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Friday, March 27, 2009
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35 comments:
With all the items to attend to in order to close and move, it seems I have been missing out on great fun back here. But I had to share an evil landlord moment, in great frustration this morning:
We had asked repeatedly for a two-week extension of our lease, so we would definitely have time to set up the move through the Marine Corps and clean it well. There are so many moving pieces that we need to align, we wanted to be safe, even if it meant spending an unnecessary $1000. On Tuesday, our landlord FINALLY emailed yes, he would extend the lease, but we had to make the commitment immediately.
So we emailed back and did so. Now we were on the hook until May 15, no matter how quickly we managed to close/move.
And the very next day, we learned of a family from church being evicted because their landlord had stopped paying the mortgage months earlier. They had been ontime with their rent, and have five homeschooled kids. They were given two weeks' notice, but someone volunteered to work with the bank and get them to stay through the end of April. We showed them our house, which they loved, and gave their information to our landlord. Win-win all around, if our landlord vetted them and it worked out.
Well, yesterday, there was an email from our landlord's wife--I guess our other landlord. She said they were "no longer able" to extend our lease two weeks, and would be showing the house to "multiple families" Friday, as in today.
Do you have any idea what my basement looked like at that moment? I would have been reported.
My husband wanted to go thermonuclear and point out all the ways in which they were in violation of our lease agreement, and that it was too late for them to change their minds about the extension, but for the sake of this family getting kicked out, we held back, not wanting to make them mad enough to not even consider renting to someone associated with us.
So we cleaned like crazy people all day yesterday, and I am about to head to my brother's house to hang out all day.
The only reason we are cutting things this close is because HE took four months to decide to accept our offer to purchase, and by then, it was too late--we had worked things out for our dream house.
Accidental landlords.
We'll see how today goes. But if they do not get new tenants out of this round of showings, when we know one of the families was willing and desperate to rent, I'm unleashing my husband.
Sorry so long, but I needed this blog therapy so I could deal with today. In other news, buying the house is coming along well so far. Mysteriously, the bank's appraiser came in at purchase price. I have a long long post coming about appraisals, but I'm going to wait until I actually own this house. Let's just say I learned firsthand that appraisals are, or at least can be, a farce.
Must go vaccuum one more time...
I'm so glad you're not buying from that POS.
Best of luck.
Tabitha, glad the purchase is still moving along well and will look forward to your thoughts on appraisals (I have a hazy suspicion that they will be similar to my own)!
Your landlord story is simply outrageous. The sooner you get away from these people, the better off you will be. I hope you can get everything done in the shortened time. No, wait, I hope he messes up again and your husband gets unleashed!
Tabitha-
You are too nice - should have left the basement the way it was on such short notice.
I have looked at plenty of thrashed rental properties for sale in my day ( not saying yours was thrashed, you get my point)
You all are in the middle of moving after all - who the heck doesn't grasp that??
Tabitha,
Sorry about your jerk of a LL. We are not all like that! Actually, someone moving out mid-month can work out quite well for me. I can show the place while you are there and get someone lined-up for the first (that is when most people want to move anyway). The 2 wks downtime gives me the opportunity to paint and otherwise get the place ready for the new tenants.
On another note, I have a current situation that I am trying to figure out and I was thinking that the nice people here might help me.
We have located a terrific TH. We have been thinking about trading down. The only child is off at college and the two of us are rambling around in a 5bd/4.5ba colonial.
We are 50 and 51. I dread the idea of moving. We have several things that need to be done to our first before putting it on the market. We would have to act fast (very fast) to get the new place.
I'm not sure I feel like putting forth such an enormous effort right now.
Here is what I am thinking; buy the TH and lease it out for 2 or 3 yrs while we get our act together (paint, new marble foyer, redo a bath, de-clutter, etc.) and then move.
Perhaps the sales market for our house will get better - but it may get worse. Maybe we will come across something we like even more.
