patrick.net

no your money will spend better in a few years. your down payment would do better in a money market fund. houses are for living not for profit silly.

Danimal says

no your money will spend better in a few years. your down payment would do better in a money market fund. houses are for living not for profit silly.

Danimal, I do plan to live in this. I'm not in that much of a hurry as we're currently living in a property that has been completely paid off with a low property tax basis. It's just that it's been partitioned out into a few rental units and I wanna get the heck out of there. I don't mind 1 rental unit in the same building but there is currently 3. The rent that would come from the place I'm currently living in will cover all of the mortgage on this new property.

Side question for you, I'm curious if you supplied your comparable data with your original offer? I'm wondering if the deal was accepted because the chase employee sifting through these deals had enough data to warrant the sale and do a full CYA on it with the data you provided?

Prices don't seem to be fluctuating too much right now, up or down. Good sales data, bad sales data it probably won't matter much, you're not likely to see a massive shift in housing prices regardless. There are a lot of hungry investors waiting for a deal to come on the market, when prices move down there will be buyers to hold these price levels.

For this house to become a poor investment choice, it would have to drop from 550 to 460ish. As most have said here, anything under about 500K is being bought up these days by investors. If this house were to drop to 460, it would be snapped up by one of them. You aren't going to be able to send in an offer of 400K for that place and get it in 6 months, it will be gone, like many homes if they started dropping in value. If you could turn around and sell the home for 540K, you've already got a fairly decent safety margin built into the deal.

pkennedy says

Side question for you, I’m curious if you supplied your comparable data with your original offer? I’m wondering if the deal was accepted because the chase employee sifting through these deals had enough data to warrant the sale and do a full CYA on it with the data you provided?

I did not personally supply any comparables for the initial offer. $430k was outright a low ball offer that should not have been responded to in the first place. But as time passed, it started to look a little bit better. I was under the assumption that the listing agent provided Chase some comparables but I cannot be certain. The comparables I gave to her were for houses that are identical but located on the other side of Skyline Blvd where it's practically next to the Pacific Ocean. Those houses are not desirable but Chase does not know that. I guess you can say with the help of an unethical agent on my side (to some extent), we are pulling a fast one on the bank. I haven't found her very resourceful aside from her telling other interested parties that the offer pending was for a very high price, discouraging people to even offer. And I guess even if they do offer, it's going into the shredder, but she doesn't want to resort to that.

pkennedy says

There are a lot of hungry investors waiting for a deal to come on the market, when prices move down there will be buyers to hold these price levels.

I totally agree on this. I actually need my father's approval to purchase because he will be doing all the renovation. So he calls the shots, regardless of who is paying. But it seems he's finally caught onto the mainstream media regarding lowest sales in history, etc., and etc. I also know that if listing prices went to an average of $399k, that he will NOT be willing to blindly bid to $450k since it seems like overbidding is required around here anyways. I can take the deal against his will. But if he turns out to be right, it will kind of be disastrous for our relationship.

I would present the facts you've got.

Bid is pretty low, and comps used where probably not the best, bank has accepted.

House appears to be valued around this much.

What will happen if prices drop? A bidding war.

560 to 399 would be a pretty big drop, and there are a lot of people who can afford 500K, so at 400, there would be masses of people jumping on it.

Vain, I am curious why you would offer a 200K-250K downpayment? It is not like there is any value to putting more down. I would put as little as possible to get the best interest rate possible. That looks to be either 20% or 30%.

SF ace says

Vain, I am curious why you would offer a 200K-250K downpayment? It is not like there is any value to putting more down. I would put as little as possible to get the best interest rate possible. That looks to be either 20% or 30%.

Personally I like the higher down payment strategy unless he's going to make at least 4.5%(current rate) by investing the down payment some where else. What do you think?

I rather keep the money for flexability. You can always drop a huge payment later on for the same effect. It doesn't work the other way around. (You just put in an extra 100K with no related consideration)

The other strategy is to go with a 15 year loan to cut interest rate to 3.75% if there is so much excess capital lying around.

"I can instantly relist it back on the market and can most likely get $540k-$550k."

Um if you could, then your offer wouldn't even be considered.

SF ace says

I rather keep the money for flexability. You can always drop a huge payment later on for the same effect. It doesn’t work the other way around. (You just put in an extra 100K with no related consideration)
The other strategy is to go with a 15 year loan to cut interest rate to 3.75% if there is so much excess capital lying around.

Banks like cash more in case of distressed property so that it don't drop in escrow due to financing issue.

