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October 1, 2008
Close? Or Walk Away?
Here's what I'm mulling. I promise to think my decision through myself and not rely entirely on this forum. So don't freak out. That said, I'm genuinely interested in Brownstoner opinions.
We signed a contract to buy a brownstone back in June. The sellers have been jerking us around for the last four months, but they're getting ready to actually set a closing date. (There is a longer story, but the short one is that they discovered they can't afford to close so we had to set up a short sale. Which takes time.)
Given the state of the economy right this second, we're having serious second thoughts.
If we want our escrow back we can have it, so we don't loose much by walking away. What we loose is the time it takes to start over.
Inspecting, negotiating, all that.
We'd be dependent on renters to make our mortgage work, which is a strike against going forward in this economy. Or a strike for it, since apparently everyone will have to rent now?
It is a nice place. We're kind of happy with the price. Assuming we can find tenants we can make it work.
So seriously, would you close today or wait for the market to tank?
Comments
You can get your escrow back? Seriously? RUN, do not walk, RUN from this closing.
Unless you got a truly phenomenal deal, that is.
Posted by: lechacal at October 1, 2008 2:26 PM
Well serpentor, I faced a similar choice a few weeks back and chose to move forward. I could not have gotten my escrow back though--why can you? We were very happy with the price of the house we bought and felt like we had benefited fairly substantially from price decreases related to the current downturn so for us it made sense to go forward.
I am wondering about the rental market as well. I will only be renting one floor of my house as I will use another floor as the headquarters for my business (and pay myself rent towards the mortgage). So as long as there are people who want to pay 1500 or so for a floor through garden apt in Clinton Hill I will be fine (does anyone want to rent my garden apt?). IF the rental market completely bombs it will make my situation more difficult but its hard to see it completely tanking.
So, for the sake of being positive, I will say if you like the place, you feel OK about the purchase price, your financing is lined up and you think you are going to stay for a while, you should move forward. On the other hand if you are not losing anything except the time you took to inspect and negotiate, I am sure that the "smarter" move (money wise) would be to wait. For me that consideration did not outweigh my needs and my love for the house so I went forward. Hope it works out for you.
Posted by: wasder at October 1, 2008 2:32 PM
I'm with The Jackal! Get while the getting is good and sit tight for awhile. I just wish I could see the looks on the sellers' faces when you stiff them after they've been jerking you around, especially when they realize they'll have to begin the process anew and likely have to settle for a lower selling price. Either way, whatever you choose, best of luck. Please let us know what happens.
Posted by: Biff Champion at October 1, 2008 2:38 PM
I am surprised to hear that you can get the escrow back. Are you quite sure you see eye-to-eye with the sellers (and their lawyer) on that point?
Posted by: lechacal at October 1, 2008 2:41 PM
There is no question about the escrow.
We had a 30 day contract and we've spent the last three and a half months sending them letters asking for a closing date. It is pretty cut and dry that we're entitled to get out.
Meanwhile, I know for a fact that the roof hasn't gotten any better since we last had it inspected, so if we have to pull some "whoah, this isn't the roof we agreed to buy, you better fix all this new damage" we can.
Posted by: serpentor at October 1, 2008 2:48 PM
PS, we just need 1250 for our one bedroom apts, but we're in Bed Stuy.
Posted by: serpentor at October 1, 2008 2:51 PM
Sounds like these folks have not been negotiating in good faith with you (not fixing things uncovered in inspection etc). In which case I guess I revise my go forward advise. Again, the way I see it a lot depends on how long you plan to be there and how much you like the house.
Posted by: wasder at October 1, 2008 2:53 PM
Wasder, it isn't that they're not negotiating in good faith (not about the roof anyway), but rather that things we were thinking would need fixing immediately upon closing have now had to survive a few very serious storms.
Posted by: serpentor at October 1, 2008 2:55 PM
Why have they been delaying the closing so long?
