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Wednesday, July 22, 2009
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55 comments:
Saw a number of places last night, Jeff's writing up an offer for one of them today, which we'll read through make any changes and sign tonight to submit.
Not the one we thought. Didn't like what they had done between the two viewings...
We shall see.
Congrats on finding one you like and good luck with the offer!
When the rule of thumb was that you could afford a house that was 2-3 times your income, does that mean the entire house should be 2-3 times your income, or your loan should be 2-3 times your income?
MJC-
I think normally they were talking about the entire house, but the rule is a very very rough rule of thumb. As it has nothing to do with interest rates. If people tried to buy houses that were 3X their income in the 80s when mortgage rates where in the teens they would really be struggling so find money for food. On the other hand with 5% rates 3X your income is fairly manageable. For this reason most people say that your payments should be less than ~28% of your gross income
MJC,
I've been interpreting it as the loan. But this could be because the rule of thumb came from when interest rates were much higher.
It also depends strongly on the property tax rate. I was at my aunts place on the Jersey Shore, and rents there (assuming you only stay a month) wouldn't cover the property taxes.
Just run a real affordibility calculator with reasonable DTI's 28/36, preferably one that breaks down exactly how much you'll have left over each month after normal expenses. Ginnae Mae's one is good for those details.
We have 6 months left in our lease in Arlington. Our landlord has announced that he must sell due to financial difficulties. He has informed us that we must leave when he sells. We told him we have a lease and he can't unilaterally break it. The lease states that it would be transferred to the new owner.
Anyone have any experience with something like this? Would it be best to negotiate some sort of buyout so as to be beneficial to all parties? How much money and time does the landlord stand to lose (on a condo worth 500-600k) given that 1. the place has our stuff in it and is not staged, 2. that the new owners would inherit our lease, and 3. selling with tenants screams "distressed sale" and encourages lowballing? My old building in Dupont had lease buyouts of around $20k when they switched to condos. Even with some sort of theoretical offer, we are pretty happy where we are and really don't want to move.
Also any advice on him showing the condo while we're living there?
Cara
What did they do between the 2 viewings that couldn't be undone?
Hi,
Sorry to hear this.
As a possible, buy-out price, I would propose whatever the fee for you terminating the lease early would have been, he pay you instead to get you out. That's probably only 1-2 months rent.
However, if he is selling for financial distress reasons, he probably can't afford to not be recieving rent either. So, staged or not staged is not the point.
First things first, rent out a secure storage space for your bulky semi-valuables, and store any movable valuables in a safety deposit box or at a relatives home. (leave you laptop at work that kind of thing).
When and if he gets a contract, start looking for a new place. And try to get that early termination fee from him for breaking his end of the deal.
You may not like my roll-over and play dead solution, perhaps others have more pro-active advice.
MJC,
Nothing technically. But what they did was paint over the wallpaper in the kitchen, and put in new cheap carpet upstairs. And the random stains in the stairway leading outside have proliferated. Basically, the things they've done made it clear that they are half-assed, but expecting a full return for their money. It just doesn't give off a good vibe of an honest broker.
Hi-
I am pretty sure legally he can not kick you out, so if you want to stay tell him to sell the house and have the caveat that your lease must be upheld. If you are content moving, I agree with Cara tell him that you will stay until the day it sells in which case you will move and he owes you whatever it would cost for you to have broken the lease(1-2) months.
Also any advice on him showing the condo while we're living there?
I rented a place for my MIL to live in a few years back. The lease stated that the owner could not list the house for sale (or show it) more than 60 days before the lease was up. You might want to check your agreement to see if something similar is in there.
It can't hurt to negotiate some terms to allow the landlord to break the lease. I don't have any experience with that, but you might as well ask for as much as possible. If you broke the lease 6 months early, i'm pretty sure you'd be responsible for the remaining balance...guess it depends on the details of your agreement. If your rent is $2K/month, that's $12K. Mention that to your landlord and maybe ask for half that amount to leave early and find yourself a new place.
at some point sooner or later, depending on how this goes, I'm going to need a home inspector.
