Author Topic: What would you do?  (Read 2189 times)

rolliefingers

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What would you do?
« on: March 20, 2018, 04:23:37 AM »
In early 2008, my wife and I purchased a McMansion in a large Midwestern city.  Of course, just after this the complete meltdown ensued.  At the time we thought we may need the space but we are not blessed with children, so the extra space is now frivolous.  And that's not to mention that we are not terribly enthralled with the location other than the home itself and the local nature trails.

Our purchase price was $551k in '08.  Ten years later, we are looking to sell the home again; we have listed 3 times prior to this to get closer to the city with not so much as a single offer.  Here is my struggle ... it has been very, very tough to sell this particular home (There is a glut of NEW homes with the modern touches; the road behind the home has also gotten quite busy with the growth of the area).

The good news:  We did actually just receive an offer, at long last.  The offer is for $523k plus home theater equipment (15k).  Given my sheer disdain for losing $, I am struggling with letting go of the $60k or so in "loss" to the buyer and realtor.  Granted, a reduced cost of living, having no debt and complete flexibility are hugely appealing.

To add another layer, we will have $2.6mm in investable assets and no debt if the home sells.  We dream of moving to (and scaling down our lifestyle tremendously) Hawaii.  Our annual spend with the massive current home is around 100k.  I believe we can get it under 70k in the Midwest or 85k in Hawaii.  Being only 45, I am a little hesitant to go the ER route but I feel this is a strong option for us if we choose to take it.

I am just curious how folks who have been in this Real Estate position have pushed through the dilemma.  Would you sell the home and take the massive hit or would you opt for the freedom to move on?  I know this is a bit preposterous.  But I am looking for other points of view. 
« Last Edit: March 20, 2018, 04:37:41 AM by rolliefingers »

Cranky

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Re: What would you do?
« Reply #1 on: March 20, 2018, 04:56:54 AM »
Have other houses in your neighborhood sold recently?

Laura33

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Re: What would you do?
« Reply #2 on: March 20, 2018, 07:22:39 AM »
The way to convince yourself to sell is to look at everything else the house is costing you.  It's not just $551K vs. $523K; it's $551K minus all of the extra mortgage payments, property taxes, utilities, maintenance, insurance, commuting costs, etc. etc. etc.  How much "extra" have you paid in these costs over the last several years?  That will tell you what your real burn rate is every year, which will then tell you how many months that extra @$28K is worth (and, if you insist, the additional profit necessary to cover the RE commissions and closing costs).  And is that amount of money worth giving up that much more of your life hoping for the market to turn around?  How is that any different from hanging on to a job you don't like to earn just a little more money?

Right now the house is an albatross; you are not enjoying it, the reasons why you bought it no longer exist, and it is keeping you in both a financial and an emotional holding pattern.  Cut your losses and move on with your life.

jlcnuke

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Re: What would you do?
« Reply #3 on: March 20, 2018, 08:07:50 AM »
Maybe look at it differently? $60k plus mortgage interest isn't a terrible price for living in a home for a decade plus having the freedom to move now..

nobody123

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Re: What would you do?
« Reply #4 on: March 20, 2018, 08:11:58 AM »
<snip>
Right now the house is an albatross; you are not enjoying it, the reasons why you bought it no longer exist, and it is keeping you in both a financial and an emotional holding pattern.  Cut your losses and move on with your life.

+1.  I'd take the money and run.  An asset is only worth what someone else will pay for it.  You are getting market value for your house, its current value just happens to be less than you paid for it. 

I had to sell my previous residence for about a $45K loss due to the market downturn.  Luckily, the selling price was still more than the amount outstanding on the mortgage.  I rationalized the $45K loss by thinking of it as rent I paid on the place while I lived there, and that I probably was still better off financially because the amount of the loss was about half of what I would have spent on renting an equivalent house over the timeframe.


charis

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Re: What would you do?
« Reply #5 on: March 20, 2018, 08:15:08 AM »
As you pointed out, you are lucky that you have an offer at all, especially one so close to what you paid 10 years ago.  Don't get hung up on this relatively minor shortfall and lose your chance. 