Does anybody care that the real estate agent is actively discouraging other offers. The market cannot get better with all the fraud and collusion. Buyer confidence will continue to erode. Agents have a fiduciary responsibility, they're no better than bad banks. W.C.Fields

SF Ace, E-Man, dadab,

I am using a large payment exactly as E-man suggested. I'm 29 years old earning mid $40k's a year. I can have my sister co-sign into it but we like positive cash flow in the event we have to rent the place out. I do not plan on selling this place, ever. Walking away due to being under water will not be an option, even if I do become unemployed since we have rental properties that have been paid off. Plus I have not seen these houses go below 200k in my life time. I will never be under water; only losing down payment. I haven't really looked into investing much and I do not feel like I can get a better return on my money than 4.5ish percent. These bank interest rates are ridiculously low, and I'm sure it's to force savers to spend. And it looks like it will work on me. Back when Wamu was around with their higher interest savings account, I was able to live off interest income. But that is not the case now.

Tenouncetrout says

“I can instantly relist it back on the market and can most likely get $540k-$550k.”
Um if you could, then your offer wouldn’t even be considered.

10oz, yes I know the offered should not be considered. But the bank is currently a victim from me giving them bad comparables. Only the local people will know about it. Flippers are selling these properties in the $600k range.

thekettle says

Does anybody care that the real estate agent is actively discouraging other offers. The market cannot get better with all the fraud and collusion. Buyer confidence will continue to erode. Agents have a fiduciary responsibility, they’re no better than bad banks. W.C.Fields

Hey kettle. I know it's wrong. But what goes around comes around. Before I started to allow agents to double dip, it happened to me. Technically speaking, the agent is not lying. Her definition of "very high" may not be high to others. Same with the agents doing the "multiple offers" tactic. That statement makes buyer agents think there must be high offers, and will in turn, have the commission hungry buyer agent urge the buyer to over bid. I am willing to bet many "multiple offer" scenarios that are actually true could very well be low ball offers.

No. Numbers don't add up. you cannot afford to make this risky investment. My $.02. Listen to 10, the market price is the market value. Also, you don't earn enough to buy this house. You'd probably need north of $150K per yr in income to justify it. Plus, crappers like that are going for free in many other cities. There's a huge downward spiral and your city could very well be sucked into it. Did I say FREE? nope, I meant negative. Some people are paying/putting in money to get rid of the anchor of a little dumper house.

So, that's opinion and maybe worth nothing or negative just like the house may be. But i'd concentrate on finding a better paying career/job than getting sucked into the housing mess.

W.C.Fields

Well...I wouldn't be as harsh as maxweber...but I sort of agree. $460k for 1180 sq ft? Rent your existing residence and move to somewhere like AZ where $460k gets you 3x to 4x's the sq footage and probably a pool for that price.

Yeah, okay, you don't want to move to AZ or anywhere. However, like everyone on this forum, I understand CA is a different market but don't lose sight of the fact that CA has been so far out of line with the rest of the US that it has a long, long way to fall. That or the average resident in CA needs some serious wage increases which, you might agree, won't be coming. So, do I think your 1186 sq ft residence will be worth less down the road? Absolutely. Will it fall to AZ levels? Well, no but $460K will be look like a premium price in the future. Trust me...I've been through that feeling :(.

I suppose the good news for you is that you look like you have done a lot of research and won't get totally killed if you buy based on your wants. With your downpayment, etc you won't go broke even when the long term price adjustments happen...forcing the price down over time. I think the real question is do you like it enough to buy it to live in EVEN if it turns out (long term) to be a poor "investment". Right now, what would you invest in at this point that has reliable returns anyway. If you LOVE it, then it's money spent with a purpose. Good luck!

Has anyone even bother to notice that, net of rent, principle repayment and upon in law addition, Vain's cost is 0? In a place that rents for 2000-2200 a month.

@dittomichel
CA is in line with many other large cities. Look at New York or any other major cities. Wages are far higher in these cities than in AZ, there is high demand for housing close to a city, unlike AZ commuting in from 20+ miles is extremely painful, creating 90 minute commute times easily.

Comparing other inland cities of California with Arizona or other areas of the US is fair. Comparing pricing of one of the largest metropolitan areas in the country with Arizona? Average wages here are significantly higher as well. Along with those higher wages, tax deductions increase for when purchasing a house, so the ability of a buyer to pay for these large loans is feasible.

dittomichel says

Well, no but $460K will be look like a premium price in the future. Trust me…I’ve been through that feeling :(.

