I bought my house for $262,00 in June of 2007. (There were multiple bids on the house, so I overbid the asking price of $259,000.)
The original structure was a 630 sq ft one bedroom/one bath home built in 1943.
When I bought my house, someone had already added about 250 sq ft in a big room across the back, bringing the house to about 880 sq ft. The back room had a stained concrete slab for a floor.
This is starting to look good
I turned that back room into a second living and second bedroom (which are about the same size as the front living and bedroom). I added carpet throughout.
I also enlarged the tiny original bathroom by appropriating interior space from the hot water heater closet (upgraded to exterior tankless), a front bedroom clothes closet, and a few feet from the kitchen. The bath was almost completely updated.
Those upgrades came in at about $18K. Add the $4K in upgrades in getting the house ready for sale, and I have about $284K invested in my house. (I owe $238K.)
My real estate agent says that home prices in Central Austin have stayed pretty stable compared to the rest of the country, so I was surprised when she showed me a bunch of comparables and suggested my home should list for about $265K.
In my typical obsessive compulsive researching style, I have always kept up with listings in my neighborhood via email notification. I feel, very strongly, that my house should list for $299K. (In my view, her numbers were skewed by homes much closer to the Interstate as well as several in a flood plain.)
I would rather subsidize a rental than lock in a loss on my house.
So, $299K is the list price.
I’ll let you know how it goes.
—
RV question: If I wanted to start out with a cheaper RV, something like a 5-7 year old 25 foot Class C, how hard would it be for me to upgrade a year later if I wanted something nicer? Aren’t they really hard to sell? I would be upgrading to a nicer used model, not trading in for a new model.
***
Countup: 49 days of sobriety. This is not easy.
Countdown: 109 days until I move into my RV?!
One week until auto mechanics!
19 Comments
Real Estate prices are depressed all around the country, and are apt to continue that way well into 2013. Waiting for prices to go up from here will test your patience. If you bought in the summer of 2007, you probably bought at the extreme peak.
The problem now is excess supply, due to mortgage resets. All over the country, people are finding their monthly mortgage payments increasing, sometimes doubling, as the special deals they got for a low payment run out at the very moment that jobs are in question.
It is not just sub-prime resets. That wave is slowly subsiding. But now begins the problems with Alt-A and ARM mortgages. All these debts were undertaken with the blithe assurance that real estate “only goes up”. That is now in question.
Take a look at this chart:
http://www.hussman.net/wmc/wmc091109a.jpg
Defaults and forced sales will follow this chart by 6 months or so, as distressed sellers come to terms with their situation.
OTOH, these figures are national, and it may be dangerous to apply them closely to Austin conditions. Perhaps there are more local figures available. Though indeed your real estate agent sounds like a woman who knows her business.
You may have to delay your trip. Just be glad that you are still young, and have a dependable source of income. And that you didn’t buy that diesel pusher.
You don’t get out of a hole by digging it deeper. To paraphrase the conclusion of Candide: philosophy is all very well, but “we must cultivate our own garden”.
Good luck.
Bob
Jennifer, Real Estate is a gamble at any cost.
Some are lucky and buy low only to turn around a few years later and sell high. But then again buying is a personal thing, some buy only to invest, some buy to live.
The market is hard to read, no one has the magic wand that can help you.
It may be smart money to hold off, see how the market goes (can it get worse? yes, but that is part of the gamble) if you don’t want to take the loss.
OTOH, you could sell now, screw the market, take a hit and not worry about the house anymore (and be like me, and never buy again!).
Our market here is forecasted to be getting better, especially in the new few months (spring).
Spring also tends to be a time for “new beginnings” and people like to buy with the summer ahead of them.
I’m listing in March, and hope that the market improves enough that I will walk away with about $100K in my pocket. But then again, I bought low. Very low.
Good luck, and remember it only takes that one person to say “oh this is the house I really want, in the neighborhood I really want….” for you to sell.
No real opinion on the house sale except to say that is normal for home sellers to expect their home to be worth more than it actually is. I do hope you sell it for what you want.
Would it be okay to concentrate on selling your home, purchasing an RV and getting on the road before you start worrying about upgrading? I think if you buy a worthy used RV, even if it has it’s little faults, things you don’t like – as long as it is road worthy and safe you can keep it. Right?
REstate is like the weather…it is local. In one area the market still does well, a few miles on down the road, it’s bottoming. But the folks jumping on good prices in great areas are those with much cashola, or investors.
