There are a few different issues here. The first is that you and the builder have arrived at different bottom lines. You need to sit down with him and find out where the discrepancy lies...I have a feeling it is probably the sq. ft. discounting as you mentioned that it is "about 5000." You need to agree on what the actual price of the house is...ask to see receipts/change orders/documentation. At this moment, who owns the house? Is it you or your builder? If it is you, he may be willing to negotiate (even if his numbers are correct)just to be finished with the job and to be able to move on. The second issue is the low appraisal. I'm sure that this happens regularly; however, I have never seen it in my area with new construction. We had, on paper, an appraisal that was $50K more than our contract price...the bank congratulated us on a good negotiation with our builder. I have the same question as the above poster...does your contract address this issue about appraisal? What are comps for new construction in your neighborhood? Price per sq ft? Try to determine if your home falls within these parameters. If it seems out of line, ask for a second appraisal. But, if it doesn't appraise then you're on the hook for the difference. Isn't your husband an attorney? (mine is too...I empathized with your stories about his billable hours. Mine billed 2400 last year...brutal!)Maybe he can do some high level negotiating with the builder? I'm blown away by the price of your home. The pictures that you've shared are so pretty...it looks very nice. There is nothing new being built in my area for anything near that price. I don't think I can remember seeing anything (in a neighborhood where you don't have to worry about being shot)in a new subdivision for less than $350K + in the past year!

Sorry it took me awhile to respond, thanks for all the comments Chelone I have lots of relatives who have a great retirement doing what you are doing. MIL struggled to put the kids through college on a teachers salary and now in retirement is rolling in it. Keep it up I have no problem mortgaging or not mortgaging my own house. Our real estate taxes are high, probably more than many mortgages, so even if you got rid of a mortgage you are still paying 1k a month in taxes. In the above example, I probably would do option 4, if I really had a 5% mortgage I would not pay it off and probably stick part of the money in a CD paying 5.5 or whatever rate I could get above 5! To pay it off really would be leaving money on the table if you could SAFELY get more than that. I agree that Universal life is seldom a good deal and I would only do that if I thought from an insurance point of view it was a better deal than term for some reason. Otherwise I think its just a scam. The problem I had with the post that started this, if you have a mortgage at 5% and now have some extra cash, great, do not park it in your house because you really can get more at the bank. However the advisor was suggesting pulling money out (does not matter REF or HELO) just so you have it in your hands instead of it sitting dead in your house. Thats a great idea but if I am borrowing at 6% and can only SAFELY invest at 5% who is going to pay the spread? Also what about the 10k in closing costs I paid to pull the equity out? Worse what if I do follow a hot stock tip that ends up not so hot?! People are tempted when they have acess to so much cash (I think I could manage but who knows). Dave claims its an issue of safety to have too much equity without owning it outright. The HELO that was suggested would actually be one way to safeguard the eequity. Do not tap it unless you really need it, the perfect storm scenrio that Dave mentioned where people cannot tap the equity and lost their house even though they have lots of equity Thanks for the compliment Celtic, I just could not figure out how to adress the shortfall in an owner occupied property. Ia lso agree with you about the rental increase issue, 6% annally is impossible, office leases around here have a 3% increase, sometimes less. CMarlin I love your examples and you have given me things to think about. My DH thinks I am the most risk averse person on the planet so I doubt we will be competing for property (especially from NY!). In running your numbers why even invest the 500k? If your debt service at 6.7% is about 116k and your income is 144k, even assuming taxes are 20k why tie up so much? Do the lenders require this? Is it to give yourself a perfect storm cushion? Why not put aside 100k in an interest bearing acount instead and maybe put down 100k so you can cover incidentals with the rental income? I have no idea how this works. What is an SFR? Also do you buy rentals locally? You mentioned you research the areas which assumes you go outisde of your local area, do you go out of state? Just curious. What about I have Two real estate stories I think about that stop me from following your lead, I guess if prices really do drop in a mini crash maybe I will rethink it. Although there are still lots of people like me who know a bunch of people who recently got rich on real estate so we wonder if we could do the same and I always wonder about things everybody is doing, someone has to lose money doing it. Not saying you CMarlin I actually think your plan is sound except for the 6% but I assume even at 1 or 3% you will still make money (although how does that play into local tax increase, here they have been increasing taxes up to 6% PER YEAR based on the rapid increas in value of these properties). How many apartments do you feel you need to own when starting out to truly spread the risk so to speak? Also of the 144k, what percentage is overhead unrelated to taxes and mortgage. What are those expenses? Here are the stories that stop me. In 1986 a wealthy physician I know (not well) decided to invest in real estate out of state in Boston. With the 1987 crasg the condo market went belly up and they could not sell these in the late 80s. He and several others were general partners. One of his relatives who got him into this ended up losing her law licsence over this! They tried to sue him and he almost lost everything outside of this (had a large home etc) fortunately most of his assets were in his wifes name anyway for liability reasons relating to his medical speciality, so they dropped the suit when they realized this. This same guy started trading stock on margin out of his retirement account in the late 90s, his account at one point was up to 42 million! Needless to say he is still working after that market crash and he is now near retirement age My father was approached by his accountant in 1975 who was running a tax shelter. He and his partners were buying a building near Lincoln Center in NYC. At the time the neighborhood was a bad and they paid 1m for a 40 story building plus garage (400 per car per month) and retail stores in the lobby (now a Chase Bank, a drugstore and a McDonalds). Dads share would have been 100k but back then he did not have it and even if he did, well I get my risk averse thing from him! For some reason I remember telling him to invest but who listens to a 12 year old and again they really did not have that kind of money to throw out with 3 kids. In 1987 (yes at the absolute height of the market) I bought a last remaining sponser apartment in, you guessed it, that building for more than double what 10% of a 200 unit building would have cost 12 years earlier! This was a fluke dad did not realize it until he saw the purchase contract. They ended up selling the apartments back to the tenants for 10m in 1985! They kept the master leases on the garage and the McDonalds so I am sure that funded someone's retirement. The irony is this was sold as a tax shelter, it was not supposed to even make money! Dad has no regrets (well other than that 4th child they never had!LOL) he says that for every successful deal he was offered, there were 20 that failed and he would have lost his investment I know this is way too much information but its what makes me leary about real estate as an investment. I actually just want a bigger house for me and my household, I do not care if its paid off or not as long as I am not awake nights worrying about how I can pay the mortgage. Still trying to figure out how to get there Its funny I flip flop on the do it yourself investing. I hate being told what to do and need to understand it before I can commit. I also hate mutual funds as a general rule excpet for the ones that are based on indexes. I sort of get frustrated with magazines like money that seem to try to make everyone feel like they need to be in mutual funds and not just one, but a portfolio of them,. Are they secretly owned by a constortium of mutual fund. Also I wonder what an investment advisor can tell me? Its like my theory on stock brokers, if they were so great at picking stocks why would they need me to make money. No offense intended to any investment advisors. I do think an individual investor can beat the market average (or not!) even if they do not have access tp all the inside information because they have flexibility that a mutual fund running 1B does not. Then there are days when I look at my house which is basically decorated but the reality is that it lacks the fine tuning a decorator could give it but I hate the idea of living with something someone else has chosen for me(I tend to return gifts too). Its sort of like that with investing, I am not comfortable with the loss of control but I do not have the time and energy to follow this all the time

