Astounded by buyers' thought process
I am working with some clients who are looking to buy their first home. It's a personal contact of mine, and we have talked about them buying off and on for a couple of years. They spoke with a random mortgage broker, who told them that they qualified for a purchase of about $150,000.
Since they wanted to live well within their means, they originally decided to cap their price at $115,000. I always try to respect my clients' criteria, so we looked at four homes that were in the desired range. As it turns out, three of them had foundation issues, which didn't terribly surprise me, based on the area of town that they were considering.
They decided to bump the price point into the $130,000's on my advice, since the payment difference was manageable and the difference in quality was huge. We found one that I thought was probably perfect for their needs, but they didn't pursue it.
A couple of weeks passed, then he sent me a home priced in the $80's! This, too, had foundation issues, so they decided to pass. I thought they would probably start looking at homes in the "reasonable" range again.
I was wrong.
The buyer sent me an email over the weekend. He asked about whether it was possible to roll repairs into the loan for a fixer-upper. I told him that it might be possible, depending on what was needed and on the type of loan.
Then, he emailed me the property that he was interested in seeing. Please keep in mind that it's a family of five.
The home price was $32,000. Yes, really.
I paid more for my car than that. I can't imagine that it is even habitable, but he claims that he drove by it the other day. It's roughly 40 minutes further from civilization than anything else they had considered.
The best that I can tell, they are worried about the economy, so they're looking for the bargain of the century. I asked him how much money it would take to fix it up, and he was hoping to get a loan for $100,000 and use the difference to fix it up. WHAT?!?
So, rather than spending a little over $100K for the house, you want to spend $68,000 on repairs?
How does this make sense? How could you convince yourself that financing THREE TIMES the purchase price is wise? Not to mention the fact that there's no chance of it appraising anywhere near that level in that area. This is wrong on so many levels that I am frankly at a loss for words. Well, maybe not a total loss, since I am writing this post, after all.
I suppose if they decide to pursue it, it would be a new record-low home sales price for me, and that goes back 12 years. I hope that I can find the right place for them, but I am a little concerned about the way they think, truthfully.