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Walk away from new construction or commit for another 2 years

0mega 270 92 October 7, 2015 at 07:36 PM
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The situation is as follows, in February my wife and I signed contracts for a new construction to buy our first house. The construction will be done in December but last week she told me she wants to move back to Florida (currently in Denver). After discussing it at length she agreed on staying another 1 or 2 years.

Some more details: we are in an apartment for like $1600 a month. The house mortgage would be around $1850. The total mortgage amount would be $265K + $10k down. Houses in the neighbor hood with the same floorplan are estimated at 300k+.

I'm trying to see all the angles and perspectives if we should commit to the house for 1-2 years and then sell it and move back. Or if we should stay at the apartment for a few more years.

Any thoughts on the matter?

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#2
Quote from 0mega View Post :
The situation is as follows, in February my wife and I signed contracts for a new construction to buy our first house. The construction will be done in December but last week she told me she wants to move back to Florida (currently in Denver). After discussing it at length she agreed on staying another 1 or 2 years.

Some more details: we are in an apartment for like $1600 a month. The house mortgage would be around $1850. The total mortgage amount would be $265K + $10k down. Houses in the neighbor hood with the same floorplan are estimated at 300k+.

I'm trying to see all the angles and perspectives if we should commit to the house for 1-2 years and then sell it and move back. Or if we should stay at the apartment for a few more years.

Any thoughts on the matter?
Why wait for two years? Are you expecting to be able to sell it for really that much more than it's worth? What is your penalty for walking me away?
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#3
Quote from LivninSC View Post :
Why wait for two years? Are you expecting to be able to sell it for really that much more than it's worth? What is your penalty for walking me away?

Indeed. If you assume you'll be able to sell for the ~$300k, waiting a couple years might make sense - you'd more or less break even on it, especially considering that you wouldn't be paying rent - but this heavily relies on any penalties that exist for backing out of it.
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#4
What are your ages
did you already put 10k down?
refund?
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#5
Quote from stufine View Post :
What are your ages
did you already put 10k down?
refund?
We put down 4k down already as earnest money. Ages 27/29.

we already know we will lose that 4k for walking away. I'm not sure what else we would be penalized with for walking away but i think it's just the 4k.There's a lot of papers to go over.
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#6
When you sell, you lose 4-6% on real estate fees. Attorneys, title insurance, inspection, survey, etc. and other stuff like moving expenses. Not worth the trouble even if you think you can sell it for 300k (and one can never really be sure of that 2 years from now either). It just does not make sense to buy a home for only 2 years unless you plan on keeping it afterwards as an investment property to rent out but I assume that is not in play as it is your first house.

My 2 cents.

As for the earnest money, believe you are SOL on that and you can not even deduct it either unless you can claim it was an investment property (which it clearly is not and even then it would fall under the Misc limit I believe). A lesson learned.
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Last edited by YanksIn2009 October 8, 2015 at 06:15 PM
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#7
Talk to the builder it i possible since new homes are selling well they may let you back out and give you back your $$ since they can sell it for more than your price and since they have probably not done any of the "custom" work like carpet, cabinets etc they can still let the new buyer pick their finishes and get a home right away. There is a good chance the market could ebb in 2 years and then you would be stuck. Better to get out of the house and move back sooner vs later.

PS I live in Denver and many people that I work with juts moved from Arizona to Denver.
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#8
Quote from komondor View Post :
Talk to the builder it i possible since new homes are selling well they may let you back out and give you back your $$ since they can sell it for more than your price and since they have probably not done any of the "custom" work like carpet, cabinets etc they can still let the new buyer pick their finishes and get a home right away. There is a good chance the market could ebb in 2 years and then you would be stuck. Better to get out of the house and move back sooner vs later.

PS I live in Denver and many people that I work with juts moved from Arizona to Denver.

They can ask but I would tend to doubt it. First off, the contractor has no real reason to give the earnest money back. That is the price being paid to lock in the property assuming all parties meet their contractual obligations.

Add in that while under contract, the seller stops trying to sell to someone else and loses time and may now have to wait longer to get the house sold which will mean larger carrying costs (Insurance, taxes, etc.). It can't hurt asking but the builder really has no reason to.
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#9
the reason they might do it is that the price of the home has gone up over 30k so they can let them back out and still make more money and even charge more for someone that can't or doesn't want to wait. Home sales here have slowed down it now takes about a week to sell a home in the 300k range.
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#10
Quote from komondor View Post :
the reason they might do it is that the price of the home has gone up over 30k so they can let them back out and still make more money and even charge more for someone that can't or doesn't want to wait.
They can still do that AFTER they take the earnest money from the first buyer after they back out. The only way they would consider giving up the earnest money is if they think the buyer is willing to stay and buy the house. Give it a shot, sure, but don't expect the construction company to give in right away.
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#11
you may be able to get your earnest money refunded if you can find a way to torpedo your financing. i think there was a clause in our contract that if we were unable to secure financing, our earnest money would be returned.
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#12
as housing is in a bubble your house will be worth less in 2 years

the last bubble crash people could not sell condos at any price
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#13
You seem pretty lucky to walk away with only a $4k loss. I think you need to long term plan a bit better if you're buying new construction and then moving a few months later.
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#14
Denver real estate is hot. build it and flip it.
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