Any thoughts/suggestions from the group?
Tabitha,
About the foreclosure eviction. From my experience (although one-year plus ago so things could be different now) the sheriff will not evict the tenant until a court judgment is made. The bank will try all kinds of scare tactic to drive the tenant out but without a court ruling the sheriff won't do nothing (they'd file a complaint with the sheriff and a notice of the complaint would be served, but not an eviction notice) Also, if they've been current on the rent, the bank is in a very weak position to give only two weeks if and when they bring the case to court. It's probably why they got an extension.
But of course I don't advice the family to wait until the judgment is made, but they have plenty of time until a court date is given to them, which is usually one-month away. Just make sure they move out before the court date and they should be able to come out of this mess just fine.
outjust my .02.
va_investor
There are a huge number of very nice THs that have been built in recent years. So I'm not sure why you'd want to lock in to one particular one now if you're not ready to move yet. In other words I find it hard to believe that you won't find one that you equally love in the future, unless this one is both that fantastic and that underpriced, in which case I don't see why you wouldn't just go ahead with your plan without asking us about it...
Tabitha,
Maybe think about this -- would this landlord make a good landlord for this poor 5-kid family?
I'm sure there must be other eager landlords out there -- I am SO sorry for this family you mentioned.
VA_Investor,
It sounds like you really like the TH. But if you're not eager to make the effort -- if in fact your current place needs the upgrades -- then it's probably worth it to just wait.
Trading down is possible at any juncture, I would think.
On the other hand (and there are always other hands), I do wonder about demographic shifts and boomers in your situation retiring, and what it will do to 5-bed 4-bath house appreciation and desirability, etc. It may be that there's no better time than the present to rid yourself of it.
Harriet,
Thanks for your comments. As far as demographics, the two houses that have changed hands in my neighborhood in the last 6-8 months have involved the "younger" generation moving in (30 somethings with babies and pre-schooler's). I don't see much downside in price.
Having a couple years to get things together gives me a certain comfort level. I'll know exactly where I am going and can plan (furnishings, etc.) accordingly.
The unknown is the direction of the market. If the TH wasn't a terrific buy (in my mind) I wouldn't be considering it.
Again, thanks for your thoughts. I might get the gang (our good friends) over there tonight to see it. They don't, however, have the interest or insight of many on this board.
I'd move to this TH tomorrow, but I'm not 30 (or even 40) anymore. It could very well be available in a few years, but there is no guarantee. It has a very special (attractive to us) feature that is rarely replicable.
Ridiculous. No one in Virginia can evict with only two weeks notice unless it is a non-payment of rent issue. 30 days notice must be given. See:
Virginia Eviction FAQ If you get a chance, let your acquaintaces know that they have full rights to the security deposit and can sue the former LL and/or the bank jointly as appropriate to recover it, plus damages and fees. I'm glad the family got support and can stay until the end of April. These scare tactics are deplorable. There is no way the bank could have gotten them out earlier than end of April, probably not even end of May!
FWIW, in your circumstance I would have informed the landlord that the house was not available for showing on Friday due to a family event (or sick kid) Friday - Sunday, but it would be available on Monday.
This is completely within your rights. You can't refuse to let the landlord show the property, but it is reasonable amd defensible to reschedule it.
Notable part of FAQ:
Can a Virginia landlord lock out a tenant or shut off utilities?
Under either the general law eviction or the VRLTA eviction law, the landlord may not shut off utilities, lock the tenant out of the rental unit, or evict the tenant without giving notice and going to court. You do not have to move out just because the landlord tells you to leave and takes out an unlawful detainer. The landlord must wait until a court order is issued. These steps usually take more than 2 months from the day the tenant gets a notice to move out.
va_investor
If it has some feature that you particularly crave that doesn't happen often for THs (like the fabulous screened in porches I've seen on a few in Burke, not for sale) then that changes things. If it's at a good price and it's particularly desirable I don't see why your plan isn't a good one.
