You may be wondering what we did with our other house. The one that turns me from an airhead into a crybaby.
Well, we sold it. sortof. sortof not.
It helps to start at the beginning. We didn’t want to sell the home and be upside down in the end. We were very strict about that fact. So let’s just put it all out there…we bought our house for $169,900 in March of 2007. That amount included an allowance for the appliances and a brand new garage door (making the carport into a legitimate garage). The renovations that we did updating the house and yard totaled about $20,000. All we wanted to do was break even with our existing mortgage. Basically, all the renovations would be thrown in as a bonus since we didn’t factor in those costs when we listed our home but we really felt strongly about going into the new home with only one camel on our back. Our listing price was $169,900 (mortgage still due the bank + the fees we would owe real estate agents + closing costs + a tiny cushion for counteroffers = Break even!)
You may be wondering…but Katie you lose that $20K you invested in renvoations and updates! That’s a lot of moolah!…and you would be right. BUT when you think about the alternative (carrying two mortgages as we wait for the market to get it’s act in gear!), that is a loss we are willing to accept.
PLUS. Yeah…there is a plus…
PLUS our real estate agent told us that there would be a fat chance we would get what we wanted for our house. In fact, they wanted to list the selling price closer to $150K. Um. Insert awkward silence with the realtors here. That would mean that we would have taken a $40K hit…if we got the asking price. yowzas. In fact, a house just three doors down from us recently sold for $130! Sure, it didn’t have the basement but it did have similar stats and a nice big fenced in backyard. Basically I looked like this after hearing that:
Yeah. Basically it is because of all the foreclosures. The foreclosed houses MUST be listed as comparables in our area…so even if a house is worth more…it won’t be reflected that way in the sale price because the appraisal will be so low. Insert string of curse words here. So when our real estate agents told us that there would be a better chance to get a higher offer if we did rent it for a while…well…I can’t say that we were thrilled with the idea but at least there was a glimmer of hope that our beloved home would get the price tag closer to what the actual worth is (and Jeremy wouldn’t have to get a second job!). So we put it on the rental market…
But before we get into all that…let me tell you, my underarms were soaked that first day. TMI? I hope so. Both Jeremy and I were nervous about the entire process. We had never been ‘landlords’ before or really managed anything that we didn’t live in personally. So knowing that our first home would be subjected to a strange family (possibly with house-abusing tendencies) was a little scary. What if they burned the place to the ground? What if the kids stuck their entire Lego set down the toilet and it floods the house? What if they got hurt in the yard and sued us for everything including Will? The fears were big. And then came the fear of not getting enough in the rental income to cover the mortgage. Could we afford to pay extra for the old mortgage while still paying for the new house? We had a ton of questions and concerns.
Thankfully we had a real estate agent that was on our side…AND he had a great deal of experience with rental properties. He told us that rentals are nothing to be afraid of…just a little extra work up front and a little bit throughout the rental agreement period. We never have shyed away from work before so we were glad to hear that it didn’t require a PhD to getterdone. He said that the number one thing is to get the right renter. The right renter is a totally personal decision. Only you can determine who is the “right” person. It’s someone that knows the rental boundaries and respects them. Right away we felt more at ease. Something about hearing the word “boundaries” helped us breathe a little easier.
We actually put it on the rental market and within a week, we had two offers. The first offer was to rent it. The second was a lease/purchase offer. A lease/purchase offer is sortof like two offers. One is to lease it (like a rental agreement) and the other to sell it within a predetermined amount of time. So the first thing that we did was look at the first rental offer. The family actually offered more than what we were asking for each month’s rent…so we noted the down payment and the amount that we were going to pay to our real estate agent to do background checks and credit checks and all the paperwork…and then we calculated the amount that we would pay out at the end of the rental period for repainting, cleaning and repairs. All in all, we would break even and still own the home.
Then we looked at the lease/purchase offer. This family actually offered less on a monthly basis than we were asking for BUT with their purchase offer, they were able to put a down payment of $7K and their offer was only a little less than what we were asking for in the purchase price. The seven grand would act like an insurance policy that they were definitely interested in purchasing. It would go toward the purchase of the home when they got a loan approved and if they didn’t end up purchasing, then we would get it free and clear. Our real estate agent told us that amount meant that they were serious. Some people walk away from $1K to $2K but $7K…um no. So we automatically felt very secure in that they did in fact want to purchase.
