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Friday, January 7, 2011
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22 comments:
Some important considerations for people considering a condo purchase.
I realize that this does not apply to most here.
Questions to ask:
percent of investor owned units.
whether the condo doc's limit this percentage.
number of units in default of payment of condo fee's.
You can buy a condo that currently qualifies for FHA/conventional financing but may quickly lose this ability. It is very important that the doc's limit investor ownership to 30%. Once a condo has too many investor or arrearages it no longer qualifies for conventional financing. This makes resale very difficult and could cause a downward spiral in prices.
You should also ask in writing about any expected/possible upcoming repairs that may result in higher fee's or a special assessment.
VA law only requires the disclosure packet to cite special assessments that have already been made.
I find myself in such a situation and made the mistake of asking about upcoming repairs/concerns over the phone rather than in writing.
I routinely ask the above questions but not in writing.
Due to the unavailabilty of financing at this one particular development, I see opportunity for me but pain for sellers.
Va_Investor,
Your comments remind me of one of Stephen Colbert's guests, Atul Gawande, who wrote The Checklist Manifesto, which says that checklists can help even the most seasoned professionals successfully navigate complexity and dramatically improve outcomes in fields like medicine. I can imagine that it is helpful in house hunting, too. :)
The Checklist Manifesto
Wow, things got a bit lively in yesterday's thread.
For what it's worth, I always noticed (anecdotally at least) that the truly heated/busy discussions on these housing threads tended to take place when rent vs buy calculations were brought up.
My guess is that, on the way up, showing just how expensive buying is over renting made the owners defensive. And now, on the way down(or sideways), showing just how expensive renting is vs owning gets the renters defensive.
My $0.02
Robert,
As per yesterday's comment about Kunstler, perhaps it is true that he is an entertainer. But have you heard Nicole Foss at the Automatic Earth blogspot (her messages re designed to help ordinary people become aware of the possibility of a major crisis, rather than to help rich people get richer)? Or Robert Hirsch, who, as an energy sector expert and public servant, is the complete opposite of an entertainer? The basic premise of Foss and Hirsch's arguments is that we need 20 years to make a smooth transition to an economy not based on liquid fuels, but that we don't have 20 years left to do this. Hirsch and Foss both believe that we will experience a severe economic crisis based on declining supply and increasing global demand within the next 2 to 5 years.
I often hear "but alternative fuels will be developed." That is a reasonable argument, but Foss and Hirsch claim that none of the alternatives have a net energy output that is as great as that of the oil. They also claim that the expense of extracting new oil is going to become cost prohibitive.
There will be no way to avoid economic pain.
I am really interested in finding a strong refutation of Hirsch and Foss' claims that alternatives will not provide a sufficient, smooth replacement for oil. Therefore, I think that anyone's assertions that alternatives will save us are based on blind faith, or unexamined assumptions about the potential of alternatives.
Krugman says that we will not descend into a "Mad Max style collapse" but he does not explain in convincing detail why this will not happen.
Can anyone cite an expert who has convinced them that our alternatives can be hastily assembled into good working order prior to economic devastation?
I often think about Texas Native's "we're the bow of a sinking ship" metaphor, which helps explain the relative strength of this area. But eventually, the problems of the rest of the country will eat away at our RE markets as well.
I often think about Texas Native's "we're the bow of a sinking ship" metaphor, which helps explain the relative strength of this area. But eventually, the problems of the rest of the country will eat away at our RE markets as well.
Thanks [blushing].
But my point was and is...that's there are concrete signs that my a$$ is starting to get wet from the very cold water that is much closer to the bow then when I made the original post. I don't beleive for a minute that the DC/NoVa market is in a sustained recovery. That's really just whistling past the graveyard when I see or hear "Happy Days are just around the corner" types of posts. If you're an investor with a cast iron fortitude with a long term view, then DC/NoVa is your playground and I leave it to you. Godspeed.
That listing on Kingsley was not the first sign. It followed a long list of emails I have been getting from my Frankly MLS alert, which, after today, will be edited to the new zip code. Because I've decided that renting was the smart choice for Vienna, for me, during my stay.