Then you have the first-time buyers (your house seems to be out of their market) and the relocators, which are often padded via their companies.
Appears your realtor is pricing for a quicker move on the market.You could also check tax card comparibles to see what HAS sold (the key is SOLD)in the last 3-6 months. Check them out re: sq footage and condition, as well as their actual location.
If you can absorb the loss of freed up cash by renting out, at least the rent might pay part of the mort. while you are trekking…? AND you’d still have the house to return to should the RV life prove to be unpleasant (Hopefully NOT!)
But buying an RV is going to put you further into the $$$ money pit…..
Ouch! My head hurts.
XOXO
I wish you the best of luck in selling your home and getting your asking price. Now comes the waiting game. Be patient!
We can all sit around and discuss current real estate market conditions until we are blue in the face. There is nothing further you can do physically to make sure the house sells. Now the main key to selling your house is to focus “mentally”. Listen to Eckhart Tolle and really concentrate. Put your “order” into the Universe and it will happen. Remember, Ask, Believe, & Receive. Trust me on this one, I have sold a couple of properties in my lifetime. I’m channeling positive vibes your way to get this house SOLD so that you can get rolling!
49 days of sobriety is far from easy! That’s a huge milestone! Remember that you only get out of recovery what you put into it. You are doing a fabulous job! Keep it up!
Don’t some people bury some sort of statue in their backyard to help the sale of their house? Have you heard that superstition? I figure, in these times, everything helps! Good luck.
RE: RV question
I suggest you try and find an affordable Class C (that’s in great shape) that will work for you for a couple of years. This not only gives you time to get the feel of living in an RV but it also gives you time to save some money towards a newer model if that’s what you choose to do. This way you are out on the road traveling and living – doing it! You can always trade in and get something fancier later on down the road. RV’s are worse than cars when it comes depreciation(new or used). But the good news is that a Class C usually will hold it’s value (depending on the year and the condition). Obviously it won’t be full value but if you keep it in good repair I don’t see why you wouldn’t be able to trade it in when the time comes. Just do your homework and make sure you don’t go out and buy a hunk of junk that you will be stuck with.:)
There is a good chance that waiting will NOT improve the situation, at least in the medium term. California house prices have dropped 30-40% in many areas since 2007. Austin is not immune. You may well wait two years and actually get considerably LESS than you can get now. While your debt grows.
That’s why they call it a bubble.
Can you actually service that enormous credit card debt for the next few years, plus subsidize a renter, plus buy an RV? You should be prepared for Visa to start squeezing customers more and more if credit contracts.
Of course you could always pray for some really vicious inflation to make your debts worth less. But be careful what you ask for. This only works if your income goes up at the same time.
In your situation, given the likely economy for the next few years, I would cut my losses and get clear as much as possible. Re-boot. But that’s just me. I am one of those “rip the bandaid off quickly and get it over with” guys.
I’m reminded of an old song by the Amazing Rhythm Aces. “Typical American Boy”:
“You’re a typical American boy,
from a typical American home.
Started out with a couple of breaks,
Couldn’t leave well enough alone…”
But you are not by yourself.
Bob
This is a tricky question. How easy to sell a Class C after a couple of years really depends on how good a deal you get when you guy it. You have to find a Class C in great shape, well maintained, been used on a regular basis for a rock bottom price. It’s possible, but will take patience. Like homeowners, most RV owners have an inflated idea of what their RV is worth. You will need to find someone who MUST sell quickly, and is willing to take a loss to sell. If you buy with the intent of sellling to upgrade you will be taking a risk. There are no guarantees.
Real Estate Agents Sell their home for a higher price than they sell their clients homes, because they will leave them on the market longer and not take a lower offer, so go for! Wait until the right person comes along and buys it.
RV question.
If you work real hard to keep the purchase price really, really close to value, you can sell it in a couple years and come out ok. I would plan for a $5K to $10K hicky. Ask this one over at RV.net, and get the experts answer.
James
Put your house on the market – you lose nothing by trying to sell it and seeing if you get an offer you can live with.
But you gain some valuable things by leasing it out for a couple years, not the least of which is the ability to come back to it if you tire of the road. So renting it out is ‘Plan B’. Austin is NOT California, and your market is ‘likely’ to improve in 2 years (though no one has a crystal ball). If you do come back to it, then you’ll have an even longer period for the market to recover.