Posted by: wasder at October 1, 2008 2:57 PM
I would walk. If this economic cycle is a deep and long as predicted, you may very well get caught just as the current owners. BedStuy is the kind of area that is hurt most in a turn-down. Just becasue prices have gone up so much there in the last 3-5 years, it does not mean that they will not fall up to 40%+ in the next few years and it may take 20 years for the prices to reach where they have been recently. Only way I woudl say yo go through with it is if it truly is a steal (which I doubt).
Posted by: BH76 at October 1, 2008 2:58 PM
I would walk. If this economic cycle is a deep and long as predicted, you may very well get caught just as the current owners. BedStuy is the kind of area that is hurt most in a turn-down. Just becasue prices have gone up so much there in the last 3-5 years, it does not mean that they will not fall up to 40%+ in the next few years and it may take 20 years for the prices to reach where they have been recently. Only way I woudl say yo go through with it is if it truly is a steal (which I doubt).
Posted by: BH76 at October 1, 2008 2:58 PM
serpentor, based on what you say, I don't get a good feeling at all about the sellers. If you go through with the purchase, don't be surprised if you find hidden problems you were unaware of and issues they've intentionally covered up.
Posted by: Biff Champion at October 1, 2008 2:58 PM
If you're dependent on the renters to make the mortgage work, then you need to determine what rent you can realistically expect to get in this market. You can always rent an apartment out (assuming it isn't a dungeon) - it's just a matter of what you get for it. So how optimistic - or pessimistic - were your rent projections when you decided to go ahead with the deal? if they were optimistic, that's probably a good reason to back out, because rents really can't go anywhere but down in this market.
I would think the other consideration would be - how much do you love this house? If you're totally in love with it, I would think that would tilt the scales toward going forward. it could take a long, long time before you find another house you can really connect with.
Posted by: geekspice at October 1, 2008 2:59 PM
Run don't walk. . .whatever you were going to pay in June, the place is worth a lot less now.
Not anyone's fault, but times are different.
Wait a while for the financial crisis to sink in and much better deals will come.
Posted by: ontheparkway at October 1, 2008 3:40 PM
The problem with questions like these is that the answer is inside you, not with us. You seem to have an "I can take it or leave it" attitude about the house. That right there makes me think maybe its not a great idea. If you are going to be spending big money for a house, it better be one that you REALLY WANT, especially in this environment. Normally I'm inclined to say if you think they will actually close, then stay the course. But here, you have to decide how much you really want it. Is it "the house I've always wanted," and a great price to boot? If it's not, I say get out and find the one that is. And when you do, buy it and don't worry so much about the price. So many people on this board seem to think of a house as some kind of investment security you could buy or sell on any given day. This is your home and therefore YOUR LIFE -- invest in yourself, its always worth it.
Posted by: slopenick at October 1, 2008 3:40 PM
$1,250 should be easily doable in Bed Stuy if it's a typical 800-850 sq. ft apt that is in decent shape. I rented mine out for $1,200 and know I could have gotten $1,300, maybe $1,400. I have a new kitchen & bath in there though..but hardly any closet space
Posted by: daveinbedstuy at October 1, 2008 3:42 PM
From what I see around me, and we are talking about similar neighborhoods here, the market for nice rental apartments in your price range is still strong. Most of the rentals in 2 or 3 family brownstones around here go to 20 and 30-somethings who are either a couple or share the space with roommates. I don't think you'll have a problem finding renters.
Secondly, as I'm sure you know, finding the right house is time consuming and fraught with emotion. When you love a house, that can be a pull that's hard to resist. If this house is THE house for you at this time and place, I say do what you have to do to get the most for your money (roof etc)in terms of negotiation, but take the plunge.
No one really knows what's going to happen, financially or socially. I disagree with those who think Bed Stuy is going to revert back to the bad old days. This is a different time, different people, different neighborhood. We are all more aware, more active in our community's fate, less complacent.
I also don't think we can time the market. If you pass, you might spend another year looking, you might find something better next week. Who knows? I know too many people who missed out on many good things, including houses, because they tried to second, third, fourth guess the future. It sounds as if you are buying a home, not just an investment. If that's the case, go for it.
Posted by: Montrose Morris at October 1, 2008 3:43 PM
I guess it depends on your motives. If you are annoyed with the sellers, you could certainly screw them over nicely by walking away.
