Home buying thread

Jalynfane

Jalynfane

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TheCutlery said:
I mean fuck, my house is currently "Worth" probably $245k, but the insurance guy just told me it would cost $275k to rebuild it. There"s 30k of work here that"s just not figured into the value because of the way the market is right now.
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This is extremely common here in OR. We routinely will run a replacement calculation on a home and find it costs X% more to rebuild than it is getting a loan for. It some times freaks newbie mortgage guys/gals out and they scream that they want the insurance binder listed for the loan amount and not the actual rebuild value. Fortunately I can explain to the client/buyer the differences between rebuild/loan value and educate them more than they are getting from realtor/lender.

Usually only takes me telling the buyer "If you only insure your home for $175k like the broker demands and it costs $250k to rebuild, what do you think the insurance is going to pay out?"

I have actually had people change lenders before over it (and picked up some referrals). Probably lost a sale or two due from it but I am ok with that, I"d rather take an informed buyer then a price shopper any day.
 
Cutlery

Cutlery

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That"s actually an easy fix, when you think about it. I know what my home is worth on the real estate market, and my insurance guy is pretty confident in his numbers on cost to rebuild. The absolute last thing I want to have to do if a tornado walks away with my house is have to finish the basement on my own dime. If that"s what they say it costs to rebuild, then lets use that number, because I sure as hell don"t wanna stop 50k short of putting it back the way it was.
 
Dis

Dis

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Slightly off topic, but if you are sitting on a mortgage with a rate of 5 or higher, it might be in your best interest to look into refinancing. I had a 5.25 through VA. I am currently in the process of doing a streamline VA refi that will drop the rate to 4.25. My house payment is dropping by about $160 a month, and overall savings through the life of the loan is roughly $20,000 (taking into account closing costs, and that I am losing 18 months of the current loan).

Anywho, obviously I have an advantage of doing a streamline VA refi which costs me considerably less than doing a traditional refinance, but like I said, it may be worth your time to do some math. I feel finally feel like I am somewhat taking advantage of a system and economy (low interest rates, and having the credit scores to get them) that was not rewarding people who are living within their means, saving money etc etc.
 
Cutlery

Cutlery

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I have 5.5, and we talked to the mortgage guy awhile ago about refi"ing down, he said it wasn"t worth it. New rules in place for FHA loans and the mortgage insurance premium increased as well, would end up being a wash on monthly payment.

VA obviously a bit different deal than most homeowners.
 
Cad

Cad

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I have a 3.4% fixed rate on my new house. It"s practically free money it"s so cheap.
 
Tripamang

Tripamang

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Eomer said:
I think if you have more than 25% down you don"t need CMHC insurance, maybe even 20%, so you"ll get a touch better rate.

As far as getting approved for a loan, as was mentioned, you"ll need proof of employment and income to get approved for any kind of mortgage. So if your wife is taking a transfer and you"ll be finding something new, they will likely be reluctant to pre-approve you for a mortgage based upon both of your incomes. Depending on how much you need for a mortgage and how much coin the wife brings in, you might be okay or you might not be.

Talk to a mortgage broker like Dominion:Dominion Lending Centres

Don"t just ask your bank for a mortgage, get a broker to shop around for you.
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It"s definitely 20%. I also checked out my bank and then ended up getting a way better deal through a broker. Bank offered me a 5 year fixed at 4.04%, the broker got 3.79%. My own bank offered a better deal through the broker than through talking to them directly if you want to add insult to injury.
 
Eomer

Eomer

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haha nice, more or less the same thing for me, although I was pleased because it allowed me to keep all my banking, investing and borrowing under one roof. It"s been paid off for awhile, but I left the "Total Equity Plan" as it was and just transferred the allowable balance to my line of credit. Car financing? No thanks, I"ve got this handy 4% line sitting here unused, and I"ll take another couple percent off the price because I"m paying cash, please.

I actually heli-ski"d with a couple of the guys who started Dominion last year. Good dudes, and quite young. Late 20"s roughly. They"ve definitely got a good thing going.
 
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Chaotic_foh

shitlord
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I have a question for you guys regarding shared equity ie; buying a house with someone not a spouse.