Mr. Boh

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Re: What would you do?
« Reply #6 on: March 20, 2018, 08:27:57 AM »
This is the sunk cost fallacy. Get rid of it today and move on with your life.

loyalreader

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Re: What would you do?
« Reply #7 on: March 20, 2018, 09:40:08 AM »
This is the sunk cost fallacy.

Boh knows.

I went through the same thing myself, although the home sale was predicated by divorce. The massive loss we took on the sale has been more than made up for 5 years later by not keeping that sinking ship afloat.

honeybbq

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Re: What would you do?
« Reply #8 on: March 20, 2018, 12:41:28 PM »
I lost 100k selling my house in the midwest.
To be blunt: you can afford it. Accept, get out, move on.
IT hurts and it'll always hurt but at least you will have a chance to do something different.

cadmm@aol.com

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Re: What would you do?
« Reply #9 on: March 20, 2018, 01:40:02 PM »
In early 2008, my wife and I purchased a McMansion in a large Midwestern city.  Of course, just after this the complete meltdown ensued.  At the time we thought we may need the space but we are not blessed with children, so the extra space is now frivolous.  And that's not to mention that we are not terribly enthralled with the location other than the home itself and the local nature trails.

Our purchase price was $551k in '08.  Ten years later, we are looking to sell the home again; we have listed 3 times prior to this to get closer to the city with not so much as a single offer.  Here is my struggle ... it has been very, very tough to sell this particular home (There is a glut of NEW homes with the modern touches; the road behind the home has also gotten quite busy with the growth of the area).

The good news:  We did actually just receive an offer, at long last.  The offer is for $523k plus home theater equipment (15k).  Given my sheer disdain for losing $, I am struggling with letting go of the $60k or so in "loss" to the buyer and realtor.  Granted, a reduced cost of living, having no debt and complete flexibility are hugely appealing.

To add another layer, we will have $2.6mm in investable assets and no debt if the home sells.  We dream of moving to (and scaling down our lifestyle tremendously) Hawaii.  Our annual spend with the massive current home is around 100k.  I believe we can get it under 70k in the Midwest or 85k in Hawaii.  Being only 45, I am a little hesitant to go the ER route but I feel this is a strong option for us if we choose to take it.

I am just curious how folks who have been in this Real Estate position have pushed through the dilemma.  Would you sell the home and take the massive hit or would you opt for the freedom to move on?  I know this is a bit preposterous.  But I am looking for other points of view.
Been there , done that. My husband and I built a beautiful 3800 square foot custom home back in 2006. Then , the stock market cracshed and the real estate market took a huge drop. Long story short,my husband who is a builder couldn't find any work ,so begrudgonly we sold our beautiful home worth well over $700,00. For $575,00. The house was on the market for over a year. The house was really hard to sell but it was harder to live in a house that was unaffordable. Hardest thing and best thing I ever did was to move on to smaller home,with smaller expenses.We were house poor.

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Laura33

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Re: What would you do?
« Reply #10 on: March 20, 2018, 01:50:17 PM »
I should add:  BTDT.  Had to sell the dream house and move to a new state.  Rejected a decent offer because of what I thought were some red flags (and, duh, it was my dream house and I had a 6-week-old kid and was hugely emotional and stupid).  RE market crashed (same thing that caused DH's plant to shut down and us to have to sell), so we carried that albatross for 13 months before we got another offer.  Sold it for $75K less than the earlier offer; probably lost close to $100K with all the extra costs.

Here's the thing:  I loved that house.  Loved loved loved.  If I could move back to it today, I still would.  But it was such a dead weight for so long that despite my love for it, I still felt infinitely better once it was gone -- I could mourn that dream and get on with my life.

2Birds1Stone

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Re: What would you do?
« Reply #11 on: March 20, 2018, 02:05:19 PM »
This is the sunk cost fallacy. Get rid of it today and move on with your life.

^This x100

Take the money and run......you could have likely sold for a loss and made out way ahead by now.

