On the surface it looks like you've done the right thing. You've found a deal where you can buy the cheapest house in a great neighborhood and fix it up, which is a great way to get into a location you otherwise couldn't afford. This assumes, of course, that you can cash flow the improvements and/or DIY it so it doesn't put you further in hock.

You've also opted to price aggressively for a fast sale. Paying a double mortgage will cost you. Good for you for plugging your nose and taking the plunge.

That said, there is a more complete answer, that depends on the financials of everything. To provide that answer, you'd need to share the financials on the deals. If you're comfortable posting them here (it is anonymous), I'm willing to give a more thorough answer. The details would be:
1. Market price/selling price of house you're selling, current mortgage balance and mortgage payment.
2. Market price/selling price of house you're buying, amount you'll put down and monthly mortgage payment.
3. Household income
This might be a bad idea if it will stretch you financially to live in the new place. IMO it's not worth cashing out a retirement account and incurring all the penalties to live in a place you otherwise couldn't afford.

Hi Weedyacres,

1. The mortgage balance should be paid in full. However, due to the fact that I will get refunded my home owners' insurance after closing, and depending on what kept in escrow for utilities (all paid and up to date), and taxes being paid a year behind (the city does it this way), I may need to come up with 1K at closing for the sale of the old house.

2. I am putting 10% down on the new house. My monthly mortgage bill will be $88 dollars more a month than living in my old house. For the old house I would anticipate needing a new roof and furnace in 10 years. The new house has all major things (roof, furnace, electric, AC) replaced in last 2 years. So I think this is a saving. Also insurance covers replacement cost on new house, not on old house.

3. New housing costs are 13.5% of my gross income and 18.5% of my net income. I will have only 2k in CC bills and 14K left on my car. No other bills except food, dogs, gas, maintenance, entertainment and unexpected costs.

I have not included my husband's income in the mix because he is a painting contractor and things are very slow. When things are not too slow our household income can increase by 20 to 25%.

If I had to cover both houses than I would be paying 38% of my net income plus utilities. I could avoid delving into my retirement if I lived dirt poor or rent the old house. Both options I don't like, but may have to choose one if the old house does not close.

Am I crazy here?

Thanks!!!!!

This post was edited by Acadiafun on Thu, Nov 14, 13 at 12:16

Is your current home under contract?
Are you under contract on the new home?
IMO, you best get out of the declining neighborhood NOW, before these interest rates climb much higher. Every time they go up, means less and less potential buyers for your home, and you could just ride the market down even further.
Can you make the new home contract contingent upon the sale of your current home? That would be your best bet.

Both houses are under contract. I close on my new house in the next two weeks.. The old house should close the first week of December. The house inspection was done- buyers accept condition of the house without request for repairs.

So if it all works out it seems brilliant. If my home sale falls through it then seems reckless and stupid of me.

Hi Acadiafun, don't have any expert advice to offer, but just wanted to say I feel for you! I'm in a similar situation - about to put in an offer that has some element of risk to it (long story) and the dilemma for me is much the same, weighing the risk against the benefit.

The other night I walked over to my possible new house and stood in the backyard (no one living there) - the quiet and moonlight just felt so peaceful, I felt a tension leaving me that I didn't even know I had! Ahhhh..... exhale!

Just want to wish you well with this deal! The house sounds great - cosmetic mess can be addressed with creativity and sweat equity. It's great that the stuff for professionals to do has been done (mostly).

Good luck with your decision Orange-catz. I know exactly what you describe when you say how the tension leaves when in a peaceful surrounding. In my old house I feel tense all the time.

Checked out the competition again. Two foreclosures in the neighborhood going dirt cheap- about 5% under my accepted price. Three new listings that are IMHO overpriced. These homes are more updated than mine, have garages, smaller lots, less square footage and listed 40% higher than my home. Makes my house look like a great deal. Holding my breath until the sale is completed.

Acadia,
have your buyers already gone through the appraisal process, and the inspection process? Usually, those are the two contingencies that screw up a deal. If the buyers are past those stages, more than likely your deal will close.

ncrealestateguy- Inspection completed- buyer is satisfied. I am not worried about the appraisal because I am selling so low. If it doesn't appraise at buying price- something is seriously messed up.

Thanks for the support- I really need to hear it will go through. I entered this with confidence and swagger. Funny how a few weeks of anxiety makes you feel like a puppy with his tail between his legs. lol

Take a deep breath and keep karma on your side in your dealings.

My last double transaction were my acquaintances buying my neighbors' home with a VA loan and the neighbors downsizing to a condo with cash from the sale - to close on the same day. Appraisals, garage sales, flood insurance, extra VA paperwork, inspections - setbacks at every single turn for a 25-day closing - it was the most stressful, hand-wringing, tears & anguish sale I've ever had to endure (long story). But I worked my butt off and it all worked out - I can safely say that I earned every penny.

Keep packing & cleaning - be positive that it will all work out.

(And make sure they will take a cashier's check - all the title companies here will only take wire transfers due to the fraud now - and they take longer - that was the reason for two days of the frantic driving all over town to various credit unions and clearing just in time.)

If I am correct, I think since the Patriot Act was passed, that no closing attorney will accept a cashier's check over $10,000. Only wires.

Sounds like you can easily afford the payments on the new house. That's a very low percentage of your income going to housing.

Thanks for the Good Karma guys. Will check with the Title Company regarding wire transfer vs. cashier check. Thanks!

We did the exact same thing this summer. Listed older house in declining neighborhood, looked at a number of houses, casually, while we identified what we really wanted & needed... Got a contract on old house, and then ramped up our search until we settled on a 20 year old house in a very nice area that has a new roof, HVAC, water heater, and flooring - leaving only painting to make it "home".

Gut wrenching few weeks while we waited out contingencies, inspections & appraisals, and closed both sales on same day - with out of state buyers and sellers. Loan officer and our realtor did amazing work to keep both sales on track.

So happy to be in a nice quiet neighborhood, and relieved beyond measure to have offloaded our lovely house in the declining area. New house is a real step up in luxury for us too: a jetted tub - swoon!

abbycat- a jetted tub- I would swoon too!

We close on the new house next week. I am glad to see that I am not the only one who has taken this route. It is gut wrenching for sure.

Just thought I would update this thread. I had some angst over selling so low and thought I would really regret this as time progressed. As of today all the houses in my neighborhood listed at market price when I listed are still unsold. My house is the only house that has sold there since August of 2013. The nicer area of town is faring better but still listed at sales decreased 31% this year. Two houses reduced their prices at the 11th hour, were foreclosed on, and are now scheduled for auction. According to Trulia (not the most accurate source) the house I bought has appreciated 21%. All in all I think I made the right decision to sell so low. It hurt, it still hurts but I think it could have hurt much more if I had held out for more money.

You should look at retro renovation website. A lot of people, including me would love to have a time capsule 1960s home.

Acadia, Congrats on your new home. I hope you find it peaceful.
From the sounds of it, you made great, wise choices. You sold your home for what it was worth given the time frame you had to work with.
Being at peace in one's home is worth far more than a few thousand dollars that you MAY have ended up with.

You acted quickly, but wisely. You made a sound financial decision trading a home in a declining neighborhood for a better home in a great neighborhood. IsnâÂÂt it great to have data available to confirm the wisdom of selling at the price you did? Congratulations!