And you'll be able to sell your current home at a leisurely pace if you can get tenants that want to go month to month with a 90 day termination by either party. Which, if it's such a nice TH it will probably attract the kind of renters who are just renting while they learn the area and look for a house themselves. Heck they might even buy yours.
Everyone needs to go read this:
Atlantic Monthly the US as a banana republic by Simon Johnston, formerly of the IMF, now a professor at MIT.
Best explanation since Planet Money's global glut of money program. Oh and if anyone missed NPR/Planet Money/This American Life's coverage of an FDIC bank takeover yesterday, you've got to go listen to that too.
(and south park)
LOL yes, definitely South Park=) Great episode.
Cara,
You can buy a screened porch, but not a view. And, in this case, not waterfront. The supply is limited. We happen to value waterfront highly - others may not care. Some may even see it as a negative (little kids, etc.).
I just thought that I may get into a rational pro-con discussion. I certainly have strong opinions, but that doesn't mean that I don't value other opinions.
Hi Folks - been away for a while, but I used to hang out a bit around here. Looking for NoVAWatcher and others to weigh in here...
We currently lease a smallish SFR with a 2 car garage in 20171 for a bit under $2k a month - pretty good deal, I think. Our lease is up end of July. A friend of ours from called to let us know about a house that's coming up for sale - a smallish 3/2/1 colonial on a pipestem in Franklin Farm, 1700 sqft + full finished basement, 2 car garage, clean but no real updates since new in 1983 or so. Expected asking price is in the $390 range, which I expect to sell quickly at the price based on what I've seen go under contract. Last sale was at $189k in 1989.
I know we're likely to see some more price drops before we hit "the bottom", but I'm seriously starting to consider this as an option. Rates are stupid low, we have a hefty DP, and frankly I'm sick of renting. Is this a 2002 price? 2004? Am I nuts for even considering it?
Thanks,
Jason
Jason,
not familiar with Franklin Farm, but if this is any indication:
http://franklymls.com/FX6986920
you can expect quite a lot out of a $380k price point there. While this is indeed lacking a garage (you missed the great garage debate the other day) it seems pretty darn nice for the price. If what you're looking at is on this order and under 400k and you don't mind a little paper losses, go ahead. Given your rent I'd put your upper limit for rental parity closer to 360k, and that's only with todays low rates, more like 300k for your future buyer (in today's dollars). So, if a paper loss is going to bother you, or if you don't love what you're buying, then its not time yet.
va_investor
not sure why you're asking us about investments...afaik, you and like one other person on here are landlords. why would you sell the colonial, why not rent it out?
this lady cracks me up..
http://www.good2green.net/2009/03/most-affordable-zip-codes-under-400000-inside-and-outside-beltway-pt-1.html
"No one could have predicted this, that one day you can buy single family or townhouses inside the beltway for prices below $400,000."
nope, nobody could've predicted that
I know a few people in what I'll call Franklin Farm/Oak Hill. My terminology might be off, but I'm referring to the areas that straddle FFX county parkway between 66 and the toll road. My friends seem to like the area.
As far as prices go, relative to other areas, they seem reasonable. But, they still have a ways to go IMO. I'd say find some places on the internet that you like, then use Zillow or the tax database to find what comps sold for in 2000 (the tax database allows you to pull up the sales for a street and then sort by last sold date). That will give you an idea of how much places sold for when prices were reasonable, and then you can extrapolate forward. Likewise, you can look up prices in 2006 and see how far asking prices have fallen, keeping that final sale prices are usually around 90-95% of last asking these days.
Hey Cara, the only paper loss Jason will experience on the house you posted (http://franklymls.com/FX6986920) is that room outfitted in all pink. I'm sure the seller thought that the wallpaper and drapes probably add value to the house.
I may not be one to talk ... but Franklin Farm/Oak Hill is the area I would like to move to. Compared to current prices, from what I've seen, that price is good for a house there with a two-car garage. Don't know if prices will go down further, but it's pretty good currently.
