Time to consider another hypothetical housing market scenario, this time from a buyer’s side.
Meet Sam and Tiffany. This late 20’s couple has been renting for the first five years of their married life. They have always had a nice reasonable rent that has allowed them quite a bit of discretionary income between their two jobs. They used some of this extra money to pay off all their debts, including $35,000 in student loans and an auto loan for the new Toyota SUV they bought a few years ago. They don’t carry a balance on their credit cards and have excellent credit scores.
Tiffany recently quit her ‘regular’ job to pursue her jewelry business, take care of the home etc. They are living off of Sam’s income (tech/telecom industry) alone and continuing to save a major portion of each paycheck into a “house fund,” now up almost to a 10% down payment for the price range of homes they are interested in.
Now that the market is cooling, and they’re beginning to think about children, Sam and Tiffany are looking to buy a house. They are excited about fixing up a home and doing all sorts of handiwork on the home and yard, and are not looking to buy a spotless new home w/ granite countertops. They want something they can pour some effort into.
They started the process off by going to a lender, and are pre-qualified for a $380,000 mortgage. However, they only plan to actually take out a loan for between $325,000 and $350,000, putting 10% down on either a plain-vanilla 30-year fixed or an FHA loan.
Sam and Tiffany have been looking primarily in the Maple Leaf, Greenwood, Ballard, Crown Hill area, and have placed offers on two homes, the first (needed serious work and is bank-owned) at ~15% under list price, the second at 7% under list, both offers had sellers paying closing costs. All of them have been rejected or ignored so far, as sellers are not realistic at this point.
Sam and Tiffany are happy to wait as prices continue to fall in Seattle, and are still looking at listings, hunting for a well-priced house that can meet their needs. They’re not in a hurry as they continue renting, saving money into their nest egg, and keep watching more inventory come to market. They would love a home of their own, but are not willing to pay ridiculous prices for one.
If every homebuyer out there was like Sam and Tiffany, we probably would have been able to avoid the housing bubble and the present economic fallout. Most of the tips I would give to Sam and Tiffany are summarized in the post Taking Advantage of a Buyer’s Market
What advice would you give to Sam and Tiffany? What’s the best way for a well-positioned first-time homebuyer to take advantage of this market?
Kary L. Krismer » Feb 9, 2009 at 10:00 am
Look for four things:
1. A seller with lots of equity.
2. A seller who has owned the house a long time, and thus has lots of appreciation.
3. A vacant house.
4. A house that has been on the market a long time.
BTW, the last thing you want to do is be judging things by list price. You could have two identical houses right next to each other, one listed at $450,000 and one listed at $500,000. If the one listed at 450,000 has $405,000 owing against it, you’re unlikely to get them to anything below $445,000.
nonskanse » Feb 9, 2009 at 10:02 am
This is close to my situation. Scary. My numbers are a little higher (looking to buy around 450 and slightly more than 10%) but I’m in the same ideal situation financially. We’re both working.
Looking forward to the advice :)
Waiting and saving » Feb 9, 2009 at 10:04 am
Sounds like my wife and I, but the numbers are a bit higher. The longer we wait, the better off we are. Our savings increase (decreasing our future mortgage) and prices decline in desirable neighborhoods.
We have to deal with a feeling of uncertainty that purchasing a house will resolve (neighbors, schools, etc). I reassure my wife that we are doing the best thing for our family.
We say wait until sellers become more realistic!
alex » Feb 9, 2009 at 10:07 am
Always be sure to have the seller’s agent show you the house, rather than hiring a buyer’s agent – all on the condition that you’ll have them be a dual-agent should the deal succeed.
Then, when you make a low offer, the seller and their agent are likely to have a serious talk, and maybe even revise their commission arrangement in order to facilitate a deal.
Or buy FSBO and avoid this dance altogether :)
patient » Feb 9, 2009 at 10:19 am
Wait. The era of over priced homes will soon be over. Have patience.
john » Feb 9, 2009 at 10:23 am
RE: alex @ 4 – How is using the seller’s agent not in conflict of your best interests? Seems like you want to have someone in your corner, rather than someone just trying to close the deal as quickly as possible.
Kary L. Krismer » Feb 9, 2009 at 10:34 am
By alex @ 4:
In Washington they won’t be a dual agent–they’ll only represent the seller. While it might be likely they’d reduce the commission, there’s no guarantee of that. When my wife and I were looking the only property we waived our commission on was one where the seller was the agent.
You’d be better off going to Redfin and being guaranteed 2% back.
Dan » Feb 9, 2009 at 10:57 am
All the best to Sam and Tiffany!
Recend Buyer » Feb 9, 2009 at 10:59 am
I was in Sam and Tiffany’s position last month, and got an offer accepted at around 20% below market (it was actually a problem to get it financed oddly enough…since all the recent comps came back 20% higher the bank was worried there was something going on behind the scenes). Be patient, don’t fall in love, and if you’re looking at condos, look for ones that only have 1-2 units left. The builder is very anxious to get their bond back, and I found those last units are usually the biggest.
I went with an agent since this was my first purchase, but in the future I’ll definitely be using RedFin instead.
singliac » Feb 9, 2009 at 11:17 am
Add a few young kids to the equation and you’ve got my situation. I hate to bring up the $15k again, but it does factor into my decision process. It could just put me over the edge to have 20% down to avoid PMI. I’ve also heard that you can split it over two years so you can qualify for the full $15k.
That being said, I agree that $15k could be wiped out very quickly. I don’t see things turning around for a while. I’m probably not going to buy in 2009 for that very reason. Maybe if we lived in a place that had already seen 50% price reductions, I’d feel like the worst were behind us and buy a home.
alex » Feb 9, 2009 at 11:30 am
RE: john @ 6 –
if you hire the seller’s agent, you need to be confident you’ve done all your research, and trust that you’ll be protected by a good home inspector, title/escrow agent, and all the other entities. In other words, you need to represent yourself.
noegruts » Feb 9, 2009 at 11:32 am
By Kary L. Krismer @ 7
Just an FYI – Redfin reduced this to 1.5% a while ago:
http://blog.redfin.com/blog/2008/11/our_shot_at_the_mass_market.html
noegruts » Feb 9, 2009 at 11:35 am
No idea why my post above @12 showed up as anonymous…testing..testing..
The Tim » Feb 9, 2009 at 11:38 am
RE: noegruts @ 13 – It’s a quirk in the edit comment plugin that appears to change the name to “anonymous” after you edit your comment. However, it only shows up that way to the person editing the comment, and if you refresh the page, it changes back to your name.
