It has been awhile since we first found out about the foreclosure. Since our last update we've been looking at houses and doing some research. I thought about going ahead and getting a real estate license for a little while there. Our goal simply put:
rent >= mortgage interest payment + property taxes + homeowners insurance + error
It has been getting pretty close to balancing out, but not unsurprisingly, anything approaching that equation is getting multiple offers. We just looked at a house that has 12 offers already and it has only been on the market for a week. I suspect it is the same dozen people bidding on the few cheapest foreclosures while many others are ignored. We looked at another house this morning that was listing higher but had zero offers and was just as nice.
Notice to Quit
We've been put on notice so we're now officially squatters.
NOTICE IS HEREBY GIVEN that ... (ii) within sixty (60) days after service on you of this Notice in the event you are a tenant or subtenant of the property, and not one of the owners of the property, you are required to quit and deliver up possession of the premises...
We believe the sale happened around July 14, so we actually got a little extra time. Our property manager is returning our security deposit and rent as of the date of the sale. The bank is offering "cash-for-keys" meaning that if we leave in 3 weeks they'll give us a check toward moving expenses.
The silly thing is that
rent > cash for keysIt would cost us more to rent a place for a month than what they are offering us to move out a month earlier. We probably won't wait until the last minute to get out since we want to be settled before the fall semester begins anyway (and I don't necessarily want to meet the local sheriff).
Missed the Mortgage Rate Minimum
Rates have been going up. A recent New York Times article points out rates have hit their five year high. At first I thought this was a missed opportunity for us, but maybe it isn't so bad. The rate increase makes the monthly payment jump $194/mo.
$300,000 @ 5.70 = $1741/mo
$300,000 @ 6.70 = $1935/mo
$270,000 @ 6.70 = $1742/mo
If we assume that the rate increases pushes other buyers out of that price range then the asking price of the house should go down too. The $1741/mo mortgage at current rate translates to a $270,000 home rather than $300,000.
Since we're the saving and pay down debt type, the lower house price is actually a better deal for us.
$270,000 @ 6.70 => $1942/mo = 23 years
$300,000 @ 5.70 => $1942/mo = 24 years
It will just be a question of whether prices will actually dip that much in our timeframe. The housing package passed this week should also help us out:
"The bill includes $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time home buyers who purchase between April 9, 2008, and July 1, 2009"
The traditional home buying season will be wrapping up soon so there are a number of indicators pushing us in the direction of closing a deal soon. We have a couple informal offers out there now so we'll have to see what happens.
3 comments:
Good luck with all of it, guys.
Just in case it hasn't worked into your calculations yet, don't forget about monthly taxes escrow. It's always misleading when you see monthly mortgage payments advertised at $1900, then when you actually start looiking at things it turns out to be $2300 a month with the tax escrow.
-carl
On the other hand, you can subtract the equity you add to the house each month in your equation. Sure, it might cost you more cash, but it's like enforced savings. If you've got a rental at 2k, and all your home costs are 2200, but you're paying off 300 in equity, you're in ok shape.
California has proposition 13 which locks the tax rate at the purchase price of the house. With the addition of Mello-Roos for new neighborhoods, it comes out to between 1.35 - 1.5% of the purchase price each year.
Post a Comment