We have an agent for the Reston and Westward area due to my company deciding to bail on Arlington. I will take a gander and see what my Crystal Ball says in regards to buy vs. rent.
If you think residential real estate is overpriced, CRE (esp. Arlington) is flat bug nucking futs. Our CRE landlord opened the talks with a proposed 25% *increase* for 2011-2014/15.
It was a long time before we stopped laughing. I was happy. I've been wanting to move out further west.
Our 2011 austerity plan for bonuses has been scrapped. We plan to split the savings in the office space among the employees as the new cash bonus. Since the employees voted overwhelmingly in favor of the move, we're returning the favor via the bonuses.
I missed the long thread but read it, was working like crazy yesterday, but am happy I stayed out of it. Lots of good points...or barbs...depending on your POV.
Cheers.
How funny...the last email before I changed the zip code.
Jeez. What a bath. Bought in 2005 for $500K, on the market today for $455K. Yikes. Not bad for a house built almost the year I was born!
FX7506933
"Wow, things got a bit lively in yesterday's thread."
You should have seen this place back when Lance et all were still around in the 2006 time frame.
REdealSEEKER,
There is a finite amount of fossil fuel. Fact. There has to be a transition to something else. I could see there being some economic pain - higher utility bills, gas, food.
I would be inclined to let the free market take care of it.
REdeal-
I haven't studied the worlds oil issues in any real depth, but below I will list a few things I have read that can be partial solutions and definitely will take more push oil issues out well past 2-5 years.
1: 2-5 years sounds unlikely even if nothing is done. The world currently has near record supply being stored while OPEC is also holding off near record amounts of oil from the market. I am pretty sure that OPEC alone is holding something like 6 million barrels a day off the market. This does not include the majority of Iraq's reserves, which are starting to be accessed as the war is winding down
2: There are still plenty of fairly untapped areas of oil that cost ~$50/barrel to access including oil sands and the deep water wells that PBR found. These should add a significant amount of oil over starting in a few years.
3: The US (by far the largest user of oil) has started to reduce its consumption. Through technological improvements (e.g. more efficient cars) oil consumption has fallen 10% since 2005. This trend is expected to continue for several more decades. With the US cutting back on petroleum the rest of the world can continue to increase oil use without a dramatic increase in global oil consumption.
4: We have an incredible amount of natural gas (100+ years worth) that is easy to access. If oil prices go up significantly we could outfit 18-wheelers to use natural gas instead of oil.
I do agree there will be a time when oil is a huge problem, but we are not there yet and over the past 5 years the US has really tried to get its sh*t together to start using less fuel.
Leroy,
I've been around since about 2002. That's why I brought up the whole rent vs buy discussion. Those things used to have a life of their own on the bubblemeter blog.
My $0.02
Robert-
I don't really like letting the free market take care of it. I think the government should get involved. The free market doesn't do a good job planning ahead so it will continue to use oil until it is nearly gone and the price becomes expensive. This effectively benefits current generations at the expense of future generations. Governments are really the only group able to do plans that make sense for decades or centuries. Not that our government has shown this ability, but I think they can and should
Wells Fargo lost the case. All previously foreclosed homes are now at risk of being returned to the original owners. The banks will have liquidity problems again, all title insurance companies will go bankrupt, current "owners" will lose their houses and if they don't have title insurance will inundate the courts with bankruptcy cases further pressuring the banks into insolvency.
On the positive side, the housing market will see a massive rebound as there will suddenly be no supply as all foreclosed homes will revert to the previous owners.
http://www.bloomberg.com/news/2011-01-07/us-bancorp-wells-fargo-lose-pivotal-massachusetts-foreclosure-case.html
"REdealSEEKER said...
The basic premise of Foss and Hirsch's arguments is that we need 20 years to make a smooth transition to an economy not based on liquid fuels, but that we don't have 20 years left to do this."