Scotsman » Feb 9, 2009 at 11:39 am
Have you heard anybody talking about how home prices may shoot up next year?
Have you heard anybody talking about the big raise they’ll get next year?
Have you talked to anybody looking forward to a big tax cut?
Is your employer hiring, having trouble finding enough good people?
Putting emotions aside, and considering all of the above, can you think of any reason that the home you want will cost more next year?
Did you know that if you wait a year or two and save $50-100k on your purchase and invest the difference, it will completely pay for your children’s education, or allow you to retire earlier, or buy a cabin on your favorite lake, or…
What does buying now cost in terms of lost future choices? There are really no reasons to buy now, and plenty of reason to wait.
Schools? The difference between my rent and the cost of buying the same house is enough to put two kids in private schools, a much better investment over the last several years.
jon » Feb 9, 2009 at 11:41 am
“They want something they can pour some effort into.”
If they are buying a house to have a kid, they should have the kid first and then decide if they still have the energy to do a remodel. Their priorities for being close to trendy restaurants and what not will shift towards low traffic streets and nearby parks.
kfhoz » Feb 9, 2009 at 11:45 am
Offer what you want to offer on the home you want. You never know what might happen.
We got maneuvered out of buying our dream house this Fall. It was a short sale with the list price falling to $475. From public records we could see loans out on the house about $800, and the last transaction was in 1993 for $295k.
We were willing to pay $440k which is what we calculated to be the real long-term “base” value using the Case-Schiller data. Tim’s old overly-generous by intent calculator gives a current non-bubble value to be $615, for a comparison. There was “deferred maintenance” on the house further complicating the situation, but this really was a special architecture-built house that met my dream-house criteria. The listing agent said that she already had an offer at the listed price and would not take another offer anyway. Our buyers agent did comps that showed that the $475 was a reasonable price in this falling market, even though we thought that the value last Fall should have been higher than that. We were not willing to offer more than $440, so we didn’t go any further.
Turns out the listing agent was lying and has pretty much admitted to lying. The offer she had in hand went through at $366,480. We called the bank, but they said it was to late to do anything, and besides they were going to make their short-sale prospects even more lenient.
The seller doesn’t care the house went for $75k less than it could have because they have no stake, not even taxes on the forgiven loans. The bank doesn’t care much, maybe because the government will bail them out, maybe because they are just to busy to care about losing another $75k. Certainly nobody at the bank wants to hear that some employee has let $75,000 go, or that they still have sloppy procedures. The listing agent gave bad vibes to everyone, and I speculate on her motives. Maybe she did a deal for a friend of hers?
We are to proud to get involved now, even if the gleeful buyer was willing to flip the house it would hurt to much to give someone $75,000 turn-around in a couple months when we do not know what their involvement might have been.
This is a true story, the sale date was this December, location was within 25 minute drive of downtown Seattle or downtown Bellevue. There could be some hidden information that we don’t know, but we had our buyers agent call the listing agent after the sale got listed on King County and she gave no other circumstances, so it appears to be what it is.
Lessons:
1) offer what you want on the house that you want.
2) If it is a short sale talk to THE BANK directly. This is big work for your buyers agent, if they don’t want to do this much effort then get a new agent. Redfin does not handle short sales.
3) never believe a Real Estate agent because they might be like this listing agent.
4) never rely on the judgment of a Real Estate agent because they may just not know what to do like our to-nice expects-others-to-be-honest and can’t-believe-the-market-is-down-that-far buyers agent who missed his commission on this one. Ours won’t get fooled again, but if this hasn’t happened yet to your agent then do not assume that they “get it” in these strange times.
5) some banks and/or appraisers are just as incompetent now as they were going in to this mess.
6) there may be bargains out there now that are about which may be as good as what will happen at the “bottom” of the market IMHO, if you can and are willing to play the short-sale game and you might get lucky.
Rob Jellinghaus » Feb 9, 2009 at 11:47 am
We’re in a similar boat, except we have about 20% down for a $500K-range house. I can’t imagine why anyone would buy anything before the Case-Shiller curves flatten out (e.g. under 3% YOY price drops) for at least a month or two. When they’re plunging like they are right now, and when all the economic news is grim grim grim, why buy??? Makes no sense to me.
We’re figuring fall 2010 at the earliest, though Messrs. Case and Shiller will give us the real cue — if it’s before then, great.
Kary L. Krismer » Feb 9, 2009 at 11:53 am
By kfhoz @ 17:
An agent would be a fool to contact the bank directly until the distressed property law is amended. Also, if your offer had been accepted and closed within 20 days of a foreclosure date, that also could have been very bad for you. The changes to the distressed property law should fix that too.
Rather than go to the bank, I’d go through the listing agent’s broker.
Joel » Feb 9, 2009 at 12:16 pm
By john @ 6:
The idea is that if the buyer uses the seller’s agent, the seller’s agent will get to keep all 6% of the commission effectively douling their compensation. That will put pressure on the agent to get the seller to accept your offer.
kfhoz » Feb 9, 2009 at 12:25 pm
RE: Kary L. Krismer @ 19 –
I know 2 agents who have contacted the bank directly with good results. Can you further explain the problem you see with this?
Kary L. Krismer » Feb 9, 2009 at 12:44 pm
Contacting the bank arguably could make the buyer’s agent a ‘distressed home consultant” under RCW 61.34.020, with any potential liability tripled up to $100,000 plus attorney fees. And if the agent is a distressed home consultant that makes them a fiduciary to the seller, who is not their client. RCW 61.34.060.
It’s admittedly a stretch on the definition part, but IMHO not worth the risk. Even ignoring the liability, potentially becoming a fiduciary of your client’s adversary is not a good idea.
StillRenting » Feb 9, 2009 at 12:48 pm
RE: Kary L. Krismer @ 19 –
What’s the problem about closing within 20 days of foreclosure?
Kary L. Krismer » Feb 9, 2009 at 12:48 pm
Also, until they fix the 20 day rule, buying at a short sale is risky, because if you close within 20 days before or after a foreclosure sale, the buyer is a fiduciary of the seller. Given short sales can take 3-4 months to close, and foreclosure sales can be continued either 90 or 120 days (I forget), the chance of a short sale closing within 20 days is not insignificant.
You can sometimes get good prices on short sales, but it’s not without risk.
vboring » Feb 9, 2009 at 12:55 pm
WAIT. WAIT. WAIT. You are in the position of power. No sense throwing that away to get a “good” deal.
