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Tuesday, January 25, 2011
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36 comments:
we struck out again - this house is being bid up and we had to bow out.
i bet some bids were from investors whom i just can't compete with.
MM-
Shoot. If you are right that there are investors buying it to tear it down I bet you the owner will be upset they added a new roof this year.
I am sure sooner or later you will find a good house :)
The CS numbers just came out and DC outperformed again. The national index was down ~1% and DC was down 0.1%.
The tiered index shows an interesting story though. low properties (288K or less) were up 1.6% mid tier(288K-457K) were up 0.2%, but high tier properties 457K+ were down 0.7%
Ace, Jewel,
Given MM's experience lately I may have to start adjusting my stance.
Ace, you are correct that I have a limited subset of homes I'm referring to. Specifically, I'm talking about the very small 2 bedroom brick colonials as well as the slightly larger 3 bedroom brick colonial. The first is distinguished from the latter in that they only have 1 window on the shorter side of the rectangular footprint of the house. The larger 3 bedrooms typially have two windows on each side of the house.
My criteria for a SFH when I was looking back in 2009 was I wanted something walking distance to metro (1 mile or less) that was comparable in price to a nice 2 bedroom condo right on top of the metro. This put my upper price range around $500k. (Price based on rents for high end 2 bedroom apartments translated into an approximate mortgage on a condo in similar condition.)
When I started looking a lot of the smaller brick colonials were higher by 10-15%. I didn't consider this to be a good deal vs condo's for a few reasons(granted I was willing to pay a small premium for SFH living vs condo but not much):
1. I viewed the future pool of buyers for my house to be young professionals that wanted to marry, move from a condo, have a kid, and still have accessibility to their previous lifestyle.
2. I wanted that transition cost to be negligible (hence I needed a price on par with the condos).
3. Group house rental rates in Arlington topped out around $1000 per room so the mortgage would have to be ~2k/month on a 2 bedroom and ~3k/month on a 3 bedroom. Again, hard to achieve much north of 500k. (being able to cash/flow rent my place was a contingency consideration in case of job loss.)
So anyhow, I found a 3 bd brick colonial in an as-is sale and I jumped on it. Well under 500k. I even used an escalation clause. Fortunately it got no where near my upper boundary (thankfully there are some realtors with integrity out there) and I haven't looked back.
I am neutral to bearish on the market right now but your in the trenches experience is something to note.
My $0.02
mytwocents,
You seem to have bought at a very good price. May I ask when you closed and how "bad" the place showed?
Was it an obvious distress sale? How many other offers were presented? Did it go over list price?
Since it was "as-is", did you get to do an inspection. If you had a financing contingency, did you provide a preapproval letter and show a significant downpayment? Would you have gone forward with a low appraisal?
As another poster indicated (hb?) did you believe you had spent enough time looking that you could recognize a "deal" when you saw it?
Or, did you really feel it necessary to have an appraisal confirm this?
I've bought places where I thought the appraisor was totally clueless and that I knew better. In one circumstance where I wanted conventional financing I went as far as to get 3 appraisals and the difference between high and low was over 30%.
mytwocents,
Glad to hear everything worked out for you.
You're braver than I am - we considered some fixer-upper's, but in the end, went for something that was more or less move-in ready.
housebuyer,
or it could be a quick rehab to appeal the $800K-$900K range to savage the new roof :)
spring can't come fast enough for me!
VA_I,
I had been looking seriously for about 5 months when I stumbled into this home. So I had a pretty good idea of what types of homes in my price range sat with no interest, and which ones went under contract pretty quickly.
I closed in the fall of '09. It did show very poorly. Hardwood floors through out but with very obvious "pet stains" damaging the wood in the living room.
The bathroom was (sort of still is) a disaster. The vanity had no door. The tub/grout were filthy. The mirror/medicine cabinet was completely missing.
The rear awning was rigged poorly and sinking down so low it blocked the back door from opening fully.
The kitchen cooktop looked like it was out of a bad sci-fi movie from the 50's. The linoleum (asbestos based?) tile floors were awful.
So yes, it showed very poorly but overall the bones of the house were great.
I did have an appraisal and inspection contingency. And it all happened pretty quickly. The house came on the market on a Friday. My realtor had me in there on Saturday. And I put an offer in on Monday. My realtor was able to sniff out that there was a serious competing offer so I determined my upper limit, and put in an escalation clause offering $3k more than any other offers.
I was convinced the signed agreement would come back at my upper limit and was pleasantly surprised when it was no where near that. The seller actually commented that, I must really want the house if I was willing to go that high (107% of list), so they knew I was serious and signed my contract.
The sales price was under asking price. The seller was just trying to get rid of the home and lived out of state. Spent very little time there. So it wasn't distressed so much as hands off. I think I got the deal because they knew I was serious, mine was the better of the two offers, and given that it was an as-is sale her realtor probably counseled her to be wary of an appraisal sinking the deal if they tried to get too aggressive in getting more money.
As far as the offer itself. I think I put down a basic $5k good faith deposit and I already had pre-approval for a conventional loan with a 15% downpayment. I wasn't so much worried about the appraisal confirming I found a deal as I was having the appraisal torpedo the financing I had lined up. Ie, needing to bring more to the table so a smaller down payment so FHA vs traditional lending etc.
Fortunately the appraisal came in above purchase so I was good to go.
