What would you do? Opinions please

[rkser]

We are faced with this Dilemma, whether to buy this smaller foreclosed bank owned house now, across the street which seems to fulfill all our needs for downsizing.

Here is some background info about us ---- We will be empty nesters with our son leaving for college this fall & are planning to downsize our house in a few years when the Real Estate market would hopefully improve. Our house served us well, with entertaining, housing both kids, a string of winter guests etc, but it is time to move on to a smaller one.

I am 54 & DW is 49, I have had my knee replaced after a terrible road accident 5yrs back and am on disability with leg weakness, with knee pain coming in the way of house chores, which leads to hiring help for practically everything around the house. I do wishfully hope for a recovery in home prices.

Our present house is a 2 storey, 9yr old, paid up, about $525k (Approximate), 3600sq ft in Orlando Fl, with a pool on 3/4 acre & does require a lot of upkeep. This smaller house of 2500 sq ft is for sale for $220k, which is a very good buy in a neighborhood of $500k & up houses. It does not have a pool, which was a waste for us anyway.

Our finances are in order for $90k/yr for 35 retirement yrs, by Firecalc, Fidelity & several other calculators. The 529 plan savings will take care of our son's education costs. We would like to move after June after our daughter's marriage this year for which, we have savings set aside.

Our conservative financial leanings want us to sell our house, before we buy our next house vs We think we can pull this off. We do have $150k in savings to put towards the $220 house, if we do decide to buy it.

If we did buy it, then what -- Rent it for 1 to 2 yrs (Ugh, be a landlord) before we sell our house, then move into the smaller house. When all is said and done, we may end up with a profit of $300k & everything will be hunky dory in 2 yrs.

But we are not sure, it is a gamble as we do realize the hopeless RE market, which may not improve for many years in Orlando area. We are getting tired of upkeep of one large house & now we are adding another one. In these times, just sit tight, do not sell if you do not have to & that $300k profit may not end up being there.
VS
Our life has to go on, no matter what the real estate market dictates. We cannot be married to our larger house when our lifestyle needs a smaller one. Money should not decide everything & every move.

A good thing which would be great, IF the bank agrees is buying that house contingent on selling our house. The Bank can only say no, if we try.

What would you do ?? - Please ask any additional info you may need.

Warm regards

[Rustic23]

It seems like all the pundits/talking heads are forecasting an even worse housing market this year. As Fl. is one of the worse states, I am not sure I would be looking at real estate now. Seems like it will even get better six months to a year down the road. I certainly don't think it is going to get that much better.

[Rich]

rkser:

While I understand your desire to downsize as soon as possible I think it would be most prudent to sell the home you are now in first before purchasing another residence. The market in Florida is, to be kind, rather weak. There will be many homes to choose from when you do sell your primary residence.

Best of luck,

Rich

[bbbamI]

My thought is more on the emotional side. How would you feel living across the street from the house you have now?

[73ss454]

I think that if you buy one house cheap and sell the other cheap it all comes out in the wash. Yet you'll have the cheaper house that fits your needs, which is your objective.
Everything sells at a price so you can sell your house if the price is right.

I'm also in central Florida but on the east coast. I'm finding that in our area all the short sales and forclosures are getting snapped up quick. Many of them have multiple offers and back up deposits. If someone thinks they are stealing somthing it will sell.

Bottom line is that if the other house fits the need and the price is right I'd take it. It doesn't sound like you are hurting for money so if it takes a while to sell your house, so be it.

[GregLee]

Offer $150K.

[Brat]

Another advantage of buying that house is that you know the neighbors.

A contingent offer is always a posibility.

[veremchuka]

i'd be very careful about owning 2 houses! what if you can't sell your 3600 sq ft house? being a landlord sucks and you are disabled so any work means paying someone. i would not buy a house until yours is closed on, not under contract but the closing is over.

[Texas Proud]

How low of a price would you accept to sell the bigger house IOW, would you drop the price $50K so it can sell If not, then I would not want to be on the hook for two houses at your size....

I was on the hook for a 2100 sq.ft. and we moved into a 2700... utilities, taxes, insurance etc. etc. were more than I wanted on the old one... and it took one year to sell... soooo, if you are willing to downsize, and take the loss... go for it...

One of the things I told my sister a LONG time ago (in the last house downturn when she wanted to buy UP).... the more expensive house will probably rise faster in actual dollars than the cheaper one.... she bought the bigger house... you are the opposite... when things start to come back, your house should rise faster than the cheaper house....

