Front Page Forum: Walk Away from Downpayment?
This post from yesterday on the Forum has already received seven comments but we thought it deserved even wider input. Take a gander: A couple of months ago I entered into a contract on a one bedroom apartment. I put 10% of the $380,000 purchase price down at contact. I am scheduled to close at…
This post from yesterday on the Forum has already received seven comments but we thought it deserved even wider input. Take a gander:
A couple of months ago I entered into a contract on a one bedroom apartment. I put 10% of the $380,000 purchase price down at contact. I am scheduled to close at the end of October. The apartment is great and I can afford the monthly payments (only slightly higher than our current rent). The apartment is priced around or a little lower than comps in the past year. I have been getting cold feet watching the news this past month and have been thinking about walking away and losing my deposit. Is that crazy? Also, is there anyway I could recover even part of the 10% deposit? I’ve already passed the board interview otherwise I would think of talking about my love of piano playing, etc.
Words of wisdom?
Break Contract or Not [Brownstoner Forum]
Photo by Mike Hurren
I have not discussed this as a real possibility with lawyers. I’ve read the contract and I’m pretty certain that there’s no way to avoid losing the deposit, but that is also the limit of what I will lose.
Realistically, I doubt I will walk away. I have a relatively stable job and a decent amount of liquid funds post-purchase. I may lose some money, but so be it.
Parrotgirl– Where are you? Have you spoken to lawyers or anybody else? More comfortable with you decision? Just curious.
This is insane… with irrational fear like this, no wonder the markets are tanking.
Let’s consider this: mortgage plus maintenance equals current rent. Renters’ common refrain is that a down payment on real estate could be put to better use invested in stocks or whatever than in real estate… but here you’d be giving up half your down payment just for the privilege of remaining a renter. And with the way the financial markets are right now, with even some money market funds breaking the buck, it would be very difficult to make up the difference.
– So if you walk away, you have an apartment you’re comfortable in, you have identical monthly expenses, you have 38 grand burning a hole in your pocket, and you give 38 grand to some jerk.
– If you go through with the deal, you have an apartment you’ve decided you would be comfortable in, you have identical monthly expenses, you’re building home equity, and you have 76 grand in a solid, long-term, illiquid investment.
By my math, you’d have to be crazy in the head to walk away from this deal.
Why would you walk away from this deal? The market value of the place is irrelevant until the day you sell it.
gosh, buy this! your rent may or may not change, but a month to month means you are probably out sooner rather than later. with the tax benefits, you’ll be ahead i’m sure on a monthly basis. rent usually goes up. plus, it’ll be your home, and you can definitely make it better to suit you in a way that it is not possible to do when renting.
don’t worry!
good luck.
Parrot girl:
Take a deep breath. Do not walk away from the deal, or lose $38,000. Look at it this way-each month you are throwing away money paying rent with no tax advantages. Even if the apartment is not appreciating in value right away, you will be paying the same amount each month and getting tax benefits. You will always come out ahead owning. You have to live somewhere. The problem is the economy is bad-we all know that and it will be rough for a while, but current state of the media and our electronic frenzy is putting people into a panic. Turn off the radio! I bought a condo in 1990 when real estate was down. I sold it in 1995, for a small loss, but purchased a house for a good deal. Real estate is always a good investment because you need a roof over your head. Why not own it, if you can, instead of paying off someone else’s mortgage?
Easy decision:
Postpone closing a week (this is always possible), wait until after the election. If McCain-Palin wins, walk away. If Obama-Biden wins, stay and enjoy your new home!
This is what I’d keep in mind:
“For every person crying that the sky is falling I know of another person (you and myself included) sitting on a pile of cash. Ask yourself how many people you know who are hoping to purchase a distressed property in the next year or two.”
There are a lot of people who were priced out of NYC real estate over the last few years and are holding out until something they want and can afford comes on the market.
Sometimes, when I look at it, I look at it like this: there are a lot of people in NYC with stable salaries, partners, money in the bank. People who are good and ready to own their home and would have bought ten years ago if they lived anywhere else in the country (I guess except San Francisco or something). So all of those people (us), if they have half a brain, realized that they need to take saving very seriously if they want to own. And some of them did. Or they went to dad. Whatever, they’re ready to buy and they still can’t freaking afford it. Not to cash in on the crazy ride, but just to own their home. To know that if they can afford to get someone to build the perfect counter or tile the bathroom as per fantasy, that they can do that and they won’t just be doing the landlord a big old favor.
And while we all kind of want to get the most bang for our buck, we’re also not wanting to get left out again. So when the market-grapes finally sag to within our reach, we’re grabbing them.
It is a theory. I don’t think anyone really knows.
Wasder: Guesstimate? Mid-2010.