Real Estate Investing

I live in a major metropolitan area - not big like New York or San Francisco or Chicago, but the metropolitan area is at 1.5 million.  I’ve recently been on a quest to find a buyer a home and we’ve definitely been on a roller-coaster ride.  I don’t like roller-coasters because they make me think my head is going to explode when the migraine sets in after being jerked, rolled, and having had my stomach fly up to my throat.  Just no.  

Fortunately, the roller coaster Aunt B. and I have ridden hasn’t been that drastic, but some of the results have at least warranted an upset stomach for me.   The problems we’ve encountered in the hunt for her home begs the questions B. asks,

And it just leads me to continue to wonder–when we talk about there being a lot of affordable housing in Nashville, is that really the case?  Right now, for instance, there are 695 houses on the market under $125,000, which makes it seem as if there’s a lot of housing stock for working class people.  But if sixty percent of those are pits that need major help before you can get into them, are they really real possibilities for folks?  Because, even if you can rehab them–if you have the skills–if you don’t have the money, is that house really feasible?

This observation led to another’s comment that really sums up a silent problem our nation is having:

But more generally, the loss of affordable housing stock for the lower 50th percentile of folks is the unmentioned scandal of U.S. cities.

Are there affordable homes available in our U.S. cities?  If they are affordable, are they liveable?  Do they require tens of thousands of dollars in renovations before someone can move in?  Will the pipes need to be replaced to gain a strong water flow free of potential lead poisoning.  Is the roof ready to cave in?  Are there vines growing out from outlets?  I’ve seen all of these problems in the last year - most in the past month.

Forbes magazine recently published an article about the most affordable places to live.  Included are Atlanta, Cincinnati, and Minneapolis… a city for every climate!

From personal and professional experience, I can tell you that although home prices are dropping daily and meeting qualifications of FHA loans may become more difficult, it doesn’t mean buyers will have an easy time finding a home that meets their needs.

People looking for affordable homes often need to have easily accessible public transportation, need to be able to purchase food nearby, should live in an area with plentiful jobs, and the cost of utilities shouldn’t be crazy expensive.  Are there really places like this out there?

An always fabulous agent I work with told me recently about one of her closings.  She found a home for her buyer that had first been on the market for $145,000.  Following the market downward, it was reduced after several months to $130,000 in order to remain competitive.

Her buyer wanted this home, so they wrote a contract.  In the contract, they asked for 3% ($3900) in down payment assistance and 3% ($3900) in closing costs.  They also asked for a home warranty, a $1000 repair limit, termite inspection (we’ll say $75, but could be up to $800 depending on whether termites were found), and for the seller to pay for title expenses (another $1200).

This once $145,000 home was being purchased for

… drumroll …

$119,925 after the seller paid all of the concessions on behalf of the buyer.

That was $25,075 less than the original list price.  BUT because the market sets the price - and in fairness - the number would be $10,075 off the list price.  So the buyer made a full price offer on paper, and yet it was not a full price offer.

It got back to my friend the agent that the buyer’s father fussed at everyone he met because the agent didn’t get her son a “good enough” deal in a buyers market.  I beg to differ.  That she saved his son over $10,000 dollars from the list price was a pretty fabulous deal.

Yet there are always people who argue that it wasn’t enough.

Another friend of mine wrote a comment to me about full price offers saying, “No one should ever pay full asking price for anything that lends itself for negotiation possibilities…..there is always someone willing to wiggle….keep looking.”  I respectfully disagreed with her given the scenario outlined above.

I believe people need to always remember that just because you see something on paper, it doesn’t tell the whole story.  A full price offer may appear to be full price, but when a seller walks away with over $10,000 less than expected, they are not receiving full price.

Of course, you can also ask yourself how badly you want a house.  Even in a strong buyers’ market, homes in your price range in safe neighborhoods may not be available, so you do what you have to do.

I urge buyers and agents to never let the naysayers convince you that you made a mistake because only you know and have the complete picture of what your needs are.

Photo by Kathy T. and her blackjackii phone. Special guest: the calculator.

My friend and fellow Relator told me this morning that he’s been working with a potential buyer for two years and she refuses to buy.  He found her a $225,000 all-brick gorgeous home that was on the market for $180,000.  She refused it. He has explained to her that interest rates are going up, so if she wants to buy at an inexpensive rate she should do so now.  Note: Interest rates actually went up a quarter percent yesterday, from 6.0% to 6.25%.  It looks like the rate increase is across the nation because my buyer just had their rate jump, just as it happened in California.

Meanwhile my friend’s possible buyer still won’t commit.  She says her dentist has told her, “Real estate hasn’t hit the bottom yet.” He advises her to keep waiting.

The buyer is taking real estate advice from her dentist, not from a Realtor who is quite aware of the housing market.  As my friend says,

I am confused by people that say they want to wait or the market to hit bottom. The reason for this confusion is that I spend many hours per week studying the Real Estate market and I can’t even tell when that will happen. I can tell when it is starting to happen and when it is over. With that said here is my advice we are in the best time in 25+ years for people to buy a home. 

I’ve commented before that we’re near the bottom.  Then I change my mind and think we have a ways to go thanks to articles like this on MSNBC.com which lists four reasons housing won’t recover quickly.

[Reason #4] There’s a bigger underlying inventory of homes for sale than you realize
We’re all aware of the number of homes available for sale from the homebuilders, and the Realtors’ association keeps us up to date on the pace and price of existing homes turnover, but those numbers don’t tell the whole story. How many of your friends or neighbors would list their homes in a New York minute if they thought there were any realistic prospect of a sale?

In other news, I saw Ed & Pam McMahon on Larry King last night and they are a class act. They said they made their foreclosure problems public to try to bring comfort and hope to the million other people in foreclosure.  They aren’t giving up and don’t want others to lose hope either.  Mr. McMahon said,

I wanted to, in a sense, speak for the million people you mentioned [facing foreclosure]. I heard that figure today and I just couldn’t believe it. Anyway, the million people that now have foreclosure signs on their house, or nearby. And I just want to give them hope, give them optimism, give them some kind of guidance. Get the best corrective people you need around you. Keep working on it. Don’t stop. There’s a lot of people that are hard workers, did everything right, didn’t do anything wrong, and all of a sudden, they’re in this boat. And I speak for all of them, as far as I’m concerned.

Finally, let’s welcome the weekend with some Friday dental humor.  Afterall, I’d much rather laugh and focus on good things than to let let bad news take over my head:

A guy goes to visit his grandmother and he brings his friend with him. While he’s talking to his grandmother, his friend starts eating the peanuts on the coffee table, and finishes them.

As they’re leaving, his friend says to his grandmother, “Thanks for the peanuts.”

She says, “Yeah, since I lost my dentures I can only suck the chocolate off ‘em.”