But if you like the house and plan to live in it for quite a long time and feel like you got a good price, then I'd say go forward.
Some anxiety around any event this "big" is normal in any market and its even worse in this economy. But unless you plan on selling in the short term, I don't think it really matters how the market is doing if the price is reasonable.
Posted by: Mrs. Limestone at October 1, 2008 3:48 PM
I don't understand how you can loose your money and time? Lose, I understand.
Posted by: diego at October 1, 2008 3:51 PM
"I don't think it really matters how the market is doing if the price is reasonable."
Mrs. Limestone, the problem is the vast majority of people on this blog seem of the opinion prices are falling and will continue to do so. What is "reasonable" today can quite easily be considered "unreasonable" tomorrow.
Posted by: Biff Champion at October 1, 2008 3:53 PM
"I don't think it really matters how the market is doing if the price is reasonable."
Mrs. Limestone, the problem is the vast majority of people on this blog seem of the opinion prices are falling and will continue to do so. What is "reasonable" today can quite easily be considered "unreasonable" tomorrow.
Posted by: Biff Champion at October 1, 2008 3:53 PM
Serpentor, I can't believe you are still screwing around with these folks (Biff, click on serpentor's link to get the history; your observation is right on, but old news). In fact, I think that may be the second time I wrote words to that effect in response to one of your posts. You must really love the house.
I see both sides here. Lots of reasons to assume prices will come down, so if you are not postponing a sale, you may do better in a few months. But I know lots of people who mistakenly thought the market would tank for a while right after 9-11 and got out. That didn't go so well for them. I really think you decide this one based on your situation - what is it worth to you to close now and get this all over with rather than start all over? that's a function of your time, tolerance, current living situation, finances etc. Those suggesting you bail probably have the right advise from an investmetn standpoint, but buying a home means many things, and investment is but one of them.
If you are truly free to walk and are not obligated to close, and you have found problems in the house, then maybe the right answer is to push for some concessions. They may not have the ability but you certainly have the leverage -- they are not going to sell it for more to someone else. But my hunch is also that you may have found enough problems in both the house and with the sellers to suspect that there are more problems with the house you don't yet know about.
Good luck.
Posted by: slopefarm at October 1, 2008 3:54 PM
Biff - True. But Ive always felt the same about the real estate market and the current situation hasn't changed that. It always seems like a fortune when you buy no matter what the price. I can only give advice on the limited information he provided. Anyone trying to buy at the bottom is just guessing anyway. If you pay what you think is fair today, chances are it will work out in the end if you stay around long enough.
Posted by: Mrs. Limestone at October 1, 2008 4:13 PM
Fair enough, Mrs. Limestone. I agree that if one really loves the place and is looking to live their long term, one shouldn't pass up the opportunity to grab it. In this case, I got the impression serpentor wasn't so sure. That, combined with the sellers' hijinks, makes me think he/she should walk away.
Posted by: Biff Champion at October 1, 2008 4:29 PM
Wasder -- if you think your garden apartment can accommodate me, my husband, my kid and our cat, I might be interested in renting your garden apartment. If you're serious, would you e-mail me at persephone2669 at yahoo dot com?
Thanks.
Posted by: I_haz_TWO_toilets at October 1, 2008 4:31 PM
I haz--I just emailed you.
Posted by: wasder at October 1, 2008 5:04 PM
I haz and wasder, that would be fabulous if this worked out. I haz, I've never met wasder, but he seems like a very kind, good hearted soul based on his many posts I've seen. I bet he would make a great landlord.
Posted by: Biff Champion at October 1, 2008 5:08 PM
Thanks Biff. We will meet on the 16th though, right? I just emailed you too.
Posted by: wasder at October 1, 2008 5:18 PM
wasder, for sure. I'll check my email and reply hopefully tonight. Sounds like a bunch of the Brownstoner addicts are in. I think we should just confirm the time and place on Brownstoner as it gets closer so anyone who wants can show up. I don't want to be exclusionary.
