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I purchased a home at peak in early 2005 in Maryland. I put it on the market aggressively 2 months ago and am finally under contract. I basically "undercut" my competition by at least 25K even though I had more upgraded options in my home.
I am losing the 100K (downpayment and principal payments I put into it the last 4 years). When you include the real estate commission, I have to bring another 30K to the table just to close the deal.
But I'm trying to look at it on this brightside.
1. I sell low, I buy low (I know there was another post on this board about this topic). I purchased another home a couple of months ago in Florida that sold for 140K more in 2006 than I just purchased it (03/2009).
2. I converted the property I am selling in Maryland into a rental property 2 years ago (I got an official 3rd party appraisal at the time for a high cost basis) so I'm getting to write off the entire 130K loss (about a 42K tax savings). I also managed to get 50K in rental income the past 18 months from the property I am selling. So the 130K loss isn't a true 130K loss.
3. I'm a numbers guy. The Maryland property I'm selling is costing me almost $4000 a month (principal/interest/re taxes/insurance/hoa/utilities). If I let it sit idle for 6 months trying to haggle 10-20K more, I would essentially be throwing away 24K in mortgage payments in 6 months.
My realtor and I are on the same page. She thinks more people should think like me. It's a bad real estate market but I think people get their emotions get the better of them. Sometimes you have to take your losses and move on. I think the "safer" areas like Maryland starting declining later than the early states (like Florida, NV, AZ, some parts of California) and are starting to feel the full effects of the housing downturn.
I really didn't want to rent the property out any money (I could have gotten 3k in rent a month...so I was losing around $300-500 a month because you can't deduct principal payments on the Schedule E but I had really good tenants and I didn't want to take another chance on what essentially is a mint condition home with another renter).
Still losing a load of money on the property any way you cut it. But I'm still young (in my early 30s). I can make up the losses in 12 months since I can raise cash in a hurry.
Are there others out there who think like me? Granted you have to have cash reserves/and or have a high paying job to do what I'm doing.
Seems like you answered your own questions!
Congrats for having the fortitude to stick with common sense. In the long run you'll have minimized losses which will enable you to recoup them far sooner via other investments or savings than the many delusional sellers out there.
I am curious though, what part of Maryland was this property located? I'm a MD resident and had expected housing here to turn down in places outside of PG county and Baltimore City, and except for a few outliers, it doesn't seem like there are too many foreclosures or short sales in good neighborhoods in Montgomery, Howard, AA, and Baltimore County. I guess there are a lot of dual income households with stable, 6 figure government jobs and there are still lots of lawyers.
I sold my first home in MD in late 2007, and did the same thing as you. At the time I think we walked away from closing with a couple grand, but felt good as the inventory in our neighborhood kept creeping up but listing prices held steady.
Congrats for having the fortitude to stick with common sense. In the long run you'll have minimized losses which will enable you to recoup them far sooner via other investments or savings than the many delusional sellers out there.
I am curious though, what part of Maryland was this property located? I'm a MD resident and had expected housing here to turn down in places outside of PG county and Baltimore City, and except for a few outliers, it doesn't seem like there are too many foreclosures or short sales in good neighborhoods in Montgomery, Howard, AA, and Baltimore County. I guess there are a lot of dual income households with stable, 6 figure government jobs and there are still lots of lawyers.
I sold my first home in MD in late 2007, and did the same thing as you. At the time I think we walked away from closing with a couple grand, but felt good as the inventory in our neighborhood kept creeping up but listing prices held steady.
GLTY
Property is in Howard County, MD (for those who do not know, Howard County, MD is one of the top 5-10 most affluent counties in the United States.
There are not many short sales or foreclosures. People are just eating the costs like me and moving on.
But I got very concerned because my sister lives in Howard County (Clarksville, which is probably the absolute best school district in Maryland), had one of her neighbors properties go into foreclosure because the guy had lost his banking job.
A lot of properties in Howard County start from the low 600K all the way up to the 2-3 million dollar range. There's a lot of inventory building up.
I always thought my part of Maryland would be immune to the housing crisis but housing is dragging every community down (even the good ones with top rated schools).
I would have gotten 80K more for my house if I would have sold before the credit crisis (Oct/Nov 2008). That's how fast the housing market is turning down in Maryland and it's scary.
I don't think it will go down much lower (maybe 5-10%) or it may stay flat. All I know is that housing prices will not go up anytime for the next 3-5 years. And I'd rather just eat my loss now and free up money.