Then came the math part. So we calculated all the different scenarios and decided that we preferred the lease/purchase offer (because it meant that in the end, our house would be sold – hey that was the ultimate goal, right?!)…and that we would have to counter offer just to break even. We countered on the monthly amount and the final purchase amount. Then they countered. Then we countered. Finally, it was accepted. In the end, we do have to chip in about $100 a month toward the home’s cost…for landlord’s insurance, our increased taxes, etc…but we can trim the fat off our current budget and do that for 21 months.
Why 21 months? Well, that is the amount of time that the current residents have to secure an approved loan to purchase the house. They have to purchase within 21 months or the $7K deposit will be ours. Oh and in addition, there were repairs that needed to be made. I honestly couldn’t believe that there were any repairs that we HADN’T made already…but after the inspection came back…well, there were a couple little things that needed to be addressed. We agreed to change out the outlet in the first floor bathroom to GFCI:
and the gutters needed to be cleaned and then there was one little spot on the corner of the house that termites had gotten into the wood.
Jeremy had to replace all the boards and since we were currently under a pest control contract, the termite treatment was scheduled and the cavity was inspected to make sure there were no more active infestations. All that to say – don’t let your mulch get close to the wood part of your house….
So after feverishly cleaning and fixing and scheduling…we came to the closing. And this is when I must say…I never expected God to bring us the perfect family for our home. Never ever in a million years. In my head it would be a single guy that smelled bad and had two dogs that he would chain up out back and he wouldn’t appreciate things like butcherblock countertops or a beadboard vanity or a subway tile backsplash. But then on closing day…we met the people that would be caring for our loved home. And I must say…they really are the perfect family for this house. They are exactly what I hoped for…and you know…I don’t mind pitching in that extra $100 a month because I know that they love the home, are excited to live there and are thrilled about owning it one day. Hey – she even was saying that she is thinking about homeschooling her kids…what a small world right? When we chatted, I gave her the lowdown on what plants are finicky and how to care for them, how to work the exhaust hood in the kitchen, and how to change out the curtains in the master bedroom to launder them. Then she told me the thing that really buttered my biscuit…she loved them so much, she went out and bought the exact same counter stools for the kitchen from Ikea.
And that is how our we-lost-money-on-our-first-house story turned into a I-am-so-happy-for-someone-else-that-I-forget-to-be-sad kinda ending.
Now you have a new home to decorate, love and create amazing memories in. 🙂
150k for a huge, beautiful home?! I’m moving to America!
Thanks so much for explaining this process. We haven’t bought a house yet, but when we do, chances are we will have to move out of it three years later (thanks so much Air Force) so we’ve talked about buying and then renting out homes. I’ve always been a little leery about it, but renting to own sounds like an awesome scenario. That’s great that you got such amazing renters – do they read the blog??
I’m impressed with the home prices in Georgia too now! I’m convinced, and currently researching Air Force Bases in Georgia 😉
We lost money on our first house, too. But not as much as we saved on buying the new house. Same with you, yeah? The bad market helped us. So, it’s allllllll good.
Once again – I cannot believe the housing prices in your area! It’s much bigger, has more done to it, and on more property for about 1/2 the price of houses around here!
Happy story!
I am so relieved for you! You are right, it could have been bad, but luck and happiness is certainly on your side 🙂
thanks for sharing! that is a neat story about how the right family bought your home. Would you mind sharing what your dream home cost?
Had the new family read your blog before?
I am so totally thrilled that you guys had a direct helping hand in making the American dream come true for a family!! You guys may loose a little money each month but that is priceless in my book!
I’m so happy that this worked out for you!
We put our house on the market last month and it has been a crazy experience so far. The first people who walked through our house put an offer in for a lease/purchase contract. We were so excited to have an offer and then crushed to find out it wasn’t going to work for us. We are moving out of state so we decided it would be unreasonable for us to be landlords from 500 miles away. PLUS the buyer/renter was not willing to put any money down–actually the whole offer was a little sketchy. So now we’re back to just waiting, and praying, and waiting.
Good luck with the new house. It looks amazing!
Do they know about your blog? It would be interesting to see how they decorate it. Wonder if you could house crash them in a few months?