Within 1-2 weeks:
The senate version of the stimulus bill includes a $15k tax credit for buying a house within one year after the bill is enacted. Anyone who buys before this bill is passed may be throwing away $15k and they sue their realtor for not mentioning it to them.
Within 1-2 months:
The spring that didn’t bounce last year scared a few people into lower prices. A second flat spring could bring reality home to a lot more folks and enable lower prices. Also, there has been a lot of talk about subsidizing mortgage rates into the 4-4.5% range. Why would anyone buy now, when this kind of discussion is ongoing and could save them 10-15% in monthly mortgage costs?
Within 1-2 years:
We’ll probably see a market bottom, unless this ends up being World Depression II. Even Suze Orman, who generally loves real estate as an investment, says that people should be looking for “the deal of a lifetime,” if they are buying now. If you really like the places you’ve made offers on, follow up with exactly the same offer once a month or so until the house is off the market or the offer is accepted and get your deal.
kfhoz » Feb 9, 2009 at 1:01 pm
RE: Kary L. Krismer @ 22 –
Interesting, I see your point, and if I were an agent then I would take your position as I am a cautious responsible person.
Maybe the buyer needs to contact the bank him/her self. We did talk to the bank after the sale, and we did not go through an agent to do it, just picked up the phone ourselves and started calling. I was pretty miffed at the time. We had to track it across 2 transfers of financial institutions, but we did it. In other words, the original mortgage broker listed in public records had been acquired by another financial entity, who had passed the mortgage on to yet someone else. We eventually got to the “bank” holding the bag. They would neither confirm nor deny any information about the sale or mortgage, but said that they would have welcomed our phone call if we could have gotten to them before the deal was done.
As a buyer I would go with an agent who IS willing to take the chance on RCW 61.34.060, and there are hungry agents out there who have done it already.
The bank is in a funny position because the listing agent works for the “seller” and does not appear to have any fiduciary duty to the bank. The banks are completely overloaded so they 1) take a long time to do anything 2) often do the wrong thing. The bank may turn back the best deal they are going to get in this market or may let the property go to cheap, leaving money on the table (but maybe our tax dollars are going to pick up the slack if they do not look after their own self-interest?)
The Sam » Feb 9, 2009 at 1:11 pm
Hey folks, ‘Sam’ here. Thanks for the great comments so far, I’ll respond to a few, but not all as I don’t have that much time.
By Rob Jellinghaus @ 18:
A big part of me agrees w/ these statements, however we’re not purchasing this house as an investment, so in addition to price we’re looking at our life situation, the fact that our current residence is too small, we need various amenities like an artist’s studio, extra bedrooms etc. It’s not all about $$$ for us, we value our time, our location, our current and future lifestyle, commute, etc.
While we could rent another bigger place, we’re not interested in signing a new lease, then moving again a year later while pregnant or with small children. Also, the changes needed for an artist studio and hazardous chemicals/propane or acetylene torch setup aren’t cool with most landlords and insurance companies. The fact that my wife wants to garden, decorate, etc. all lends itself to purchasing.
As the post above also noted, we’ve been offering less than list price knowing that prices will drop. Yes, they may drop quite a bit, but as long as I can make the payments I’m happy. I would rather have a house an extra year and lose 10-15% in mythical paper value than wait and end up pushing off other life priorities.
Also noted above, we’re not doing anything crazy, if we have to wait a few months while the market plunges, hey that’s cool – sellers will only get more desperate, prices will only drop.
We just had two offers rejected, we’re not going back and upping our offers as we thought they were fair offers and told the sellers to ‘call us if you’re interested’, we’re not paying more than we feel the house is worth, and not above what we’re comfortable paying from a monthly standpoint given my employment and current mortgage rates.
By jon @ 16:
My wife has explicitly stated that this situation will never happen, in fact it’s contrary to our plans for the future. We will find a place that’s suitable to raising children (3BR + Yard) which may need some work, or it may not, but we’re willing to pour some effort into it while we’re able, aka, no pregnant wife or small children.
By alex @ 4:
I’ve been warned away from this and it seems like a huge conflict of interest. I’m not really enthused by Realtors in general, but I’ve found one that I’m happy with as we attempt our first home purchase. I’d consider something like Redfin for future purchases, but with our first we’re looking for some guidance and we’ve received very helpful tips and guidance so far.
chris » Feb 9, 2009 at 1:14 pm
On the 15k credit, HOLD YOUR HORSES! As I read it (and until it gets signed by the President, anything could happen), it is only 10% of the purchase price.
So… If you’re getting a $1.5 mil place, then yay, you get 15k credit. Otherwise for a 400k place you’ll get a $4000 credit. BIG DEAL…
The Tim » Feb 9, 2009 at 1:25 pm
RE: chris @ 28 – $4,000 is only 1% of $400,000.
anonymous » Feb 9, 2009 at 1:28 pm
We’re looking in the 600k range and have nearly 50% to put down. But we’re on the fence. We are not finding the type of house we want for the price we want.
Cris » Feb 9, 2009 at 1:35 pm
600k ranged houses in Eastside are mostly older than 1970s with low ceilings, small window frames, dark inside.. We started with $550k now only visiting $800k to $700k houses..
Mama » Feb 9, 2009 at 1:48 pm
I have a question for you smart folks. We’re also in this situation — we’ve been “looking” for almost 2 years now :), reading Tim’s blog and stashing away to get to 20%down.
However, with the economy being the way it is, I am now thinking that maybe I’m better off putting as little down as a bank would let me, sitting on the rest of the cash if worst-case scenario happened and we did lose a job or two…
What is your thought on % down vs 1+ year of “rainy day” cash stash? (I would love to do both but we don’t have that amount of money at present)
jesse » Feb 9, 2009 at 1:49 pm
This market still requires massive patience. In order to get their price they will need to throw out tons of offers and hope one sticks. For the next few years it is going to be a tough slog for them. Lots of viewings and vettings and lots of offers and probably not too many will stick.
If you factor in time spent the “deal” they will get isn’t as much of a “deal” at all. You figure, they will spend countless hours of negotiations and viewings with a small chance of succeeding. Add up all these hours and we’re talking real opportunity cost. The time would be better spent doing courses and upgrading skills IMO.