MrGville

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Re: What would you do?
« Reply #12 on: March 21, 2018, 08:27:58 AM »
Accept the offer. 

MoolahLula

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Re: What would you do?
« Reply #13 on: March 21, 2018, 08:55:12 AM »
Accept it, feel the pain and know that in time you’ll feel great.  I lost about 10k on a condo awhile back, but it was the right move for sure.

the_fixer

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Re: What would you do?
« Reply #14 on: March 21, 2018, 09:21:02 AM »
Take the offer. Also see if you can get the Realtors to step off the commission a little more.

Listed our house in late 2007, had a low-ball (according to us) offer. Rejected the offer, house sat for about a year and we sold it for 5k less than the original offer.

Sucked writing a check at closing but if we had sold it to the first offer we would have been so much further ahead.

FYI we just sold a MC mansion coming up on 2 years and we have saved so much money not taking care of a huge house for just 2 DINKS it is amazing you will thank yourself.

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rolliefingers

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Re: What would you do?
« Reply #15 on: March 21, 2018, 02:58:55 PM »
THANKS to everyone who replied -- excellent stuff!  What a great community.

TheMCP

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Re: What would you do?
« Reply #16 on: March 21, 2018, 05:24:49 PM »
I don't think it's preposterous at all... I'm set to close on the sale of my house a week from tomorrow and I'm going to lose about as much as you on the deal.  I built this house.  It's special to me, and it was never part of the plan to sell it for less than what it cost to buy land / build.  Part of letting it go for less than I think I can get really hurts, and not just from a monetary standpoint but from an emotional one.  I'm sure I could wait around, paying my mortgage, and get a better offer someday... but how long will I have to wait?  What if the economy crashes again while I'm waiting for my extra 50k?  What is the value of waiting 6 months, a year... the cost of the mental strain of sitting around wondering if maybe it'll be three years, five or maybe never get an offer this high again?

No.  I have things I want to go do, and while this house is fantastic and we have enjoyed it tremendously, it isn't the direction we want to go anymore.  Once we accepted that as a fact, "this isn't what I want to do anymore", it just became a question of what we were going to do to put ourselves on the track we wanted to be on for the next part of our lives.  On to the next thing, which I fully expect to be not exactly what I want 10 years from now.  I'm fine with that, I'll solve future problems as they arise.  Good luck to you.

rolliefingers

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Re: What would you do?
« Reply #17 on: March 23, 2018, 07:34:05 AM »
Thanks for weighing in -- it sounds as though we are in very, very similar spots.  I get the emotional piece too, which surprises me a little bit.

My reasonable fear is if we do not cut bait now, this will be even more difficult in the future as tastes change and the home becomes "dated" and needs a major overhaul.  No thanks.  I want no part of that on this scale.

Best of luck to you too.

I don't think it's preposterous at all... I'm set to close on the sale of my house a week from tomorrow and I'm going to lose about as much as you on the deal.  I built this house.  It's special to me, and it was never part of the plan to sell it for less than what it cost to buy land / build.  Part of letting it go for less than I think I can get really hurts, and not just from a monetary standpoint but from an emotional one.  I'm sure I could wait around, paying my mortgage, and get a better offer someday... but how long will I have to wait?  What if the economy crashes again while I'm waiting for my extra 50k?  What is the value of waiting 6 months, a year... the cost of the mental strain of sitting around wondering if maybe it'll be three years, five or maybe never get an offer this high again?

No.  I have things I want to go do, and while this house is fantastic and we have enjoyed it tremendously, it isn't the direction we want to go anymore.  Once we accepted that as a fact, "this isn't what I want to do anymore", it just became a question of what we were going to do to put ourselves on the track we wanted to be on for the next part of our lives.  On to the next thing, which I fully expect to be not exactly what I want 10 years from now.  I'm fine with that, I'll solve future problems as they arise.  Good luck to you.

Fishindude

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Re: What would you do?
« Reply #18 on: March 23, 2018, 07:44:12 AM »
Sell it and move on.
The notion that houses are good investments and money makers isn't always accurate.