moving from house to condo - options?

[cranberry]

I live in a house that I inherited and own outright. However, it's really too big for me and the upkeep is too much. I would like to move into something smaller and a condo in the same town seems like a good fit.

I have enough in savings to make a 20% down payment, so that's not an issue. I have no debt and my credit score is around 850.

However, I've only worked part time for the last five years. Two of those years involved taking care of an elderly relative. The last three have involved repairing and cleaning out this house, getting it ready to sell.

Also, I'm a self-employed writer, so my income levels go up and down.

I suspect I'm not a stellar candidate for a loan with this income history, but I'm wondering if I have any options at all. In a perfect world, I would sell this house and then use the proceeds to buy the condo outright. Or, I would stay with friends after the house sale, until I found a condo. ( I have a cat, however, so that plan wouldn't really work.)

I would love to get a short-term loan to buy the condo and pay it off when the house sells, but am not sure if that's possible.

Do I have any options? Or is the best course of action to stay in this house for a few more years while I build my business back to full time and have a more reliable income?

I just feel like I have the money for the condo in the house, but I can't get to it.

Thank you!

[Savoir Faire-Demogague in NJ]

How much is the home worth? What would it sell for?

[cranberry]

I think it would sell for $150k to $175k. It was worth about $200k at the beginning of 2008, but simliar homes in the area have been selling for the 150-175 range. However, I've done a lot of improvements, so that could help.

I haven't had a realtor here yet to figure that out.

The condos I'm interested in are between $100k and $150k.

[jospaced]

I did the same thing...moved from a large house into a condo in the same town. What I did was make an offer on the condo with a "Hubbard" clause (I think that's right; I'm sure someone here has more knowledge on this that I). What that did was say I was making an offer contingent upon the sale of my home.

[Savoir Faire-Demogague in NJ]

You can sell the joint, keep in mind the real estate sales commissions and other expenses you will incur as a seller. You could be looking at around $12,000 give or take, depending on where you live.
You can, conceivably pay cash for the condo. I'd move all my belongings, furniture etc, out and put in storage, sell the house then buy the condo.

[8 Bit WWBG]

Is the only problem with the house really that it is too big for you? I would stay put a few more months or a year and build my business back up. Unless the house is about to hit a milestone and need some expensive repairs, and that would then affect your selling price.

You'd also need to look at your overall picture. Utilities on a cavernous house can be several hundred more/mo than on a 2br condo. Plus, the need to keep the place clean and all that could be eating up your time. What would the condo fees and taxes be in the new place compared to now?

[Deleted]

The best situation would be to put your house up for sale but contingent upon you finding suitable housing.

[Gardening Grandma]

Is there any reason you don't want to put the house on the market now? What's the housing market like where you live?

[cranberry]

I would love to put the house on the market now if I knew I had a place to go after it sells. I have a cat, so that makes staying with friends temporarily less of an option.

I'm curious about the contingency clauses. Is it common to make an offer on a new place with the condition that my house has to sell first? I would think that a buyer without that condition would be more attractive. But maybe if a condo has been on the market for a long time, it could work.

There's nothing forcing me out of the house, however, I'm just paying for property taxes and upkeep. But I grew up in this house and feel like it's time to move on.

That said, and thinking out loud here, what I perceive as headaches (upkeep, etc. - which I now hire out for because I have a herniated disk) could just translate into headaches with condo associations if I move.

Hmmm..

[cranberry]

Then again, I do want to move into a place that feels like it's "mine" in an area and with a layout that I choose, not where my relatives chose back in the 1950s.

[jospaced]

The way I understood it, if a buyer came along who did not have any contingency, I had the option to buy immediately or drop out of the running. I chose to buy immediately (the real estate market was different then and condos in my complex sold with six to seven offers made). My parents loaned me the minimum I needed to buy, and I paid two mortgages for awhile.
In this market though, I'm thinking things are different now, and there isn't a glut of buyers, so that contingency might work better.

[Deleted]

" Is it common to make an offer on a new place with the condition that my house has to sell first? I would think that a buyer without that condition would be more attractive. But maybe if a condo has been on the market for a long time, it could work."

You understand the issues. You'll be a less desirable buyer. Don't be surprised if you're told to come back when your house is under contract. Alternatively they may accept the offer but continue to market with a 72 hour "kick-out" clause, meaning if they receive another acceptable offer they give you 72 (or 48) hours to either perform or they "kick-out" your offer and proceed with the other.

Doing the reverse however puts you in the driver's seat. Obviously you'll need to do your homework BEFORE you put your place on the market. Are there a couple of complexes you are interested in? Alternatively is there an apartment complex that you would be willing to move to until you found a suitable condo?