If you really want a true “deal” you have to wait until list prices are low. It will happen but not for a few years. There is still too much denial. If they REALLY want to buy, they will have to look a lot and forego their time doing it. If they can afford to wait, they should spend maybe a weekend per month looking around and only offer occasionally. Do not waver. When prices are within 10% of their target they can step up their efforts and get much better value for their time./
You hear the same thing with selected “deals” in the stock market. Problem is too much stuff is still overvalued to the “deals” take forever to find. Unless you have the time and skill to do it, that’s a sucker’s game. Good luck to all.
Ray Pepper » Feb 9, 2009 at 2:03 pm
BUBBLEHEADS. This should be quite an interesting show for all that enjoy this blog. It premiers on CNBC Thursday Feb 12th*******************
http://www.cnbc.com/id/28752614
anony » Feb 9, 2009 at 2:25 pm
RE: singliac @ 10 –
Singliac, I don’t think you get the 15,000 up front, so I don’t think it would push your down payment % up. You could put your next 2 years of tax refunds into the loan, but by then the appraised value might have dropped and you have already paid 2 years of PMI.
Kary L. Krismer » Feb 9, 2009 at 2:42 pm
By kfhoz @ 26:
I can understand that a bit, but do you really want an agent that either ignores this, or ignores the fact that they might have a fiduciary duty to the seller?
I think the better approach is to deal through the broker and specify an escrow that can deal with the bank issues if and when the offer is accepted, using a Form 22 NFW to back out of the deal if you come up against the 20 day rule.
It would have to be a very special property otherwise, because there’s enough inventory out there that it really isn’t worth the risk, IMHO.
BTW, one other thing about the short sale scenario. One side-effect of the distressed property law was a lot of third parties that solicited agents to enter into transactions that sounded a lot like bank fraud. It’s possible the listing agent described could have fallen for one of those schemes.
singliac » Feb 9, 2009 at 2:56 pm
RE: anony @ 35 –
That’s true, but as long as I know that the 15k will be there for me at tax refund time I can borrow the money temporarily from my parents and pay them back promptly. I still don’t think $15k would cover the loss of value over the next year, so I highly doubt that this would push me off the fence.
Ira Sacharoff » Feb 9, 2009 at 3:31 pm
Kary has given great advice here. While I’ve read his posts in various places and sometimes vehemently disagreed with him, here he is spot on, clear and wise. You’d think the guy was a lawyer or something :)
I’d advse remaining patient, and not to get influenced by those who have a vested interest …if a property remains on the market after you’ve mad an offer and seen it rejected, there’s nothing to stop you from submitting the very same offer a month or two later…You also might want to explore other nearby neighborhoods, expand the search a little bit.
patient » Feb 9, 2009 at 3:34 pm
“While we could rent another bigger place, we’re not interested in signing a new lease, then moving again a year later while pregnant or with small children. Also, the changes needed for an artist studio and hazardous chemicals/propane or acetylene torch setup aren’t cool with most landlords and insurance companies. The fact that my wife wants to garden, decorate, etc. all lends itself to purchasing.”
Sam, for your situation I still recommend patience. You are talking about potentially saving $100k in one or two years. You future kids and wife will thank you even if it feels like a drag now. A year or two passes quickly while saving $100k + interest over 30y takes a looong time for most, hence the comments regarding insuffiicent downpayments.
“I would rather have a house an extra year and lose 10-15% in mythical paper value than wait and end up pushing off other life priorities. ”
It’s not paper losses. As soon as you sign on the line you start paying for the extra 10-15% and continue to do so until you sell or pay of mortgage. On top of that you could go “under water” with all the stress that includes.
Angie » Feb 9, 2009 at 3:55 pm
I’d also encourage waiting. Patient makes a very good point.
I’ve done renovations, and I’ve had kids, so I’ve got a pretty good sense of the magnitude (and costs) of the tasks involved. Since you’re talking about putting off pregnancy until after renovations, I’m inferring that you don’t have a big fertility concern that means you’re going to pull the goalie ASAP. In that case, you probably really are not under the gun to get into a house–just (understandably) tempted by the drop in prices.
Prices are likely to fall some more in the next year. If you hold off six months or a year, you could either:
(a) get a house at your price point in sufficiently good shape that you don’t need to do renovation beyond choosing paint more to your liking, and then get down to babymakin’ right away, or
(b) get a cosmetic fixer and save a lot of dough that will really be important when you’ve got another person in the family.
Can your wife set up a studio offsite? One of those ArtSpace/flexspace kinds of places? Or get a membership at Pratt and use their studio space? I can totally appreciate wanting to have studio space right downstairs–but suffice to say it may become rather less attractive to have hazardous chemicals and flammables in the residence where your offspring live. I’m no new-agey chemical-phobe, far from it, but this is another one of those issues that can look a whole lot different once the baby is in the picture.
patient » Feb 9, 2009 at 4:19 pm
Regarding our newest agent addition, Kary I think the comments he makes here is what counts not what or who he is or what he commented on other sites. So far it looks informative and worth reading.
Kary L. Krismer » Feb 9, 2009 at 4:24 pm
One other thing on the buyer contacting the bank, I’m surprised they would even talk to the buyer or the buyer’s agent. The deed of trust trustee might, if they’re foreclosing, but typically the bank would want permission to do anything but listen. Listing agents doing short sales typically get authorizations signed by the owner for the banks to talk.
jon » Feb 9, 2009 at 4:30 pm
“We will find a place that’s suitable to raising children (3BR + Yard) ”
My experience is that kids don’t use yards anymore. They are either playing on a team somewhere or are inside on their games, etc. Especially in wet Seattle. I was shocked when I moved into this area with all the close houses, but it really makes sense.
Kary L. Krismer » Feb 9, 2009 at 4:30 pm
By Ira Sacharoff @ 38:
Exactly. The time limits in the contract to respond are only applicable if you’re accepting an offer or counter-offer. Sometimes letting the deal sit for a while is a good thing. Patience is exactly the word I would use. Too few buyers have enough of it.
Ira, I don’t recognize you from other sites. What’s an issue that you “vehemently disagreed” with me elsewhere?
David Losh » Feb 9, 2009 at 5:35 pm
RE: Kary L. Kris mer @ 44 –
I’ll agree that you are much more informative here at Seattle Bubble. It’s the absurd arguments you engage in on other sites that are distracting from the information. There’s a lot more thought here, with statistical analysis, bs calling, and data to make points.
ira sacharoff » Feb 9, 2009 at 6:12 pm
Kary,
I’m most familiar with you at the P-I forums and Active Rain?, where I seldom post. The main areas where I’ve disagreed with you have been the wisdom of buying at a particular point in time…but I’m not going to point out now where you’ve been wrong, especially right now when you’re being practical, informative, helpful, and wise.
