Are we in trouble?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
delamer
Posts: 6460
Joined: Tue Feb 08, 2011 6:13 pm

Re: Are we in trouble?

Post by delamer » Wed Nov 07, 2018 10:22 am

welldone wrote:
Wed Nov 07, 2018 9:53 am
We've sold a couple homes in the Chicagoland area, both within 10 days of listing. One sold for 98% of list price, one sold for full list price. Neither of these homes were sold during hot sellers market. We listed one in October (not a great time to be selling) and the other was listed in February while the housing market was still quite weak. Some information we were given by our realtor when we were selling:

You need to know how to price your house to sell in Chicago and also, if you need to lower your list price, how to reduce your list price effectively. So many people drop their list price without realizing they aren't bring new eyes to their listing because their drops aren't big enough. Multiple price drops that aren't effective work against you selling your house quickly and for the best price you can get.

If you are selling a house for under $400k you can drop list price by $10k increments. People searching for houses under $400k in the area search listings in increments of $10k. There are many buyers at the lower end who increase their search price by $10k increments as they see what their money can (and can't buy).

At $400k - $600k, you need to drop list price by $25k each price drop or you aren't bringing new eyes. If you are listed at $550k, no one new is going to see your listing if you drop it down to $539k.

Between $600k - $800K, you need to drop list price by $50k to bring new eyes at each price drop.

This is why pricing your house is such an important factor, the more expensive a house is, the bigger the price drop needs to be to attract new eyes to a listing. Pricing the house correctly the first time helps to not have to make those big drops after the house has sat for a while. Little price drops don't work for a couple of reasons...you don't get new eyes and you also show that you are emotionally attached to the house price and opposed to understanding that it is overpriced. That can indicate to potential buyers that you might be a difficult seller, and also cause them to wonder what is wrong with the house.

In our current neighborhood (beautiful lots with mature landscaping, excellent schools, close to public transportation, strong hospitals, shopping, parks, etc) there are several houses that have lingered on the market for months. We have a couple that have been on the market for over a year. They are beautiful, custom homes that show well. Which the owners have priced too high. In the current climate (increasing property taxes, rising mortgage rates, reduced tax deductibility) - there just aren't a lot of people looking to buy houses in the $500 - $800k price range in our area.
Interesting comments regarding price drops.

I live in an area with lots of houses in the $800,000 to $1.25 million range.

And it is common to see a price reduction of $20,000 once a house has been on the market for awhile.

And my reaction always is “Who cares?” On a $800,000 house, that is less than a 3% drop.

I assume the realtor recommended a decrease and the owners don’t want to do it, and the $20,000 is the (ineffective) compromise.

an_asker
Posts: 2210
Joined: Thu Jun 27, 2013 2:15 pm

Re: Are we in trouble?

Post by an_asker » Wed Nov 07, 2018 10:52 am

3funder wrote:
Mon Nov 05, 2018 4:04 pm
greg24 wrote:
Mon Nov 05, 2018 3:29 pm
You have made some sub-optimal decisions.

But your 370k annual income and 900k savings means you are far from "in trouble".
+1
I disagree! Unless that income jumped from near 0 to 370k relatively shortly, I don't understand how you (OP) have saved only 900k at age 47. Well, I do understand actually - it means that you've been spending most of what you've been earning. That does not bode well if you have only 900k saved.

But - on the bright side - you have a great income. If you maintain that income and cut back on your expenses, you should be very well placed in a decade.

That said, I don't think that for that income-savings-age combination, you are not in great shape.

michaeljc70
Posts: 3932
Joined: Thu Oct 15, 2015 3:53 pm

Re: Are we in trouble?

Post by michaeljc70 » Wed Nov 07, 2018 11:07 am

an_asker wrote:
Wed Nov 07, 2018 10:52 am
3funder wrote:
Mon Nov 05, 2018 4:04 pm
greg24 wrote:
Mon Nov 05, 2018 3:29 pm
You have made some sub-optimal decisions.

But your 370k annual income and 900k savings means you are far from "in trouble".
+1
I disagree! Unless that income jumped from near 0 to 370k relatively shortly, I don't understand how you (OP) have saved only 900k at age 47. Well, I do understand actually - it means that you've been spending most of what you've been earning. That does not bode well if you have only 900k saved.

But - on the bright side - you have a great income. If you maintain that income and cut back on your expenses, you should be very well placed in a decade.

That said, I don't think that for that income-savings-age combination, you are not in great shape.
That was my thought as well on a post I made above. There are other explanations though. The spouse makes $220k and maybe took off to care for the kids or maybe their incomes recently went up a lot. Regardless, NW is definitely something I would factor into a large home purchase.

