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Is Buying or Renting a Better Choice? And Other Questions Answered

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Friday's Curbed U. open thread generated a number of questions. Today, Krae Van Sickle of Saunders answers them! Thanks, Krae!

Q How many years do I have to stay in a house to make buying a good choice over renting?

A From a cash flow point of view, if your rent starts to approach the amount you would pay for mortgage payments, maintenance, and utilities (if you are not already paying them as a renter) then it starts making sense to buy. Of course, you have to have a down payment and good credit these days, because getting a loan is not a slam dunk anymore. It makes sense to submit your financial information to a mortgage broker and have them give you an idea of what amount you would qualify for, what your closing costs and monthly payments would be. Maintenance costs depend a lot on the condition of the house you ultimately choose, but 3% of the cost of the house per year can be a very, very imprecise rule of thumb.

Q If you make an offer to purchase a house and make a good-faith deposit with the offer, and then you have to withdraw the offer because of an unanticipated job transfer to a different state, is the deposit forfeited to the seller?

A Here in the Hamptons and in most of NY State, a deposit is not put down until there are signed contracts. So if the premise is that a deposit has been made, then that means contracts have been signed as well. Once a contract was signed, unless there was a contractual contingency in the contract specifically providing for a buyer being able to get their deposit returned because of a move, the deposit would not be refundable, even if the buyer walked away because of a job transfer.

Q The buyer [perhaps you mean the seller here?] is willing to accept my offer but now wants to close 3 months later as they can't move out yet. This will eat into my summer and delay the work I was going to do on the house before summer. It will also mean high mortgage rates for me (longer lock period or general increase by then). Any suggestions?

A I had just such a situation with a contract I successfully negotiated last week. The agent has to impress upon the owner the value of the summer in real terms to the buyer. The agent needs to determine the value of the rental were that house to be put on the market for rent. That value is the amount the buyer is attributing to their ability to get into the house for the summer. If they don't get to use it for the summer, they may decide to walk away and find someplace they can get into for the summer, or they may want the seller to give them credit for that amount so they can go rent another place for the summer. You can also quantify the cost of the risk of losing the lock on their mortgage as a way of convincing the seller that it is important to try to accommodate the buyer.

Q Regarding the Peconic tax, how can a first time homebuyer find out about the exemptions that are available?

A There are few exemptions that would ever apply to anyone buying out here but if someone wanted more information they could call the people at land acquisitions for EH Town: Scott Wilson, Land Management Specialist III, 631-324-7420. Or refer to this fact sheet. Or call the Peconic Land Trust. I hope this answers your questions and let me know if anything is unclear.