[cranberry]

Yes, there are a couple of complexes that interest me. I've also considered selling the house first and renting an apartment until I found a condo. In fact, that would work out very well.

But I'm very concerned that, again, this spotty income issue will make me a less attractive renter as well. I'm very afraid of having nowhere for my cat and me to go after a home sale.

The thing is - if I sell my house and have the proceeds in the bank, I should be more then able to pay my rent for awhile. And if I'm working full time by then, I should have no trouble at all.

But I talked to a few landlords who thought it would be very difficult for me to rent, even if I did have money in the bank. And my offering to pay, say, 6 months of rent in advance, didn't make me look any better.

[Deleted]

Have you talked to a few LLs in your area or just with us here?

BTW How old are you?

ETA: I see from your profile you are 43. That's a little young to be "retired" and you may effectively be for some time given that you've only had part time income over the last 5 years.

That said I think a bigger complex would not have a problem giving you a 6 month lease with $200k in the bank and 850 credit score. What's the likely amount of rent you'll be paying?

You will have a difficult time getting a conventional loan e.g. best rate, 80% LTV but that doesn't mean you can't get ANY loan. Try your existing bank and then a credit union. You should be able to get a loan for $50k with 50% down.

[cranberry]

I've talked to friends who are landlords and they said they would rent to someone in my situation. But they know me.

I've talked to landlords here and it didn't sound so promising.

I talked to the management of an apartment complex that interests me, but they require a 30% rent to income ratio, which, because my income fluctuates, I would not be able to prove. I did just send a message asking about the fact that I'd have considerable savings after the house sells - and I do have money in the bank now. I don't forsee any problems with my paying rent from savings if I need to. But since I expect to work full time soon, I don't expect to need to.

I am 43 years old.

Thanks!

[jitterbug]

Why don't you find a realtor that you like and trust and start talking to them about selling your house and buying a condo. They can tell you your options. Start investigating what condo(s) you like - and yes, make a contingency offer. I think that's quite common.

One caveat, though. Investigate the home owners association! How does it work? Who runs it? Who plans for the future? My mom lived in an 8 condo unit for 20 years and it was well run in the early years. The financial person understood the need to collect extra to pay for major repairs down the road, such as a new roof. Fast forward, though - and nobody wanted to be the president, so it somehow fell to my 80 year old mother - who can't manage her own money! - to be the president. So when they needed a new roof, each condo owner had to fork over $1,000. There was no planning ahead.

I, personally, would be interested in a condo as I get older - but now know my eyes need to be wide open as to how it's run.

[Tiny]

Why not talk to some of your local banks/savings & loans/credit unions about getting a loan for the condo. A smaller local financial institution may be just what you need to get a loan. You can check the 'health' of your local financial institutions at bankrate dot com. The big name banks may not be easy to deal with in your situation. There's nothing wrong with borrowing money locally.

[Deleted]

Also, with a large down payment you could be an ideal candidate for seller financing. Some retirees would love to have a $50k 5% "cd" for 10 years.

[phil5185]

I would buy the condo first, no strings, no contingencies. (I don't like to have forced schedule dates - move by X, sell by Y, yada.) And I avoid the hassles of moving to a rental, moving again to a new house, storage, living with friend.

IMO, you will qualify for a 20% Down, 30 yr mortgage. Your score and your net worth (the paid-for house) will qualify you. Get the 30-yr loan, that way your payments will be low and won't be a burden during the transition.

After you move, list the house for sale - but list it at the 2011 price so that it moves in a few weeks. Many sellers are underwater on their loans so they continue to ask for the 2006 price, that is why houses stay on the market for many months. You have no such constraint, you can sell at the 2011 price and complete the sale quickly. It is often worthwhile to sell at $5000 or $10,000 under the market and sell quickly, as opposed to asking the higher price and then spending the $54000 or $10,000 to maintain the house for an extra year.

And then, when you are settled, you have the option to either pay-off the mortgage or keep your 'house cash' in the bank and use the account to pay the monthly payments if you like. Or pay off half of the loan, whatever you choose.

[Gardening Grandma]

I think jitterbug's advice about talking to a local realtor (get recommendations from friends and interview several), explain your situation and what you'd like to do.

Contingencies are pretty common. If you find a condo you really like, you can make an offer on it contingent to selling your house..... They don't HAVE to accept your offer, but unless they have buyers beating their doors down, they probably will. The contingency can have a time limit on it -the realtor can explain your options.

It would not hurt to talk to a bank or credit union abput getting pre-approved, but, personally, I would not buy one place until I had a buyer for the house. People Have gotten themselves into financial trouble when things didn't work according to plan and they had to make two mortgage payments. If you have enough cash liquidity, that's fine.

