patrick.net

DinOR,

Are condo's selling so well that you couldn't just let him try and sell it to others first? Or would you get takers straight away at that price - could you bluff him? Every month that it's his he still has to pay a mortgage payment right and HOA's? Plus, he has to buy you out of your lease doesn't he? Don't make it easy for him!

”I started out in a fairly “contained” fashion but after it was obvious the in-laws had fill’t her up with visions of quick and easy wealth I had to act fast…”

DinOR,

I can’t imagine how your in-laws are able to justify trying to dump their failed specu-vestment on their own family. They may display “the best of intentions” on the surface, but the very idea that they haven’t imagined “what’s in it for them”, is insulting. And trying to win you over on the idea too? …amazing.

Fast forward a couple of years when they’re sitting pretty again, but Son and wife are living under crushing debt, upside down in a property that saps any extra income, if there is any. Will “Mom & Dad” answer the phone? How will a Christmas visit go?

Please find the words and appropriate temperament to get you important message and your educated perspective on this, through to your daughter. If they choose to pass on the “deal”, any resulting harsh feelings between Mom & Dad In-law and Son and new wife, will fade quickly. But the resentment following a deal like this will last a lifetime.

My dad once told me, “if you lend someone $20.00 and never see them again, consider it a bargain.” At the very least, this “family deal” presents an awkward situation for all involved. They know what they’re doing. Shame on them for creating it.

BTW, Am I missing something, or is this situation really as offensive as it feels?

Of course with mental accounting in full force every seller wants 2005 + “normal appreciation”.

Too bad this line of thinking tends to be very over-powering.

Claire just had a great suggestion.

DinOR: if I asked (gods forbid!) my parents for lawnmower money, there's a 90% chance they'd manage to find one of those ancient push-mowers to happily present to me instead.

DinOR,

Depending on your daughter's temperament, I would suggest caution in your approach to steering her from making the purchase. Although you would be correct in the coming years, she might not appreciate being wrong, and being reminded of that fact every time she thinks about the house or you.

I would lay it out for her as if she were a client. Bring up all the risk factors, work out the numbers, and then give her your recommendation. Or better yet, have her call the Dave Ramsay show and ask for his opinion.

Claire,

My sentiments exactly. I'm told however that there IS another offer on the table so this has but shouldn't come as a "bomb shell" to us. I feel awful for the Mrs. b/c she had the spare bedroom all arranged for her mother ( who has never been to the states). I'm praying real hard that this guy doesn't accept my offer b/c I feel 220k for this place is beyond ridiculous. One way or another, he'll be out of my life so the more distance I can put between myself and these "investors" the better off I'll be.

The realtor just left and she agreed it is probably an unreasonable asking price but neither of us could figure out the guys logic? He wants 220k (but was renting for $850 a month?) It doesn't make sense and couldn't continue. After the mortgage, taxes, HOA's, rental manager fee of 6-7% it had to have been a HUGE black hole EVERY month. So much for "deep pocketed investors".

So much for “deep pocketed investors”.

So deep that there is a hole in their pockets.

MtViewRenter,

True dat. She's very sensitive and it immediately became about me transferring "our" perceptions on to her! That's when I backed down and took a calmer approach. I said, look, take all of the personalities out of the equation and we still can't make the numbers work. She focused on the convenience issue (or lack thereof) so you're right. At that point it really IS like working with a client. Also you don't want to create an environment where she's going to want to do it just to spite you?

Arghh! (I'm surrounded by "playahs")

Steveoh,

You are correct sir! Asking these "playahs" to think long term is like asking a bear to sh1t in a toilet. My LL needs relief from his UTTERLY FAILED specuvestment so he wants to sell like a month and half before our daughter's wedding. My in-laws need relief from their UTTERLY FAILED specuvestment so they're trying to pawn it off on the kids creating LONG TERM PAIN for them!

DinOR - are you on month to month then - or yearly lease - could you delay your landlord until after the wedding and your mother in-laws visit - me thinks he thinks he has you over a barrel.

HOWEVER, do what makes you happy - you at least know what you are doing - what price happiness - after all?

Monday just keeps gettin’ better. Now my LL decides he wants to sell his LONG TERM specuvestments and I mean right now! So the realtor (also has a unit in our complex) calls me with the “good news”. They’re asking 220k which is WAY more than I think they’re worth but at least it means “he’ll” be out of the picture.

