Home Budget: The Pastor’s House


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.

Train Wreck Tuesdays are a weekly post of horrible financial mistakes. They are posted anonymously.


    Leave a Reply