Posted by: Biff Champion at October 1, 2008 5:27 PM
Wasder - $1500 is a low rental price for a garden apartment in Clinton Hill, unless it is very small, or run down, not too nice etc. You can easily get $1700 and up for a one bedroom.
Posted by: 1842 at October 1, 2008 5:29 PM
1842--right on. Thanks. I was trying to make my estimates conservative so that there were no rude surprises.
Posted by: wasder at October 1, 2008 5:46 PM
Biff--I agree. All invited is cool. Thanks for organizing.
Posted by: wasder at October 1, 2008 5:46 PM
Hello new home owner in Bedstuy here = bought back in July. If you are concerned about the rental market - don't worry it is doable. I just rented my 3rd floor apartment recently for $1400 (finished renovations) and my 4th floor about two months ago for $1200. I put the posting on craigslist and had about 4+ responses in less than a day. There will always be a rental market in or near Manhattan and yes I do depend on the rental income to pay my mortgage. Lastly the right renters for your home are looking for a community situation and if the landlord lives in the home, even better. I love living here. Yes times are tough but I am here for the long haul
Posted by: feelyng at October 1, 2008 7:42 PM
Threaten to walk unless they reduce the house price by 15%.
Posted by: justinm at October 1, 2008 8:00 PM
I would Buy the home unless you are looking to sell in the next yr or 2. The rent will make up any loss of value and i believe that loss will be no more than 10 to 15%. Don't listen to these people the Bailout package is coming on Friday and guess what folks it bails out bad mortgages.
Posted by: sebb at October 2, 2008 12:23 AM
Bed Stuy is commanding higher rents than ever. We have rented our (renovated) floor-thrus for $1500 for a few years now. Neighbors are more recently seeing $1600-$1700. Despite the chaos, the retail in Bed Stuy is now strating to catch up to the residential demand of the last few years(see Peaches, Olivino, upcoming wine bar, Butternut, etc.). Im not so sure demand demand wont increase in the better areas of Bed Stuy, at least relative to other communities.
Posted by: housebywe at October 2, 2008 11:32 AM
We're talking about G Train (but on the park) Bed Stuy, not A Train Stuyvesant Heights and Bread Stuy Bed Stuy. So I think we're safer with our $1250 estimates than dreaming of $1700, though that'd be sweet.
And, slopefam, I thought we were taking your advice! Our version of "not screwing around" was to just dig in our heels and say we aren't leaving or letting you out of this contract. That was a lot easier than actually suing them for specific performance. We have been looking for better deals but haven't really come upon any yet.
Posted by: serpentor at October 2, 2008 1:13 PM
Sorry, I did not intend to be dismissive. I really meant to convey my surprise that this has gone on so long. Whether you bail or close depends upon how much you want this house and the position you will be in if you have to start again. One factor is how much financing you need for whatever you buy and what the recent turmoil in the credit market may mean for your ability to borrow for another house down the road. Another issue, which I second with Biff, is whether there is enough reason to think, based on how shady sellers have been plus the problems you have found in the house, that there will be many more problems behind the walls. Will you have enough left over to deal with that? On the other hand, if you love it and aren't planning to move for a while, I would not get too wrapped up in market timing. This is your life, not just an investment.
Posted by: slopefarm at October 2, 2008 1:44 PM
For what it is worth, since you all (some of you anyhow) were such a lovely little support network ... we got our deposit back.
They actually tried to fight us on it, even though they actually have so many liens (okay, one plus the mortgage) on the house that they couldn't have afforded to close even if they wanted to. I still think that the lien (mechanics lien for nearly six figures) is a fiction that was invented to try to squeeze some extra money from someone (us, the bank that is foreclosing on them, a rock -- not sure who), but the lien exists nonetheless.
So we asked for our money back finally, they said "no" and sent us a time is of the essence letter. We sent our own letter, they scheduled a closing but wouldn't return calls from our title insurance company.
And then, this weekend, they just handed us a check.
I have no idea what I just learned, but I am seriously glad it is over and ready to start looking again and hoping for a bit more market tankage.
Posted by: serpentor at November 12, 2008 4:19 PM
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