Sell now or wait?

Parent Cafe
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<p>In light of the diverse opinions expressed on the casual dress thread, I thought I’d try asking your opinion on another subject. ; ) I’ve been asked for advice, but have been reluctant to give any; I’ll be pressed about it again soon.</p>

<p>Friend and her husband own a large house. They bought it (new) at the height of the housing bubble when elderly parents needed to move in with them, but the parents have since died and left a very small estate. The house for which they paid approx. $1.5MM now appraises at $1.3MM. The absorption rate for houses >$1MM in their general area is about 30 months (& would likely be higher if discouraged sellers returned their properties to the market.) Nothing in their neighborhood has sold for >$1MM in several years.</p>

<p>Friend and her husband have been quite frugal and just paid off their mortgage. Their RE taxes, utilities, HOA fees, HO ins., etc. average $1,500/mo. They estimate routine maintenance (from HVAC service to refreshing the mulch) runs about $300/mo. </p>

<p>Nice rentals are rare; a 3bd/2ba condo in a desirable area rents for about $3,500/mo. If they moved into a rental condo, their monthly expenses would probably total $4K/mo. including utilities, renters’ ins., and rent on a 2nd parking spot, or more than double their current routine monthly expenditures. </p>

<p>Their monthly outlay does not include savings for major repairs, appliance updating, etc., and they have a $5K co-pay on their HO ins., so there’s a chance they could face some big out of pocket costs if they remain in the house. That unknown has Friend worried. Friend’s dh wants to remain in the house until he retires in ? years (he’s not sure when), then try to sell it. He thinks it would be foolish to downsize so drastically for nearly double the monthly outlay. Friend is tired of taking care of the big house (& probably exhausted from caring for the elderly parents until recently.) </p>

<p>Both Friend and her dh are concerned about the absorption rate in their price range and think that even if they price the house below appraised value it may linger for a couple of years. It would be stressful to keep the house ready to show for so long. She’d be relieved to move on, even if that meant pricing the house at ¾ of its appraised value. I think her exhaustion is clouding her thinking, plus her feelings about the house may be affected by the sadness of the last few years. Friend also argues that we’re facing another recession and it will just get tougher for them to sell. My crystal ball broke back in the ‘80s, so I have no clue. Friend does recognize that they can no longer invest the proceeds in anything reasonably safe and get a return that will cover their rental expenses. She admits her reasons for selling are mostly based on emotion and fear of the unknown, but says life is too short for her to spend the next 5+ years maintaining a huge house. Hiring a cleaning service would help right now, but there’s still the issue of needing to replace appliances, HVAC systems, etc. before they sell if they stay six years, and they may get even less for the house down the road. I happen to love their house (or more specifically, their lot & view) and think they should stay put until the husband retires. But I’m not the one who may have to pay for a (huge) new roof or any other repairs. The husband’s commute time would be halved, but he says that’s not an issue for him. She may be hoping that between the shorter commute & lack of house chores they’d have more time to do something fun together.</p>

<p>Under these circumstances, would you remain in the house for another 5+ years, or would you try to sell now and move to a convenient and easy to maintain rental?</p>

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<p>Mortgage rates hit a 50 yr low this morning…anyone who is going to buy their house knows this…great time to sell; if it were me, I would not wait as I have no idea where interest rates(and the housing market) will be in 5 years…</p>

<p>Especially since they have their own mortgage paid off…</p>

<p>Sell now…imo</p>

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<p>Bought a huge home with elderly parents ? Not a good plan…i think worrying aout replacing appliances and hvac systems is a waste of time…You said they purchased the home new, so the HVAC system should be expected to be fine for 15-20 years,at a minimum…same goes for many appliances…i would not hold the home in hopes of reaping more money at some point in the future,as interest rates increase,home prices usually decrease…</p>

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<p>I would hold until husband retires. Real Estate shows signs of improving in many areas, and selling at a huge loss for emotional reasons just doesn’t make sense to me.</p>