I understand the pros and cons, so I"m not really looking for advice on that, really what I want to know is the finances involved, in terms of exiting at some undefined point in the future. Obviously if we sell it, it"s a simple story.

However, if and when one of us leaves how does the leaving individual get his equity back? It"s not feasible for most people I imagine to "buy out" the other person financially.

What we are concerned with is 1) Not being able to handle payments when the bills are no longer split and 2) The leaving party getting their equity out of the house should 1 person decide to stay.

More then likely, 5 years or so in the future I will be looking to move. My salary is almost double his, and for me it"s more of an investment while the market is so down and rates are so low. He plans to maybe live in the house long term. He"s concerned he will struggle with payment in my absence and I"m concerned with getting my equity out of the house at that point without some BS arrangement. I tried googling things but nothing much comes up.

We are going to see an attorney and figure things out, but I"d like to arm myself with some knowledge first.
 
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splorge_foh

shitlord
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Chaotic said:
I have a question for you guys regarding shared equity ie; buying a house with someone not a spouse.

I understand the pros and cons, so I"m not really looking for advice on that, really what I want to know is the finances involved, in terms of exiting at some undefined point in the future. Obviously if we sell it, it"s a simple story.

However, if and when one of us leaves how does the leaving individual get his equity back? It"s not feasible for most people I imagine to "buy out" the other person financially.

What we are concerned with is 1) Not being able to handle payments when the bills are no longer split and 2) The leaving party getting their equity out of the house should 1 person decide to stay.

More then likely, 5 years or so in the future I will be looking to move. My salary is almost double his, and for me it"s more of an investment while the market is so down and rates are so low. He plans to maybe live in the house long term. He"s concerned he will struggle with payment in my absence and I"m concerned with getting my equity out of the house at that point without some BS arrangement. I tried googling things but nothing much comes up.

We are going to see an attorney and figure things out, but I"d like to arm myself with some knowledge first.
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There is no way to "take your equity out" without either having the other party buy you out, or finding a buyer for your half of the property (unlikely unless family since its difficult to transfer half interest in a property). One option is to put the property into a company name, and then transfer shares of the company - this allows some ability to transfer ownership, but wouldn"t alter the liability on the mortgage.

If 1 person moves out, and the other remains, but both continue to have 50% ownership, then in fact the fair arrangement is for each person to pay 50% of the mortgage, and the person remaining to pay rental costs equal to the remaining share to the person who has moved out. Maintenance costs such as lawn care and leaky roof etc. should be agreed upon at the time the arrangement is set.
 
Eomer

Eomer

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Why do you want to share ownership with someone Chaotic? Seems like it"s just asking for problems and complications.
 
Cad

Cad

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Chaotic said:
I have a question for you guys regarding shared equity ie; buying a house with someone not a spouse.

I understand the pros and cons, so I"m not really looking for advice on that, really what I want to know is the finances involved, in terms of exiting at some undefined point in the future. Obviously if we sell it, it"s a simple story.

However, if and when one of us leaves how does the leaving individual get his equity back? It"s not feasible for most people I imagine to "buy out" the other person financially.

What we are concerned with is 1) Not being able to handle payments when the bills are no longer split and 2) The leaving party getting their equity out of the house should 1 person decide to stay.

More then likely, 5 years or so in the future I will be looking to move. My salary is almost double his, and for me it"s more of an investment while the market is so down and rates are so low. He plans to maybe live in the house long term. He"s concerned he will struggle with payment in my absence and I"m concerned with getting my equity out of the house at that point without some BS arrangement. I tried googling things but nothing much comes up.

We are going to see an attorney and figure things out, but I"d like to arm myself with some knowledge first.
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The best (and usually only) way to get your money out when you are ready to leave is a partition by sale. This is how splits are handled in divorces, as well.

P.S. Don"t do this
 
Cutlery

Cutlery

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Don"t do it. Seriously, you will not talk to this guy in 6 years if you do, it will be THAT big of a pain in the ass.
 
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Chaotic_foh

shitlord
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Eh I just view it as an investment, and at this point in my life it"s the next logical step.