Uh oh, you kinda just proved the NAR's point about how if you rent, you're subject to the whims of your landlord. :(

@Claire,

Much thanks. We were on a lease for the first year but now just go month to month. I seriously doubt this guy will accept our offer b/c he was SO OFFENDED by our low-ball offer earlier. He also gave us his word that he would *not put it up for sale without notifying us (so much for his "word"). This is his "big pay-back" so I don't want to ruin it for him. When it's all said and done there are any number of ways we can go that are equal to or better than where we're at right now.

There are subdivisions full of other UTTERLY FAILED specuvestments for rent. Realistically, how long could anybody continue to have a 1-2% ROI? At some point you have to throw in the towel (and he did so strategically right before summer). This is SO NOT OVER!

eburbed,

That IS true. Our last bubble sitting residence was sold out from under us but other than moving it was hardly a sacrifice. For a supposedly "high end" condo there's only ONE phone jack in the entire kitchen/LR/DR. We can't have Direct TV (TM) and it's only a ONE CAR garage. Nice view but that's about it. Pray with me brothers that this half hearted offer *not* be accepted!

Just got off the phone with the property mgr. and he has several nicer 3bd/2.5 ba's (also on the creek) for $950. I'm quaking.

Just got off the phone with the property mgr. and he has several nicer 3bd/2.5 ba’s (also on the creek) for $950. I’m quaking.

[Mutters incoherently about having to pay $1200 a month for a 700 sqft 1br/1ba in an awfully run down building in the bay area.]

Besides my son-in-law is just getting a sense of his place in the world and establishing his identity and purpose.

Um, isn't that something you do in college?

DinOR - you could always withdraw your offer? Or is there something else going on? (Arm twisted behind back?)

eburbed - ditto with the muttering - $2400 for 3 bed 2 bath, not great condition!!!!

DinOR - I would think that your offer will be accepted - from your account it seems it's over "true" market value.

Claire,

No arm twisting here. My wife was actually a little miffed I even dignified this whole process by responding with an offer at all!

Oh, and before all the RE perma-trolls start coming out of the woodwork with their schaudenfraude, we've bought places that had really great neighbors to begin with only to have them slowly replaced by real sh*theads. So your points about "being at the whim of your LL" or it being worth paying the premium for the "stability" of "ownership" will fall on deaf ears.

This is a pure case of "weak hands", an inability to negotiate for higher rents b/c of a WEAK rental market and just a spiteful move in general in retaliation for a low-ball offer. Cut and dried.

Family deals are bad news in this market. My aunt tried to sell me my grandmother's old place in the country for $180K, and she was sure that was a fair price. I wasn't so sure, so I let her put it on MLS. They've had two offers around $120K, and just accepted the second one.

It's a shame the place had to go out of the family, but what could I do? It's difficult to underbid your grandma's house without looking as though you are trying to steal from family, and if I'd paid $180K, that would've been family stealing from me. Bleh.

DinOR - have you checked the tax assesments for your condo - is your landlord uptodate with his payments? Has he got other offers - or is he getting behind on his payments? It maybe his other offer is the one from the mortgage company - sell or else? I can hope can't I?

DinOR,

I hope he refuses your offer. And when he does, counter with 180k, open for 6 months, and tell him you'll do it with a RE attorney once his listing agreement has expired. That'll save him 12k right there! If he can't move the condo, you might get it for an almost reasonable price.

As for your daughter, man, I feel for you. My parent-in-laws are in a tight bind of housing. They're in the worst situation possible. They own high-end furniture stores and bought their 'dream' house on the bay in early 2005. Right when property peaked, the helocs slowed, and spending has slowed. Since they sell stuff considrably better than IKEA, they start hurting first in their industry.

To top it off... the guy who sold them the property didn't disclose problems with the drainage, and half the cliff fell out from under the house. Now they're in litigation trying to get back enough of the house payment to fix the cliff before the house goes in the drink.

At this point, I think their only viable option is to mail in the keys. The house cost seveal million dollars, the repair work needed is near on another million, and because of the problems, they can't sell the house until litigation is done OR for anything close to what they paid for it, or probably even enough to get out from being underwater, and since it's a high end market, even if they could sell, it takes a LONG time to move houses in the several mill range. No matter what happens, they're going to be out several hundered thousand in legal fees, and if they do Deed-in-Lieu, they'll be out probably a million.

They could have handled one problem or the other (business slowdown or massive repairs and litigation), but both at the same time is about to break them.

At least they aren't trying to sell the house to us! :D

Claire,

Now that is... something I hadn't considered? My guess is that the guy is WAY over extended. He bought several homes in each of the new subdivisions in town (we're right outside of Salem, OR) and THEY are also morphing into rentals. Since (admittedly) these units do have a "water feature" they are among the few he CAN convert to cash on such a short notice. His other homes are "For Sale/For Rent" (and are mostly empty).

