, do it. You'll recover. In 1998 I bought my old house for cash. Half came from an equity line of credit in my rentals (that I paid off when they sold) and the other half came from my IRA for which I paid dearly in taxes but it was still a fraction of what a 30 year mortgage would have cost me.

If a HELOC figures better than liquidating assets, go for it. It'll give you more control and less hassle than a mortgage, and you can draw the money as needed, not all at once.

I would even go as far to suggest that you build your new home and move to it before you put your old home up for sale. You avoid throwing your money down the toilet on a rental and storage (costing you possibly thousands per month) and you'll have the flexibility of a leisurely move when the time comes.

I wouldn't be too concerned about the real estate market as prices are rising despite the Covid19 scare.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 11-27-2020, 11:00 AM
 
Location: Oak Bowery
2,323 posts, read 1,153,512 times
Reputation: 7083
Thank you! The sold homes nearby were taken into account also. The one referenced was to show the lack of homes for sale in our area in our price range.

Re iBuyers: I get your point but there’s no harm in at least exploring the option. I’m expect to be underwhelmed!

Appreciate the HELOC suggestion. That’s my preferred option at the moment. Like you stated, we can draw against it as necessary/when necessary.

Building and then moving is a tough option. The new home is 1,800 miles away and I prefer to be there as much as possible. I have a guy I’ve known since I was 12 who lives less than two miles away. He has a nice 2-bedroom cabin within 50 yards of his house. I’m fairly certain he’ll offer it to us to use while ours is built. I’ll pay him of course. Friends are friends, business is business.

If that doesn’t work out, rents in this area are affordable. There are several nearby lakes. Renting a house or a condo at one of them is also an option. I’d love to get out of here before summer arrives....but not at the expense of making a bad decision. 25 summers in AZ and I’m ready for a change.

Thanks again for your advice. I appreciate it!
Rate this post positively Reply With Quote Quick reply to this message
 
Old 11-27-2020, 11:02 AM
 
Location: Just south of Denver since 1989
11,563 posts, read 31,748,590 times
Reputation: 8305
How are you 90 days from closing on a fully finished house?

Have you considered a home equity loan?
Rate this post positively Reply With Quote Quick reply to this message
 
Old 11-27-2020, 11:13 AM
 
7,053 posts, read 8,269,096 times
Reputation: 18936
Just a couple of comments.

The numbers work if you sell your house NOW? Do it. Sentiment changes in the housing market in the snap of the fingers. 90 days from now buyers could be gone and then what will you do? So what if you leave a little bit on the table? Better than waiting a year to sell your house for a "poor" price.

Get EVERYTHING nailed down with the builder. Show him your plans/blueprints and get an exact price and description for everything that goes into your house from the permits to the porta potty to every piece of wood, nail, paint, shingle, pipe...you name it. If it goes into your house, it needs to be in the contract. None of this "allowance" stuff. It's Kohler Toilet, model XYZ , etc. Do you know how your contract will be structured? Fixed Price (NO!), cost plus, or cost plus plus? Get it nailed down. VERY important with material costs through the roof at this time.

Good luck. You already know the options on financing Don't get too far into the woods. These "we buy your house" are not designed to benefit you. Capiche?

Last edited by Ted Bear; 11-27-2020 at 11:52 AM..
Rate this post positively Reply With Quote Quick reply to this message
 
Old 11-27-2020, 02:08 PM
 
Location: Oak Bowery
2,323 posts, read 1,153,512 times
Reputation: 7083
Comprende!
Rate this post positively Reply With Quote Quick reply to this message
 
Old 11-27-2020, 03:54 PM
 
Location: Sandy Eggo's North County
4,352 posts, read 1,875,722 times
Reputation: 6394
The Federal housing "forbearance" may sunset around March. If it does, there are going to be a lot of properties come available, due to people not having funds to keep the roof over their heads. This is going to put add'l pressure on the rental market, likely. This may turn the market from a "seller's" to a "buyer's." (This is, of course, unless the new President addresses this.) Then, all bets are off.

Here's my though. You've been in PHX for 25 years. You likely have a bunch of equity. What if you keep your PHX house, and rent it? You should be able to rent it for more than your mortgage costs. The difference would be your profit. (I'm greatly simplifying this, as I don't need to type all this out.)

So, you get your construction loan, at a really low rate, you receive rent $$$ every month on your place now. You move into your buddies cabin until your home is finished. Then, if you decide this new place isn't for you, you can always move back to your PHX home, all while maintaining your lower tax base...

This plan gives you options.

Unless I missed it, where are you looking at going? (This could help us help you develop the tax/COL plan. )
Rate this post positively Reply With Quote Quick reply to this message
 
Old 11-27-2020, 06:11 PM
 
Location: Oak Bowery
2,323 posts, read 1,153,512 times
Reputation: 7083
Quote:
Originally Posted by NORTY FLATZ View Post
The Federal housing "forbearance" may sunset around March. If it does, there are going to be a lot of properties come available, due to people not having funds to keep the roof over their heads. This is going to put add'l pressure on the rental market, likely. This may turn the market from a "seller's" to a "buyer's." (This is, of course, unless the new President addresses this.) Then, all bets are off.

Here's my though. You've been in PHX for 25 years. You likely have a bunch of equity. What if you keep your PHX house, and rent it? You should be able to rent it for more than your mortgage costs. The difference would be your profit. (I'm greatly simplifying this, as I don't need to type all this out.)

So, you get your construction loan, at a really low rate, you receive rent $$$ every month on your place now. You move into your buddies cabin until your home is finished. Then, if you decide this new place isn't for you, you can always move back to your PHX home, all while maintaining your lower tax base...

This plan gives you options.

Unless I missed it, where are you looking at going? (This could help us help you develop the tax/COL plan. )
Thanks for the excellent advice. I appreciate it. My wife and I have both been landlords before - me in the US (CA and NC) and her in Brazil. Neither of us have any desire to ever be a landlord again!

We’re relocating to Oak Bowery AL which is just outside of Auburn AL. We’ll be on 10 acres out in the country.
Rate this post positively Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate

All times are GMT -6.

© 2005-2021, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top