Next challenge: how to rent it out at breakeven or a small cashflow loss (remember, even if you rent for a ’small’ loss, there is probably a big positive impact on your income taxes). What I’m going to suggest will NOT affect your credit score, I promise, ok? Call your mortgage company and ask for the ‘Loss Mitigation Dept’. Be persistent until you get through to those folks. Tell them you want to apply for a MODIFICATION. They may ask why and you can choose to tell them that you’ve had some mental health challenges and are concerned about your cashflow. It is essential that you affirm you are living in your home (owner occupied). I wouldn’t mention that you’re thinking about renting it out (or buying an RV for that matter). Given what you’ve stated here about your home value, you have an exceedingly high probability of getting a Modification that will lower your house payment SIGNIFICANTLY. There is NO DOWNSIDE to asking for a Modification, the worst they can do is say no. Many, many folks are having success merely by asking, but you have to get through to the right folks.
I look at major investments with a long-term view and in that context, homes are appreciating assets while vehicles are depreciating assets. Yes there are exceptions but you don’t want to ‘Buy High and Sell Low’ which is what you do if you sell now. This is also why you want to buy a used RV. If you can live with 25ft for 2 years, fine, but it’s better to spend just ’slightly’ more to get something you may be comfortable in for up to 5yrs, even if it’s an older model.
If you buy an 8yr old RV and sell in 2 years you’ll lose less than if you buy a 2yr old RV and sell in 2yrs. Generally, the older the RV the less you lose in resale – except for the additional costs to bring it up to speed (which are essential to understand). If you have the adventure of a lifetime and sell it at a small loss, it will probably be worth it.
Oh yeah, one last thing, here is a website I found that seems to have more used Class Cs listed in one place than all the other sites put together. http://www.rvsearch.com/
You guys are AMAZING! I hope this information is helpful to other readers, as I feel so damn selfish getting all of this guidance from you guys.
Take care,
Jennifer
You should read the chapter on real estate agents in the original (not super) freakonomics next time you’re in a bookstore… or just buy it. One huge point they make is that there is actually a disincentive for real estate agents to list a home at fair market price. They only get 3%, so while you get 299-265 = $34K less, they only get $8K instead of ~$8900 for selling it. They only get a cut of that anyway, so basically they’re getting a few hundred dollars less but probably MUCH SOONER than they would it if was fairly listed– a matter of weeks rather than a matter of months, cause too-cheap houses sell faster.
The book proves statistically that real estate agents list their own properties at a much fairer price than their clients (aka marks). Go for the $299 girl!
BS.
AND…sooo NOT true…not if the agent CARES about their clients, AND their own reputation. (and Most do)
Towns/Cities are small….agents live WITH their clients…past and present. Period.
A good reputation and excellent honest ethics makes the difference in an agent’s success or failure.
So..I call BS on that one.
Just saying…
OK, well based on that well thought out critique, go ahead and list it for $265 and give up the chance for that extra $34K in your pocket.
just saying…
Hi Jennifer,
I agree with everything “GypsySoul” said, particularly about the income tax benefits of renting out your home, if you can swing it financially. This is what I did, though I’m older than you, had owned my home longer, and didn’t have to contend with a negative cash flow. My primary goal in moving into my R.V. was to save more money toward retirement. Renting out the condo has enabled me to live elsewhere and hang onto an appreciating asset that will generate income free and clear when the mortgage is paid off. Also, as GypsySoul and LadyDiga pointed out, this gives you a “fallback” position if you should tire of the R.V. lifestyle. I don’t think you will, though. Good luck and best wishes,
Mary Ann
my husband and i bought a fifth wheel trailer and traded it in for our toyhauler about 9 months late(in 2008). we didn’t have any trouble trading it in, though we did wind up upside down in the loan. what that meant practically was that our trailer payment went up about $60. what we discovered was that your trade in value with most dealers is much lower if you admit to having lived in the RV (as opposed to using it for “vacations”). so if you can keep your RV in good condition, don’t admit to having lived in it. just saying.
Stick to your guns. I went to put my house on the market in the fall of 2008. All the agents that looked at it wanted to list it for about $40,000-60,000 less than what I thought it should be. Then an agent came over and said “what do you want?” I told her, we listed for that and it sold for just 5% less than the asking price.
Then I went to Mexico and bought a house. LOL.