Author Topic: House purchase on a whim  (Read 3411 times)

TravelJunkyQC

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House purchase on a whim
« on: August 14, 2015, 07:04:10 AM »
Hello, so my boyfriend and I visited a house yesterday slightly on a whim, and I need the wise MMMers to help me see straight.
A little about our financial/real estate situation:
I have 22% shares in a rental condo with a friend, although the condo is for sale currently as we both want to get back our liquid funds for other purchases (she wants a quadruplex, I want a house).
My boyfriend has 50% shares in his condo that he bought with his father fresh out of school, and this is the one we live in (I pay a portion of the mortgage interest and maintenance costs - pro rata to our salaries - and he covers all the capital and taxes since it is in his name).

We've been exploring home real estate in the area for over a year (and by exploring I mean doing online research only), because we're both outdoor people and not having a yard is hard on us (city living isn't relaxing for us after work). We've never actually visited a home simply because we are in no rush (no kids, condo is in excellent condition and low cost). We found a house on a lake close by, shown for 55,000$ below it's appraisal value, and couldn't understand why, so we decided to visit. The house is a converted summer cottage, so aesthetically it is stuck in 1986. There would be a few worries as to making sure the foundation is still up to scratch (and being a converted cottage, there is no drainage system around the house - although being on a lake there is the obligatory sump pump). However, just the land is apparaised at 200,000$ (current equivalent land on the same lake is selling for 350,000$), and they are selling for 289,000$. The house has been on the market for 10 months, down from 360,000$ (full appraisal is 345,000$). Realistically we could have the cash to pay a 60% downpayment if we wanted to, but are we just psyching ourselves out with the thought of being on a lake? Does anyone have experience with converted cottages? Are there any particular things to look for during an inspection? Does anyone have experience with adding a draining system?
Let me know if you need more information about the situation to add your in put, I guess I'm thinking out loud and tired of answering myself :)

imustachemystash

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Re: House purchase on a whim
« Reply #1 on: August 14, 2015, 09:08:36 AM »
I don't have any experience with having lakeside property.  Maybe hire an inspector with a lot of experience in this area and see what he/she says?

Bruinguy

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Re: House purchase on a whim
« Reply #2 on: August 14, 2015, 05:05:38 PM »
Where is the "appraised value" coming from? 

If it didn't sell above $300k, then it is likely not worth more than $300k.  Just based on the information provided, I would not assume that you are getting a discount of $55k to its fair market value.

Megma

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Re: House purchase on a whim
« Reply #3 on: August 17, 2015, 07:57:26 PM »
I would at least check out a few of the other houses on the lake in person, even if they are higher priced you need some basis for comparison to see if this one is really a good deal. And no you cannot tell from the photos, the more houses you look at the more clear it will be that the photos can be misleading.

I would not be in a rush to buy the first house if I were you, emotions and real estate are a bad mix.

forummm

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Re: House purchase on a whim
« Reply #4 on: August 17, 2015, 08:05:42 PM »
Don't rush into buying a house. Use logic not emotions. There are thousands of places to live. If a house didn't sell for a long time at a particular price, the market is saying it's not worth something close to that price. If it was even close to that price someone would have bought it for a price below asking price.

Be careful buying a house with someone you aren't married to. It can cause problems if you split up if you haven't prepared for that before buying the place.

historienne

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Re: House purchase on a whim
« Reply #5 on: August 18, 2015, 10:57:02 AM »
How "converted" is the cottage?  I'd be looking very closely at weatherproofing.  Was it done so that owners could go take a vacation there in winter occasionally, or is it really done well enough that you can live there comfortably year-round without crazy heating bills? 

And yes, inspector who really knows his stuff for the basement/foundation.

MissStache

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Re: House purchase on a whim
« Reply #6 on: August 18, 2015, 11:06:46 AM »
I would say that under NO circumstances should you buy a house with someone you aren't married to.  Don't even consider it as an option.  That way anguish lies.  IF you decide to purchase it, then one of you should buy it and pay rent to the other one. 

I'm going to echo the other posters and say that the house isn't worth $345,000.  The house is worth what someone will pay for it, which in this case looks like it is less than $289,000 since it hasn't sold for that much.

I'm not saying it isn't a good price, but don't think that you're buying a house "on sale" because it just doesn't work that way. Appraisal values are meaningless when it comes to house values.   

It sounds like you are excited, but don't don't anything emotionally when it comes to real estate.   See more houses.  A lot more.

Bearded Man

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Re: House purchase on a whim
« Reply #7 on: August 19, 2015, 09:24:47 AM »
I would say that under NO circumstances should you buy a house with someone you aren't married to.  Don't even consider it as an option.  That way anguish lies.  IF you decide to purchase it, then one of you should buy it and pay rent to the other one. 

I'm going to echo the other posters and say that the house isn't worth $345,000.  The house is worth what someone will pay for it, which in this case looks like it is less than $289,000 since it hasn't sold for that much.

I'm not saying it isn't a good price, but don't think that you're buying a house "on sale" because it just doesn't work that way. Appraisal values are meaningless when it comes to house values.   

It sounds like you are excited, but don't don't anything emotionally when it comes to real estate.   See more houses.  A lot more.

While I agree with some of your points. I'd hardly say that "appraisal values are meaningless when it comes to house values", unless you have scientific evidence of studies conducted to back this statement up as fact.

Appraisals are far from meaningless. An appraiser compares houses of similar size, location and condition and what they recently sold for to give you an idea of what the house is worth. I'd hardly call that "meaningless"....

