Home Budget: The Pastor’s House
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My wife was seven months pregnant. I just landed a new job making $15,000 more. We just saved $9,000 dollars. We were ready to buy a house. Our first house. We had enough in the home budget.
We found out our Pastor was selling his house. He was working on buying a new house, contingent upon unloading his former home right away. We’ve been to his house many times, and it was dated but large. Big enough to raise a family. We wanted it. This is in December 2000, and the housing market was booming.
We lived in a depressed area and house prices hadn’t inflated. He wanted $70,000 for his 2500 square-foot Victorian. The appraisal came in at $62,000. In order to buy his new home, our Pastor needed to sell at $69,000. He was a good friend, and we were sure he wouldn’t set us up for a bad deal. After all, he’s our Pastor, right?
He needed everything right away, and didn’t have time for us to get a loan. We had very little credit and weren’t sure if we could get a loan, anyway. Our Pastor suggested a Land Lease Contract. The terms were simple: We pay $700/month and $9,000 down. This sounded fine. In a few months we could get a loan and buy the house. That night we signed the deal and gave him a $9,000 check.
Boy, were we taken for a ride. We have been in this house for over six years. The contract for the Land Lease was so vague that no lender could figure out how to support us. The $9,000 we paid our Pastor initially wasn’t good as a down payment on a loan, months — even years — later. Lenders wanted us to start over and make another down payment. In effect, we had given away $9,000. What a shame. Since then we’ve never been able to save $9,000.
Within six years we’d paid over $11,000 for improvements and repairs. We found out quickly that this house was falling apart. It’s over 125 years old and has seen very little maintanence. As brand-new home buyers, we didn’t realize that we should have had an inspection done, even when a friend — a Pastor — was selling us his house. If we had had an inspection, the “sale” would never have happened.
Two years after we moved in, the “rent” was lowered to $500/month. We’ve paid about $40,000 in “rent” on the land lease. Now the housing market has seen a downturn and this area is even more depressed. Most homes in town have been on the market well over two years.
By the numbers we’ve sunk $60,000 into a home that appraised at $62,000. We should own this house by now. But we don’t. If we buy this house we’ll have to finance an additional $60,000. If we finance that money at 6% for 15 years we’ll still be paying $500/month. At the end of the loan we’ll have paid $90,000 with interest. That brings the total price of this house to $150,000! How is that for a poor home budget.
Friends don’t set up friends with a bad deal.
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seems like your pastor screwed you!
however you need to subtract out the price of actual rent you would’ve spent during the same time period.
Also, have you been claiming any sort of tax deduction?
You might be able to hire a lawyer and sue your pastor. He definitely acted in bad ‘faith’.
Dang. I mean double dang!
Does the pastor still hold the mortgage? If you’ve been paying it all this time, then couldn’t he just sell it to you for what’s left on the mortgage? Is he still your pastor????
I used to work at a real estate company and heard horror stories like this. In most cases you’d have to be crazy not to get a Realtor to help you with the purchase, after all you’ve got nothing to loose since the Realtor usually makes commission off of the sale of the house and buyer pays nothing (that is how it was in our market).
Before I buy a house I am always going to at least talk to a Realtor.
as everyone mentioned, that is definitely a tough situation. I’m assuming that the poster knew some of the necessary precaution to buying a home, but unfortunately a good friend turns out to be not such a good friend.
since details of the land lease aren’t mentioned, it’s tough to say what the possible legal recourse could be.
Orrin: it’s true that getting professional help before buying a home can be a good idea, but there are definitely ways a buyer can be taken advantage of buy a realtor (e.g., push for homes you can’t afford so they can ensure of a sale), and to be sure, it’s not always the seller thats paying the commission or closing expenses.
couple random points to take away:
1. never sign a contract without carefully reading it. if you can’t understand the terms, consult a professional.
2. always have an independent physical property inspection (and be there while the third party do it too) don’t always rely on an appraiser from sellers source or mortgage company, etc.
You should tell him that God’s mad at him and see what he says. Go talk to his superior at the church - that may light a fire under him. You aren’t altogether blameless here but YOU TRUSTED YOUR PASTOR, after all!! That’s SUPPOSED to be ok!
[...] 2. Financial Train Wreck - The Pastor’s House [...]
i think it’s pretty crummy to post this and then not tell us what’s going on with it!
Maya,
This is a horrible financial train wreck. Once there are updates from the home buyer we will post them.
Great, thanks.
When you’re a young person, and all excited about getting a new house, it pays to have a parent or wise older adult to reel you in and force you to do a reality check.
It’s a wonder I didn’t run into more trouble when I bought my house, I was just so thrilled to find a house I could afford that I didn’t see a lot of problems. If I had to buy the same house today, I wouldn’t.
But, my mom and dad DID talk some sense to me, and I credit my savings and loan company with doing a good job with many of the details that I was too young to know about (like an inspection).
Lessons learned? Always look a gift horse in the mouth. Even if it’s the preacher. Especially if it’s the preacher, because so often they are horrible with financial stuff. I’ve seen it more than once.
Kathy: Great point! Buying your first house while you’re young (or in any age) can certainly be exciting, and it is indeed that very feeling that many of us fail to take proper care or thought into our purchase process. We’ll have an article covering more on first time home buying in the weeks to come.