Sniglet » Feb 9, 2009 at 7:49 pm
The same rule applies for those interested in buying as those contemplating selling: would a 50% drop in the value of the property in question cause significant hardship?
If a 50% drop in the value of the property would constitute significant hardship, then you shouldn’t buy.
Unfortunately, I believe that huge price declines in Puget Sound real-estate is in store over the next decade, and that virtually every home sold today will wind up being worth 50% less several years from now. If such an occurance wouldn’t be all that big of an issue to your life-style and finances, then by all means go ahead and buy.
P.S. If you want more details as to why I think we will see big price declines check out my podcast on deflation at http://www.surkan.com.
2kt » Feb 9, 2009 at 10:31 pm
RE: Sniglet @ 47 –
Sniglet,
I checked out your web site. Kudos on better appearance, but it looks like you are still heating the universe. That’s why they call it faith.
Sniglet » Feb 9, 2009 at 10:38 pm
By 2kt @ 48:
Are you infering that prices might drop more than 50%, or that people shouldn’t buy even if a 50% price drop wouldn’t cause significant hardship? Or are you suggesting that it is silly for potential buyers to consider the consequences of depreciation?
harbord » Feb 9, 2009 at 11:05 pm
Sam and Tiffany, I have nothing to sell you. Here’s my 2cents:
Get w-2 income for tiffany,even if part time
open and put a balance on revolving and installment credit
maximize pre tax retirement investment
hold nest egg in cash equivelents in a roth ira
investigate neighborhoods, schools, sex offenders, bus lines, shopping, dining, entertainment
look for some data on seattle elementary schools on the chopping block.
Rethink your desire to want to do a ton of work on a house. It takes a ton of money and time.
To be blunt: re-evaluate your desire to get a house that needs a ton of work. Take an inventory of your free time, what do you do? Hang out, sports, hobbies, travel, shopping, drinking, coitus?
I’m very handy and keep my place in great condition. It really sucks that I have to do it. I’d much rather be fishing with my kids, going to soccer games, band concerts, or just kicking back all weekend. Instead I have to drop a couple of hundred a month (averaged out) at home depot and do chores at least half the weekend. And I bought this place brand new, I didn’t have to fix up anything. I’ve seen a lot of fam and friends buy great old homes and have grand dreams. 5 years later your living in construction zone, or worse, your upgrades turn out to be a bust.
Hey listen, if your hobby is woodworking, more power to ya, go to town. If Sam’s a techie who has never hung a door, or loves to watch HGTV, please take my advise and rethink it. Please trust me when I tell you that remodeling costs a fortune, even if you don’t factor in how much your time is worth, not to mention your marriage. If your really serious, buck up and buy some software like Xactmate that insurance adjusters use to calculate replacement costs. You have to factor it into your total investment costs.
Look for a house that you can raise a family in, improve your cash position every month. Your extremely fortunate in your timing. You can watch your buying power increase. I’d wait until at least 2010, as all the Alt-A’s will be going bust. Don’t worry about missing the bottom. Make a date with each other and go to open houses. Walk in and check out at least 100 homes. Drive through potential neighborhoods on a summer saturday afternoon.
You will know it when you see it. It will feel like home. The only alternative to a 30 year fixed mortage is a 15 year fixed mortgage. If you can afford it, buy it and love.
Don’t forget to include taxes and insurance
Jonness » Feb 9, 2009 at 11:33 pm
Please excuse me while I digress to MV=PQ.
M = Amount of money in circulation (let’s say averaged over a year)
V = The rate at which the money is circulating
P = The price of goods
Q = The quantity of goods sold
So the velocity (V) went way up when the cheap easy money hit along with all the exotic credit default swaps etc. The money was diverted into assets, which caused the price of homes and stocks to escalate (P) along with economic output (Q). PQ can be thought of as the GDP, so the economy underwent a great period of expansion.
But when the bad loans were exposed that caused the velocity increase, the banks wouldn’t lend anymore, and V went into the cellar. Thus, the price of stocks and homes started coming down to match MV. So the government wants to print more M in order to support V and ultimately raise PQ. But the problem is, V cannot be increased to the bubble level or the house of cards will collapse (need good credit to borrow and no toxic assets).
The goal appears to be to print enough money to shore up the banks and return to a normal healthy level of velocity (lender confidence) while P and Q go up (more money and credit in consumers’ hands=consumer confidence). Ultimately this means the price of assets go up or at least level out, but houses and stocks are actually worth less because the dollar is worth less (inflation). But it causes people to start buying because V starts to move, and sitting on cash means losing money. Consumer prices rise along with assets, so in a way, things balance out as long as wages rise along with PQ.
Now I seem to be saying during the contraction, the velocity shrank so far that it’s questionable whether the govt. can print enough money through quanitative easing to offset the loss in velocity and support a rising PQ (GDP). IOW, it can increase M, but not to the point of offsetting the dramatic fall in V, so PQ will continue to decline.
But this appears to be different from Sniglet’s argument that the amount of wealth destruction cannot be offset by printing M. To me, his wealth destruction is not real because M didn’t increase or decrease. In fact, P decreased. Thus the rise in P during the bubble made people feel wealthier because they could cash out with a big profit, but when they failed to cash out and P fell, they felt poorer. This affected velocity and will continue to affect it in a negative manner because people with less percieved wealth are reluctant to borrow and spend. This will offset the government’s efforts to increase M because V will not rise in this scenario.
So we don’t really appear to have an M, P, or Q problem here. We have a V problem. PQ cannot rise to the bubble level without inflation because V cannot be Jerry-rigged to the same level as the cheap easy era of half million dollar loans to strawberry pickers and the wonderful era of credit default swaps. That’s what caused the massive increase in V, and printing M cannot replace a loss in V. IOW, M and V are not equivalent even though a rise in either can affect PQ. You can have a high PQ, but the intrinsic value can be less or more depending on the ratio of M to V. High M and low V with fixed PQ means 1 unit of M has less purchasing power than low M and high V.
Am I making an ounce of sense here? Can we ever get back to where we were before? Do we even want to?
Jonness » Feb 9, 2009 at 11:44 pm
“High M and low V with fixed PQ means 1 unit of M has less purchasing power than low M and high V.”
Oops, that’s off, but flip it and I think it makes a point of non-equavalence of M and V. But I’m guessing at that as I haven’t read that far yet.
Hugh Dominic » Feb 9, 2009 at 11:54 pm
Great post! Really a lot of good comments here.