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<p>Selling and spending 4K a month on rent when your monthly expenses are now under 2K, doesn’t make sense to me. If they wanted to move to a less expensive area, it makes a bit more sense. Once his income ends, wouldn’t a 4K nut every month be difficult? I can see them eating into the money they get out of the house just to stay even every month, which is not a good prospect for a retired couple. Or they’d have to move out of the area, which also has it’s downsides if family and friends are close-by.</p>

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<p>I’m confused…why would they be renting a townhouse rather than buying? Yes, to increase monthly expenditures seems to be a bad idea…</p>

<p>This is the time to be reducing expenditures…my thought was that they would take the $$ from the house, buy a smaller/ less maintenance unit and pocket the diff…</p>

7

<p>

I’d consider selling now and buying another place. I don’t understand the point in renting for them. This is the perfect time to buy since prices are down. If they wait for this house to increase in value, which eventually it’ll likely do but it’s hard to predict when, then whatever they buy/rent will be up as well. </p>

<p>Since they’ve already paid off the mortgage where they are now and would be downsizing there’s no new mortgage to worry about and there would be no new costs. I’d expect their monthly costs would go down, not up, and that they’d have additional money in the bank to boot from the additional equity in the home they’d sell. In addition, by buying versus renting they won’t have to worry about ever-escalating rental prices while they’re on a fixed income. </p>

<p>Am I missing something here?</p>

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<p>^^^My guess is that the townhomes they would consider living in would be too expensive for them to buy outright- in their current location. In some areas, new condos are almost as expensive as the older homes. It’s the case where we live. If we were to sell, there really isn’t anything to buy that would cut our costs in our immediate area. We would do very well if we left our expensive location, however. I’m guessing the OPs friends are in a similar situation.</p>

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<p>If they could sell the house to move somewhere with fewer expenses I could see the point, but moving just to move seems silly. Why not shut off some portion of the house. Put covers on the furniture and pretend it’s a smaller house. Maybe get more household help. If they’ve got $2000 extra a month to spend, spend it on making the current house less work.</p>

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<p>It can’t be that much work, particularly with only 2 people living in it</p>

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<p>^^^I agree. The secret is a good part-time housekeeper-even just twice a month- to do the floors and bathrooms, and a good gardener.</p>

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deleted for privacy reasons

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<p>How clean a place needs to be really depends on the person or family. If the owners are only comfortable with show-case levels of cleanliness, then the work is going to be much harder (or more expensive) than if the residents tolerate more dust/clutter/grime. The possibility also remains that your friend needs to be doing something (you haven’t written anything about her job or volunteer commitments) so maintaining a certain level if order in the home may be her job equivalent. Nothing wrong with that.</p>

<p>If what she is really saying is that she’s sick if worrying about and maintaining the house, and she can’t bring herself to close off parts of the house or let het housekeeping standards drop, maybe she needs a job outside the house until they can sell it. Then she’d have a bit more spare change to help pay for home maintenance and she won’t be home all day looking at the house and fretting about how to care for it.</p>

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<p>Two adults in a large home, with at least one working full time just can’t possibly create all that much mess. I lived in a medium sized home with three children and a dog while our home took 8 months to sell. Once it was cleaned and de cluttered it really wasn’t that hard to keep clean for showings with very little notice. I did a lot of driving around with a preschooler, the dog and baskets of dirty laundry. You just get used to it.</p>

<p>If similar homes are taking two years to sell, and they are planning to retire in five years, I would put it on the market now, anticipating it taking a long time to sell. If it takes two years, at that time they would have the money available to build their forever home in time for retirement. Which would only mean a couple of years in a less than desirable rental while they are building. And I really think they could tough it out in a less than wonderful rental in a less than desirable place if they knew it was for just a few years. So if it meant a slightly longer commute, or an older place, they might be able to find something that would “do” for a couple of years.</p>

<p>What I have read is that generally it is going to take a very long time for housing prices to regain their 2005 prices. Too many foreclosures and short sales, even in the million dollar market.</p>