As a side note, building a house can be risky with regard to the housing market. Most people before 2008 (and not in CA or FL) didn't think about it because prices always were going up. What if in Sept of 2019 the $1.2M house is only worth $1M? They lost $200k before even moving in.

an_asker
Posts: 2210
Joined: Thu Jun 27, 2013 2:15 pm

Re: Are we in trouble?

Post by an_asker » Wed Nov 07, 2018 11:18 am

michaeljc70 wrote:
Wed Nov 07, 2018 11:07 am
[...]
That was my thought as well on a post I made above. There are other explanations though. The spouse makes $220k and maybe took off to care for the kids or maybe their incomes recently went up a lot. Regardless, NW is definitely something I would factor into a large home purchase.

As a side note, building a house can be risky with regard to the housing market. Most people before 2008 (and not in CA or FL) didn't think about it because prices always were going up. What if in Sept of 2019 the $1.2M house is only worth $1M? They lost $200k before even moving in.
Sorry I just jumped on the thread and didn't really read all the responses! :oops:

But yes, I am with you on all of those points. But OP cannot go back and undo decisions already made. Only try to make up for those going forward!

alfaspider
Posts: 1631
Joined: Wed Sep 09, 2015 4:44 pm

Re: Are we in trouble?

Post by alfaspider » Wed Nov 07, 2018 12:08 pm

We live in Texas with a higher income than that, and I can't fathom paying $1.2M for a house. Not because we couldn't afford it per-se, but because I don't see the value in living such an expensive house when a more reasonably priced one still gives you a very nice house in a good neighborhood. I also hate the idea of needing two incomes to pay the mortgage. The chance of one of two spouses losing a job is much higher than a single person losing a job, especially when one spouse works for a start-up. There's no guarantee similar employment could be found- especially if the job loss occurs during a recession.

I'd echo another poster and think about testing the waters on selling the new-build house as well as the Chicago house. That gives you the ability to re-evaluate and perhaps go with something that isn't causing financial stress. You aren't in immediate trouble, but you have certainly significantly increased your risk of getting into it.

vested1
Posts: 1616
Joined: Wed Jan 04, 2012 4:20 pm

Re: Are we in trouble?

Post by vested1 » Wed Nov 07, 2018 4:42 pm

TimeRunner wrote:
Tue Nov 06, 2018 8:19 pm
vested1 wrote:
Tue Nov 06, 2018 6:12 pm
Property taxes $652 a year. Gotta love that prop 13....
Just to be clear, that prop tax is what the current owner paid. The new owners will pay around 1.2% of the new assessed value. Prop 13 also allows a 2% increase/year for inflation, etc, and new bonds and other local taxes can also be added on with few restrictions. No free ride in California. :wink:
Still pretty good. :wink: The $652 was my MIL's carryover property tax basis that she transferred twice when she sold and bought the next home, which is also allowed for seniors over a certain age. In fact, if she would have moved in with us, as we offered, her property tax base could have been transferred to our house.

Our home which we bought in 1994 for 185k is appraised for around 650k now, and we pay around $2,700 a year property taxes currently. If/when we sell we will be moving out of State because we won't be able to afford a similar house here without a mortgage and huge property tax increases. The property tax bite for the new owner of my MIL's condo went into his decision to buy. This condo will go from having a property tax liability of $652 in 2018 to one of $6,273 in 2019.

For long term owners, it's pretty close to a free ride.

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TimeRunner
Posts: 1427
Joined: Sat Dec 29, 2012 9:23 pm

Re: Are we in trouble?

Post by TimeRunner » Wed Nov 07, 2018 5:12 pm

vested1 wrote:
Wed Nov 07, 2018 4:42 pm
Still pretty good. :wink: The $652 was my MIL's carryover property tax basis that she transferred twice when she sold and bought the next home, which is also allowed for seniors over a certain age. In fact, if she would have moved in with us, as we offered, her property tax base could have been transferred to our house.
I don't want to derail the thread. Here's the gov link about Calif prop tax transfers for seniors for anyone who wants to dig deeper: http://boe.ca.gov/proptaxes/prop60-90_55over.htm It says "transfer twice" is limited to person forced to do second transfer due to a disability, inter-County transfer is only permitted between 8 counties, and I guess a parent could transfer her prop tax to your house if you are in the same County or one of the 8 named counties and you sell it to her? Interesting subject, but I digress, sorry! (Maybe I'll start a thread as I'd love to know more.)
“Some depart to remain.”

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