My wife and I are in a similar position, although we have two kids and we have the 20% saved.
We know full well prices are coming down, and that the longer we wait the better off we are financially. But, we have recently seen a house that comes close to “dream house” territory for us.
They owner is quite realistic and has offered prices equivolent to around 2005 levels.
We know that prices will continue to drop, but we like it so much we are planning on making an offer.
To ensure we dont go into negative territory we will offer well below the asking price (another 15% off) but are pessamistic about our chances. The house has only recently been put on the market.
Net-net, we will jump if we feel we are getting a great deal, but given the huge downside potential, and the certainty of getting better prices on all proporties over the coming 1-2 years, we are are going to err on the cautious side.
Sniglet » Feb 10, 2009 at 12:03 am
To be clear, I have never said that a massive decline in asset prices (which I think it highly likely) will be due to “wealth destruction”. Further, I have even suggested that we could see asset price drops EVEN with an expanding money supply. This crash in asset values (and rise in the purchasing power of the dollar) will be driven by 1) a lack of purchasing demand and the acculation of savings/cash and 2) continued tightening of lending standards, which will decrease the over-all pool of available credit.
Jonness » Feb 10, 2009 at 12:33 am
@53
I’m in the same boat. I have no good advice to give because my common sense is clouded with feel-good buy-it-now chemicals. Complicating the issue is it is a one-of-a-kind that would be impossible to replace in certain aspects due to its unique “dream-house” location and setting. It’s tough because I would like to live my life there and retire in that setting. It’s that good. But the market timing is very poor. If we enter into a depression, having financed a high-dollar house at the leading edge will prove to have been out and out foolish. I’d kick myself from here to Kindom Come. OTOH, if we simply have a 2-year downturn and come out the other side, I’ll have lost the irreplaceable setting. As much as I hate to say it, the smarter move is to error on the side of least risk, which means wait out the storm. It’s tough to do though when after 3 years of looking you finally find the perfect house. Maybe in 3 more years of searching, I’ll find something that can replace it.
6 years of my life wasted on a frigging artificial housing bubble created by a bunch of 4-letter words.
Jonness » Feb 10, 2009 at 12:40 am
“To be clear, I have never said that a massive decline in asset prices (which I think it highly likely) will be due to “wealth destruction”.
Sorry sniglet, I was under the impression you argued that QE could not offset the massive wealth destruction resulting from falling house and stock prices.
ira sacharoff » Feb 10, 2009 at 5:11 am
jonness!
Being house obsessed myself, I kinda know what you’re going through. If this house is so perfect, and you plan on living there forever, and you can afford it…if it’s THAT nice you won’t be kicking yourself if prices continue to decline a bit…
On the other hand…believe me, it’s probably not really the perfect house, it’s that altered state that you’re in. And there will be other perfect houses.
David Losh » Feb 10, 2009 at 6:15 am
RE: Jonness @ 51 –
Yes, you are making sense. The point sniglet is making and you are making also is that wealth is money in the bank. Rich is a new car in the drive way, but wealth is cash.
Money circulating is the leverage. Wealth is capturing the money in your own investment strategy.
You’re all going to love this, but the price of the house makes very little difference if you have a strategy of paying it off. It also depends on the future value of money. You buy at today’s prices with today’s money. If you pay today’s money off with inflated future dollars you come out ahead.
The way I look at it is how fast can I pay the thing off. Buying a fixer gives you a lower payment. It is a negotiating point with the seller. You look at the property, determine the cost of repair and make an offer accordingly using as little cash as possible.
That idea is the buy in cost of getting equity. Rather than start fixing right away I would put money towards the principle balance up front. Run some amotization schedules for what principle payments will do in creating equity as opposed to what fixing the place does.
I also recommend some one live in a house a year before they start fixing. Each house has quirks and it takes some time and planning to know what will give you the most bang for your buck.
Kary L. Krismer » Feb 10, 2009 at 6:31 am
By David Losh @ 45:
Well I’m done engaging in absurd arguments at one site, indirectly as a result of you! Thanks!
What I don’t get is why some people buy into the absurd or self-serving arguments. For example, do people really expect their real estate agent to turn to Zillow if they can’t find comps?
BTW, Ira, I’ve never posted on Active Rain.
Sniglet » Feb 10, 2009 at 6:49 am
But what if the future value of money increases? As I’ve mentioned here before, I believe there is a good chance that the purchasing power of the dollar will be substantially higher in the years ahead (i.e. that asset prices will fall signficantly in dollar terms). In such a scenario, it becomes even harder to pay-off debts.
Just look at how companies across the nation are cramming pay-cuts down onto employees. People should expect to have LOWER incomes in years ahead, and the dollars they do manage to save will go a lot further than they do today.
Sniglet » Feb 10, 2009 at 6:52 am
What I have said is that policymakers will not be able to make up for the collapse of private credit markets with their stimulus or bail-outs.
george » Feb 10, 2009 at 7:44 am
Sam,
I’m in a somewhat similar situation so I get that it’s not all about the money.
On the other hand, this is already the worst recession since 1981. In a few months it will be the worst since WWII. After that, who knows?
So the way I see it, I can’t afford not to wait.
BTW: Does Windermere gather their agents together in a room and advise them on how to price? I ask this because realtors seem to be pricing units about 20 higher than I would expect given the fact that no sane person thinks the market to recover in Spring of 2009. One more big reason not to buy a house right now…
stephen » Feb 10, 2009 at 7:45 am
I just don’t get it.
Since when does a 20 something com tech make low-mid six figures which is what a 380K load on a 30 fixed with 10% would reguire. None of the stuff you put out remotely seems possible. The 20 somethings with 60-70 COMBINED income buying 380k houses with ARMS was a big part of the problem. Get out a calculator and put it all down right down to 401K, medical matching, realist grocery entertainment budget , cable, phone and such. Unless they inherieted some dough this skit is not realistic in the least. Renting is cheaper but it is not that much cheaper.
David Losh » Feb 10, 2009 at 8:08 am
RE: Sniglet @ 60 –
For sure buy what you can afford today, but governments like inflation. A thirty year mortgage is a long term investment.
BTW you have excellent content on you site. Thanks
If I were buying today for the first time and wanted a fixer or close to it, I would first go to a foreclosure auction to see how that works. I’d go more than once to see who shows up, who bids, and why.
Then I would go to the foreclosure “classes” on the Eastside. Don’t sign anything. You are there to meet people. You should know how the process works.
In buying bargains there are three types of situations:
Divorce,
Death,
and,
Investors.