I don't care how deep your pockets were when you started, everyone has a 'threshold of pain'. I happen to think the guy (given his circumstances) IS doing the right thing. P_r_o_b_a_b_l_y would've worked a little better LAST YEAR but... better late than never. This is just another affirmation of all our theories. He HAS to do something. Myself OTOH only need to move a few blocks. If it weren't for the wedding I really couldn't care less.

SFBB,

Ouch! My "problems" pale in comparison. That IS the worst possible situation! From their trade to their entry point (2005 peak) and now the repairs! I feel for them. What I'm going through is just an inconvenience and it really has zero financial impact on me, short OR long term. Since we just had the movers take "the big stuff" it only cost $300 (and lunch, great guys).

And I WILL counter w/180k open for 6 mos. (when the listing expires!) LOL!

My wife feels horrible for her parents. There's not a dang thing we can do for them, really. I've even volunteered to be a sign spinner for them on weekend furniture sales. :D But nothing we can do can begin to deal with the ouch they're getting.

The only good thing from it is as a very good lesson on why not to buy too close to your 'edge' of affordability for me and my wife.

As bad as your Monday was, at least you didn't wake up to find that your $525,000 house which had a basement wall made out of Frosted Flakes boxes collapsed.

http://www.burbed.com/2007/05/07/149-mangels-had-frosted-flakes-boxes-as-a-wall/

or even worse - your house is now what's propping up your neighbor's $525,000 house that had a basement wall made out of Frosted Flakes boxes...

My wife feels horrible for her parents. There’s not a dang thing we can do for them, really. I’ve even volunteered to be a sign spinner for them on weekend furniture sales.

Any good deals? My 2nd hand sofa is a real mess.

SFBB,

Wow, is it a situation where they might not be able to even LIVE there? Is that the pits or what? Come home from a busy day or rearranging inventory (and selling very little) to find your home has slid another few centimeters. That has GOT to suck.

I spoke with the property manager and he said even if they close tomorrow (which he doubted) the buyer would have to establish ownership and THEN serve us a 30 day notice. He was a little miffed that he was in no way in the loop and "I" wouldn't have found out about this shifty little stunt had I not been friends with the realtor. (She and her husband used to own the local golf course so cool it all right!)

As bad as your Monday was, at least you didn’t wake up to find that your $525,000 house which had a basement wall made out of Frosted Flakes boxes collapsed.

Frosted Flakes walls - They're GRRRRRRREAT!

DinOR,

They had to get studies done to see if they could stay in the house. Nobody is happy with the situation right now, city/inspectors/parents/previous owner getting sued/etc. I just hope they get it worked out soon, whichever way it works out. No matter what happends, they'll feel better having the issue resolved.

eBurbed,

The best thing is there will be no insurance payoff for that. The guy lifted the house himself off the foundation and the braces buckled. If he'd hired guys to do the foundation work, they might be 'okay' financially.

The best thing is there will be no insurance payoff for that. The guy lifted the house himself off the foundation and the braces buckled.

Well, there is some speculation on Socketsite that this was much easier than trying to get a demolition permit from the city. ;-)

EBGuy,

True... that might be the case. However, the lawsuit from the neighbor who had his house damaged will probably make it more expensive.

DinOr

Long letter, but this moved me and hope it helps. I'm getting married also, and can think of nothing that could create resentment more than being enslaved/ indebted to by/to my in-laws. This has reminded me how fortunate I am, which I sometimes forget in spite of my beautifully perfect fiance. Sometime it bothers me because my in-laws are "financially retarded". However, my future father in-law is SO sketchy with such a track record of failure that the thought of participating in any of his schemes (which of course now involve real estate), is beyond the pale for either of us, especially my fiance.

First a scenario regarding doing business with a friend, which hopefully illustrates a point. I am a recovering rehabber and have a current hard money loan to a borrower who is a friend/ worked on another project. I told him to go out to other lenders, gave him the names, and beat their "market" offer for a loan. But he just doesn't have his act together and has managed to eat (or rather drink) away at his substantial equity. He understands that I did him a favor lending the money, but it will be awkward because he is old enough to be my father and this project was a ticket to a secure retirement for him. For me, it is sad to watch him squander a great deal he put together, but it's ultimately not my problem and a loss would make some difference to me and my future wife.