Your problem is can you get a smaller house in your neighborhood then

Lots of things to ponder... I guess I will boil them down to two major themes... do you want to make a housing decision or a financial decision... with me... it was a housing decision and I lived with the negative financial results.... glad I made the decision I made...

[Htown Harry]

House sales have a market, but so do house rentals. Have you researched the rental market in your neighborhood?

My guess would be market demand and rent-per-square-foot would be more favorable on the smaller house.

[Amethyst]

Try to estimate what it would cost to fix up the smaller house if you rented it for a few years, and factor that into your calculations.

Based on my experience as a landlady, you would need to do at least the following:
1. Thoroughly clean entire house. Sounds like you'd need to hire this out.
2. Hire painters to re-paint entire interior.
3. Replace the flooring, if it's carpet; if it's tile, maybe not
4. Replace some appliances. For some reason, appliances die faster under tenant use.
5. Plumbing problems that surface after the tenants have moved out. Tenants tend to abuse plumbing, although since you are right across the street, they may not be as prone to illicit sub-letting as our tenants have been in the past (try 8 extra "guests" living in a townhouse that was rented to a couple with no kids).

Moreover, since it's a foreclosure, you will probably need to do No.'s 1 through 3 and maybe 4, just to get someone to rent the house in the first place. Then you'll need to do them all over again when you move in.

Amethyst

[DeborahB]

Are you able to get around in the old house - are the stairs an issue, for instance? Is the smaller house a ranch, or a house with a bedroom on the first floor?

If there are medical reasons I would buy the smaller house now and move if you feel you can let your larger house sit on the market for a while. Your health is a priority.

If that's not the issue at all, I don't see the huge difference between the sizes - a 2500 sq ft house is still a pretty large house. Why don't you just keep what you're in? Do you want/need to invest the money?

Or - you could buy the smaller house, rent it out, and stay in your house for a while. Then move & sell the larger house. At least you can keep an eye on it, across the street.

[Moemg]

Why not put your house on the market and see if there is any interest and what price you will get ? I live on the west coast of Florida and the real estate market is still slow .

[devans0]

I am in a similar situation. I haven't decided what to do, either. My thoughts are that RE Long cycle is at a low, but that cycle runs 18 years. I am currently living in the cheap house in my situation and renting the better one. If I want to make a profit, I will have to sit on this for several years. Currently it is cheaper to rent than to own to many experts.
In time, I will be looking to handicap accessible downsized housing for easy living. The last time I helped a person move, they had a handicap ramp that made moving easy, even the heavy stuff such as refrigerator, freezer, and fold-a-bed couches.

[MichaelB]

Why not sell your current house? See what you actually get, not what you think you can get. Then rent while you take your time looking for a new place to live?

Edit to add: in a bad market it is better to sell before you buy. In a hot market it is better to buy before you sell. In this market it is critical to sell before you buy: first, to make sure you get what you are thinking for your current house, and second because with cash in hand you have excellent bargaining power to buy.

[Orchidflower]

This might help someone here:
Real Estate Market Forecasts on Home Prices

[Buckeye]

Devil's advocate question - What makes you think your house is worth $550K? Would your decision be any different if it turns out your house would sell for only $350k? If the sale price would have an effect on your decision, have an appraisal done and subtract 25% for things getting even worse.

[rkser]

Thanks everyone for your opinions.

To answer some of the questions posted ----

1. Yes the 2 storey house we live in is inconvenient but is not unlivable, it has a chairlift installed on the stairs, to help me reach our bedroom upstairs. DW also has knee issues & has had orthoscopic surgery done.

2.A comparative analysis by a realtor, priced our house at $563k with a net to us of $521k. If I subtract 25% the net will be $390k approximately. We got this house built, without a mortgage in 2002 for $510k. Frankly a loss of $130 will be a considerable loss, but in long run it may not change our lifestyle. In short term a single storey house will improve our lifestyle.

3.We had planned to sell our house in a year or two when the market improves. Frankly we did not consider the ramifications of an extended bad real estate market. We thought vaguely that we may recover our $510k we put in 2002.

Please continue to have suggestions/opinions coming for this strange situation we find ourselves, where we do not have to (fortunately) sell for financial reosons, but are being tempted to for lifestyle reasons.

Warm Regards

[TomG]

If you do buy the one across the street, you only need to sell your current house for $220 001 to profit

From what you've written, that seems possible to do very quickly, so that's the route I would take

[FreeAtLast]

I would first focus on selling what you have now before purchasing anything else. I have been down this road before years ago and it took me 3 years to sell my previous house. It took less than 3 months to find, purchase and move into the home that I am in now.

It sounds that you could end up with 2 homes for a very long time should thing not play out.