Is ASHI membership meaningful? Is BBB acredidation meaningful?
Recommendations from here? Using who our friends used? Using who our realtor reccommends?
I plan on being present, absolutely, but still, you do want someone thorough...
Hi...Of course, since your landlord is selling for financial reasons, chances are you're not getting much out of him/her. You'll probably just have to stick with whatever is in writing.
You can paint over wallpaper???
I can't imagine how annoying it would be to be living in a condo for sale. Would they need your permission before they showed it? Because otherwise you would have random people traipsing through all the time.
I would try to get a lump sum from your landlord, and he should cover your moving expenses as well. Cite the lease terms. If landlord doesn't want to pay up, then make suggestions about how had it will be to sell the condo with you all living there (can you refuse to let anyone in unless you are there? refuse to allow open houses?).
Also, there is a statute in VA governing landlord/tenant rights but it only applies to landlords who own more than a few units. You can always cite to that even if it may not apply to your particular landlord (he might not know it doesn't apply). For ex, I'm pretty sure landlord needs to provide 24 hours notice for non-emergency access to property (which would be really inconvenient to do for every real estate showing).
Hi-
I would have to imagine that the landlord also wants to keep you happy. If you are living there while he is trying to sell you can hurt him a lot more than he can hurt you. If you start telling people how bad it is to live there it will be hard for him to sell...
I am not saying that you should be a jerk to the landlord, but you do have the upper ground so don't let him just push you around.
Somewhat in response to yesterdays discussion about current grads making less than grads from 20 years ago I found this interesting
http://economix.blogs.nytimes.com/2009/07/20/do-elite-colleges-produce-the-best-paid-graduates/
It really is amazing how worthwhile a good degree is. As a Dartmouth grad I find it a little amazing that the average Alumni is making 130K/year
House buyer-
I sure as heck HOPE my Darty boy makes 130K a year after he graduates!!!
I'm giving Darty 5K A MONTH for his tuition!!!!
Of course, there's med school afterwards, but you get the point
Cara,
Use Gary Cox (ProView Inspections 571 233 2837), he's very good, goes through the test home frequently (the inspectors make a home with hidden flaws and send inspectors through to be educated and rated) and best of all explains what different signs mean (and things to watch/work on after you close). He's thorough, sharp, and very talkative. Be sure someone is there for the walkthrough rather than just reading the report though.
I've built several homes and still haven't been on an inspection with him that I didn't learn something.
Spunky-
You just make too much money :-p Go relax for the 4 years that he is at school as long as you make under 150K Dartmouth is no more expensive than a state school.
housebuyer
don't get enthralled with the number for a darthmouth grad Mid-Career, look at the relative number, then do a discounted cash flow analysis.
The starting salaries are all the same, Mid career, Dartmouth is reporting about 130K, but Lehigh
U is reporting 119, and Santa Clara is reporting
110K
so say Dartmouth is 240K for school and santa clara is 100K (Arbitrary numbers.)
at 20 years out it's about 20K more, so it's 1K per year per year salary growth.
so it's about 200K extra earnings over 20 years.
taxed at 33% that's about 133K.
now you pay an extra 100K up front for an annuity that pays you 133K over 20 years?
Sounds like 1.5% interest to me.
Seems like you could give your kid a 100K annuity,
and encourage them to invest it in tax free municipals for that kind of money.
spunky -- the $130k figure is midcareer not right out of college
The averages would be more helpful if they controlled for the metro areas the graduates locate in. Salaries are higher in some areas than others. I would expect a school with a lot of graduates in NYC to report higher incomes than a school with a lot of graduates in Texas. And yet both populations could have equal number of CEOs and high level executives.
There is obviously a value to going to a highly regarded school. But there are many highly regarded state schools and they cost much, much less if you are in-state.
pat-
For one you are grossly overestimating the cost of going to Dartmouth and under estimating the cost of going to Santa Clara.
Due to great financial aid Ivy's are less expensive than anything except a state school. Most of the Ivies now say if you make less than 150K a year you will pay at most 10% of your income and will get no loans. I think it phases out so you pay the full amount if you make over 200K.