Seeker -- for starters let me admit to being an agnostic on the peak oil thesis. I dont doubt that it is coming, however, I do know that someone has been calling "peak" for a good 35 years now. Again, I havent done the research myself, so lets table that discussion for the time being. Also, I dont know anything about Hirsch, but I do know a thing or two about Foss.
My main point is that I pretty much dont trust Nicole Foss ability to estimate (timingwise or magnitudewise) anything in that too much of it looks like extreme fearmongering (i.e. Kunstler and the Y2K issue). Consider this gem of hers about the stock market:
++++++++++++++++++++++++++++++++
"And that next phase should carry the market down much further than anything we've seen so far. By the end of 2010 I'd be surprised if the DJIA was still over 1000." Stoneleigh 11/1/2009 - 2:50pm
http://europe.theoildrum.com/node/5917
+++++++++++++++++++++++++++++++
WOW!!! Excuse me, but you better be reeeeealy sure before you make an epic, monumental, earthshattering, life altering prediction like that. If you dont know, you better hedge your bet more than just saying "id be surprised". (I.e. "caution guys, this may not happen if XYZ happens", or "let me say, at best I give this a 50/50 shot"). Otherwise, it looks like you think you have the gift of prescience, and there is no need to doubt your claim.
Likewise, when your predictions not only fail, but fail spectacularly (she was off by 10 orders of magnitude for christs sakes), the predictor should offer up several mea culpas, along with lengthy explanations for why they think they got it so terribly terribly wrong. She did no such thing. Instead, she just ignored it, and now just thinks it will happen "soon".
Problem is, its highly likely she has been thinking it will happen "soon" for at least 5 years, possibly longer. We know for example that 10 years ago she deemed the threat of near term collapse so credible that she packed up her family from the UK and moved to a farmstead (doomstead) up in Canada.
Given this, while I do not doubt her motive is indeed "helping people", when someone acts with such certainty, such conviction as to leave the country, I highly doubt that person has the capacity to judge alternative evidence that is a threat to their thesis of what is going to happen.
Consider someone who believed their whole life that Jesus Christ is the one and only path to salvation. If standing at the pearly gates is not God, but Vishnu saying "I am the one true
path to heaven -- you must believe in me to get in", its probably more likely that the person will think its a "trick propigated by the devil" than accept the fact that they were wrong their whole lives. Such is the case with Foss. Given that she has uprooted her entire way of life for her thesis, I do not think she has the capacity to accept evidence that tells her, peak oil is 20 years away, severe deflation is unlikely, etc.
Again, this isnt so much a critique of Hirsch or the peak oil thesis as it is a critique of Stoneleigh. While she is a very good writer, and a capable debater, her inability to change her thesis as the facts change makes me think she is "just another permabear" along the lines of Kunstler, Prechter, Contrarian, etc.
Jeff-
The banks couldn't show that they owned the mortgage. Banks realize this is a problem and now are being more careful to have the documentation in order before they foreclose. This will be a little bit of a pain in the butt for the banks, but that's about it. If you hadn't noticed the banks are only down ~2%. If it was catastrophic news I promise the stocks would be down a lot more than 2%.
Wells Fargo stock over 6 months. If you hadn't noticed banks have had a lot more good than bad news recently
Only 24 hours earlier Bloomberg had this story:
Foreclosures May Be Undone by State Ruling on Mortgage Transfer
"Massachusetts’s highest court is poised to rule on whether foreclosures in the state should be undone because securitization-industry practices violate real- estate law governing how mortgages may be transferred.
The fight between homeowners and banks before the Supreme Judicial Court in Boston turns on whether a mortgage can be transferred without naming the recipient, a common securitization practice. Also at issue is whether the right to a mortgage follows the promissory note it secures when the note is sold, as the industry argues.
A victory for the homeowners may invalidate some foreclosures and force loan originators to buy back mortgages wrongly transferred into loan pools. Such a ruling may also be cited in other state courts handling litigation related to the foreclosure crisis. "
TN,
When the CRE landlord thinks that money can be made, why be pessimistic?!
But that's the same thing with the stock market. Why shouldn't investors be pessimistic, if they can make some money?