Property is in Howard County, MD (for those who do not know, Howard County, MD is one of the top 5-10 most affluent counties in the United States.
There are not many short sales or foreclosures. People are just eating the costs like me and moving on.
But I got very concerned because my sister lives in Howard County (Clarksville, which is probably the absolute best school district in Maryland), had one of her neighbors properties go into foreclosure because the guy had lost his banking job.
A lot of properties in Howard County start from the low 600K all the way up to the 2-3 million dollar range. There's a lot of inventory building up.
I always thought my part of Maryland would be immune to the housing crisis but housing is dragging every community down (even the good ones with top rated schools).
I would have gotten 80K more for my house if I would have sold before the credit crisis (Oct/Nov 2008). That's how fast the housing market is turning down in Maryland and it's scary.
I don't think it will go down much lower (maybe 5-10%) or it may stay flat. All I know is that housing prices will not go up anytime for the next 3-5 years. And I'd rather just eat my loss now and free up money.
If home prices remain level or drop 5-10% over the next 3-5 years, that would be, IMO, validation MD has a strong real estate market!
I think much more pain is in the cards for Maryland real estate as well as the rest of the country...and IMO you'll have the largest smile on your face over the next few years.
By conventional standards, you would need a household income of around 350k to be able to buy a 1 million dollar home, and that assumes you put down 20% so you can afford to live comfortably. How many single earner families can afford that, especially if they can't trade up because they built up equity in their old home? How many dual income families can really afford that when you account for the fact the dual income family buying a 1 million dollar home would also probably have a lot of other expenses like daycare taking huge bites of their income?
Home prices are drifting down despite mortgage rates remaining at historic lows. MD or CA, I fail to see how homes can possibly hold their values if the housing market is struggling with historically low rates and government programs to subsidize the housing market (like the new homebuyer credit).
Even if one assumes every household in the USA with an exotic or with a 30 year mortgage above 5% were forced to refinance into 5%, 30 year fixed rate mortgages, what is going to happen when rates eventually rise to more historically normal levels, say around 7-8%?
Future buyers won't be able to afford as much house as they are today, so either home prices will come down (via direct price reduction or through de-valuation of the dollar/inflation of goods and services) or there will be continue to be a glut of inventory.
And either case homeownership will be a burden for many, the economy won't be able to recover, and we'll remain in this negative feedback loop until something shakes us out of it.
I purchased a home 2.5 years ago in Kendall County IL supposedly an up and coming area in the "fastest growing county" in the US. Put in on the market in March because I was feeling buried by it plus company layoffs hang over my head. After closing I'm walking out with $60K less than I walked in with. I have until the end of the day today to break the deal. Should I cut my losses and rebuild?
Not enough info. How about the obvious stuff: do you have a place to live? Do you have to sell or can you continue to afford the place, regardless of the "value" lost? Do you anticipate that there are worse or better times ahead?
I purchased a home 2.5 years ago in Kendall County IL supposedly an up and coming area in the "fastest growing county" in the US. Put in on the market in March because I was feeling buried by it plus company layoffs hang over my head. After closing I'm walking out with $60K less than I walked in with. I have until the end of the day today to break the deal. Should I cut my losses and rebuild?
There are couple of questions you need to ask yourself before you consider selling.
My situation (where I really wanted to unload the home) may be different. I didn't really want to rent out an essentially new home again (home was about 3.5 years old). I"ve gotten very lucky with my two tenants and wasn't going to tempt fate again.
So to me, every month I leave the home empty, that's almost $4K mortgage/RE/insurance/HOA down the drain. I can try haggle over 10-20K and let the home sit empty for 4-5 months but than I would be out 16-20K in mortgage payments.
So you have to do the math.
Are you still living in the home?
Do you plan on moving soon?
Do you have an ARM that will reset within the next 1-2 years and know you won't qualify for a loan mod because you make too much money.
Honestly, I believe in the sell low/buy lower theory.
If you can afford it, sell it for a loss and move on. You can rent temporarily and reload on cash quickly. You can probably buy a similar home like yours for the same price next year.
It's a guessing game whether housing has bottomed out.
You need to look at your own neighborhood also. Are there a lot of foreclosure/short sale activity? Are there new building around the area.
