If you read MP Dunleavey on MSN, well she's also taken to writing for the NY Times. I like reading the message board hosted by MP called the Women In Red. There is a lot discussion about money from a female perspective. Anyway this week Mia writes about her decision to purchase a new home.
This does not sound like a bad idea at first. Great time to buy with lower interest rates recently, prices of homes dropping meaning good deals to be had. However, reading the article it sounds like a clear cut case of the GIMMES, and I WANT IT NOW!
Mia chose to make a full price offer on the house. Because location is everything, no one knows if this is a good or bad deal. However a day after their offer a second competiting offer in cash came in. She felt she had NO CHOICE but upping their offer to match the deal or lose the house.
What's the problem? First, her initial offer was already at the edge of her price range, because the counter offer was SOLIDLY out of their price range. But they went and offered it anyway. What? Well MP DUNLEAVEY literally said they "Bid first and did calculations later."
That is the worse possible financial advice or dribble ever written. I nearly spewed my drink reading her justifications about why they needed this "dream home". That if they missed this home they would only have regrets. She says they moved forward against her better judgement and logic because it felt right.
Of course not having all the numbers she isn't even worried. Well neither would I, because MP Dunleavey probably has NO IDEA how much debt she just took on. Do you think she calculated how much the Principal, Interest, Taxes, and Insurance (PITI) for each house is individually and how much of her gross income it is? How much the two mortgage would be of her sole income? Nope.
Instead they are flying by the seat of their pants. They have no cash reserves in case they are unable to sell their old home, find a tenant, or if a major repair comes up. They cannot afford a new washer and dryer! They can't handle if anything breaks in the new house.
How is this in any way, shape, or form a good idea? This is a roadmap to bankruptcy. I hate to say it, but she's quickly travelling down the path of no return. One misstep and they will fall into a deep abyss of debt. But hey, writing this makes it seem all the more real. The mortgage mess we're in as a society, here's another contributor!
Saturday, December 08, 2007
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3 comments:
LAL-I read the article and without any doubt, these home buyers got scammed by the oldest trick in the real estate market book. For New Yorkers, they're pretty stupid.
#1, when you shop for a house, not only do you never, never offer full price (especially in this market) but you never, never, let the broker know you are excited about the home. BINGO!
#2. There is no other buyer!!!!! If there was, the sellers would have accepted the second offer and told the first to go f**k themselves. (sorry for the language, but I am a New Yorker). It is a common trick, to tell a motivated buyer that there are other buyers. it is against the law to tell the prospective buyer what another buyer is offering. You have to submit another offer.
OH MY GOD! The woman should be fired from writing for the NY Times. Especially about money. (which brings me to the realization that really, no one knows how to handle money nor give advice about it. We are all going by the seat of our pants!)
STUPID. STUPID. STUPID. AND SUCKER, SUCKER, SUCKER. She got scammed with the oldest trick in the book.
#3. She should have walked away and declined. I bet you the equity in the Empire State Building, the broker would have been calling her back in a few days that the other deal didn't go through and the house was hers!
Let her bleed through the nose. Don't be surprised if she takes out an interest only loan or some sort of ARM.
STUPID. STUPID. STUPID.
PS: there is no such thing as a 'dream home' Houses come and go.
I agree about dream homes. Homes are just places to live. I like owning, but I fully acknowledge that renting makes sense in many cases and can be financially more beneficial.
Now MP says she has 30 years to decide if it's a mistake. She says she got a 30 year fixed. Which is great, but the average amount of time spent in a home is 7 years. I wonder if this house will not be the dream house if they grow their family?
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