I had trouble logging back in to continue the discussion I was involved in a few days ago. But Stuck does not like the idea I thought made most sense (which I think Cara suggested) of selling now before another drop and before the tax credit expires, then renting awhile, and then buying a bargain SFH. He wants to hold onto the TH till the price rises to the point we sold it at (no matter how long that is), and buy a low-priced TH next time we move. Any final thoughts on this?
My guess is that they had a little girl and that was her room.
If you could get it for $340k, that would be only 36% higher than the 2001 price, which wouldn't be too bad.
Heading to FFX, my advice (worth what you're paying for it) is to separate the decisions info (a) personal and family need and (b) financial considerations.
It sound as if hubby isn't sure he ever wants a SFH but you want one because it will better meet your growing kids needs. Can you try to get consensus on that? Can you factor in the kids future preferences?
Once you decide on the type of place you eventually want to live in, I think the financial options will become less complicated.
Ace, you're right on that. Good point.
ace is right that those definitely need to be separate decisions is right.
What I meant about renting is just that whichever plan you take on the TH, sell or rent it out, if you're moving out, my advice is not to buy again right now.
What I meant on run the numbers is roughly this. Your husband may be right, that selling now is not the correct plan. If you were to move and rent it out, you basically set an upper limit on your losses (or rather you share those losses with the federal government 72/28 or whatever your marginal tax rate is). So, there's a couple financial calculations that need doing. (1) Which is more expensive, (a) a 70k un-collateralized loan at say 8% for 5-10 years, or (b) the current mortgage. You need to do this both on a cash-flow basis and on an over-the-life-of-the-loan basis. You should exclude the cost of rent because you need a roof over your head in both scenarios.
(I'm going to go run some numbers on this and get back with part 2)
toffx
(continued)
other's should assess whether I'm doing this right,
but my idea is to use the WaPo's compare mortgage terms calculator:
WaPo
and compare the costs and remaining balance on a loan amount of 70k over the course of 5 years (the expected time that you might hold onto the TH under the current mortgage). (I assumed 2% inflation and 28% bracket, but obviously you can rerun this yourself)
To pay it off in 5 years if you got a 7% loan (which I can get on my consumer loan line of credit so I'm guessing you could too) you'd need to be paying out $1,422.7 every month, and would have paid a total of only $81,060.45 for the privilege. If you had it amoritize over 10 years at say 8% you would pay $869.34/month, have paid off $45,492.81 so far, and have $41,652.21 left to go for a total cost of $87,145.02 (at the 5 year mark). If you just keep paying down your mortgage you'll only be paying an additional $424.32/month ($20,533.73 total) for having bought at the wrong time, and after 5 years you'll still be $62,131.84 underwater if prices haven't recovered any for a total cost of only marginally more than the 5 year loan: $82,665.57
Thus, I would conclude from this that selling now and getting an unconsolidated loan versus continuing to own the TH and pay off the mortgage is essentially a wash on a total cost basis, but only if you're willing to aggressively pay down the 70k.
Thus, the plan of converting your current TH into a rental to put a lower limit on the capital losses (if you think TH prices have more downside risk) while renting out someplace for yourself cheaply in your preferred neighborhood seems like the most financially sound plan. At some point you may have to pay the piper, but there's no good reason to do so now.
So, now someone can tell me if my math is wrong. Basically I'm equating the interest on the bulk of the loan (less the 70k) to rent. And applying the principle to the 70k portion. It's like splitting it in your head to an interest only portion and an amoritizing portion. That seems correct to me, but I may come back in a few minutes...
Ok, I've decided my math is correct. And furthermore, clearly renting out the TH is the winner. Why? for the obvious reason that you can take some of the ~$1000 difference in cash flows between the 5yr loan and your current mortgage and put it in CDs or money market or some other very safe vehicle and set it aside to either (a) pay back the 62k balance if the prices haven't recovered to above where they are now or (b) to have built up a nice new DP.
