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Our house contract deal is going bad. Contract buyers were supposed to get their own financing within 3 years. The end of the third year is rapidly approaching and I need some guidance on our worst case scenario here -- they don't get the financing and walk.
Here's how I see our options.
Renegotiate It's costing us $4,000/year for them to live in this house. Its not ideal and I'm not even sure its what they want but it may be an option. If they don't get approved for this financing they're working on, I think we could reasonably expect it to be another 2 years for them to get their ducks in a row totaling $20k we've forked over on this deal -- and that's if our insurance/tax expenses remain the same which is probably wishful thinking. The only upside here is that we will recoup a little of the cost simply from the amount they've paid down our mortgage.
Save to sell I estimate its going to cost us around $19,000 to sell ($7k tax credit we have to repay, $10k realtor fees, $2k closing costs and other mumbo jumbo). I *think* we can sell for approximately $10-15k more than we owe. Downsides here are that we'd be putting it on the market in December which isn't ideal here and theres a good chance selling is going to wipe out our entire savings. Once the house is vacant, the mortgage payment will be more than we can afford without dipping into savings monthly so it has the potential to get ugly really quickly. If our savings diminishes, we could have to turn away offers on the basis of not being able to cover the difference and at the same time we'd be struggling to make the payments.
Save to move When we took on this contract sale, we did purchase another house. Our current home is a fraction of the size and cost of the house we moved from. We loved the old house but wanted to be closer to family and free up some cash to get our finances in order. The contract house is 2.5 hours from where we are now and my job could easily transfer back to that area. Its a very real option for us to move back into the house...but we don't really want to. We like our smaller digs, the area we're in and we eventually want to move abroad and keep our current home as a rental so we have a place to come back to eventually. Financially speaking, this may be the best option but it will severely hinder our future plans since we won't be in a position to save as much, kid costs will go up with not having family near by, etc. If we were to move, we'd likely keep and rent the smaller house which might bring in $200/mo after taxes and insurance but that doesn't take into account maintenance, vacancies, etc. The upside here is that the risk of renting a house with a $400/mo payment is much smaller than the risks with renting a house with a $1,200/mo payment. If we were to move back in, there is a finished basement with two bedrooms a bath and separate laundry that we could consider renting to help off set the larger payment, but in the end its still just a short term fix because we don't want to stay in that area and eventually we'll be looking to sell.
Selling the old house on contract/renting to another famly isn't an option. We learned our lesson and need to get out from under this weight. I feel very stuck and don't feel like any of these are good options. WWSAD?
ETA: FWIW, we finished paying off debt in December and since transitioning to savings mode we've saved up about $5k. I anticipate this amount to be near $12k by the time the contract expires.
Let me know if you need any additional details. I super appreciate any thoughts/input.
Here's how I see our options.
Renegotiate It's costing us $4,000/year for them to live in this house. Its not ideal and I'm not even sure its what they want but it may be an option. If they don't get approved for this financing they're working on, I think we could reasonably expect it to be another 2 years for them to get their ducks in a row totaling $20k we've forked over on this deal -- and that's if our insurance/tax expenses remain the same which is probably wishful thinking. The only upside here is that we will recoup a little of the cost simply from the amount they've paid down our mortgage.
Save to sell I estimate its going to cost us around $19,000 to sell ($7k tax credit we have to repay, $10k realtor fees, $2k closing costs and other mumbo jumbo). I *think* we can sell for approximately $10-15k more than we owe. Downsides here are that we'd be putting it on the market in December which isn't ideal here and theres a good chance selling is going to wipe out our entire savings. Once the house is vacant, the mortgage payment will be more than we can afford without dipping into savings monthly so it has the potential to get ugly really quickly. If our savings diminishes, we could have to turn away offers on the basis of not being able to cover the difference and at the same time we'd be struggling to make the payments.
Save to move When we took on this contract sale, we did purchase another house. Our current home is a fraction of the size and cost of the house we moved from. We loved the old house but wanted to be closer to family and free up some cash to get our finances in order. The contract house is 2.5 hours from where we are now and my job could easily transfer back to that area. Its a very real option for us to move back into the house...but we don't really want to. We like our smaller digs, the area we're in and we eventually want to move abroad and keep our current home as a rental so we have a place to come back to eventually. Financially speaking, this may be the best option but it will severely hinder our future plans since we won't be in a position to save as much, kid costs will go up with not having family near by, etc. If we were to move, we'd likely keep and rent the smaller house which might bring in $200/mo after taxes and insurance but that doesn't take into account maintenance, vacancies, etc. The upside here is that the risk of renting a house with a $400/mo payment is much smaller than the risks with renting a house with a $1,200/mo payment. If we were to move back in, there is a finished basement with two bedrooms a bath and separate laundry that we could consider renting to help off set the larger payment, but in the end its still just a short term fix because we don't want to stay in that area and eventually we'll be looking to sell.
Selling the old house on contract/renting to another famly isn't an option. We learned our lesson and need to get out from under this weight. I feel very stuck and don't feel like any of these are good options. WWSAD?
ETA: FWIW, we finished paying off debt in December and since transitioning to savings mode we've saved up about $5k. I anticipate this amount to be near $12k by the time the contract expires.
Let me know if you need any additional details. I super appreciate any thoughts/input.
I mean this in the nicest, most complimenting way possible. Love the advice I get here.
thought this was way more than people would pay!) and am personally shocked by the amount of interest we've gotten since I listed it. We're going to go up next weekend to show it and meet the candidates. We aren't 100% sold on co-habitating with strangers but if there is someone that would be a good fit, we might give it a shot. It would free up that money to do some improvements on the house and continue saving at a rate we're comfortable with, plus it makes use of space thats otherwise going to sit empty because the house is plenty big for us even without that space. Additionally, we're looking to refi the house which will bring our payment down about $350/mo. While we still have some kinks to work out (school for DD, etc) I'm comfortable with where we've settled and actually a little excited. 
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