Real Estate Investing

I come from a generation and a location where buying a home for $50,000 was a big deal.  If you purchased a home for $86,000, you had more money than sense.  And a house for over $100,000?  You must be insane!  This has always made me question the true value of a house anytime my husband and I are in a position to buy.  We’ve made mistakes that haunt us today and yet we’ve not been completely insane in our decisions.

This post was a very refreshing story in someone’s home-buying experience.  Posted on The Housing Bubble Blog, a lender who calls himself “An Englishman in NJ” wrote about his decision to delay his home purchase.

Even although I work for one of the largest mortgage lenders in the world, I decided to contact a couple of “mortgage brokers” referred to me by my in-laws. One said that given my credit and income I could get a loan for “over $2 Million” with nothing down. My income was approximately $300K per annum at that time. I went home and told my wife we were not buying for a while because something incredibly insane is going on. Later that week at a family function, a BIL tells me that I should “buy something for $700K or $800K because there is no chance you will lose anything at that price”, implying that is a “low-end” purchase.

He did eventually buy a home at a reasonable price (for his area).  Indeed I applaud his decision to hold off not just until he and his wife were ready, but when the market was ready.

If you’re thinking about buying now, here are some quick money-wise tips:

• Save a down payment (again required by FHA and most conventional loans).  No more 0% downs!
• Make sure your agent runs a comparable market analysis before you buy to make sure the home is priced correctly according to the neighborhood.
• Ask the seller to pitch in for closing costs.  This is something that’s negotiable so it doesn’t hurt to ask.
• ALWAYS get a home inspection to be sure there are no major hidden defects in the home.
• Be prepared to negotiate again if the appraisal comes back short.  You have the ability - if you wrote an appraisal contingency in the contract - to walk away, but the seller may be willing to drop the price which will actually improve your monthly mortgage payment.

Happy house hunting - and remember … only 53 days left to close to get the $8000 first-time homebuyer tax credit.  Move fast if you want it and you’re eligible!

There’s an agent in my area who shall remain nameless.  He’s a big, popular agent.  He guarantees his listings will sell in 60 days or else.  The else is the charming part… or else what?

Or else he’ll buy them personally?  No.

Or else he’ll sell them without charging a commission?  No.

Or else he’ll just re-list them again and again so it will appear it’s only been listed for 60 days?  Bingo!

A friend of mine - before I became an agent myself - once said that she called him and learned that to list with him you were required to sign at least six listing forms.  Each form was good for 30 to 60 days.  When one listing date expired, his staff would re-input everything into the MLS thus creating a new MLS number.  We’re not supposed to do this - it’s against the MLS rules… more specifically there’s supposed to be a 10-day rest period before a home listing shows back up as a new, active listing.  Here’s what I found the other day on one home:

August 6, 2007 - 49 days
September 24, 2007 - 49 days
November 12, 2007 - 46 days
December 28, 2007 - 61 days
February 28, 2008 - 46 days
April 14, 2008 - 46 days
May 30, 2008 - 63 days
August 1, 2008 - 45 days
September 15, 2008 - 45 days
October 30, 2008 - 48 days
December 17, 2008 - 170 days (wrong picture)
June 5, 2009 - 119 days

I definitely sense a pattern that the agent is tired of the 45 days listings and is expanding them to three and four months! So this may be a boost for sellers - to give them optimal exposure because we agents do keep an eye on the hot sheets - to see what’s new on the market, what prices have come down, who’s withdrawn and expired.  Yet it’s misleading to buyers UNLESS their agent performs due diligence and looks at the full history of the house.  If I was the buyer’s agent, my thoughts would be that since it’s been on the market for 787 DAYS, they may be willing to negotiate.  OR they probably are NOT willing to negotiate!

Maybe we should just call this Reason #29 to Interview and Hire a Professional Realtor to Represent Your Best Interests.

In the best case scenario when the housing market and home values are down, a seller may still have equity in his/her home.  Let’s say they owe $125,000 on a house that could’ve sold three years ago for $165,000 (a $40,000 gross profit).  Today, the same home is worth $145,000.  (And let’s just forget about fees, commissions, etc. for now).  To many sellers, this could feel like a $20,000 LOSS on the home - though they’ll still walk away with money.

The other very important consideration is what you would’ve paid in RENT on a comparable property… because rent or own you would’ve paid something either way.  Let’s say Mr. Seller has lived there for seven years (just a random number) and it would’ve cost $1000 p/month to rent.  That’s $84,000 that would be straight up gone without even $20,000 in capital gains to trumpet.

Finally, you’re selling in order to move up, down, or sideways.  The potential savings on the next home purchased is where the seller will make up the $20,000 difference he could’ve earned by selling three years ago.  Mr. & Mrs. Seller could possibly now get into a $210,000 home for $180,000, for example.

CNN Money.com illustrates what I’m saying with some tips for people looking to find a new crib.

Galdes, 43, may have to sell her condo — bought in 2003 for $287,000 — for less than she’d hoped. But the discount on a better place will more than offset the reduction on hers. And she’ll net $86,000 after closing even if she breaks even.

If you plan to sell but not to make another purchase, I’d advise to hold on for several more years until prices come back (if you can).  If you plan to change homes, however, the time could be right for you!