Actually now that I think about it, this home would call for a premium price. There are only a handfull of homes there that have a view of the Golden Gate Bridge from a picture window in the living/dining room combo (I'm thinking 90 homes. Three blocks have the view, assuming 30 homes each block. But my opinion is premium may not be the same for others. I'm probably lucky that the guy doing the BPO did not even go inside the home to see this.

Dittomichael, now that I think about it, you're right. I never knew what was really in my mind when I'm hesitating on this offer. I don't know if I like this place enough to know I have overpaid for it in say... 10 years.

SF Ace, yeah I know that the cost is close to $0 and may even have positive cash flow. But what wouldn't be able to stand is if I could benefit even more by waiting. We really do not know how it is to purchase homes for consumer use. My family has always bought "Contractor Specials" - which are between fixxer uppers and teardowns. The only house we purchased in move-in condition (somewhat) was our first home in 1988. It's just hard for me to accept that we won't be purchasing anything at half price, and making it worth market value.

Thanks for all your opinions though guys. I think I will bite on this one.

@robertoaribas
Please use the quote function and pull out where I said urban centers don't drop in price. I can't find it.

Don't pull out where I said they can support the pricing, but where I said they wouldn't drop it. The difference is significant.

Are Tokyo prices inline with what is being sold in Arizona? How about New York, London, or any other major Metropolitan area? Where do they sit in the pricing structure and affordability? Can a Tokyo home be purchased with the income of two professionals over there? You're comparing with Tokyo and how their housing has declined over 15 years, so these facts should be easy for you to publish here.

Can a Bay Area home be purchased with the income of two professionals? The answer here is Yes. It might not be the size of home they get in Arizona, but it can be purchased. Are they going to live in a neighborhood with like minded, socially and economically similar people? Yes. If you can buy a house, that is in the same neighborhood as your coworkers, then you're buying at your level of affordability.

Don't compare a 3000 square foot house in an undesirable location with a highly desirable location. You'll never be able to afford a comparable house in the middle of SF, even if you use pricing from *1990*.

Vain says

Tenouncetrout says

“I can instantly relist it back on the market and can most likely get $540k-$550k.”
Um if you could, then your offer wouldn’t even be considered.

10oz, yes I know the offered should not be considered. But the bank is currently a victim from me giving them bad comparables. Only the local people will know about it. Flippers are selling these properties in the $600k range.

Hey I'm buying now, too, but just be honest with your self. I expect another 20K to fall off what I'm paying, in the short term.

What things are selling for and what they are worth, I think are two different things.

Here's the reality of the house I'm buying by tax data.

Sold in 64 for 13K Sold in 99 for 88K . In the second chart I ignored the bubble and made a line to 160K that I paid.
It still looks funny to me.

The reality
7/15/2010 $160,000
4/23/1999 $85,000
9/1/1964 $13,500

But looking at the at areal photos of the property I saw in 2002 about 24 X 24 Slab was laid, for a big extensive patio, an over hang was installed, for 12 X 24 of the area and a screen enclosure was installed over the rest. The roof was coated with Somay, and the over all appearance from 2001 to 2002, for my taste I would say was at least a 25K improvement.
Not to mention there was some small correction due in early 2000. The problem was give em and inch and they took a mile.

What the curve should look like today.

7/15/2010 $140,000
7/15/2002 $110,000
4/23/1999 $85,000
9/1/1964 $13,500

So in the first chart, at 2002 I gave it 25K from 99 to 02, and I took another 20K off the 160K I'm paying.

It looks more honest and fair to me.

It's 20K, I don't think it's lost for ever. It will come back up eventually. 20K is a lot better than 100's K like some have lost.

And for 20K I would have given someone 20K to find me a listing that was no Bullshit sign the paper and lets make a deal house. 20K for no more aggravation of having to watch this market with no skin in the game, yet my families future is the balance from the outcome of the pathetic display in Washington over the last three years. And who knows where we go from here.

I think I go off for one hell of bargain.

@robertoaribas
So all housing to you should be based on Arizona specs, ignoring higher wages, differing tax laws and demand completely?

Is that what you're saying?

@Tenouncetrout
Where are you buying?

I'm guessing that higher demand hasn't added any value to this property. Normally homes follow pretty close to inflation, unless location pushes the value faster than inflation, like in most suburban areas.

LOL! Higher CA salaries dont grow on trees. They come from employers who often explore other alternatives and easily make those changes to favor their business climate. Arizona becomes more and more attrative.

@thomas.wong1986

You keep saying this, time after time. Me, and every high tech person I know is getting paid more. I do know a few people who were terrible to being with who aren't able to get the salaries they did during the run up in 2000. You're obviously very bitter about your salary. Others in accounting, including SF ace have said they're doing well.

