House selling costs

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prettybogle
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House selling costs

Post by prettybogle »

We are in a conundrum debating to close the house we signed up for. It is only becoming a tougher decision as the closing date is nearing. We are in a high housing cost area in Tennessee. On the positive side, we really like the house, brand new and it is in a good neighborhood with good schools, low property taxes. But on the negative side, it is 540k - DH income is 130k, i just started working ~70k. We already paid earnest money ~30k, we will more than likely lose this if we back out. One option we are considering is close the house and see how it goes and may be sell if it does not work out. What will be the usual selling costs and other costs that we will take on to sell ?
Last edited by prettybogle on Fri Oct 26, 2018 12:55 pm, edited 1 time in total.
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Bogle7
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Typical house selling costs

Post by Bogle7 »

Figure on 8% for a new house.
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prettybogle
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Re: House selling costs

Post by prettybogle »

Thanks. We are intensely debating to go ahead with the buy or lose the earnest money. This is really stressing us out - our house buying decision has been going on for over a year now and now we are really drained out and really want to end this in some way :oops:. Whichever way we go, we want to stop this house buying from affecting our physical, financial health, careers, kids education. Hopefully we will make the best decision for our family for the long term.
barnaclebob
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Re: House selling costs

Post by barnaclebob »

Once you own the house, your main source of comfort will come from cash flow. What will your budget look like including 401k contributions and how much extra will you have leftover to save.

What is your down payment and total mortgage? You should be able to afford the house with 200k in income.

To sell the house you are looking at 6% to realtors, probably 2% for transfer taxes, and then the costs to move.
Last edited by barnaclebob on Fri Oct 26, 2018 1:19 pm, edited 1 time in total.
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serbeer
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Re: House selling costs

Post by serbeer »

I'd say 9% is about right if selling through agent that takes reasonable comissions (closer to 4% than to 6%).
If selling on your own, you could get to keep 4-5% of that. But most likely, even in this case, you'd still have to pay 2% for buyer agents to bring people to see the place, plus some expense to get listed in MLS, so I'd expect 6-7% at a minimum.

This is based on my current year sell/buy experience in IL (my agent charged only 3.5% paying buyer agent 2% to bring people in -- and keeping only 1.5% for himself because I agreed to do both sale and purchase of the new house with him--and I got check for 91% of sale price after closing).
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Cycle
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Re: House selling costs

Post by Cycle »

I always assume 10%, but I include vacancy (ie money tied up in an unused house) and little inevitable repairs that will be required for the buyers.

This is probably a little high, but intend to assume worst case.

Housing is cooling. You may be able to buy it for 30k less in 1 month.... Seriously, I'm seeing prices go down in my midwest market and it's not just the usual fall discount. If I weren't in love with the property, I'd consider eating that earnest money or talking with a lawyer to see if they can get u out of the deal.
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bloom2708
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Re: House selling costs

Post by bloom2708 »

You are just having "buyers remorse"?

$30k in earnest money is 5.5% of the purchase price. That seems steep, but I also don't think you want to walk away from $30k.

If you did number crunching before (hopefully), nothing has changed except some wobbling in the markets. $540k house on $200k income is within reasonable.

Tighten the belt for a bit, don't do crazy upgrades until you've lived in the house for 6 months to a year. Even if you "don't like the floors" or "always wanted granite countertops and stainless steel", just get used to your new budget. With a new home, you shouldn't have any upgrades to do and most things have a 1 year warranty.

Stay the course, if it is just too much after a year, then you can make choices. Being tight usually works out, forced savings.
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sjt
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Re: House selling costs

Post by sjt »

prettybogle wrote: Fri Oct 26, 2018 12:53 pm ... One option we are considering is close the house and see how it goes and may be sell if it does not work out. What will be the usual selling costs and other costs that we will take on to sell ?
Why the sudden jitters? Are you nervous because you're signing up for a long term loan? Has your situation changed in the sense that you no longer want to buy a house? If you back out, will you rent or look for a lower cost house?

Honestly, I've bought 3 homes (sold 2) and it's incredibly stressful each time. Seems that your home value is at 2.7x your gross income, less earnest money is about 2.5x your annual income which is reasonable....
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale
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prettybogle
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Re: House selling costs

Post by prettybogle »

barnaclebob wrote: Fri Oct 26, 2018 1:16 pm Once you own the house, your main source of comfort will come from cash flow. What will your budget look like including 401k contributions and how much extra will you have leftover to save.

What is your down payment and total mortgage? You should be able to afford the house with 200k in income.