Oh, as for the inspection contingency, I had the right to get the home inspected but I could not haggle based on that information (as-is sale) I would have had to pull my entire offer and resubmit. Allowing other contracts to be considered. So basically, my approach was back of the napkin estimate the repair costs needed, add that to the purchase price, and compare with the appraisal. Those numbers worked so no need to pull the contract.
My $0.02
Jewel,
My thought has always been, why pay the premium for someone else's tastes/choices? Granted, living through renovations is not fun but I do not have a wife or kids to worry about so that makes things easier for me.
The bathroom is finally scheduled to be redone in March. I'm looking forward to that.
My $0.02
Like watching paint dry waiting for WDC home prices to fall.
Still think PGC might be weighing on the index.
NOVA was probably up again.
Robert-
I think Nova has outperformed the area as a whole, but I think this month it likely underperformed. The lowest tier index was up 1.6%(I assume this is mostly PG, bad parts of DC, and some condos in further out VA suburbs). The highest tier index, which is mostly the inner suburbs was down 0.7%.
mytwocents,
A house that needs some work (mainly cosmetic in your case) presents an opportunity. I'd guess that cosmetics eliminate 90% of your competition. People want turn-key, move-in and will pay quite a premium for that. They quite often (always, imo) over-estimate the cost and time involved.
I can certainly live with awful paint, wallpaper, etc for awhile - at least I did back when I was younger. I'd do it now but can afford to stay elsewhere while these upgrades are accomplished by others.
Up until my early to mid-30's most of my sneakers were speckled with paint and I actually enjoyed hands-on labor.
2009 presented some great opportunities and your 5 months of looking seemed to pay-off quite nicely.
I compliment you on your ability to see thru floors that can be easily refinished and a bathroom that is quite functional until you can make upgrades you desire.
You should have seen some of the stuff we lived with back in the day. I had relatives (from out of state) shaking their heads. No matter to me.
hb,
Here's a snapshot:
Fairfax County
DC
PGC
Robert-
I agree that our markets are in much better shape than the other places, but that has been the case for a long time and its not like we have outperformed those markets every month. I also really don't like using median price, because on a monthly basis it is mostly telling you whether a there were more/less condos/McMansions than usual.
hb,
Wouldn't you think that would be the same in any area?
VA-
If you are asking is the median number noisy everywhere. I think the answer is yes the number is always noisy and hard to get much information from.
If you are asking if there are a higher than usual number of condo sales in Fairfax does that mean there will also be a higher than usual amount in Arlington, I would think the answer is no. The problem is in most of these areas there are only a couple hundred sales/month so it only takes 10-20 sales happening in one month vs. the next to make the median price move a decent amount. So although I will use median prices if that is the best data available I would much rather use a CS or corelogic number.
mytwocents,
what's your guess on the highest bid of the home i listed?
it could use a new kitchen/appliances, and updated bathrooms.
VA_I,
I agree with you, it frustrates me when people actually look at "the place" rather than the "the space" in a house. Well, frustrate isn't quite the right word, it's irritating. Mainly because I don't suffer fools well.
You see it all the time on these HGTV shows. Some ditzy buyer walks into a room and says "oh my god, light brown paint, I could never live here."
Really? You're going to let the color of the room ($50 worth of paint) be the deciding factor in a home purchase?
My $0.02
MM,
It looks to be ranch style, a 3/2/1, with both a garage, a decent deck, and easy walking distance to EFC Metro and Westover village.
I'm guessing that could easily fetch the listing price given our recent discussions.
My $0.02
mytwocents,
we offered (barely) above listing and still got beat.
care to guess the winning bid?
MM,
$630k? That's 5% over list or so.
My $0.02
Mytwocents,
Thanks for the explanation. Congratulations again on getting your house at the price you wanted.
MM,
Sorry this one didn't work out, but I agree with HB - one of them will. Meanwhile your savings keeps going up, up, up...
Apparently Obama is going to announce they will not increase government spending for the next 5 years. I can't imagine that is good for housing in this area. I don't think housing will fall because of this, but I don't see many increases if government salaries and contracting budgets don't increase.
Ohh yeah I should also comment that it is probably just a talking point and won't actually happen...
mytwocents,
One of my favorites - will my furniture fit in here? How much is a used couch worth?
VA-
As an example of how worthless used furniture is I recently tried to donate a sofa to good will. They wouldn't even take it because it had lost color from the sun. It was in great shape, but after sitting in a sun room for 10 years the top was slightly lighter than the bottom...
tks mytwocents. 5% is quite a bit more - we couldn't stretch that far...
HB
People in Norfolk are Defecating on themselves.
JFCOM is closing and half it's jobs are moving away.
If Gates keeps pushing for a 10% cut that will rattle around here .
contrarian,
Common sense prevails!
pat,
Check out "unemployment in Virginia by County"
and "unemployment in the Washington, D.C. area by County"
The BLS has Dec. data for Virginia. When I said last week that most reo's in VA were in the south or the hinterlands, this could explain it.
Contrarian,
I'll demur. Yes and so what? Do you have a comment? Looks OK to me. How does this tie into your gloom and doom for this region?
contrarian thanks for the data.
Data is good.
Interesting the low tier hit 300, while the high tier only hit 225,
pretty big spread.
Should the low tier drop more? right now the Low tier has a higher index then the high tier.
VA_I
Yes unemployment is better here then in southern virginia, but, the employment here is puffed up by Obama and bernanke spending like crazy.
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