This argument of out sourcing has been going on for at least 15 years now. I make significantly more than I made 15 years ago, and have never felt any pressure from out sourcing. Obviously it has hurt people, but salaries and incomes in the bay area have been going up during this time. The population has been growing steadily.

Maybe they've slowed down or trimmed costs, but population growth + high incomes in the area ARE being supported and have been supported for the last 15 years, even during all this out sourcing.

Vain says

dittomichel says

Well, no but $460K will be look like a premium price in the future. Trust me…I’ve been through that feeling :(.

Actually now that I think about it, this home would call for a premium price. There are only a handfull of homes there that have a view of the Golden Gate Bridge from a picture window in the living/dining room combo (I’m thinking 90 homes. Three blocks have the view, assuming 30 homes each block. But my opinion is premium may not be the same for others. I’m probably lucky that the guy doing the BPO did not even go inside the home to see this.
Dittomichael, now that I think about it, you’re right. I never knew what was really in my mind when I’m hesitating on this offer. I don’t know if I like this place enough to know I have overpaid for it in say… 10 years.
SF Ace, yeah I know that the cost is close to $0 and may even have positive cash flow. But what wouldn’t be able to stand is if I could benefit even more by waiting. We really do not know how it is to purchase homes for consumer use. My family has always bought “Contractor Specials” - which are between fixxer uppers and teardowns. The only house we purchased in move-in condition (somewhat) was our first home in 1988. It’s just hard for me to accept that we won’t be purchasing anything at half price, and making it worth market value.
Thanks for all your opinions though guys. I think I will bite on this one.

Vain, the most difficult thing about living in the SFBA is the housing cost either renting or buying. It's not like eveything is three times more expensive, it's pretty much the same. In fact, CA fruits and veggies may be the cheapest and most diverse in the entire nation. we just went through two days of uncomforable heat, by day three, it is comfortable again. It's a diverse industry and to the extent you are hardworking and diligent, there are prospective employers for you. I understand you may be asian, so asides from San gabriel Valley or Irvine, what other comparables are out there?

You have a chance to fix your living cost @0 and over time positive and significantly positive. What is better than fixing your living cost @0? You fix the living situation and eveything else will follow.

Me and spouse make San Francisco downtown salary on 0 housing cost as well, it's a lethal combination to build wealth quickly.

Vain says

Thanks for all your opinions though guys. I think I will bite on this one.

Good luck. Our last and final bid on a short sale (this was #3) fell through. Bank foreclosed. Mostly get the feeling they didn't want anything but a cash offer.

Well if I did that, then I'd have to go by what it sold for in '99.
From where it was when it sold to the guys mother in 64.

That gave an appreciation rate of 3.74%.

the Schiller index is 3.4 which puts the house at 127429.36 at the end of 2010.

Now to be fair, the house sold from family to family, I should ask him the circumstances of how if his mother bought the house in 64. What was the factors of the house being sold to him in 99?

10 Ounce. I am expecting my purchase to drop in price too. But I would be upset if the prices collapsed, as in plunged, and prices were chopped in half. But now that I do calculations for lower prices, it would just seem too easy to purchase then. I'm not too sure that's going to happen in my area. Most purchases I am seeing gets swooped up by someone with huge down payments as well. Then there's another crowd that obviously borrows exactly $417k; who knows how much cash in reserves they have. The price I'm paying isn't far off from what historical trends are suggesting. But it is overpriced by a little. I'm not willing to wait another few years just to "see" if things will get better.

Find some pre 1999 data, I'm lucky the house I'm buying sold right at '99 just a year before RE started going through the roof, WOW.

It would be hard for me to gauge what I think fair market value is for my neighborhood if all I had was one sale in 64 and then a series of over inflated prices in the 00's.

Vain says

This house would have sold for $750k in 2006, mid 200’s to low 300’s in 1996, and low to mid 200k’s in 1988...

But I would be upset if the prices collapsed, as in plunged, and prices were chopped in half.

To rich for my blood, but it looks safe.