I only said "eventually" because there are some positive indicators (and I checked out sawbuck, which seemed to rate a lot of local markets as "healthy.")
After the bailouts, the fall 2008 banking crisis seemed somewhat effectively bandaged up by the US government. The stuff I'd read about parallels between our times and the Great Depression, I could shove under the rug as we watched the tax credit, lowered interest rates, and stimulus spending buoy up our local markets.
But as time has passed, the parallels are becoming clearer: the deepening chasm between rich and poor, the violent populist reactions to austerity programs in Europe, and the general decline in real estate markets in the US paired with the revelations of robosigning have me convinced that we're headed toward economic instability. Whether there will be hyperinflation or deflation, it doesn't make sense to have a disproportionate level of personal income tied up in a mortgage.
So we've slowed down our search. A 3500 square foot house way out in suburbia makes little sense to me now. I think that we should move before our townhouse goes underwater, but for the time being, we're still above water. Renting without considerable downsizing would increase the amount that we pay for housing (we bought in 2002). Rents may not go lower, but eventually, paying more might make more sense than feeling trapped with a lot of lost equity. I'm not sure how to define "eventually", but I will wait and watch so that we can act in a timely fashion.
hb
we have way less Nat Gas then you think or the drillers say.
These things are toxic and the states are going to cut back on Fracking.
Also more important the wells are amortized at a 20 year life but a bunch of these wells are sitting at year 3 with a 15 year decline point.
The pores close a lot faster then anticipated. (The gas rushes out and the gravity closes the pores.
unless you refrack them, or regenerate the wells, they have big fat decays.
Cheryl
Yeah, those closeouts are a real trap.
Most people don't get the impact of loss of FHA.
It's why i don't like condos.
it's brutal if you are in a small 10 unit building. you go in and 2 units are investment, and suddenly 1 person rents and the remaining 7 owners are screwed.
from Yesterday
"Translation -- Pat is going to be a millionaire."
Yeah, by the time it happens a million won't be the same thing.
I would much prefer a quadplex that yields 15%/Year that never appreciates, to a SFH that costs me $3K/month in taxes and is worth a million.
I'm one of those guys "Profit is an opinion, Cash is Reality".
My problem is the yields are so miserable on nicer areas, that it's hard to figure out what to do.
Bonds pay poorly.
Real estate pays poorly.
CRE is starting to price out well, but, I think it's way overbuilt.
We have 2X the Retail SF of Canada.
whenever the crush out finishes you can get a CRE Strip mall for pennies.
It might make a very cool house.
Put up Solar, make part of it into your home. Live kind of all techno warehouse.
pat-
You are correct that there are a lot of issues with nat gas. Some can be solved with better technology others will be ignored if the option is no energy. I am not saying everything is rosy, I really think that the government should start working on plan to conserve our resources and reduce pollution. With that said I was just trying to say I don't think anyone should expect the world to be like Mad Max in the next 2-5 years or for that matter the next 20 years.
Here’s how it might work. Let’s say that as of late December, you had just over $230,449 of principal left on a 30-year fixed-rate loan for $300,000 taken out at 7.93 percent in 1995. You have been paying just under $2,187 a month in principal and interest. But if you put in $20,000 toward that remaining principal and asked your lender to reamortize your payments over the remaining 15 years on the loan, your monthly payment would drop by $52, to around $2,135. Putting in $100,000 would save $730 a month and bring payments to $1,457.
Making extra payments toward the principal while not asking the bank to recast a loan keeps monthly payments the same and merely shortens the time it takes to pay off the loan.
Re-Amortization
Seems to me you are better off "merely shortening" the loan with that $20k-100k than reamortizing it. I suppose if you hit trouble down the road it's nice to have the smaller mortgage payment, but if that's possibly in the cards maybe you should keep that $20k-100k in your savings.
TBW-
I also saw that article today and thought the exact same thing. If you have extra cash that generally means your payment is manageable. So it would be nice to pay off the mortgage earlier rather than lower the payment $100.
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