Author Topic: Should We Buy This House...Or Walk Away?  (Read 6371 times)

fiddlercricket

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Should We Buy This House...Or Walk Away?
« on: July 19, 2014, 11:11:51 PM »
So, here's the situation (and this is long, sorry...but I just want to lay out the facts):

For the past 3 years, my domestic partner and I have been renting a house.  (We are in our mid-30s, no kids.)  It is currently owned by an acquaintance who can no longer live independently due to a severe stroke.  (She lives in an assisted-living facility now.)  Our arrangement with her and her power-of-attorney (her cousin) has always been casual, friendly, and mutually cooperative.  For instance, my partner and I provide all repairs, maintenance and upkeep to the property.  (We have also adopted the homeowner's 2 cats.) 
In return, the homeowner and her cousin have kept the rent low for the area ($600/month) which includes all utilities.  As tenants, my partner and I have free reign over the yard, garden, home decor, etc.
The homeowner now wants to sell her house and almost everything in it.
And she wants to sell it all to us.  She knows we have come to love and appreciate the house and have taken good care of it.  The house itself is a 400-square-foot, one-bedroom cottage built in 1928 with a 3-season porch and a 2-car garage that is nearly the same square footage as the house itself.
The house is in a quiet community just outside St. Paul (Lauderdale, MN).  The "estimates" for this house that I have viewed online hover around $120k.
The homeowner would like to sell for $80k.
My partner and I are pre-approved for a mortgage through our credit union.  We have more than enough for a 20% down payment.  There would be no fees through a realtor for this property.
And yes, since we've lived here 3 years, we like the house and community a lot.  We know our neighbors, and we know this house and its ups/downs.
Our combined annual income is currently ~ $90k.

The ultimate question is: should we buy this house?  Yes, we like it.  Yes, it seems like a good value.  Yes, it would be a fairly direct transaction between the owner and us.
It seems that our mortgage would be about the same as our current rent.

But a nagging part of me is a bit afraid.  We've never owned before.  What if we want/need to move away from this state someday?  What if the floor falls in the day we buy it?  What if we get sick of the house or the area?

The small size of the house (with one single closet in the whole place) is okay with us, but it could be a negative aspect for selling in the future, or even renting it out someday.

If we did not buy this house, we would probably look for a place to rent.  Average rentals for 1-2 bedrooms around here are about $800-$1200/mo.

Again, I apologize for the length of this query's background.  But I feel like I need to look at it from all angles, and that means going outside the sphere of family and friends for feedback (most of whom think it's a good idea to buy it, a few who do not because they believe renting = freedom).

Thoughts?



swick

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Re: Should We Buy This House...Or Walk Away?
« Reply #1 on: July 19, 2014, 11:24:35 PM »
You know the house inside and out, it works for you. If your jobs are fairly stable, I'd personally go for it. Sounds like even if you wanted to rent it in the future or sell it you could be guaranteed more than the 80 grand you'd put into it so a good investment.

Also, how much are the furnishings worth? Sounds like a great situation if you ever want to diversify and become land lords at a later date. Keeping in mind I don't know the economic stability of the area.

If you aren't sure, you can always get a home owners inspection to make you feel better about it.

Frankies Girl

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Re: Should We Buy This House...Or Walk Away?
« Reply #2 on: July 19, 2014, 11:52:26 PM »
I think I'd buy in the same situation. It sounds like a great fit and you're happy there, but you're being held back by the whole commitment/being tied down by the idea of being a homeowner.

Nothing is permanent. If you decide down the road that you'd like to leave the area, you can sell the house - and probably easily for what you paid for it if the neighborhood stays halfway nice.

And if something breaks or happens, you fix it. That's what you've done so far, so it should be okay even if you own the house going forward. If it gets to be too annoying then you sell and go back to renting. You always have an out.

If you'd like to get a second opinion, call in a home inspector to check out all of the house and let you know if any major work or systems are expected in the future. It should cost you under $500, and would help you feel a bit better about the decision.

I think it's a really lovely thing that the current owner wants you to have the house - it sounds like they are really pleased that it would go to someone that likes living there and were good to them (adopting their cats is a pretty big deal and shows that you are good people) and that's why they are making the offer so low, both as a thank you, and as a belief that a house they loved is going to someone that will maybe love it too.






former player

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Re: Should We Buy This House...Or Walk Away?
« Reply #3 on: July 20, 2014, 02:17:08 AM »
For the last three years you have been looking after the house as if you owned it.  The proposal you are looking at now just makes it formal.

I'm guessing your acquaintance doesn't have children of her own living nearby, and that partly what she is doing by offering you the house is passing on her legacy to you rather than seeing it sold off, and ensuring that her cats will continue to be looked after in their own home.

I thought when reading your post that your question was going to be "is it fair for us to buy from our acquaintance at an undervalue" and "are we taking advantage"?  To which the answers are "yes" and "no" respectively, because you are providing your acquaintance with value back.

As to being tied down, or the house turning into a money pit, realise that you can always sell or rent if you want(although you currently sound settled and happy to me) and getting a good home inspection/survey would be reassuring.

lizzzi

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Re: Should We Buy This House...Or Walk Away?
« Reply #4 on: July 20, 2014, 06:59:07 AM »
Based on what you've told us, I would buy it. For all the reasons others have posted. I've bought and sold six houses over the years, and sure wish I could have fallen into a situation like yours.  : D

Another Reader

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Re: Should We Buy This House...Or Walk Away?
« Reply #5 on: July 20, 2014, 07:36:39 AM »
Yes, but take excellent care of the cats, because you are getting a $40,000 grant to do so!

