I decided to investigate would happen we had to sell our house in 2009. I got comparative market analysis of our house from 3 different realtors. They were all pretty close in listing price range and what they thought the it would sell for. This of course is based on 2008 data, and all three realtors feel that 2009 might be a better market because homes did not sell in the Fall of 2008 because of the lack of available mortgages.
So what’s the damage?
Well we could list a little above what we bought for and probably sell close to what we bought for. Definitely we could sell for more than what we bought – cash back incentives that the developer sold to us with. However, we’d probably be in the hole still with closing costs. So we would have to bring $30-40k to the table to close, or take it out of our equity.
What does that mean in financial terms? It means we’ve been “renting” our house for 3.5 years. We basically paid to rent to the bank. Was it worth it? Yes and No.
Yes in intangible measurements. We didn’t have to move, got to keep our dogs, enjoyed living in our house, and it’s better than we might have rented. So it’s been fantastic. Plus a mortgage is a small hedge against inflation.
Financially? It cost us around $2k/month to rent our house. I know we would have paid more to rent a comparable home, but we probably wouldn’t have rented a townhouse. We might have continued living in a tiny one bedroom condo like previously. So yes we “wasted” money because we “upgraded” our rent. Although maybe we might have splurged and rented a 2 bedroom for $2k/month. It’s hard to say looking back.
The only thing we can do is realize what is done is done. And make the best decision moving forward. Will this loss in home equity prevent us from moving? No. Will it prevent us from buying again? No.
Are you renting your house?
11 responses so far ↓
1 fitwallet // Jan 7, 2009 at 11:55 am
We bought our house in 2007, and we haven’t had it appraised or anything since. On the one hand, even in our “transitioning” neighborhood, where home values seem pretty stable, prices must have dropped somewhat. Plus, we only put 10% down. On the other hand, we’ve put quite a bit of work into our home–it wasn’t a fixer upper, but a 100 year old house that was an investor flip will always need some work! I am guessing if we tried to sell right now, the closing costs would kill us too. Our area has insanely property transfer tax on top of everything else.
2 fengshui // Jan 7, 2009 at 6:57 pm
“So we would have to bring $30-40k to the table to close, or take it out of our equity”
I’m not sure what you mean by this. Would this be to buy a new house? What would you need $30-$40k for?
I wouldn’t even CONSIDER selling until 2010 or after, due to the incredibly sh*tty market/ credit situation we’re in. So, just hold on…. and stay in your house and let it appreciate more. I think that most peeople are in your situation. DH and I are as well. We purchased with no money down, and thankfully it has not lost any value. But, we’d probably sell for what we bought it for, perhaps a little but more, but we would be out the interest that we paid on the mortgage, as well as the property taxes, which is equivalent to what we would pay to rent here…..
What closing cost does the seller pay? We had to pay the closing costs as the buyer. The sellers we bought it from were “for sale by owner” and they had an attorney, which I’m sure cost a few hundred dollars….
3 LAL // Jan 7, 2009 at 9:00 pm
We put down 20%. We have paid off another 5%, so we’d pretty much lose the 5% we’d pay off if we sold or not. It’s a close call, we’d probably be able to sell for what we bought it for, maybe a bit more, but not a ton more.
The closing costs are the real estate agents. Right now and in the future with the poor market, it’s imperative to sell with an agent. Most people are hesitant to buy without a seller’s agent, wondering what is going on with the house.
And attorney charge $2k here, that’s what ours cost to buy. So minimum $2k. And if a buyer’s agent brings the buyer’s you need to pay 3% of the cost to the RE agent anyway.
4 Miss M // Jan 8, 2009 at 12:28 am
Well I think you just read some of my story about being underwater as much as $100,000. In addition I’ve paid out $120,000 in “rent” while we’ve lived here. Before buying we were looking at rental houses for similar monthly payments, but they were in better neighborhoods. We couldn’t afford to buy in the better neighborhoods, such is LA. You sound like you’ve weathered this storm better than I have, in this market, breaking even sounds pretty darn good!
5 Kristy // Jan 8, 2009 at 9:09 am
I agree wtih Miss M….breaking even in this environment is a good thing. We have lost the 20% that we put down in 2006 and if we sold now we would be shit out of luck.
6 LivingAlmostLarge // Jan 8, 2009 at 10:13 am
Couple of things I didn’t mention, the area we bought in had already dropped from 2004 to 2005. The neighbors had bought for almost 10% more and we had bought for nearly $75k less than they paid. So it had already come down.
Then ended up selling 8 months later for about $15k less than we bought for. And the reason was a retaining wall, which is a huge deterrent for most people. Since then we’ve repaired the retaining wall professional with an engineer and had it’s stamped and approved by the city. We didn’t pay our developer did as our contract.
Anyway though, I believe after looking over comps we could sell for what we bought $575k to $599k, depending on the comps this spring. That however would mean we’d be out closing costs basically to move.
If we waited I think 1-2 more years we’d recoup the closing costs. It was fortunate that we were able to buy on the down slope, not the absolute bottom, but going down.
We also happened MissM to sell at the absolute peak in San Diego by sheer chance. So we only transferred our risk from one home to the next.
Like I said our mortgage is a rental payment so we’ve broken even I think over these past few years.
7 fengshui // Jan 8, 2009 at 11:02 pm
Ok… I see what you mean about the selling costs. Buyers agents are very popular now, and I believe that they go for about 3% around here. That is a chunk of change. Even though we are “renting” our house by it appreciating at a glacial speed, I still think that we got it for a steal, and plan to stay in it for many years to come. I’m also glad that we bought a home that is “inexpensive” relative to our annual income. Some of my friends are “house poor”, and some are about to lose their jobs, and I really feel for them. I wouldn’t sell my house in this market unless it were absolutely imperative…..
10 Sell My House // Jan 19, 2009 at 12:54 pm
“So we would have to bring $30-40k to the table to close, or take it out of our equity” – well, I suppose that makes sence
11 LAL // Jan 19, 2009 at 4:27 pm
It depends. I am estimating that it didn’t appreciate at all. I’m going to pretend that all I did in paying for equity was paying for closing costs.
But who really knows?
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