Posted on 02/23/2012 8:15:15 PM PST by Altariel
Dear Dave,
My husband’s company recently told everyone that massive layoffs are coming, and they should start looking for other jobs. Right now, all of his options are out-of-town. A real estate agent told us we’d have to remodel our kitchen in order to sell the house. We’ve got $3,500, but remodeling would take about $2,000. Should we get a second mortgage to get the work done?
Pamela
Dear Pamela,
You might want to get another opinion. Sure, a new kitchen would be nice, but is that the end-all, be-all? Either way, there’s no way I’d go into debt to make this happen. Your house isn’t even on the market yet. There’s no reason to fix up a house that’s not for sale, especially when you only have $3,500 to your name!
There is, for sure, a financial storm brewing on your horizon. Start right now living on rice and beans and saving up piles of cash to build a bigger umbrella.
Wait until he actually lands another job before you make any big decisions. What if something pops up where you are? If you end up moving, then you might take $2,000 from savings to fix up the kitchen and get the house sold. Don’t do it unless you’re going to pay cash, though! You don’t want a second mortgage hanging over your heads, making everything even more difficult.
—Dave
Dear Dave,
My husband has been transferred again in his job. Right now, we have three houses and about $60,000 in other debts. He just found out that he can borrow against his 401(k) without hardship at the beginning of the year. Is this a good idea?
Yvonne
Dear Yvonne,
Three houses? Do you buy a new house every time you move? You guys need to stop doing that. The “other debt” isn’t the problem. It’s those houses that are killing you!
I would never recommend that someone borrow against their 401(k) just to pay bills. It might be a different story if you were facing foreclosure or about to file bankruptcy, but that doesn’t sound like the case here. I think you’ve just made some really bad decisions, and these decisions are following you around and messing up everything else.
Most of the time in situations like this I have to say: “Sell the car!” In your case, it’s: “Sell the houses!” I know the market isn’t great in some areas, but these things are eating you guys alive. You’ve got to put some effort into getting rid of them. Then, start living on a really tight budget and clean up the other debt!
—Dave
Do those count as jobs created or saved in Obama math.
That first letter probably has a typo in it — if you need a kitchen remodel so bad that it’s crucial to selling the house, it would be a $20,000 job not $2,000.
That said, it’s not necessary IMO. Even if it returns twice what you paid, you’re gambled the price of the return that you couldn’t have sold the house at all. I don’t believe that.
Both. It counts double in Obama math!
I agree with you. Spruce them up as best you can. Yard work, clutter gone, make it clean. Paint does not cost much and running a rake and prunning sheers costs nothing.
Next question, is there a market for selling houses right now. Nothing is selling that I can see. Investors that thought they could flip or rent have not been able to flip or rent so they are not beating down the doors even at the really, really low prices anymore.
If you improve your home, the agent won't have to work as hard to make the sale.
If he can sell it at a higher price (due to YOUR investment), then he gets that much more commission.
If the house still doesn't sell he's not out anything, those improvements came out of YOUR pocket.
I'm not saying don't fix up your house, I'm saying weigh the costs of improvements against the increased value/appeal of the house. If you spend 30K for an increase of 20K in sale price, you LOSE (and your agent still wins).
Dear Dave,
Should I borrow money for X.
No.
House customers are more finicky today, and want their new home to have that modern, updated kitchen rather than getting that much lower of a price then doing it themselves, because they know that all they have to do is keep looking for a little while, maybe only a few weeks, and they WILL get it. Sometimes it seems a little silly. My neighbor was told that the perfectly good, immaculate white vinyl bathroom flooring would have to give way to genuine ceramic tile in order to sell. Maybe the real estate agent gets kick backs from the contractor?
Unless, possibly, X is “to buy a primary residence.” There isn’t an easy way to amass the price of a house in less than most or all of a working career.
It is a buyers market for sure. Having everything up to date will attract more low down payment buyers. That way everything is included in the loan. Most people aren't going plop down 20% and then have $20K laying around to fix things up..
I agree and I blame HGTV. It seems that every buyer on that channel, including 1st time buyers in the low end of the market, see laminate counter tops and vinyl flooring and say “no way, we NEED granite and ceramic. Oh, and the appliances have to be stainless steel too.”
It seems that the idea of buy what you can afford and get the high-end finishes down the road when you can is no longer even considered.
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