BPA

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Re: Should We Buy This House...Or Walk Away?
« Reply #6 on: July 20, 2014, 08:41:31 AM »
I would buy it unless I were super close to FIRE and planned to move to a different place when I FIREd.


waltworks

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Re: Should We Buy This House...Or Walk Away?
« Reply #7 on: July 20, 2014, 09:25:58 AM »
So refreshing to be able to answer and emphatic YES to the "should I buy" question. This place will be a solid investment property even if you move away, and you're getting a screaming deal. Do it. In a few years if you want to move, you can easily rent it and make a tidy profit, or sell and at the very least (barring some huge housing crash) make your money back as well.

Seriously, this is a slam dunk. I'd buy it even if I didn't want to live in it, probably!

-W

oldladystache

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Re: Should We Buy This House...Or Walk Away?
« Reply #8 on: July 20, 2014, 09:36:26 AM »
Yes, buy it.

fiddlercricket

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Re: Should We Buy This House...Or Walk Away?
« Reply #9 on: July 20, 2014, 10:31:54 AM »
THANK YOU ALL for the replies.  :-)

Everything you have written makes logical sense to me. 

It is true-- we have essentially been acting as homeowners for 3 years-- now we have the opportunity to "put a ring on it".  ;-)

The homeowner, indeed, has no children or spouse...so she has no one else to pass the house on to.

We are definitely not in the realm of taking any financial advantage of the homeowner's situation; she is a vulnerable adult, yes, but her power-of-attorney cousin is extremely protective of her interests (which is a good thing). 
A big reason that the house is being offered to us for a low cost is because we have done 100% of all repairs and maintenance (good thing we're handy folks) and because the homeowner knew us prior to her stroke and knew we had similar values/interests-- namely, thriftiness, love of the outdoors (canoeing, camping, biking), love of animals, interest in gardening, etc.

And her cats are also getting 100% love from us.  She is happy they did not have to go to a shelter.

Again, thank you, everyone!

SDREMNGR

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Re: Should We Buy This House...Or Walk Away?
« Reply #10 on: July 20, 2014, 10:44:09 AM »
Quite simply, find out the true market value of the house if you were to sell it on the open market today.  You can talk to Realtor friends or look on Red fin or Realtor.com and see what similar houses in the neighborhood has sold for in the last year or so.  If it is $90k or higher, then you won't be making a big mistake. If prices are $100k or higher, then you are getting a good deal.  If prices truly are $120k or higher, then you are getting a very good deal. 

I would buy it.  I wouldn't haggle much with them since they were good to you all these years.  If you have the cash for it, I'd just buy cash.  Banks don't like to fiddle with tiny loans and the fees will be exorbidant.

SnpKraklePhyz

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Re: Should We Buy This House...Or Walk Away?
« Reply #11 on: July 20, 2014, 05:35:20 PM »
Adding to the chorus - yes, yes, yes, yes. <3 those cats

Goldielocks

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Re: Should We Buy This House...Or Walk Away?
« Reply #12 on: July 20, 2014, 07:16:52 PM »
Buy it.

Get a home inspection or title insurance review or whatever to ensure you know of any liabilities, such as the two of them not actually being the owners and are committing fraud.  Or basic info about all the drain lines being clay ( good to know but not a killer) or a huge community oil tank is buried in your yard that you don't know about.

Looks like you are offered land value, so only a complete major environmental liability or outright fraud should prevent you from purchasing.  Any other facts are just your due diligence for planning as an owner and future sales.


arebelspy

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Re: Should We Buy This House...Or Walk Away?
« Reply #13 on: August 12, 2014, 06:07:22 PM »
Buying sounds like the right call.  Keep us updated!
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

fiddlercricket

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Re: Should We Buy This House...Or Walk Away?
« Reply #14 on: September 01, 2014, 10:01:00 AM »
We're closing on Wednesday.

Due to the size of the house (400 sq ft), the person in charge of the property has figured that the house would otherwise be a tear down, so we're getting the property for the assessed value of the land and garage - $68k.

arebelspy

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Re: Should We Buy This House...Or Walk Away?
« Reply #15 on: September 01, 2014, 10:09:54 AM »
Awesome, congrats!
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

lotigo

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Re: Should We Buy This House...Or Walk Away?
« Reply #16 on: September 01, 2014, 12:56:03 PM »
That's great!  Lauderdale is a fantastic location.

Handlebar Harry

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Re: Should We Buy This House...Or Walk Away?
« Reply #17 on: September 05, 2014, 11:39:40 AM »
Wow, what a deal! Good luck!

Cromacster

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Re: Should We Buy This House...Or Walk Away?
« Reply #18 on: September 05, 2014, 11:50:20 AM »
Contrats on the new house!

I am Just a stones throw away, Como Lake area.

frugalone

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Re: Should We Buy This House...Or Walk Away?
« Reply #19 on: September 10, 2014, 02:33:43 PM »
You know all the good, bad and ugly about every facet of this property.  Go for it. 


Edited to add:  Congratulations!!