I would get to know some investors first before buying. There are legitimate people who buy, sell, rent, and trade in properties. These are good hard working people who are apart from the get rich quick crowd.
Many investors are addicted to buying properties. They simply like good deals. The problem is you can only hold so many at a time. A really good deal for an investor is one they can sell for a profit quickly.
When you find the right investor who is buying for a resale you can be that resale buyer.
I have a lot of cautions about this. Some people let a property be foreclosed on because it is unsalable. There may be fixes that make the property cost prohibitive. Get a very detailed inspection before buying.
Buying foreclosures themselves are high risk, but it is a good thing to know. It’s also fun. You really can’t buy this type of entertainment.
Ray Pepper » Feb 10, 2009 at 8:23 am
Go Geitner!
http://www.financialstability.gov
Sniglet » Feb 10, 2009 at 8:24 am
Yes, they do. However, that doesn’t mean they will get what they want. Japan has been facing declining asset prices for 20 years despite a huge increase in the money supply and massive government spending. I don’t see why a similar thing can’t happen in the US. Heck, just look at how impotent governments have been in preventing the growing purchasing power of the dollar in the last year. If policy makers were all powerful, then we shouldn’t have seen the types of declines in incomes, stocks, real-estate, and commodities that have taken place.
As I outlined in my deflation podcast (http://www.surkan.com), I think the government’s hands are tied, and that an increase in the purchasing power of the dollar is what we are going to see. A dollar put under the mattress today will buy a bigger piece of house 2 years from now than it can today.
Kary L. Krismer » Feb 10, 2009 at 8:30 am
Sniglet, I’m on the fence between inflation and deflation, but I’m having a harder and harder time seeing how the government can commit to all this stuff without there being inflation at some point.
Kary L. Krismer » Feb 10, 2009 at 8:33 am
By David Losh @ 64:
I don’t typically see divorce situations as being something to step into, because there’s too great of chance one of the two spouses will be unreasonable.
Estate sales on the other hand can be great, especially if you have many heirs. If you have 10 heirs, a $50,000 price reduction is only $5,000 per person.
lilypad » Feb 10, 2009 at 9:03 am
this is off-topic (sorry!), but can anyone tell me this:
if we are contacted by a buyer’s agent whose buyers saw our house while it was on the market, how long after the listing expired does our former listing agent still have claim to any commission?
Or at least can anyone give me an idea of where to look this up?
thanks!
Sniglet » Feb 10, 2009 at 9:09 am
Keep in mind that the vast majority of the government stimulus/bail-outs are in the form of BORROWED money (i.e. t-bill sales), which just sucks money out of the private sectore. The Fed is threatening to begin a major program of outright purchasing of treasuries, but this is just talk so far. And even if the Fed does start buying treasuries I doubt they will do so in a huge manner since the consequences of spooking the broader market are so dire (i.e. no one who owns t-bills will want to keep them if the government/Fed becomes a major purchaser).
Also, it is important to remember that the vast majority of stimulus governments have been spewing out in the last 20 years has been in the form of debt, and debt creation (e.g. low central bank interest rates, etc). All this DEBT acts as a massive deflationary force when economies slip into reverse.
Again, to repeat my broken record, Japan has been pulling out all the stops to prevent declining asset values for 20 years, and that hasn’t worked. Japanese central bank interest rates have been near 0 for a long time, and their government has spent many trillions of dollars over the years on various stimulus efforts.
This at least indicates that asset value declines aren’t so easy to stop once begun.
Anyway, I don’t want to re-hash these arguments on these threads. You need to listen to my podcast if you want the full picture of the argument for deflation.
lilypad » Feb 10, 2009 at 9:09 am
p.s. my 2 bits for Sam and Tiffany: speaking as someone who can’t sell a house she needs to get rid of, I would not buy anything right now. You may think your circumstances won’t change and you’ll be happy in the home for a long time, and I hope you will be. However, if something does change in the next year or 2 before things get back to “normal” (hah hah) in the local real estate market, you could be stuck in heck with the rest of us whose homes are “unsellable” through no fault of our own.
Kary L. Krismer » Feb 10, 2009 at 9:11 am
By lilypad @ 69:
With the NWMLS contract, six months.
Sniglet » Feb 10, 2009 at 9:25 am
Is it really true that some homes are “unsellable”, or is it simply an issue that no one is willing to buy a given home for the price the owner wants to sell it for? When I hear people talk about being unable to sell a home I really start to wonder if they are being realistic in their pricing.
When trying to sell a home today, I think it is important to consider the consequences of further price declines when setting a price. Too many sellers wind up chasing the market down, only reducing their asking price when their home has languished on the market for a lengthy period of time, but then finding that their new lower price is no longer accurate. Instead, they would have been better off with a substantial price reduction, placing their home well BELOW typical asking prices in the first place rather than continually ratcheting down the asking price even while the broader market declines at an even faster pace.
Sellers need to ask themselves what the consequences to their own finances, and peace of mind, wil be if they still haven’t sold the home 2 years from now and the market value has dropped an additional 50% from where it is now in that time-frame.
Kary L. Krismer » Feb 10, 2009 at 9:52 am
Sniglet, volumes are so low right now that there probably are some houses that are virtually unsellable–at least without going the short sale route.
I’ve been complaining for a long time about the condition of some listings. But in this market I really wonder what some people are thinking. There are nice units in good condition that are not selling for not that much more, and sometimes even less, than units that are in poor condition.
But more to your comment, there are certain houses that in a hot market would sell, but in a cold market are difficult due to traits that simply cannot be changed. Being on a busy road or having a bizarre floor plan come to mind. Yes at some price they will sell, but I don’t think many sellers are willing to discount that much.
Finally, don’t discount the fact that some people probably are not good candidates for short sales. Perhaps they own two houses, for example. For them they might truly be unable to sell because the price the property could sell at could be less than what they owe together with their cash in the bank.
Sniglet » Feb 10, 2009 at 10:14 am
This is the key. Any home is sellable, it’s just that some sellers are unwilling to lower the price to the point where it becomes attractive to purchasers. The fact that a given owner “needs” a certain price to pay their mortgage is immaterial. If the home isn’t selling, then it is clearly priced above current market values.
I agree that in many cases the only way the homes will finally be sold is after the lender has reposessed them and listed them as an REO. It is only at that point that a true market price might be reached (i.e. where the owner is willing to price the home to clear).