Also if you look at the link below it shows that in total assuming you get no aid the total cost difference is only 1-2K a year. If you ask me paying 8K up front to get 133K over 20 years sure sounds like a good deal to me.
http://collegesearch.collegeboard.com/search/CollegeDetail.jsp?collegeId=3340&profileId=2
I will agree though that if you are getting no financial aid that it is financially better to send your kid to a state school like UVA.
TBW-
I absolutely agree that obviously a median number isn't good enough to do enough real statistics. I also agree that in VA there are a lot of great state schools that are a better financial deal(assuming you don't get aid), but I think you will find elite schools are a better deal than private less elite schools. Their costs are very similar and you make more coming out of the elite school
Another big issue is that the elite school probably gets better students, so are these students making more because they went to the school or because they are smarter. Without massive amounts of data you just can't figure out these small difference.
TBW is spot on: They really need to control for metro area. Actually, their methodology is so flawed that, while not worthless, should be taken with a huge grain of salt.
Nonetheless, the general trends make sense: social work pays squat and engineering pays lots. But the University-to-Univeristy comparison is iffy. For example, if you controlled for cost-of-living/metro area, my hunch is that Illinois grads make more than Georgetown grads.
if you read the whole analysis they acknowledge a lot of these biases. Correlation is not causation and all that.
pat, housebuyer, tbw,
Did these lists consider the fact that the mid-career population may include a substantial number of people who went on to get higher degrees?
It is far more meaningful to compare salaries for the same degree level, within the same major, at these schools. Comparing salaries without accounting for the cost of living and quality of life factors is meaningless.
It is hard to believe that Harvey Mudd is ranked as high as Stanford or Harvard for salaries. I have a friend who used to be engineering professor there, but he will never get a teaching position at Stanford; there is not much of a graduate program at Harvey Mudd.
Many Stanford engineering grads go on to start their technology companies and become super rich.
TedK-
They removed anyone who had a higher degree. The study was only trying to talk about undergrad schools, and they figured the best way to do this was to remove anyone with a higher degree. I think Harvey Mudd does well because it has a very high percentage of engineers, which are a very high paying field.
To be fair I think the real reason that Dartmouth does so well on the mid-career part is that 10-20 years ago the school was still predominantly male. 2003 was the first year that there were as many men as women. So since men tend to make more this probably gave Dartmouth a small edge over some of its competitors that went coed long before it.
If you want a WTF listing http://franklymls.com/AR7098755
They are asking $94K for a 3,600 sq ft. lot????? Can you even build a house on that lot. I have seen townhouses with bigger lots than that.
Sure, just plop an iHouse down on it!
Culpeper St has some insanely small lots but I imagine they are all grandfathered in to the zoning.
Jeff-
Sweet I can get an i house for 100K the lot for 100K and then I can brag about being sweet and living in N. Arlington and it will only cost 200K
So many people in the comments of this article on CNN are just bitter about their recent appraisals. They all seem to think their house is worth whatever they can find some idiot to buy it for. They just don't get it that the bank is the one risking their money on the transaction. The appraisal needs to reflect what the house would sell for on the open market after the overpaying buyer is underwater and gets foreclosed on. Appraisers are supposed to value what a generic buyer would pay, not some specific buyer with more money (or credit) than sense.
Jeremy,
Yes, you sell to the greatest fool, but it needs to appraise for what the second greatest fool would pay.
:)
Oh, and the Cara in DC comment is not me.
congrats/good luck cara!
http://franklymls.com/PW7002118
list 295k
200k upgrade/additions?
dom 0
wow, i guess the realtor's buddy got a good deal?
GT-
If the statements are true I can't imagine that the bank would accept it. Unless there is mold everwhere there is no way they will sell a house for 40% below what someone paid in 2003.
The government is really making a ton on the strong banks TARP deals. Goldman just bought back its warrants for $1.1B. So the Fed loaned it $10B for half a year and got $318MM in interest and $1.1B for the warrants or $1.4B total.
