[Plinker]

My wife and I retired, full time, to TV 3 years ago. The home was 4 years old at that time. We paid cash and 3 days later paid the the bond off. We have no intention of moving. If we had not paid off the bond then it would have always bugged us that we really never fully paid for the house. Realtors only care about a fast sale and a fast commission. If a realtor told me I would not recoup the bond cost, I would simply hire another realtor.

[tvbound]

Originally Posted by Two Bills

My philosophy on any debt was simple.
If my capital was earning more than the interest on the debt, keep the capital.

We feel the same way. When we eventually purchase, while the bond will be a part of the equation of what we choose to purchase, since we will be buying used (between 466 & 466A) it will only be a small part of the equation.

[retiredguy123]

Bond debt and mortgage debt are very different. When you sell your house, potential buyers won't care about your mortgage because it will be paid off at the closing. But, they will care about the bond. Unfortunately, many potential buyers would rather assume the bond debt than reimburse you for having paid it off.

[Bill14564]

I don't recall any difference in asking price for houses with the bond paid off. Zillow and other estimates are based on the value of the home and don't consider the bond or any other liens. Sellers and buyers both use those estimates. It is unlikely that a seller would price their home at less than the estimate due to the bond and it is unlikely that a buyer would pay more than the estimate for a home with no bond.

You only "recover" the bond if you can convince a buyer to pay more for your home than the same home down the street. It is going to be going to be difficult to convince them to pay $20K more today in order to save $1,500 in bond payment three years from now when they can get the same house for $20K less down the street.

[Arctic Fox]

Originally Posted by dewilson58

Not sure if it's funny or sad when buyers do not consider bond balance when purchasing a house. "my house is for sale, oh by-the-way there is a $40,000 lien against it but you can ignore it"

especially when there are so many questions about the bond on TOTV. People are confused/concerned about the bond AFTER they have bought their house, whereas they should factor it into their buying decision.

I chose to pay it off and be done with it.

[CoachKandSportsguy]

So I don't get some responses, the house appreciation without the bond is now greater than the bond, and some say that I won't get the money back if I pay it off? with that logic, no matter how high the house value gains, you will never get the bond paid off back. . .

So for simplicity, house was purchased for $350,000 two years ago, the bond is $30,000 and the current house price is $380,000. Lets use another $15,000 price appreciation for the next year. I list the house for 399,000 sell for 395,000, gain is $45,000 and the bond paid off was $30,000. so you are still saying that I am not getting my bond money back still?

The difference is that I don't have to pay for rented money, the interest of which may or may not be deductible in an audit, but only 20% deductible, so I am still paying rental fee of 80% of the interest payment. . . versus the risk of losing income, assets, whatever, and not being able to pay the bond. . .

I think there are alot of old realtor tales out there. . .

So where is the logic wrong that I am not getting my bond money back?

sportsguy

[retiredguy123]

Originally Posted by CoachKandSportsguy

So I don't get some responses, the house appreciation without the bond is now greater than the bond, and some say that I won't get the money back if I pay it off? with that logic, no matter how high the house value gains, you will never get the bond paid off back. . .

So for simplicity, house was purchased for $350,000 two years ago, the bond is $30,000 and the current house price is $380,000. Lets use another $15,000 price appreciation for the next year. I list the house for 399,000 sell for 395,000, gain is $45,000 and the bond paid off was $30,000. so you are still saying that I am not getting my bond money back still?

The difference is that I don't have to pay for rented money, the interest of which may or may not be deductible in an audit, but only 20% deductible, so I am still paying rental fee of 80% of the interest payment. . . versus the risk of losing income, assets, whatever, and not being able to pay the bond. . .

I think there are alot of old realtor tales out there. . .

So where is the logic wrong that I am not getting my bond money back?

sportsguy

The house appreciation is irrelevant to the bond calculation. Assume you have two equal houses for sale, one with a $30K bond and one with no bond. A potential buyer is not willing to pay $30K more for the house with no bond. That is just the way the market works. So, the seller who paid off the bond is at a disadvantage when selling their house because they will not recover the money they spent to pay off the bond. My opinion and I think most real estate agents will tell you the same thing. You can price a house anyway you want, but that doesn't mean you will get your asking price.