They don’t but they know about it now 🙂
xo – kb
It was under $300K…
xo -kb
$169K!! Wow. I live in Tucson and that is just shocking considering what houses are still selling for here and supposedly AZ has been one of the hardest hit states by the housing downturn. Our first home was a tiny adobe (less than 900 sq ft) and we may have been able to break even on it if we had decided to sell it (probably could have listed it for $120K or so). But we decided to rent it out and were lucky enough to find renters we are happy with (so far – knock on wood!) and that are paying rent that more than covers our mortgage. Although I was nervous about the whole “being a landlord” process, it wasn’t hard to do my research and we did all our own background checks, credit checks, etc. and had the renters pay for it themselves (basically an application fee). It’s definitely true that it’s worth it to put a lot of effort in up front to find good renters and talk with previous landlords. Now we are in a home twice the size (1500 sq ft feels so spacious to us and our two boys!!) but with a small yard and loving it. It still makes me a little nervous knowing we own two homes and are responsible for two mortgages but we had enough interest in our rental house that I’m a little more at ease that we’ll be able to rent it without a lot of hassle in the future (fingers crossed). Anyway, thanks for sharing all the details of your similar journey. It’s a ton of work but worth the effort to find the new house that is right for your family!
Love the picture of Will…he kind of has Ralph Wiggum hair going on there. 🙂
I really appreciated this post and your bluntness because we are in a similar situation and it is nice to hear all of the details that we have not gotten to yet! Please keep us posted!
Thanks for sharing your story. It makes me feel like there’s a smidge of hope that we could move sometime soon too! 🙂
will is one of the cutest babies i’ve ever seen. what a doll!
Wow… $150 k for a house on that size land, and a stunning one at that…. We got a total bargain with our home, in Western Sydney Australia. 600sqm block, 3 bedroom brick veneer single level …..for $389,000. Although we have since had our house revalued (2 years later) and have been told we would easily get $420,000 in the current market. Yikes!!!
Hmm I wonder how hard it would be to buy an investment property in America…….
Anyway, so long as you got your happy ending and your forever home!
Now I’m insanely jealous! We paid $240,000 for a small townhome that has needed $40,000 worth of work (and counting) in the Northern Va area. I need to convince my family to move to Georgia 🙂
And I’m moving to the South, because not here in NY…
So glad everything worked out for you!
Gosh Katie! I feel for your situation here – we are getting ready to list our little crib on the market at a loss and it’s like loosing a friend. I think I knew we’d be down some cash from when we purchased in2008 but I had no idea that they could expect us to show up to closing and PAY to sell our house. We are faced with listing and saving for a while to afford selling and possibly renting for less then the mortgage – it’s all rather adult and scary.
So glad y’all have found a situation and a family that can make the most of this crappy market. Congrats again on your new house – can’t wait to see what changes you make!
Hi Katie, Did you offer the lease to purchase option? Currently we are renting a townhouse that the owners are trying to sell. We are not currently in a place to buy right away but this seems like a possibility. How would we initiate this option?
Congratulations again on the new house, and thanks for being so open and educating us all on the nitty-gritty details. If you’re ever looking for another “diversion,” I’m sure I’m not the only one who’d be interested in a post full of tips on how you guys save money and budget (general tips — I’m not asking you to share personal financial info). I’ve been reading through your archives and saw a few references in the early posts to you guys saving $30k in one year — wow! I could definitely use any tips you could share, since DH just totaled the car and we will have a car payment two years sooner than we had planned (he’s fine, I know that’s the most important thing, but the $ aspect just makes me want to cry).
We did offer the lease/purchase option when we put it on the rental market. BUT I think that if you asked your current townhouse owners if they were willing to lease/purchase then you could have the paperwork drawn up. The only thing is…when the owners do a lease/purchase, it does make it harder to qualify for other loans….so if they were planning on moving or whatnot, they could be stuck. Does that make any sense?
xo – kb
That’s a bargain! Even in this depressed market, you’d pay that for a 2 bedroom condo where I live!
Um, yeah. I’m moving to the south! I live in Canada’s biggest city and a house within an hour’s drive will be $300K +! In the city, for a fixer-upper that is MUCH smaller than your place it will be $500 +, you can’t even get a 1BR condo for sub $250K. Gah, I need to live somewhere else.
My thoughts exactly! A house like that would easily go for 500,000 in my neighborhood (also NY). Wow!
Thank you for sharing. Those are some amazing prices. I guess it just goes to show that you better make sure you love a house enough to be there forever in this market! There is just no guarantee that you will ever get your money back. I know you will love your new place, congrats on making it all work out!
Wow, I can’t believe you bought that house for that “little” and that it “only” cost $20k for all the upgrades you made!! It would easily cost $500k up here in suburban Boston. Craziness.
If you want some free goodies for your new house, stop by my blog to enter my giveaway for a $50 shopping spree at Joss & Main!