Basically, if i"m paying X amount (say $1200 monthly) "to the furnace" as I like to say: home ownership costs that net me nothing, such as mortgage interest, property tax, home owners insurance etc.. expenses you explicitly incur due to owning a home that I would not otherwise be paying - it"s a terrible investment. However, splitting that off the bat with someone.. now it"s $600 to the furnace. Having the buying power to purchase something quite nice, specifically what we are looking for, in a much nicer area, with considerably less fiscal liability and in turn, risk, halving maintenance and repair costs and blah blah blah, i"m preaching to the choir with the positives, but this is why.

Then there is this; buy a nice high ranch, or something with a very nice large finished basement with a seperate entrance, in comes tenants. Now, they are paying $1200 in rent, split both ways obviously.. but now my $600 to the furnance is 0.. and any money i"m putting in is strictly a reduction in principle, and as such an investment .. which given todays market (and even more so the market in 6 months or so once spring "home buying season" is out and the economy dives worse) will more then likely be a rapidly appreciating investment in years to come.

Hell, I don"t even have to live in the place. That"s just a bonus. However, as I said with why; it"s an investment in my future and if I can get other people to pay the costs, why wouldn"t I.

But anyway, i"d prefer not to turn it into a good idea bad idea topic, it"s a home buying thread ; really what I was concerned with is the exit in the future. I"ve read about the LLC and Tenants in common approaches.. with the LLC how does the whole share buying thing work? I imagine it would be split 50/50 initially but it seems a buyout is a buyout regardless.
 
V

Vodo_foh

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TheCutlery said:
Don"t do it. Seriously, you will not talk to this guy in 6 years if you do, it will be THAT big of a pain in the ass.
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See now I just want to chime in here.

A while back I was looking for my first house. What I could realistically afford was a nicer house in the shittier part of town. My dad is a contractor and the plan was for the two of us to fix the place up over a few years then I sell it and get a better place.

However, most of the places in my price range already sold at or near their "cap" just because of the neighborhoods they"re in. So no amount of fixing was going to help me turn a profit.

So I approached a buddy of mine who I"ve known since grade one, and we decided to pool our resources and get a crappier house in a great neighborhood. And over 3 years (the renewal term of the mortgage) we did a lot of renovations. Sunk 20k (yay for no labour charges and a lot of free / cheap material) into it and both walked away with a nice profit for our next places.

Just get everything in writing with a lawyer before you proceed so there"s no surprises when you go to sell. We opened up a joint bank account out of which all reno and bill expenses came. When he put 200 bucks into that account, I put 200 bucks into that account etc. That way we knew everything was a 50/50 split.

Now I realize I may be the exception to the rule, but just thought I"d put in my two cents as someone who"s actually done it.
 
Cutlery

Cutlery

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Ah, the guy I"d known since grade 1 tried to steal my wife.

What I could do with some high quality friends....
 
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splorge_foh

shitlord
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Chaotic said:
Eh I just view it as an investment, and at this point in my life it"s the next logical step.

Basically, if i"m paying X amount (say $1200 monthly) "to the furnace" as I like to say: home ownership costs that net me nothing, such as mortgage interest, property tax, home owners insurance etc.. expenses you explicitly incur due to owning a home that I would not otherwise be paying - it"s a terrible investment. However, splitting that off the bat with someone.. now it"s $600 to the furnace. Having the buying power to purchase something quite nice, specifically what we are looking for, in a much nicer area, with considerably less fiscal liability and in turn, risk, halving maintenance and repair costs and blah blah blah, i"m preaching to the choir with the positives, but this is why.

Then there is this; buy a nice high ranch, or something with a very nice large finished basement with a seperate entrance, in comes tenants. Now, they are paying $1200 in rent, split both ways obviously.. but now my $600 to the furnance is 0.. and any money i"m putting in is strictly a reduction in principle, and as such an investment .. which given todays market (and even more so the market in 6 months or so once spring "home buying season" is out and the economy dives worse) will more then likely be a rapidly appreciating investment in years to come.

