patrick.net

To answer your question: NO!! Run away from that one.

thomas.wong1986 says

take 1997-98 prices add in inflation 30 to 40%

Inflation (per CPI) from 1998 to 2011 was 38.6%, and from 1997 to 2011 was 40.8%.

leo9 says

Since its a good deal, I am thinking to buy it
and rent it out. It would rent for around $2000k. If I pay 20 percent down
to buy this property and if I go with 5/1 arm then my mortgage won’t be too
high, it may be around $2500.

Why do you think it's a good deal to rent a house for below your cost? An investment property should be profitable.

Alternatively, are you willing to engage in consumption by buying a house that is rented for below your cost? How is your ability to afford both your existing rental and your mortgage payment if you don't have a tenant for 4 months? Is this property unique in some way that you would be missing out if you didn't buy it now? (e.g. it's a great lot, is an easily expandable house, etc.)

Also, have you considered low-balling on the short sale? Just because it's listed for $530K doesn't mean you should pay $530K. Those short sale prices are often completely made up. Do you know if the bank has approved a short sale at $530K?

corntrollio says

Those short sale prices are often completely made up.

Ask to see the appraisal once it's complete. I know with FHA, they set the minimum net proceeds at 88% of the appraised value on a short sale. So multiply the appraised value by 0.88 and that is what has to go to the lender after all closing costs are paid. Typically they'll work backwards from that to get their list price. They do that calculation, then add up all their closing costs, add the two, and there's your list price. (or a bit higher)

The 88% is non-negotiable (lender won't approve SS without that) but all the other costs are, including the realtor's commission. And in this day and age, many agents will agree to take the hit from their commission to make a deal work (say if you were close, like 86% net proceeds, the agent will relinquish a percentage point or two on the commission to get up to 88%) The fact that agents are allowed to earn commission on short sales really doesn't sit well with me in general. The fact that both the owner and the bank are taking it in the ass and somehow a realtor slips in to grab 6% off the top is ridiculous.

Don't.

First of all if you cant move their for a year or two why the hell would you pay someone to live there? It's not a good deal, it's a very very crapy deal and you'll be wasting a ton of money being upside down.

It's not like houses will go up in prices magically, world lately ran out of idiot money.

I don't live in bay area, but 500k+ for a 3bd sounds like a huge rip off to me.