Hurray for Southern home prices. ;p I just bought my first house last August: ~1900 sq ft brick craftsman home, w/ a 2 car detached garage on 150×200 ft lot for $159k. We have very few foreclosures here, so that’s just a normal buy. And it’s slap in the middle of the city, so I’m near everything (10 minutes from work) but in a quiet older neighborhood. And I’m looooving fixing up a few things around the house and making it my own. Even contemplated a little bloggin’ about it, but I’m oh so lazy. ;p
Once the move is complete, you’re going to be so busy fixing things up and getting settled in the new home that you’ll be distracted from missing the old place and making tons of new memories in no time! Enjoy it!
For all of the commenters lusting after low housing prices, that is NOT standard if you live in an intown neighborhood of Atlanta. Katie’s house(s) are way out in the suburbs. Our tiny 2/1 was well over 300k in a walkable community 5 miles from downtown.
It’s all about priorities and what a high quality of life means to you. Give me a non-existent commute and a sustainable community any day of the week over a McMansion in the boonies where resale is abysmal. But it’s a personal choice.
You would pay that for a shed where we live!
The whole house thing is emotionally and mentally exhausting! My husband and I are trying to buy our first. Glad you and your family survived!
LOL! “We’re going to be in a pie!”
Wow. That seems a little harsh.
Quality of life can be looked at in different ways, I guess. Land, beautiful nature, beautiful home with tons of room to entertain and pamper your friends and family, a wonderful home office (talk about a non-existent commute!)… Those things sure speak “high quality of life” to this girl!
As always I really appreciate your openness & honesty KB! 🙂
I live in Indianapolis and our housing market is very similarly priced. It’s nice to know that there are other areas that are similar. I’m not sold on Indy as our forever home city. Thanks Katie! Love to check your blog daily.
We are currently in a similar situation – except we haven’t bought a new house yet. We are currently trying to sell our house in central MS and would just like to break even. We’ve had several showings, but so far it’s always something – buyers bought a house two or three streets away that was more expensive, it was too big, it was over their budget but they wanted to look anyway, etc, etc….hopefully we will get a bite soon! Currently my husband is living in North MS during the week (thankfully he has a friend with a guest house and our parents live within 30 mins) and the baby and I are holding down the fort here all by our lonesome :). If it doesn’t sell soon, we are going to have to rent it or maybe we can fund a lease/purchase candidate. I know we’ll make up most of the money we’ll “lose” on this house when we buy a new one and by not spending crazy gas amounts on my husband commuting home for the weekend.
Hi Katie,
I must have missed it…but why did you have to sell your house and get a new one again? The old one was beautiful, but the new one is beautiful too… just wondering if there was a reason you couldn’t wait move out until the housing market went back up. 🙂
Hi Michelle,
We chose to sell because of several reasons….the first being that we found the Dream House and it was a foreclosure that we knew wouldn’t last long at the listed price. So that gave us an immediate additional mortgage. We obviously can’t afford to carry both the new and the old monthly payments….and we decided that waiting doesn’t necessarily mean that we would ‘make money’ on the old house. Does this make any sense?
xo – kb
Oh boy, do I know this story. We were at least a foundation into building our new place when the old one sold, and that was a risk. I almost got away with selling it for $7k more than I bought it for, but just like you the appraisals from foreclosure homes brought the market down to a point that willing buyers could not get a loan for the house at that amount.
So I ended up selling it for just under what I bought it for (the $20k in updates being ignored, of course) and I personally loaned the buyers $8k so that their loan would come in under the appraisal amount.
The bright spot was that it was a “for sale by owner” transaction so I knew the buyers (a completely awesome couple) from the very beginning, and that’s the reason why when things went south with the bank we were able to work things out together. I’m happy to report a year after the sale, my personal loan has been paid back in full.
I completely agree that knowing the perfect couple is in that house I loved is well worth the price of selling it for a little less than I bought it for.
I’m glad everything worked out for you guys too!
yes, completely. I am so happy for you and your family that you got your dream house for such a great price! 🙂 Can’t wait to see what you do with it 🙂
Hey Katie! How has this lease-to-own deal worked out for you and the hubs so far? I’m thinking of venturing into it for my own house, but I’m curious what it’s like for you guys as first-time landlords. And did you do any research on the lease-to-own process that you could share (links?)? Much appreciated!
We don’t have any links but we did have a great real estate agent who had lots of experience in how to write the agreements and also gave us advice on selecting leasers 🙂
xo – kb