[Topspinmo]

Originally Posted by Bill14564

I don't recall any difference in asking price for houses with the bond paid off. Zillow and other estimates are based on the value of the home and don't consider the bond or any other liens. Sellers and buyers both use those estimates. It is unlikely that a seller would price their home at less than the estimate due to the bond and it is unlikely that a buyer would pay more than the estimate for a home with no bond.

You only "recover" the bond if you can convince a buyer to pay more for your home than the same home down the street. It is going to be going to be difficult to convince them to pay $20K more today in order to save $1,500 in bond payment three years from now when they can get the same house for $20K less down the street.

Zillow is a only wishful guess. It’s only worth what some will pay. Even if it’s over the appraisal. House down street sold in 1 day but there was bidding war for week way over the appraised price, yes it was corner lot, on golf course, and bond wasn’t paid off.

[Bill14564]

Originally Posted by CoachKandSportsguy

...

So for simplicity, house was purchased for $350,000 two years ago, the bond is $30,000 and the current house price is $380,000. Lets use another $15,000 price appreciation for the next year. I list the house for 399,000 sell for 395,000, gain is $45,000 and the bond paid off was $30,000. so you are still saying that I am not getting my bond money back still?

...

The selling price of the house is $395,000 and the gain is $45,000 regardless of whether you paid off the bond, that is just the market price.

If you paid the $30,000 bond then your net profit on the house is $15,000.

If you didn't pay the bond then you made about $6,000 in payments on that "rented" money over the course of those three years. You passed the balance of that $30,000 bond to the new owner and your net profit is $39,000.

The house sells for the same price either way. The difference is in how much you took out of your bank account during that time.

[spd2918]

This issue has been asked and answered in many threads.

Most buyer expect to be pay a bond balance. If yours is paid off it will benefit you if you keep it, but won't benefit you if you sell it.

Are buyers foolish to not consider bond balances? Yes. Are sellers foolish to think a bond paid off early will greatly increase the value of their property's value? Yes.

[Stu from NYC]

Originally Posted by retiredguy123

The house appreciation is irrelevant to the bond calculation. Assume you have two equal houses for sale, one with a $30K bond and one with no bond. A potential buyer is not willing to pay $30K more for the house with no bond. That is just the way the market works. So, the seller who paid off the bond is at a disadvantage when selling their house because they will not recover the money they spent to pay off the bond. My opinion and I think most real estate agents will tell you the same thing. You can price a house anyway you want, but that doesn't mean you will get your asking price.

Agreed was about to say the same thing but you beat me to it.

[dewilson58]

Originally Posted by retiredguy123

A potential buyer is not willing to pay $30K more for the house with no bond.

Are there that many stupid buyers out there??


$300,000 house, no bond
$300,000 house, $30,000 bond (a/k/a lien)
Same selling/buying price????

[retiredguy123]

Originally Posted by dewilson58

Are there that many stupid buyers out there??


$300,000 house, no bond
$300,000 house, $30,000 bond (a/k/a lien)
Same selling/buying price????

Yes. I don't think you will get $330,000 for the house with no bond. And, I don't think an agent will want to price it at $330,000 because it will not be competitive with an equal house priced at $300,000 with a $30,000 bond. Another problem can be that the loan appraisal may not be high enough to get a mortgage on the $330,000 house.

[dewilson58]

Originally Posted by retiredguy123

Yes. I don't think you will get $330,000 for the house with no bond. And, I don't think an agent will want to price it at $330,000 because it will not be competitive with an equal house priced at $300,000 with a $30,000 bond. Another problem can be that the loan appraisal may not be high enough to get a mortgage on the $330,000 house.

I have not been exposed (which doesn't mean it's not out there) to these stupid people.


The appraisals will be the same. It's up to the banker to determine the max loan they will issue given the two different net values and being second in line behind a $30k lien on one property.

[Bill14564]

Originally Posted by dewilson58

I have not been exposed (which doesn't mean it's not out there) to these stupid people.


The appraisals will be the same. It's up to the banker to determine the max loan they will issue given the two different net values and being second in line behind a $30k lien on one property.

I'm not sure it's considered a lien on the property, at least from the mortgage perspective. I'll have to dig out my title paperwork but I don't recall the bond being listed and I'm sure that while the banks for the primary and secondary mortgage insisted on being listed on the home insurance, the bond did not.