Tuesday, November 1, 2011
Geez, where have I been?
With the market basically flat for the last two years there's just not that much to write about. Sure there are a few stupid listings out there and there is still a fair share of fraud and funny biz going on (inside deals selling for way less than they should etc) but it's a lot harder to find and I just don't have the energy to search through every listing to find that stuff. And as you may have guessed I did finally buy a place early last year. I didn't get a "smokin" deal in fact I probably overpaid slightly based on comps but we wanted the house and were willing to pay a little more than we wanted to get it.
Since I did actually purchase a house in this market I will offer my insights into the buying process. First off the market it TOTALLY rigged right now. Good deals are all inside deals where the realtor already has a buyer, a friend or investor they are working with. You and me have no chance of getting one of those. Trust me I tried! If you are thinking you are gonna lowball, forget it.
You need to do your research and offer a fair price based on current comps. It's not hard to find comps and if you have been looking you can check and see what the homes you have looked at are closing for. This will give you a good feel for the actual market value of properties.
If you are using a buyers agent you are at a disadvantage in this market. For total noobies it might make you feel better to use your own buyers agent but the reality is you have a MUCH better chance of getting your offer accepted if you go it on your own and just go directly through the selling agent. The prospect of collecting both ends of the commission seems to really "help" out your offer! (surprise, surprise).
I submitted approximately a dozen offers. 5 of those were submitted by a realtor for me and NONE were accepted even though they were fair offers. That's when I decided to go right to the selling agent myself. My first offer was $70k under list price (which was way high based on comps). I really though we had that one but the seller took another offer and we were the first back up. The home was a short sale and took 9 months to close. It closed for exactly what we offered. I spoke with the listing agent and the reason they went with the other offer was that they thought we did not have enough cash reserves. Offers 2 and 3 were accepted but we backed out after inspection problems. We then offered on a new home in the Stellan ridge developement. The home was listed at nearly $600k, we offered $550k but the builder would not go lower than $570k. Than home sat for another 4 or 5 months before finally selling for ..... $550k! I'm SO glad I did not buy that property. Our next offer on a short sale was accepted and we went under contract to purchase. The bank screwed this one up and ended up foreclosing on the home. We could have bought it at the trustee sale for $50k less than our short sale offer. When it hit the market as an REO 6 months later we put in another offer with the listing agent and moved in 30 days later. And yes, we still paid $50k more than we could have got it at the trustee sale.
So as you can see nearly every offer we made going through the selling agent was accepted. All the offers we made with a buyers agent were ignored or rejected. You do need to be comfortable enough to do this but you can always pay someone to look over your documents.
Our deal was pretty smooth but the appraisal was still a joke. The comps the guy used were ridiculous and the appraisal came in probably $30k higher than it should have in my opinion. I was hoping for a lower appraisal so I could negotiate the price down a little but that didn't happen. The appraisal came in $1k over our offer price (hmm quite the coincidence eh?) So did I over pay? Maybe a little but after we purchased 2 more identical model homes sold for prices very close to ours so it seems our number was actually pretty good.
What's our place like? We got nearly everything we wanted in our home. It's just under 4000 s/f and it's a single story home in Woodcrest, (like we wanted). It sits on just over an acre of land. It does have the dual 2-car garages that I wanted so bad. The wife and kids got the pool they wanted and it has a gorgeous view overlooking Riverside. It did not have everything we wanted. It has carpet and tile, we really wanted hardwood flooring. The kitchen cabinets are lighter than we really wanted and the appliances were not the high end stuff we were after. But those things can be changed. The location and the view cannot. Being an REO it did need painted and a few minor repairs but overall the home was in great shape (probably a cash for keys deal).
Overall for us the buying experience was not too bad. Of course we did have to wait a few years for the market to correct. And to be honest we could have probably bought at least a year or more earlier than we did. We started making offers in late 09 but could have started in late 08 and probably got about the same price (better selection back then too). We also lost a few months using an agent. Once I realized that going through the selling agent was the way to go our offers seemed to get "top billing". Agents are scrambling to make a buck and the easiest way to pad that pay check is to work both ends of the deal. Which is why offers submitted directly to the selling agent look so much better to them. We had a few hiccups but once we were in escrow everything went fairly well.
Unlike many areas I really do feel the IE is at the bottom or so close to it that it's a good time to buy. Especially with the interest rates right now. You actually can buy a home for less than the cost of renting a similar place. BUT, you better be ready to stay because I think that prices are gonna be flat for quite a few years. So if you need to sell after only a few years, the selling costs make it likely that you will lose money. So buy, but buy for the long term.