What should we do about the Sister In Law?! (buying a house issues)

[qdobajoe]

We are recently married...for about 3 weeks now. More and more these days the sister in law is trying to meddle in our financial issues. For example, she is pissed at us because we are not saving 100% of the wedding money we got into getting a new house. She thinks we will be out of money and at that time we will come to her and she will say I told you so. The situation is a bit different in my opinion. We currently have a condo that my wife bought. In this bad economy, I don't think she would get even 50% of the price she paid for it. It is our intention that we buy a house within 3-5 years. Now the question is, should we already be saving 100% of everything we have, etc. and be all ......WE NEED TO BE SAVING UP FOR A HOUSE?! To be honest I have never owned a house myself, so I can be honest in saying I don't know what it actually takes to buy a house,etc. Any advice and/or suggestions!?

[carhill]

Well, firstly, congratulations on your recent marriage!

 

Secondly, ignore SIL. Silence sandwich. Black hole. She's irrelevant. The union you and your W entered into takes precedence above all else. Affirm that amongst yourselves. SIL doesn't need to know.

 

Thirdly, I would need to know the current situation with the condo, along with your general financial situation (like debt to income ratio and net worth) to provide any cogent financial advice. If your W is upside down on the condo due to the economy but you are comfortable making the mortgage payments, 3-5 years in most markets will see a balancing out of pricing. The main exception would be if she's severely upside down, like if she bought at the top of the market. If so, I'd consider looking for relief from the lender, even though that sounds bad.

 

Regardless, IMO, do not make any financial decisions, absent building a 3-6 month liquid emergency fund, without speaking with a professional. Your W has sole and separate property she is bringing into the marriage and it's important to treat that asset properly, as well as to consider options for your future.

 

You'll note how SIL is nowhere in my financial advice

[Trialbyfire]

The more money you can save, the better for you, so in this, I don't disagree with your SIL. Having said that, it's your life and she should keep her nose out of your financial business, unless you're asking for her opinion.

 

Housing prices are relative to condo pricing, at least in the current low real estate market. Say you sell your condo for $100K. Say you buy a house for $200K. In an upwardly trending market, you might be selling your condo for $150K and buying your home for $250K. In this scenario, it's not even a push, in that as the seller, you'll have to pay the realtor's fee and assorted legal costs.

 

Also, when people think houses, they forget that houses require maintenance and are far less cost effective when it comes to utilities. In a house, you'll be responsible for maintaining all yardwork, including the upkeep of the external of your building, such as painting. In a condo, unless it's a full painting of the entire building, your contingency fund handles pretty much everything (btw, make sure it's a healthy contingency fund or you might find yourself being assessed soon). For anything extraordinary, you'll be charged a pro-rata assessement fee. Also, in a house, your property taxes will be greater.

 

Weight it to your lifestyle, before deciding what you want.

[qdobajoe]

thanks for the congrats!!

 

the situation with the condo is this....my wife bought it about 2.5 years ago. I am scared if we sell it now, we won't even get half of what she paid for it. Thats why I want to wait at least 3-5 years to buy a house.

 

Well we both have debt, I have school debt as well, along with some credit card debt.

 

Well, firstly, congratulations on your recent marriage!

 

Secondly, ignore SIL. Silence sandwich. Black hole. She's irrelevant. The union you and your W entered into takes precedence above all else. Affirm that amongst yourselves. SIL doesn't need to know.

 

Thirdly, I would need to know the current situation with the condo, along with your general financial situation (like debt to income ratio and net worth) to provide any cogent financial advice. If your W is upside down on the condo due to the economy but you are comfortable making the mortgage payments, 3-5 years in most markets will see a balancing out of pricing. The main exception would be if she's severely upside down, like if she bought at the top of the market. If so, I'd consider looking for relief from the lender, even though that sounds bad.

 

Regardless, IMO, do not make any financial decisions, absent building a 3-6 month liquid emergency fund, without speaking with a professional. Your W has sole and separate property she is bringing into the marriage and it's important to treat that asset properly, as well as to consider options for your future.

 

You'll note how SIL is nowhere in my financial advice

[carhill]

If you sold the condo today, how would that affect you financially? It sounds like your W paid cash for it, since it's impossible to sell a dwelling for less than the loan amount without lender cooperation.

 

If this is a cash position, I'd look at the relative costs of home ownership vs condo ownership and decide if the numbers work out right for you.

 

If you have student loan and credit card debt, and own the condo free and clear, I'd be more inclined to pay down those debts as quickly as possible and continue living in the condo.

[qdobajoe]

Well in my opinion, I do not want to save every penny we got for our wedding/we make in come to go towards the purchase of a new house. Especially, since we dont plan on buying a house now....we want to wait 3-5 years so we can get back at least what she paid on the condo for.

 

We got a lot of gifts for our wedding, nearly all of them were more for her than I:-) I merely wanted to get a toy so I got myself a Recliner with our wedding money. We also want to put in laminate flooring using our wedding money.

 

I have never bought a house before so in my thinking....if you buy a house you first want to sell the house (condo) you are living in for at least the amount you paid for it, if not more. If for instance our house will cost $200K and we sell the condo for $75K less than what she paid for it, I would assume that is a bad thing?

 

The more money you can save, the better for you, so in this, I don't disagree with your SIL. Having said that, it's your life and she should keep her nose out of your financial business, unless you're asking for her opinion.