It looks like the deal worked out well for everyone, they fed saved Goldman and Goldman gave paid 14% for a 6 month loan. Hopefully the rest of the sector will be able to follow suit. It makes me happy to see my predictions coming true that the TARP will be the one part of the bailout the Fed doesn't lose its shirt on.
housebuyer,
I went to this website:
Financial Aid Calculator
and put in a married couple making $140k and gave them some modest five digit savings, some home equity, and a 529 savings plan. It said parental contribution was $50,000. So plenty of people making less than $140k are asked by Dartmouth to contribute a lot of money. I did put the couple only had one kid so maybe it changes if you put two or three kids (but it also asks for the worth of 529 plans for those kids.)
Now I guess I could have put $140k and no savings, no home equity, and no 529 plan but that does not sound realistic to me.
Also I split the $140k as $70k dad, $70k mom.
If you get different parental contributions with the calculator let me know. I'm very interested. I think though the make less than $150k figure, then only 10% of income is not accurate since (as I suspected) they look at savings, 529 plans, etc.
All that being said -- if parents are well to do and can afford to send their kids to a private Ivy League school all power to them. Obviously it's nice for the resume to have Harvard or whatever on there.
My main objection is to people who tell students to get student loans to pay for private schools. That's going to put them into a lot of debt for a long time and is not a good idea IMHO.
housebuyer,
The government is really making a ton on the strong banks TARP deals. Goldman just bought back its warrants for $1.1B. So the Fed loaned it $10B for half a year and got $318MM in interest and $1.1B for the warrants or $1.4B total.
I hope you mean it bought back the warrants for $1.1B *and* paid back the $10B loan. In other words, you meant it paid back the $10B loan and the US Treasury earned $1.4B in interest and the loan termination?
I agree with you that the US Government may make a lot of money off of these deals. Although it does sound like we may never get back that money from AIG or the auto bailouts.
Is it me or does that iHouse look like a glorified trailer park home?
Yep that's what it is TBW. Clayton Homes builds mobile and manufactured homes.
TBW-
Yes I meant the government got their $10B + $1.4B.
It appears you are correct I may have misspoken about the Dartmouth financial aid. I could have sworn it was free if you make under 75K and 10% of income if you make up to 150K. I can't find the second part anywhere. They do say you pay no tuition and likely no other
costs if you make less than 75K. They also specifically say they do not give any loans out.
http://ask.dartmouth.edu/categories/admissions/09.html
Harvard has the program I talked about where you pay 10% of your income for anyone who makes less than 180K. I believe Dartmouth will match the aid you get at any other Ivy so if you got into both you would also be ok. Although I am not sure about this
http://www.news.harvard.edu/gazette/2007/12.13/99-finaid.html
Finally I absolutely agree with you it is much better to go to a school with a slightly worse name and have no debt when you come out. If you know you are leaving with 100K of debt it basically forces you to take a career in a high paying industry(finance, engineering...) and I would much rather people do what they want to not what they have to.
HB
Goldman was the direct beneficiary of the AIG bailout, 29 billion in funds went into AIG and then to Goldman, if you can't make a profit after that, well, then you must be a Wall Street banker
when this is done we will be lucky if the dollar is still a traded currency
Pat-
I am pretty sure Goldman would have been fine if AIG failed. They owned enough AIG CDS, that they would have made just as much money if AIG failed. The issue is this would have been very painful for many of their counter parties.
Also I don't think you need to worry too much about the dollar. We are clearly printing tons of money, which is not good. The only good thing is that nearly every other country is doing the same thing. So if every country tries to devalue their currency then all currencies will stay pretty flat.
That house in Lake Ridge possible that a friend or family member bought the original note and agreed to paid off the second. The bank can't stop you from selling a home at any price as long as the balance due is paid and maybe an early pay off fee. It assessed for 446,000 for 09 and Woodbridge is still falling in value so it will might decrease another 10 next year then throw in another 10% for a short sale and you can see its not that off the market espically with appraisers coming in from out of the area appraising properties that they don't even have access to the MLS. My bet is on a sell to a family member or good friend, tho.
Arkey,
Yeah, that's a good point, you don't know how much of the old debt was "assumed" by the new buyer. That could be what happened, no way to know.
