Expert: Dick Dennis - 12/22/2008

Question
Hello. My fiance and I live in Albuquerque, New Mexico. I am a newish attorney and in June of 2007 I purchased a condo in the North Valley -- a desirable area, close to downtown and the river, etc. -- for $167,500. I realize I purchased it right before the housing market burst and now it is probably worth much less. From recent sales in my area I am *hoping* it is worth about $160,000, but it could be worth only about $150,000. I didn't put any money down for it and I have only paid about $3,000 towards the principal. I also have mortgate insurance on it until I get 20% in equity.

My fiance and I plan to move in together soon. I think it would make little to no sense for me to try to sell my house right now in this market; plus, I can't sell it before the summer unless I want to take a tax hit for selling it in under two years. So, whatever we do probably involves me renting out my condo, which I am fine with.

My question is whether you think we should sell my fiance's house and buy a different house now that the market is so good for buyers, or whether we should just stay in his house and save up money towards a new house sometime in the future.  My fiance has a house near the North Valley which he bought about 7 years ago for $125,000. His development is desirable and he got in early; the market right there has grown without taking too much of a hit with the bad economy. We are guessing he could safely get about $200,000 for his house, although before everything crashed, he could have easily gotten $230,000 or more for it.  He has a good bit of equity built up in it because he put down 25% and he has been paying the mortgage for seven years.

There is a nice house -- his dream house -- which is for sale right now as part of a foreclosure in his same desirable development for only $209,000. We were thinking that he could sell his house for a little less than that and we could "upgrade" to the bigger, better, house for little more than what he is paying now (his mortgage is very cheap), what with the cheap price and the low interest rate right now.  Do you think this is a good idea? Or should we rent out my condo and live in his house and save up money towards a new house to buy together in the future, even though by that time the market may not be so buyer-friendly? We are formulating our plan and I would appreciate any input you could give me.


Answer
You asked for my input, Nina, and I am glad to offer it, but be aware that I anticipate this market to remain in the doldrums--pricewise--at least until 2011-2012. Buyers will continue to buy at the depressed prices because of the banks' properties doing the depressing. Further, expect another wave of foreclosures during the next two years to do some more depressing.

You may not like this part of my input: don't move in together until you are married. You as an attorney should know better. People who anticipated getting married have asked me how to solve their splitting problems quite frequently. How to take title seems to be the biggest buggaboo. Chances are you will ignore this part of my input even though I have been married 55 years come next Valentines Day.

If you're going to do it anyway, make an offer of $179,000 for that other house in your fiance's subdivision. I predict he will be able to buy one like that fairly soon at that price -- without me looking at the subdivision. You both should retain both properties because neither one of you will get what you hope for them. His house is a great headstart for your married life together.

Be aware that you may have problems renting your condo. You should check with your association to see their attitude for rentals. Further, find out what is the percentage of rentals in your condo association. The more renters there are the less you should expect to get should you decide to sell your condo. 10-15% is normal. More than that then you should anticipate problems selling. I wish you well.

Dick Dennis      dixiedee13@aol.com