At the end of the day, if it was meaningless, then lenders wouldn't use it as a guideline of whether they will lend or not. If the house appraises for 200K and you are offering 300K, they are not going to finance it...

MissStache

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Re: House purchase on a whim
« Reply #8 on: August 19, 2015, 10:56:51 AM »
I would say that under NO circumstances should you buy a house with someone you aren't married to.  Don't even consider it as an option.  That way anguish lies.  IF you decide to purchase it, then one of you should buy it and pay rent to the other one. 

I'm going to echo the other posters and say that the house isn't worth $345,000.  The house is worth what someone will pay for it, which in this case looks like it is less than $289,000 since it hasn't sold for that much.

I'm not saying it isn't a good price, but don't think that you're buying a house "on sale" because it just doesn't work that way. Appraisal values are meaningless when it comes to house values.   

It sounds like you are excited, but don't don't anything emotionally when it comes to real estate.   See more houses.  A lot more.

While I agree with some of your points. I'd hardly say that "appraisal values are meaningless when it comes to house values", unless you have scientific evidence of studies conducted to back this statement up as fact.

Appraisals are far from meaningless. An appraiser compares houses of similar size, location and condition and what they recently sold for to give you an idea of what the house is worth. I'd hardly call that "meaningless"....

At the end of the day, if it was meaningless, then lenders wouldn't use it as a guideline of whether they will lend or not. If the house appraises for 200K and you are offering 300K, they are not going to finance it...

OK, obviously it has meaning in a lending scenario, but I don't think it has direct correlation to the actual value of the house.  If a house appraises for $300,000, but you can't sell it for $300,000, then it isn't worth $300,000. 

Bearded Man

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Re: House purchase on a whim
« Reply #9 on: August 19, 2015, 04:29:20 PM »
I would say that under NO circumstances should you buy a house with someone you aren't married to.  Don't even consider it as an option.  That way anguish lies.  IF you decide to purchase it, then one of you should buy it and pay rent to the other one. 

I'm going to echo the other posters and say that the house isn't worth $345,000.  The house is worth what someone will pay for it, which in this case looks like it is less than $289,000 since it hasn't sold for that much.

I'm not saying it isn't a good price, but don't think that you're buying a house "on sale" because it just doesn't work that way. Appraisal values are meaningless when it comes to house values.   

It sounds like you are excited, but don't don't anything emotionally when it comes to real estate.   See more houses.  A lot more.

While I agree with some of your points. I'd hardly say that "appraisal values are meaningless when it comes to house values", unless you have scientific evidence of studies conducted to back this statement up as fact.

Appraisals are far from meaningless. An appraiser compares houses of similar size, location and condition and what they recently sold for to give you an idea of what the house is worth. I'd hardly call that "meaningless"....

At the end of the day, if it was meaningless, then lenders wouldn't use it as a guideline of whether they will lend or not. If the house appraises for 200K and you are offering 300K, they are not going to finance it...

OK, obviously it has meaning in a lending scenario, but I don't think it has direct correlation to the actual value of the house.  If a house appraises for $300,000, but you can't sell it for $300,000, then it isn't worth $300,000.


Again, as I just explained, an appraisal compares multiple houses of similar size, age and condition in the neighborhood and sees what they sold for recently. The fact of the matter is regardless of what you "think" the appraisal is a reasonably accurate representation of what the house is worth in most cases. You can debate all you want, but as I just said, the appraisal looks at what similar houses just sold for, so although not an exact science, it is a reasonably accurate and useful representation of the market value, much more accurate then merely your opinion, based on nothing, that they are "meaningless". If a house appraises for 300K, that means other houses like it in the area recently sold for that and you have a good chance of selling it for that price vs 200K....it is not likely to sit there for 300K untouched for years...
« Last Edit: August 19, 2015, 04:31:03 PM by Bearded Man »

Megma

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Re: House purchase on a whim
« Reply #10 on: August 19, 2015, 04:40:31 PM »
I would say that under NO circumstances should you buy a house with someone you aren't married to.  Don't even consider it as an option.  That way anguish lies.  IF you decide to purchase it, then one of you should buy it and pay rent to the other one. 

I'm going to echo the other posters and say that the house isn't worth $345,000.  The house is worth what someone will pay for it, which in this case looks like it is less than $289,000 since it hasn't sold for that much.

I'm not saying it isn't a good price, but don't think that you're buying a house "on sale" because it just doesn't work that way. Appraisal values are meaningless when it comes to house values.   

It sounds like you are excited, but don't don't anything emotionally when it comes to real estate.   See more houses.  A lot more.

+1

Be careful buying property jointly when your not married, i would never consider it. I knew a couple who dated for 8 years, lived together 5years and bought a house together and split up 6 months later.

I own the house my bf and live in, he gave input into the purchase but I own it alone. I pay the house payment, he pays all utilities/Internet/etc. the arrangement works well for us.

babysteps

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Re: House purchase on a whim
« Reply #11 on: August 20, 2015, 10:19:29 AM »
My opinion: no, don't make any major financial decision on a whim.

2 thoughts -

1) if you have decided that you are ready to purchase, give yourself a time frame, and look at as many properties as possible (drive by is okay; open houses can be helpful).  Once you get a feel for the current market, you will be in a much better position to make an informed decision.  Think carefully about location :)

2) do you mean "appraised" value, or perhaps "assessed"?  Appraisals are time sensitive and not usually public documents.  Assessments are typically public and may take some translation to arrive at implied "full market value".  In some areas assessments can be useful as an initial reality check; in other areas they are pretty unreliable...