TBW -
You are correct about Dartmouths calculator.
Believe me, my husband has gone round & round with their Financial Aid Dept for 2 years now.
They give you a discount the first year or two, to hook you into their Quarter semester system, so you can't easily transfer out..
Basically, they have enough $$ & staff to do nothing but calculate every penny you have.
Our main problem:
We don't own a home!!
The Financial Aid Dept has actually told us that our son's tuition would be cheaper if we hadn't sold in '06 & would repurchase a home !!!!
They see all that $$ sitting in our Bank account - they don't give a crap that the money maybe our retirement money or maybe we have other kids to put thru school.
Nor do they care that our Business has suffered legally documented losses the last 2 years - Oh NO!
That doesn't matter!!
Give us your 250K please.
There "generous" Monthly payment plan costs us 5K per Month - that is a house payment !
Ok rant off! Sorry
spunky,
Obviously you sold that house so that you could pay full tuition to Dartmouth.
Yeah, that's F'd up. But accurate. My parents intentionally didn't save for our college because it would just have gotten swept off the top and decreased the amount of free aid. But it seems with this new system things have gotten even worse.
Can you put the house money in a trust? and then dissolve the trust once your kids are through college? It's something to look into if it might work... I don't know that it would work.
Have you run the increased cost of tuition through your math on whether to buy now or wait? Just because buying now may not be the right time for everyone, it still could make financial sense for you? As frustratingly totally wrong as that is.
Spunky-
Another option that my parents used was putting money in the kids names. My brother was older and went to Va Tech, so they knew there was no chance he would get aid. Back then in state VA was something like 7 or 8K. So they transferred the money to his name so it looked like they had no savings. I went their from 2002-2006, my parents made ~150K at the time and our total contributions was something like 20K-25K/year(it did help my brother was in school some of these years). They also gave some loans, but I am pretty sure the article I posted yesterday said they are no longer giving loans.
Sorry about your situation, it sucks that accounting type rules can really hose small business owners because it is hard to separate business money vs. personal savings.
Cara-
No, we sold because we knew that the bubble was popping, not to put our son thru an Ivy.
We actually sold before he was accepted to Dartmouth (barely)
My husband has opened accounts, moved money, had several Accounts play with it to no avail.
We will buy a home again, but only if it's a smokn' (and I mean smokn'!!) deal.
And yes, we have looked at all the angles.
Basically now it boils down to our Business & the Economy.
We have to have a way to pay the Mortgage in this unknown reality we are all in now!
And for what it's worth - my son loves Dartmouth & it was his dream to go there.
He has had UNREAL meetings & has already done some Published research that I doubt he would have had access to at UVA or W & M.
As one Alum told me at the Dartmouth prospectives meeting on the 15th floor of a DC Law Firm (while looking down his nose at me)
"It is only money......"
Spunky
Sorry I should have put in the sarcasm or joke tag.
It sounds as if you've already fully explored the options.
However, while I do agree that Ivy league educations are a fabulous experience having had one myself. Your statement about state schools not including published research and meetings is untrue. The undergrads in the Rutgers Physics/Astronomy department went to meetings and were authors (sometimes first, sometimes not) on published research (not just conference proceedings). These days that's almost standard in order to be able to be a contender for the big fellowships for grad school. Heck, we have TJ students here at work that do the same.
spunky,
Heck NSF and NASA (and I bet NIH too) have a special section in the grants for how your work is impacting undergraduate education and involving undergrads in research. It's a real edge in getting money if you can consistently include undergrads in a substantial way. It's not supposed to be a deciding factor, but it's there for the whole committee to see.
Thanks Cara-
I must apologize for my bragging about Ivy leagues.
You are correct, good Academic work can be done anywhere, at any school
I guess my son going to Antarctica to study the Van Allen radiation belt has me too impressed.
But heck, I'm just a hick from the mid-West, so it doesn't take much to impress me!
Plus I'm his Mom, which doesn't help either!
Please forgive my stupidity...
spunky,
It is impressive. And that caliber of education and experience comes standard at the Ivies, which is the difference.
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