Some places use actual sale prices as the tax valuation, others use an average of sale prices in defined (at least at the tax office) adjusted for amenities (bedrooms, bathrooms, lot area, age of the structure, phase of the moon, whatever method they are allowed to use. Virginia generally requires averaging spread over some method (that the tax office does not want to discuss) but other places use sale prices. One thing that is common in areas that use 'market value' is that they often hold the valuation low enough to avoid a lot of appeals. I have never had a property (VA, NH, and other places) I would sell for the tax appraisal. It makes it hard to argue your valuation is high.

OP, I understand where you are coming from regarding the closing costs and wanting the seller to pay for your costs. Those costs are based on the amount you are financing. It costs money to borrow funds from the bank. Having the seller pay your closing costs, in addition to all the closing costs the seller already has to pay, is typical for first time home buyers. There are 3 ways to pay those closing fees: 1) the buyer pays, or 2) the seller pays, or 3) the lender pays. However, if you have the lender pay some or all of the closing fees the lender will increase your interest rate in order to do so. Having your costs paid by the lender is usually a poor option of the 3 choices because you end up paying over the entire term of the loan in the form of a higher rate. The 4th choice would be a combo of any of the 3 choices. You can renegotiate the contract at this stage or cancel. Do what's best for you in the long term. Having said the above, the others are right. If you are draining your entire savings just to purchase the house you are buying too much house. There are always additional expenses when moving to a new place and unexpected expenses when you own.