To sell the house you are looking at 6% to realtors, probably 2% for transfer taxes, and then the costs to move.
Assuming 2 incomes, we will be saving 5k per month. Down payment is 20% about 100k. Total mortgage is 450k. We enjoyed debt free living in apartment although at the expense of not living in our own house. The thought of taking on this mortgage is scaring us and tempting us into just keep renting. But then the question is for how long ? Is it that we are one of those who can buy house only if all cash and no mortgage ? Ton of what if scenarios are scaring us before we take this leap into taking on mortgage
barnaclebob
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Re: House selling costs

Post by barnaclebob »

prettybogle wrote: Fri Oct 26, 2018 1:48 pm
barnaclebob wrote: Fri Oct 26, 2018 1:16 pm Once you own the house, your main source of comfort will come from cash flow. What will your budget look like including 401k contributions and how much extra will you have leftover to save.

What is your down payment and total mortgage? You should be able to afford the house with 200k in income.

To sell the house you are looking at 6% to realtors, probably 2% for transfer taxes, and then the costs to move.
Assuming 2 incomes, we will be saving 5k per month. Down payment is 20% about 100k. Total mortgage is 450k. We enjoyed debt free living in apartment although at the expense of not living in our own house. The thought of taking on this mortgage is scaring us and tempting us into just keep renting. But then the question is for how long ? Is it that we are one of those who can buy house only if all cash and no mortgage ? Ton of what if scenarios are scaring us before we take this leap into taking on mortgage
Sounds like you will be fine. What was your rent and what will your PITI be with the house? HOA dues? I certainly wouldn't throw away 30k with those numbers.
ved
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Re: House selling costs

Post by ved »

Looks like you and your husband are getting a "pre-buyer remorse".
A $450k mortgage on a $130k income is reasonable. On a ~$200k income is comfortable.

As long as you have no real issues with the house, location, schools, and other important criteria that you had, I recommend you go ahead with the purchase.

Having a debt is not a bad thing - especially a mortgage type debt. You have the underlying asset (hopefully that is appreciating) against the debt. Plus, the mortgage debt is a nominal debt - in that the monthly payments do not change (unless you refinance later), as you likely will be increasing your incomes.

If any solace, we bought our first house, the mortgage / income ratio was about 3.5 - similar to what you would have if considering only your husband's income.
quantAndHold
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Re: House selling costs

Post by quantAndHold »

The ratio of the size of the loan to your combined income is quite reasonable. On your husband’s income alone, it’s still quite reasonable. If either you or husband lost your job, you could still make the payments without too much trouble until you or he found another job.

Unless there’s something you’re not telling us, I can’t see any problem except your own jitters. Go forth and prosper.
Yes, I’m really that pedantic.
pennylane
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Re: House selling costs

Post by pennylane »

Why would you walk away from 30k? Just close on the house...
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8foot7
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Re: House selling costs

Post by 8foot7 »

You should only walk away if there are deficiencies with the house and if there are, you should be able to get your 30k with some artful discussions.
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prettybogle
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Re: House selling costs

Post by prettybogle »

ved wrote: Fri Oct 26, 2018 2:13 pm Looks like you and your husband are getting a "pre-buyer remorse".
A $450k mortgage on a $130k income is reasonable. On a ~$200k income is comfortable.

As long as you have no real issues with the house, location, schools, and other important criteria that you had, I recommend you go ahead with the purchase.

Having a debt is not a bad thing - especially a mortgage type debt. You have the underlying asset (hopefully that is appreciating) against the debt. Plus, the mortgage debt is a nominal debt - in that the monthly payments do not change (unless you refinance later), as you likely will be increasing your incomes.

If any solace, we bought our first house, the mortgage / income ratio was about 3.5 - similar to what you would have if considering only your husband's income.
What does nominal debt mean ? Does that mean you can ‘give back’ the house to the lender in the event you cannot pay mortgage anymore?
Nearly A Moose
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Re: House selling costs

Post by Nearly A Moose »

prettybogle wrote: Fri Oct 26, 2018 2:39 pm
ved wrote: Fri Oct 26, 2018 2:13 pm Looks like you and your husband are getting a "pre-buyer remorse".
A $450k mortgage on a $130k income is reasonable. On a ~$200k income is comfortable.

As long as you have no real issues with the house, location, schools, and other important criteria that you had, I recommend you go ahead with the purchase.

Having a debt is not a bad thing - especially a mortgage type debt. You have the underlying asset (hopefully that is appreciating) against the debt. Plus, the mortgage debt is a nominal debt - in that the monthly payments do not change (unless you refinance later), as you likely will be increasing your incomes.