200000 3.74% 7480 207480 1988
207480 3.74% 7759.752 215239.752 1989
215239.752 3.74% 8049.966725 223289.7187 1990
223289.7187 3.74% 8351.03548 231640.7542 1991
231640.7542 3.74% 8663.364207 240304.1184 1992
240304.1184 3.74% 8987.374029 249291.4924 1993
249291.4924 3.74% 9323.501817 258614.9943 1994
258614.9943 3.74% 9672.200785 268287.195 1995
268287.195 3.74% 10033.94109 278321.1361 1996
278321.1361 3.74% 10409.21049 288730.3466 1997
288730.3466 3.74% 10798.51496 299528.8616 1998
299528.8616 3.74% 11202.37942 310731.241 1999
310731.241 3.74% 11621.34841 322352.5894 2000
322352.5894 3.74% 12055.98684 334408.5763 2001
334408.5763 3.74% 12506.88075 346915.457 2002
346915.457 3.74% 12974.63809 359890.0951 2003
359890.0951 3.74% 13459.88956 373349.9847 2004
373349.9847 3.74% 13963.28943 387313.2741 2005
387313.2741 3.74% 14485.51645 401798.7906 2006
401798.7906 3.74% 15027.27477 416826.0653 2007
416826.0653 3.74% 15589.29484 432415.3602 2008
432415.3602 3.74% 16172.33447 448587.6946 2009
448587.6946 3.74% 16777.17978 465364.8744 2010

These are actually very reassuring for me. I'd like to point out that in 1998, I had a job that paid about $10/hour right out of high school. My family would have helped me out with a sizable down payment and I could have snagged on a property for high 100kish low 200kish. But instead, I chose to go to college. When I graduated college, behold... prices have more than tripled. The increased earnings did not justify going to college. I'm sure I am not the only one that feels this way. The more I look back at it, the more college may have been a bad choice. At least I did not rack up any debt in college; I worked my way through it. Sigh. The robbed generation. I could have been the one with the ATM machine.

Vain says

These are actually very reassuring for me. I’d like to point out that in 1998, I had a job that paid about $10/hour right out of high school. My family would have helped me out with a sizable down payment and I could have snagged on a property for high 100kish low 200kish. But instead, I chose to go to college. When I graduated college, behold… prices have more than tripled. The increased earnings did not justify going to college. I’m sure I am not the only one that feels this way. The more I look back at it, the more college may have been a bad choice. At least I did not rack up any debt in college; I worked my way through it. Sigh. The robbed generation. I could have been the one with the ATM machine.

Good point. I have know few techies that got MS done and still ended up starting a liquor store in the end. Talk about recent Phd grads that cannot get teaching positions at universities.

Vain, how much did you spend on college? How long did you spend there? (Prices tripled in four years?)

That aside, I don't see why people are saying you don't qualify to borrow this money. You'd be borrowing $200-250k, half the putchase price, or 4 1/2 years' income. Some people borrow a lot more than that, ratio-wise, and think little of it.

Michinaga. I graduated (dropped out I should say) high school in 1998, and started college in 1999. I took 5.5 years in college working towards a 4 year degree. I have not calculated how much I spent in college. But I commuted. So the expenses were tuition at San Jose State University, books, gas, and depreciation on a vehicle. 2 and a half of those years were spent at a Skyline College (junior college). I also got some small grants from financial aid while I was at Skyline. If I were to estimate the cost, maybe $15k, not counting gas. But it's time that I feel was wasted.

The house I was living in was priced at about $180k in 1998. In 2005, it was over $700k+ while some agents claimed they can sell our house in the mid $800k's. We were not interested in the easy money tho. We just wanted a place to stay. This is for a 1600 sq feet SFH in the San Francisco Mission district that is 3 floors high.

I think I am good for this debt as well. I just have to be frugal though I already am. I've never borrowed a dime. This will be the first time I spend money that I do not have.

I know I have decided to get this. But it's been delayed because the seller is not happy with the terms of approval. There is a defiency judgment clause in the approval.

I'll just sit and wait to see what happens. This is a chart I just pulled from Redfin:

I'm speechless right now.

Both numbers dropping to 0 is a data set that hasn't been updated.

Wow thanks pkennedy. I almost had a heart attack there :)
The agent is trying to convince the sellers to just file for bankruptcy if the bank comes after them. I sense this is where she just wants the sale to happen.

I suspect banks are going to be smart and wait it out 3-5 years. Let these people save up a little bit, before they go after them.

If they can hit them at the right time, these people might lose a decent amount.

Vain says

Wow thanks pkennedy. I almost had a heart attack there
The agent is trying to convince the sellers to just file for bankruptcy if the bank comes after them. I sense this is where she just wants the sale to happen.

There's no relationship between the owner and the selling agent anyways. What's the point of a short sale if a deficiency judgment is attached?

The bank probably did some homework and have some leverage (recourse loan and found assets). The selling agent should never give bankrucpcy advice without all material facts.

> I contacted the listing agent and she agreed to help me and fend other offers away.

Huh? Isn't the listing agent contractually obligated to get the highest price they can get for there client? "Fending" other offers away doesn't seem legal to me.