I purchased my home in a new development (Phase 1). Now the builders are drastically reducing the prices on new home by over 100K. (Phase 3). Phase 2 buyers are even more screwed than me. So in my case, I had the builders to compete with and I had to price below the builders price. The two homes my listing competed pulled themselves off the market since my home when under contract. They just could not compete with my listing or the builders or just could not take the major financial loss.
Well I officially closed on the sale of my home yesterday (July 31st). I aggressively listed the home April 27th My tenants moved out May 29th. I was under contract on June 9th. Closing was July 31st; the home only sat empty for less than 60 days. So I accomplished what I wanted. The home was originally my principal residence for almost 2 years before I moved out. It was never intended to be a rental property.
My final numbers point to a net loss of 137K (Maryland has high closing costs for buyers/sellers). I particularly got screwed both ways. Because I purchased the property brand new in 2005 (with brand new properties, the buyer (me) has the pay the majority of closing costs in regards to the fix state transfer taxes and stamps).
With resales, the buyer/seller split the costing costs (with maryland transfer taxes/stamps/county taxes).
This was my first home. So it's not like I made money from the sale of my previous home during the housing boom and than lost it.
A part of me feels still feels angry about the situation. I see homeowners who either game the system or just plain overspent or did bad loans/no downpayment/interest only getting help. But I'm never going to get any "help" from Uncle Sam just because I'm considered too successful.
I played the housing game the right way. I put down a pretty big 60K downpayment. I paid into the principal each month and still ended up being negative at closing. I was responsible. I have always had backup reserves to cover my losses.
I will move on. Thanks everyone for your support on this. I think I did the right financial move in unloading this property. Long-term, I free up a lot of money that would have gone to pay the mortgage of that Maryland property. I could have gotten $2800-rent but my mortgage and principal/RE taxes/insurance/HOA would have been around $4K. So I would have been losing around $700 a month (since you can't deduct principal payment from rents). Plus, I see the renting option as a 3 year plan in this housing market. I think housing is going to be flat for at least till 2011-2012 (until all the 5 year option ARMs/interest only loans that were taken out in 2005/2006 parts of 2007 finally get exposed).
I purchased a great home in Florida 5 months ago at a price 140K less than what my neighbors paid for in 2005/2006. The Florida market was one of the first to tank in 2007 (along with NV, AZ). I feel Florida's at or very near the bottom already. Sure, I'm prepared for the Florida market to potentially go down another 5-10%, but from the look at home sales in the Orlando area (I'm in Seminole County just next to Orange County, FL), everything is picking up in terms of sale because prices have gone down so much.
The rest of the country (particular the NE and parts of the Pacific NW) are starting to really feel the housing bust now. I doubt those places will tank as much as Florida did so they will recover much faster.
But this is life. I'm still young (in my 30s), financially sound, even after this real estate debacle , healthy, just got married last year. When it's all said and done, this negative housing experience will just be a small blip in my overall life.
Plus my stocks are doing great. I'm up 20K in my taxable accounts and another 40K in my retirement accounts in the last 4 months! You win some, you lose some. Just remember to set aside emergency cash reserves to cover your losses. I wish more homeowners would do this or just wait to purchase their homes when they can truly afford it.
Just sold a condo for a $15k loss and was in a state of euphoria when I handed over the keys.
No more leaking appliance issues, no more plumbing issues, no more settlement crack issues, no more noisy neighbor issues (and the fact that there was no leasing office to complain to), no more nazi condo management issues...
Just sold a condo for a $15k loss and was in a state of euphoria when I handed over the keys.
No more leaking appliance issues, no more plumbing issues, no more settlement crack issues, no more noisy neighbor issues (and the fact that there was no leasing office to complain to), no more nazi condo management issues...
Renting is beautiful.
Congratulations on selling your condo! Sorry that you had to take a loss, but given the conditions you described it was probably worth it to you just to get out from under.
We took a six figure loss in 2012 when we sold our home in Phoenix (purchased in 2007) to move to Raleigh. We made the decision because we wanted to move, did not want to be absentee landlords, and didn't believe that market would recover for many years (we were right - it still hasn't. ) We don't second guess, regret or complain about our decision.
Except for one thing, which still really pisses me off. We had paid off the mortgage on that house. We watched others walk away relatively unscathed with short sales. We watched others get HARP deals that often lowered their principle balances. The fact that we couldn't even take the loss as a write off on our taxes was one huge bitter pill we had to swallow. Totally, completely unfair, imho.
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I'm having a difficult time.....