It's win win win. If your husband is right and the TH come back up in value due to inflation or whatever other means, then clearly you win by holding on to it and you can't lose taxwise b/c you're going to sell as soon as your original purchase price is met. If things get a lot worse, then renting out lessens the blow by sharing 1/3 of the further losses with the fed. And because you can use the difference in monthly costs to save up money to help pay down that debt if need be.
Then it's just between you and your husband to decide what to begin renting for yourselves. I vote for finding some place you can rent for less than you'll be getting on your TH, but I'm a skin-flint. You may compromise and let him get to hold onto the TH so long as he lets you guys move to your favored school district and a nice house now.
I of course have forgotten what the second calculation was going to be....
Cara, that is really helpful.
One thing to throw into the mix. I'm not sure exactly how he did this, but we originally had a second mortgage, which he put on a series of credit cards that had no interest for a year, no annual fee and a minimal transfer fee. We paid that off in 3 years. My ideal plan would be to do the same with this balance, and aggressively pay it off over a few years, and then be free. If I contribute nearly all my salary to this (which I'm willing to do -- it is extra $$ at this moment and will not be there for more than a few years) and we move to a rental TH at the going rate for a $500 monthly savings, we could pay it off in 2-3 years.
Part of the reason I personally would rather pay it off sooner than later is that we plan on one more kid (more his preference than mine), and I'll stay home with the baby (my salary is not high enough to justify paying childcare to be able to work, plus it's just really important to me). Plus, in a few years, the kids will be going to a private school (again, something that is important to Stuck). So we have "extra" money now that we won't have later.
So I think that skews the numbers much more in favor of paying it off soon.
I posted that before reading your last post ... will read that now.
Cara, your last post does make sense, but I'm interested to see what you think based on the last info I added.
(Tiny less important note -- I would like to rent right here near our current TH till we have to move in a few years for the private school. That will minimize the amount of school shifting required for the kids -- the school here is good -- and this area is also closer to my work. But when we do have to move closer to the other school, I have an area in mind.)
headingtoffx
unless you sell the TH now, there is no need to convert the current mortgage debt onto CC, zero-interest or not. The lowest balance transfer fees I've ever gotten was 3%, maybe you've gotten better, but it's still never zero, and these offers have been fewer and further between recently.
So, you can definitely allot the extra money every month towards your underwater amount, but you have your choice of one of three ways. (1) pay down your principle on your current mortgage faster, eliminating 5.25% of interest payments on that amount yearly (approximately) (2) put those savings aside in a safe vehicle that's earning money to be paid in full to your outstanding debt at sale time if need be or towards your dp or private school or whatever seems best at the time (3) do your plan of paying off a large chunk of the principle now with unsecured CC debt and keep moving the debt from card to card with the zero interest transfers.
Now the reason not to do option (3) is that you currently have fixed rate low at a reasonably low rate for another 6 years. Whereas, circumstance and economic conditions may conspire to eliminate the whole concept of 0% balance transfers and simultaneously raise the consumer loan interest rates up to 7-10%. Thus I favor option 1 if your biggest concern is debt, or option 2 if you want to have the liquid flexibility to cope more easily with life-shocks during your future period of non-employment/high costs. Michele Singletary from the Washington Post would favor going 50/50 savings/mortgage overpayment.
Cara, more good points. Thank you for all your help!
Thanks for the comments. Bottom line, I'm not madly in love with this house. It sure feels like we're in a bit of a false bottom - a few more houses are moving due to the stimulus, prices are stabilizing a bit, etc. I'm pretty confident that nominal prices won't be going up substantially anytime soon, and may come down a good but farther.
Problem is, every time my wife sees a house go under contract she panics, thinking we may never ever be able to buy a house ever again. I guess I'll just keep talking her down from the ledge.
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