Hell, I don"t even have to live in the place. That"s just a bonus. However, as I said with why; it"s an investment in my future and if I can get other people to pay the costs, why wouldn"t I.

But anyway, i"d prefer not to turn it into a good idea bad idea topic, it"s a home buying thread ; really what I was concerned with is the exit in the future. I"ve read about the LLC and Tenants in common approaches.. with the LLC how does the whole share buying thing work? I imagine it would be split 50/50 initially but it seems a buyout is a buyout regardless.
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If you are viewing this as an investment, the salient points should not be "buying something in a nice area" or "getting what you are looking for". These features are functions of price. Strictly speaking, as an investment one thing I feel you are discounting is liquidity, and going 50/50 in with someone without the ability to buy out or be bought out of your share means you could conceivably never exit the investment unless both parties agree to sell. In investment terms, its pretty awful.

From time to time I do buy properties with a small group of investors, but always with strict language in the contracts for buyouts, and tag-along/drag-along/right of first refusal clauses to initiate sale events and prevent ninja sales. its all very fair and straightforward.

As far as using a company to effect the purchase, the chief advantage is that it allows flexibility in dividing the ownership, basically you can divide it as many times as there are shares. It also changes the tax implications, as what is changing hands are shares instead of real estate, but the specific tax implications vary by country/region.
 
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Chaotic_foh

shitlord
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The liquidity is the primary issue. It"s an investment, that"s how I view it, I am not doing it as an investor. Big difference. Anyone looking at real estate would be an absolutel fool to not care about the area. Liquidity can also be resolved via intelligent thinking and a contract, which is why I"m trying to arm myself.

What I"m confused about in terms of the shares is that say he can only afford to buy out 20%.. what happens to that other 30% if I"m no longer living in the home?

There would obviously have to be a buy out clause, I imagine it would be something along the lines of the other party having the right to purchase other parties interest prior to forcing a sale of the home, either through outright purchase or refinance of the home. What is a tag-along/drag-along?
 
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splorge_foh

shitlord
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Chaotic said:
The liquidity is the primary issue. It"s an investment, that"s how I view it, I am not doing it as an investor. Big difference. Anyone looking at real estate would be an absolutel fool to not care about the area. Liquidity can also be resolved via intelligent thinking and a contract, which is why I"m trying to arm myself.

What I"m confused about in terms of the shares is that say he can only afford to buy out 20%.. what happens to that other 30% if I"m no longer living in the home?

There would obviously have to be a buy out clause, I imagine it would be something along the lines of the other party having the right to purchase other parties interest prior to forcing a sale of the home, either through outright purchase or refinance of the home. What is a tag-along/drag-along?
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Caring about area/size/fixtures etc. is all fine and dandy, but like I said these are functions of price. You want better, you pay more. There are plenty of crappy homes I would never live in that make terrific investments.

tag along right means if the other party tries to find a buyer for his share in advance without your knowledge, you have the right to sell proportionate with your percentage at the time of sale. Drag along means, if you want to sell some or all of your share, in certain circumstances you have ability to force the other party to do so as well, thereby dragging them along into the sale event.

Right of first refusal means either party has to offer the shares to the opposing party, before seeking to sell it to a third party. If the opposing party refuses to purchase, the price offered the third party cannot be less than the amount offered to the opposing shareholder. This serves two purposes - it notifies shareholders of intent to sell, and allows shareholders to more easily retain control of assets.

The ultimate point of these conditions is to avoid deadlock, or immobility of decision making.
 
M

Mkopec1_foh

shitlord
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0
We got royally fucked with our current home, which we bought when the housing bubble was at its peak. We payed $235K and now these houses are going for about $160-$170K. But I also made a killing with our last house we sold around that time for $185K which now is worth about $100K.

I applied for a loan modification through our mortgagor and this helped a lot. Our payment went down to $1250 from like $1850.
We do plan on staying here probably untill we die, so its not like this is and investment or anything, but still, its sad to see how this all played out.

If we would of waited just 1-2 more years we would of made out like bandits, selling high and buying low. But no one had a clue about the bubble that was about to burst, and hindsight is 20-20 right?
 
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