Scenarios for lending money to a friend:
1) foreclose on him in 3 months and recover fully w/ a little equity for him 2) foreclose on him in 9 months, recover fully with 6 more months of 1x% interest and take even more of his equity or
3) extend him a longer term loan and risk loss AND tie up money for 10-15 years at a relatively low rate and have to hassle him every month to pay me.
4) Give him ~ $250k and be happy for him

As unattractive as these options are, can you imagine how unnattractive the would be if he was family (except maybe #4)? For one, my friend/ borrower doesn't expect anything of me other than to act in my own interest (unlike family). Secondly, if he harbors a resentment, we don't need to see each other and revisit it for the next 30 years. Now that would be hell, especially if it were my in-laws and we were starting a new life together.

So reversing the scenarios, this is even worse because of the likeliehood of a lose/lose situation. If they want to give a gift, sell the f'ing place and give cash. There are no childhood memories or sentimental attachments if they bought it in 05! If they want to sell the place for top $, let them put it on the market, or at least expose them for trying to give a "negative wedding gift". Let the market determine the price!

Scenarios for buying a house from your soon-to-be inlaws:

1- it is a reasonable deal in the current market and your in-laws will lord their "gift" over you for the rest of your life, especially when they inevitably overextend themselves and need more money. My grandmother still reminds my parents of groceries she bought them back in the 70's (neither of my parents are amused by this and produced checks showing that in fact, they reimbursed my grandmother for the groceries). Older people have a tendency to overestimate their magnanimity and the value of even smallest gifts.

2- it is a bad deal, but the parents delude themselves into thinking it's good and will continue to lord it over the kids even while the kids are struggling to keep themselves above water. Parents probably have no empathy because of financial irresponsibility themselves. Kids are also resentful, especially daughter.

Resentment is a terrible thing that gnaws at people's soul. Much bad behavior is a result of such resentments. Anything that could foster such a feeling is a terrible way to start a marriage. Good luck with the counsel!

DinOR: My sympathies on your daughter's ongoing saga. I hope she doesn't have to learn her lesson the hard way. However, advising her yourself will probably become an emotional father-daughter battle. She's right at the phase of leaving the nest (what with the wedding), so this could be a "carve out my own niche" sort of thing.

Perhaps you could refer her to one of your colleagues? A truly neutral financial advisor would underscore the point that you aren't being overly parental. They could run the numbers and then decide. And point her to all the housing doom and gloom in the Main "Street" Media like CNN Money. If you send her to patrick.net, we just look like a bunch of housing bears who love sushi (which kind of makes sense, particularly sake).

Just out of curiosity, how long have your daughter and her fiancee been completely free of parental funding? How long have they been doing their own finances and budgeting? Normally this kind of starry-eyed behavior comes from a dream of independence coupled with absolutely no clue how to run the books or a household.

My parents paid for everything for my sister--her rent, her utilities, her tuition, her car, her insurance, her medical bills... all until the age of 24 when she graduated college and got married that summer. If it weren't for her marrying a stingy business guy (hey, I like him), I doubt she'd have any idea how to budget or manage her finances (actually, I would bet dimes to dollars she has no idea where the money goes right now anyway).

But if you get two starry-eyed, inexperienced kids dreaming of independence and the adulthood that homeownership brings, then you could be in trouble.

Best of luck getting it all sorted out.

DinOR,

Although 220K doesn't sound like much money to a Clownifornian, I can certainly understand your caution. We're barely into the multi-year correction (which isn't happening) of the bubble (which never existed) and are already seeing significant price reductions (which cannot happen).

Just curious, have you tendered a formal offer, or was the $220K figure just a "trial balloon"? Are you using a RE attorney to write it up/review it as most of the experienced crew here have recommended?

2 quick notes -

1) I'm enjoying a movie from 1948 called Mr. Blandings builds his dream house. It's very interesting even though it's 60 years old.

2) I walked to a restaurant tonight and saw something unusual. On one of the condo buildings that usually has a for sale sign on it was a hand written sign saying "open house today." I walked over and read that there is a 4 bedroom 3 bath with 3 bed rooms available for rent at $750 each. WOW! We're back to taking in borders!!! The times they are a changing.

astrid Says:
May 7th, 2007 at 7:56 am
"But if we really want to talk about real welfare queens, let’s talk about farm subsidies and ethanol. "

I'll talk about it with you. I used to think farm subsidies were an open and shut case of unnecessary government interference, then when I took the GMAT one of the essay questions was based on a thesis supporting the concept. It was so well written, and made some really solid points in my opinion.

The gist in a nutshell is that the government earns more in tax revenue from a relatively small infusion of a subsidy than it would if farmers produced at maximum capacity and drove the commodity prices so low that the industry as a whole had losses instead of being profitable. It was a new angle I had never thought of.