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this post was submitted on 10 Dec 2023
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My brother in law took out 200k from his 401k to put a down payment on a $1.2mil USD house (in 2023) that sold for 600k in 2019, is currently assessed at $650k, and is surrounded by houses currently for sale under $700k.
His intention was to pay back once he sold his previous house, but he found out nothing the previous owner (of his old house) did had permits, and the entire house (including his own kitchen remodel by an unlicensed contractor ) was not up to code.
So he had to sell the old house “as is” or he wouldn’t be able to pay the first mortgage payment on his new house that’s over $8,000/m.
What a moron.
How does that even work? Was the '23 assessor drunk?
You’d be surprised how much “market value” has nothing to do with worth.
If you put 200k of your own money in, the assessor is probably like whatever. Try that shit with a VA loan and see how it goes. I couldn't build a 360k house in a neighborhood of 280k homes even though we were looking to build a much nicer home than the other houses - I mean that money was going into valuable upgrades like more square footage and a three car garage and a partially finished walk-out basement. It was on the leading edge of the massive housing price increase and before the interest increase. VA appraiser said we'd have to bring 60k to the table and that's what we'd be underwater. Well to knock 60k from the cost we wouldn't even be upgrading the square footage from our current home. And while I might've considered it, my wife said absolutely not if we were underwater.
Now every house in the neighborhood is like 400-450k. I would've been very happy I made that deal. Anyway now we're stuck in our current house until our kids graduate. We'll see what the market is like then. Can't keep climbing stairs forever.
Oh, I meant I'm not understanding how the value of the new house was halved over the course of this year. OP said his brother paid $1.2MM in 2023, but the house is now valued at $650k. Admittedly I'm a renter and I don't really "get" the housing market, so a house going from $600k to $1.2MM over 4 years makes sense to me, but to halve in under a year seems drastic.
You can go to the county assessor website and view the sales history of every property. I could see that in 2019 homeowner Paid an amount nearly half of what they sold for. I’m sure you noticed a dramatic increase in rent between 2019 and 2023. Do you think these apartments are suddenly worth more? The answer is no, and the same goes for housing. Housing prices have increased dramatically for various reasons that are unimportant for this conversation. The problem is, those housing prices aren’t real. It’s just what people will pay.
Really what I’m trying to get at is that he paid nearly double for a home in an area with similar homes that are currently going for significantly less because he’s an idiot. Another humorous detail is that he used the same realtor he used to buy his first house, a house that did not get an inspection, needed a roof replacement, and had a crumbling foundation. 
Holy shit. Thank you, now I get it. He just made one HELL of a bad deal. I read your update; your brother's wife should probably take away his checkbook 🤣
Their partner is even worse. Apparently they spend all their money each month. They have a great job, so idk how they do it. They absolutely refuse advice. I swear, if I told both of them how to breath, they would stop out of pridespite.
My coworker did this too though not at such an extreme level. Instead of saving cash like I did with an equivalent income and family makeup, he decided to take a 401k loan for a down-payment on a house. This would be fine except he acts like he's a financial genius and belittles others for doing it without taking out loans to pay for other loans. This same guy was recently talking about cashing out the rest of his 401k because of the recent market downturn and called me an idiot for increasing my contribution amount. I guess he lives by the "buy high, sell low" mantra.