[cronewitch]

I would list the house now and when you get a buyer they will probably need 30-60 days to get financing and inspections then ask for 2 weeks from closing to get moved out.

If worse came to worse and you were then homeless with 150K in the bank you can stay in a motel with stuff in storage, maybe in a friend's basement.

I don't like the concept of condo so if I was in that position I might consider a small house or even a mobile home on a bit of land. A house doesn't need to be a lot of work if you plan ahead. My grandmother had her house until she was 96 but a boy mowed the lawn, the flower beds were then lawn and she never changed anything. My mom's aunt and cousin owned a house with no grass at all. The front was all driveway and sidewalk with a small raised brick flower planter. The back was patio all the way to maybe some beauty bark, it was new construction with a tiny yard and a small house.

[Tiny]

Is there a tax involved with selling the house and then buying another place to live - like capital gains or something? For some reason my brain spit up "Starker Exchange" when I read the OP... I don't know enough about it to really comment...

[cranberry]

Thanks, everyone.

I just heard back from 2 apartment complexes. One said they would need an offer letter from a new job, last year's W-2, or 3 weeks of regular pay stubs. So I think that one would be out, but that's okay. The other said they didn't forsee too many problems but they would need to see my bank statement to prove the savings and run my credit report. They also invited me to come take a look at their complex. Could be good to just look and get some ideas about renting. It wouldn't have to be forever. However, I'd be taking a chance that they'd have a place available when I sell the house. Unless I move to an apartment first and then get aggressive about selling the house (thinking out loud).

I'm going to my bank this afternoon to talk about any available options. I'm not expecting much, but it doesn't hurt to ask. It's a local branch and the manager has known me for years. She also knew my mother. Not well, but we're not strangers.

BTW, I need to clarify: I could make a 20% down payment out of current savings, not 50%.

[Deleted]

"Is there a tax involved with selling the house and then buying another place to live - like capital gains or something? For some reason my brain spit up "Starker Exchange" when I read the OP... I don't know enough about it to really comment... "

Shouldn't be unless the house wildly appreciated since the OP's mom's death. There are exceptions of course e.g. if the house passed to the OP via a by pass trust or was part of a 1031 (Starker) exchange. Given the dollars involved I seriously doubt it.

[Deleted]

" I could make a 20% down payment out of current savings, not 50%"

I agree with GG's concerns about buying before selling your old place. Phil and I could afford a 10% or 20% mistake on the estimate of the property being sold. I'm not sure the OP could.

[Clever Username]

Much of this depends on your specific market.
If it's a slow market, your sellers will be happy to offer you a sales contingency. Why? Becuase they're not getting any other offers.
Some close friends bought this way. They stalled for 4 months with no one to buy their home. The seller told them "paint or get off the ladder" and they went through with the sale despite their past home not selling yet.

Be wary about getting into another fixer upper.
Hindsight being 20/20, I bet you wish you sold your home as-is and saved your effort as well as cash.

[cranberry]

May 24, 2011 12:38:42 GMT -5 Clever Username said:

Be wary about getting into another fixer upper.
Hindsight being 20/20, I bet you wish you sold your home as-is and saved your effort as well as cash.

Yes! But that's neither here nor there now.

I just returned from the bank. They were trying to figure out a way to give me a home equity line of credit and work everything out that way, but she said the numbers were still tight and that it would be pretty iffy that I'd be approved. The manager is going to have their mortgage specialist call me to see if there's anything else that's possible.

Otherwise, looks like my options are to wait and earn more money. Or sell, move into an apartment for awhile, then buy a condo.

Assuming someone would rent to me.

Arrgh.

[cranberry]

I want to say thanks for all the help I've received here. This is a great sounding board!

I've been doing more research and it seems that it's very tough for self-employed folks to get loans, even when they are working full time. So perhaps my best bet is going the apartment route for a year or two.

I'm still concerned about someone renting to me, even if I could prove that I have more than adequate funds in the bank. But if I found an apartment I like now, and someone would be willing to rent it to me, would it be silly to move now and secure it and then sell the house? I have enough in savings to cover rent and utilities on a new place and the utilities and upkeep at my house for awhile...at least a year. I could price the house to sell and be free of it.

As I type this out, it sounds too risky....but is there any way it would make sense?

[azphx1972]

Why not put the house on the market and worry about moving when you actually get an offer? And when you do receive an offer, go make an offer on a condo that you like with the contingency to sell your house clause. I don't see the point of moving twice. It increases your expenses, and I don't see any financial wisdom in spending money to rent a place when you have a perfectly good place to live already.

[cranberry]

Yes, you are right. My thoughts are all over the place and I feel very silly now.

I think I just need to talk to a realtor as my next step.