 

Housing prices are relative to condo pricing, at least in the current low real estate market. Say you sell your condo for $100K. Say you buy a house for $200K. In an upwardly trending market, you might be selling your condo for $150K and buying your home for $250K. In this scenario, it's not even a push, in that as the seller, you'll have to pay the realtor's fee and assorted legal costs.

 

Also, when people think houses, they forget that houses require maintenance and are far less cost effective when it comes to utilities. In a house, you'll be responsible for maintaining all yardwork, including the upkeep of the external of your building, such as painting. In a condo, unless it's a full painting of the entire building, your contingency fund handles pretty much everything (btw, make sure it's a healthy contingency fund or you might find yourself being assessed soon). For anything extraordinary, you'll be charged a pro-rata assessement fee. Also, in a house, your property taxes will be greater.

 

Weight it to your lifestyle, before deciding what you want.

[qdobajoe]

My W did not pay cash for it. She has a mortgage on it and will get done paying it off in 30 years.

 

 

 

If you sold the condo today, how would that affect you financially? It sounds like your W paid cash for it, since it's impossible to sell a dwelling for less than the loan amount without lender cooperation.

 

If this is a cash position, I'd look at the relative costs of home ownership vs condo ownership and decide if the numbers work out right for you.

 

If you have student loan and credit card debt, and own the condo free and clear, I'd be more inclined to pay down those debts as quickly as possible and continue living in the condo.

[Trialbyfire]

Well in my opinion, I do not want to save every penny we got for our wedding/we make in come to go towards the purchase of a new house. Especially, since we dont plan on buying a house now....we want to wait 3-5 years so we can get back at least what she paid on the condo for.

 

We got a lot of gifts for our wedding, nearly all of them were more for her than I:-) I merely wanted to get a toy so I got myself a Recliner with our wedding money. We also want to put in laminate flooring using our wedding money.

It's not for me to tell you what to do with your money.

 

I have never bought a house before so in my thinking....if you buy a house you first want to sell the house (condo) you are living in for at least the amount you paid for it, if not more. If for instance our house will cost $200K and we sell the condo for $75K less than what she paid for it, I would assume that is a bad thing?

So you have no equity in the condo, right? In other words, you owe more than the condo is worth.

[carhill]

My W did not pay cash for it. She has a mortgage on it and will get done paying it off in 30 years.

OK, this progression tells me you both could benefit from some education about finances.

 

Firstly, since she has a mortgage on the condo, you have to determine if "half of what she paid for it" is less or more than she owes on it. If less, generally, you won't be able to sell it, as, obviously, the bank wants its money back when you sell. The bank would have to forgive part of the loan, which, in the US, has tax ramifications, occasionally substantial.

 

Let's get this part out of the way...

 

Using round numbers, let's say she paid 200,000 for the condo and can sell it for 100,000 today. Let's say she owes 150,000 on it. If so, the bank would need 50,000 above and beyond the sale price to satisfy the mortgage before they'd clear their lien on the condo title and allow the sale to go through, or you'd have to make an alternative arrangement with them, like a "short sale".

 

Insert your own numbers and tell us whether a sale today would be possible.

[qdobajoe]

well I assume...we never really tried to sell it so we dont know for sure what we would get for it. But I assume with the state of the economy,etc. we would not get what she paid for it.

 

It's not for me to tell you what to do with your money.

 

So you have no equity in the condo, right? In other words, you owe more than the condo is worth.

[qdobajoe]

she has been making payments on it for about 2 years now....she owes much more than half of what she pays for it.

 

Firstly, since she has a mortgage on the condo, you have to determine if "half of what she paid for it" is less or more than she owes on it. If less, generally, you won't be able to sell it, as, obviously, the bank wants its money back when you sell. The bank would have to forgive part of the loan, which, in the US, has tax ramifications, occasionally substantial.

[Trialbyfire]

I have two recommendations:

1. Both of you need to take some practical finance courses.
   
2. Google the properties for sale in your condo complex, to get a better understanding of property values. You're basing your argument on thin air.
   

[qdobajoe]

thanks for the good advice...

 

the condo thing is rather complicated. the condo complex used to be apartments. It is located in prime area and she was able to get the condo for a great price for the location at the time. as we speak, the condo complex is not finished...there are many units still left under construction at various phases. So my assumption is that not many people would be really interested in a place like this.

 

I have two recommendations:

1. Both of you need to take some practical finance courses.
   
2. Google the properties for sale in your condo complex, to get a better understanding of property values. You're basing your argument on thin air.
   

[Mary3]

she has been making payments on it for about 2 years now....she owes much more than half of what she pays for it.

 

To give you an idea. I too bought in 2007 , like your wife. My condo went from $ 130,000 in value and now are selling for $ 45,000. I would get an appraisal ASAP..

[qdobajoe]

well on "paper" the value of the condo is not quite as bad as yours ($45K). But do I think anyone would buy it, the answer to that is no. What is an appraisal for? We dont plan on selling the condo now....we want to wait till the economy improves so we are waiting 3-5 years to do anything.

 

To give you an idea. I too bought in 2007 , like your wife. My condo went from $ 130,000 in value and now are selling for $ 45,000. I would get an appraisal ASAP..

[Mary3]

well on "paper" the value of the condo is not quite as bad as yours ($45K). But do I think anyone would buy it, the answer to that is no. What is an appraisal for? We dont plan on selling the condo now....we want to wait till the economy improves so we are waiting 3-5 years to do anything.

 

Well to give you an idea. The 2007 price the condo was highly inflated. Now the * price * is adjusting to the REAL value. Your condo will not be going back to the 2007 price in 2012. They predict a further descent in prices up to the year 2011-2012 .