If any solace, we bought our first house, the mortgage / income ratio was about 3.5 - similar to what you would have if considering only your husband's income.
What does nominal debt mean ? Does that mean you can ‘give back’ the house to the lender in the event you cannot pay mortgage anymore?
Poster is saying that, assuming you have a fixed rate mortgage, the monthly payment will not increase over time, whereas inflation and hopefully career progression means your income will increase. FWIW, we took on about twice the debt with 1.5-2.0 times the household income. It felt a little tight at first, but after a year or so we quickly became comfortable, partly due to raises and partly due to getting used to the payments. We just moved to get a larger house in a better location, and my only regret is that we didn't stretch a little further the first time to lock in the tra low mortgage rates and to get ahead of the house appreciation that we had to pay for this go around.

It sounds like you're just getting anxious about the process. Having debt isn't a bad thing. Having bad debt is a bad thing. Assuming you like the location, the house, etc. , I'd stick with it. Moving costs would be more than your earnest money, but they're also speculative.
Pardon typos, I'm probably using my fat thumbs on a tiny phone.
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jabberwockOG
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Re: House selling costs

Post by jabberwockOG »

Close on the house. Do not walk away from 30K. $500-600k good sized houses in decent neighborhoods are not going to crash in price.

Just be careful with budget and spending for the next couple of years. Be sure to rebuild your emergency fund to cover 9-12 months of living expenses as your first priority above all other items.

We are likely in a period of historically low interest rates. In 10 years your house payment will likely seem very reasonable compared to average rents ad you will also likely have built up significant equity.
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prettybogle
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Re: House selling costs

Post by prettybogle »

Thanks y’all. We are thinking whats the worst that could happen if we back out - potentially never will be able to buy house ? Rents going higher ? We really have to stick to this location only for schools... after 10 years, we can live anywhere regardless of location.
spitty
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Re: House selling costs

Post by spitty »

Yep you can't back out with $30k signed. Good neighborhood/schools will hold value if you wanna sell in a few years. I always negotiate title insurance by calling several places and playing one vs. others. "I'm buying at $540k what's your insurance cost? Acme wants $1800, can you beat that?" And learn all small fees each place might add for total cost. It's your choice where to close; agents will write title companies on your contract that give them donuts or host happy hours. My experience anyway.
ved
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Re: House selling costs

Post by ved »

prettybogle wrote: Sat Oct 27, 2018 6:56 am Thanks y’all. We are thinking whats the worst that could happen if we back out - potentially never will be able to buy house ? Rents going higher ? We really have to stick to this location only for schools... after 10 years, we can live anywhere regardless of location.
The worst that could happen immediately if you back out from the current purchase is to lose the $30k (which is not chump change for you, btw).
The worst that could happen in the intermediate/ long term is that you repeat this process again and again.

On average, homeowners sell their houses in less than 10 years - so, if you have a reason to be in the location for another 10 years, then it would be more beneficial than not to buy a house, and then sell it when you move.

Buying a house is scary - but it's not a catastrophic event. Most homeowners (I would venture 95% plus) come out even or ahead by buying a house - financially speaking. On an emotional/ comfort level, almost all come out ahead - you have your own yard that the kids could play - update the house as you see fit, etc.
runner23
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Re: House selling costs

Post by runner23 »

All the comments on this thread are very helpful as am going through a similar situation. First time home buying is scary when you skip the starter home! We can do it OP!
Xrayman69
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Re: House selling costs

Post by Xrayman69 »

First and foremost the primary reason an individual should buy a home is to have a place to live for themselves and their family. This is a required cost and thus should have a certain amount of intrinsic value beyond the accounting numbers.

Secondly,regardless of the market a home purchase and mortgage amount should pass the stress test for the individual. They should have a six month or 1 year emergency fund that would be sufficient to cover mortgage should event occcur. Therefore even if the stock market goes into bear territory the income source from a job should always be sufficient to cover the mortgage. Even if you become under water due to real estate readjustments what difference does it make, you pay the mortgage based upon your initial agreement and you still have a place to live.

In summary buy the house if the finances work out not only for the first year but in general. I suspect that the bank or lender has already done the math and believe you ar a reliable credit risk and thus high likelihood that you will be OK.
denovo
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Re: Typical house selling costs

Post by denovo »

Bogle7 wrote: Fri Oct 26, 2018 12:55 pm Figure on 8% for a new house.
No one smart pays 6% commission anymore
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serbeer
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Re: Typical house selling costs

Post by serbeer »

denovo wrote: Fri Nov 02, 2018 9:11 pm
Bogle7 wrote: Fri Oct 26, 2018 12:55 pm Figure on 8% for a new house.
No one smart pays 6% commission anymore
I paid only 3.5% comissions, but my total money spent on transaction were 9%. All the fees--state and local, then prepayment of real estate tax at 105%, etc. It all adds up, in my case in IL to 5+% in addition to agent comissions.
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