Markor » Feb 10, 2009 at 10:28 am
Nobody’s mentioned it yet? Sam should get a divorce and find himself a real woman, or else Tiffany should get off her duff and get a real job. In this economy & with its future prospects, they shouldn’t buy a house or have children until they can make the payments for all that for a couple years at least without a job. Otherwise even if they could get a house at the bottom, they’d still be in a precarious financial position with their future kids at risk of going hungry.
lilypad » Feb 10, 2009 at 10:34 am
Sniglet—I agree that there are many greedy sellers who price their homes at 2007 levels and then complain when they languish on the market. I have seen properties on the MLS, looked at county records to see what they paid, and have been astonished at how much equity they have but they still don’t lower their price. Then there are those, like us, who lowered their price down to the break even point with what is owed on the mortgage. If it doesn’t sell at that amount, and ours didn’t, then really there’s not much left to do. Short sales are impractical and a lousy way to spend the next months of our lives. Our house will go to foreclosure and yes, then the bank can lower the price and someone will get a good deal. That’s what I meant by unsellable, I can’t go as low as the bank or believe me, I would have taken another $75,000 off the price. As it was, we lowered it $100,000 and it still didn’t sell. Several others in my area that I have been watching have given up, as well. So next fall or so, there will be some screaming hot REO properties for sale around here. But keep in mind, real families are being affected here, it’s not just all theory and cold calculations from your side of the fence. I’m not asking for sympathy, I just want you to understand why some sellers don’t lower their prices.
Hugh Dominic » Feb 10, 2009 at 10:37 am
Jonness @ 55,
I can totally relate – I have the feel good chemicals as well. And part of my brain tells me I am getting a good deal.
But, the more rational side points out there are a lot of Tokyo residents who bought when their market was 20% down who wish they had waited…
And each month that goes by puts more $ in my pocket and brings us closer to the end of this recession/depression.
So unless the owner agrees to drop significantly more than the asking price (which is unlikely since they are back to 2005 levels) we are likely going to pass.
The day dreaming was nice though….
Jon » Feb 10, 2009 at 10:49 am
Great posts…
As for Sam and Tiffany, I would tell them to keep looking, and keep throwing mud against the wall. At some point in time the mud will stick and they will have a nice home in which to build their family from over the next 10 years. I would also suggest they plan to live there for 10 years, in order to ensure they are purchasing a great investment.
I would also suggest they go back to those other homes they made offers on and present an offer lower than their first offer, but on scale of how the overall market is doing. If the market has dropped .5%, make the offer .5% lower than their first offer.
I would also suggest they take into account FHA financing, the cost of obtaining the financing, and the repairs the seller might have to do in order for FHA to take on the loan. There will be things the inspector calls out that must be fixed prior to closing if they plan to purchase a fixer (or a variation of such).
I would continue to offer 10-15% below what the market dictates to offset the potential of the market dropping further, and mull over the responses to the point that it becomes cost effective to own the home.
The 10k tax credit may help them, if they pay that much in taxes on a yearly basis (38% of americans pay NO tax), but not until the end of the year. Don’t factor it into the equation at this point in time. Use it for your vacation fund to go somewhere fun, warm and tropical over the next few years!
Hugh Dominic » Feb 10, 2009 at 10:58 am
By ira sacharoff @ 57:
Wise words Ira. I have been eyeing the “perfect house” and am considering making an offer.
I think one of the challenges is that this is the first property that we have seen that fits our dream criteria and that is also solidly within our price range.
We could pull the trigger, but I have to remind myself that there will very likely be MANY “dream houses” coming our way over the next few years, at much, much better prices.
So unless the owner agrees to a further 20% cut (and I suspect they wont as they are pricing at 2005 levels) we will pass.
This “I want it, but should wait” seems like a grown up version of those psychology experiements they run on kids to measure maturity….
Markor » Feb 10, 2009 at 11:07 am
RE: Hugh Dominic @ 80 -
Yeah, wait. Nowadays sellers are still content to try to win the lottery. Another year will soften that up considerably .
Sniglet » Feb 10, 2009 at 11:07 am
I didn’t mean to blithely ignore the pain that many home-owners are feeling. My very own sister has been delinquent on her home in Florida for over a year now (although the lender still hasn’t foreclosed), and she isn’t particularly thrilled about this state of affairs.
That said, I do think that many struggling home-owners will actually be better off once they can get out from under the debt of their existing homes, and move into more reasonably priced accomodations. I don’t think lenders are doing a service to anyone to modify a loan for a delinquent borrower, only to find them go back into default because the costs are still too much for them.
Even in my sister’s case, I think she is better off getting out from under her horrendous mortgage payments. I always thought she was insane to take on such debt loads to begin with (paying something like 50% of her income on the home). She has certainly been able to start rebuilding her savings over this past year of living “rent free”…
lilypad » Feb 10, 2009 at 11:18 am
“I do think that many struggling home-owners will actually be better off once they can get out from under the debt of their existing homes, and move into more reasonably priced accommodations.”
You are right, Sniglet. I am very much looking forward to leaving this mortgage behind and I assure you, I will never take on that big of a bite again! I’m sorry to hear about your sister’s situation. I used to be very smug about how smartly we handled everything, how we had money in the bank and no debt but our house. Well, I’ve been humbled. I’ve learned my lesson. And I’m less judgmental about others’ choices, so that can only be a good thing. I don’t want anyone else to have to go through this, that’s why I posted my thoughts for Sam and Tiffany.
lilypad » Feb 10, 2009 at 11:55 am
RE: Kary L. Krismer @ 72 – Thanks, I appreciate the help.
Kary L. Krismer » Feb 10, 2009 at 12:03 pm
Lillypad, you should check your contract–ask the agent for a copy if necessary. It’s possible they used a non-standard form.
Kary L. Krismer » Feb 10, 2009 at 12:08 pm
Here’s the standard language: “if Seller shall, within six months after the expiration of this Agreement, sell the Property to any person to whose attention it was brought through the signs, advertising or other action of Broker, or on information secured directly or indirectly from or through Broker, during the term of this Agreement, Seller will pay Broker the above commission. Provided, that if a commission is paid to a member of MLS or a cooperating MLS in conjunction
with a sale, the amount of commission payable to Broker shall be limited to the amount of commission which would have been payable pursuant to this Agreement less any commission so paid to another member of MLS.”
mukoh » Feb 10, 2009 at 1:53 pm
RE: lilypad @ 77 – You might be incorrect, should be better on your credit history to have a few months late, then a foreclosure.
lilypad » Feb 10, 2009 at 2:08 pm
RE: mukoh @ 87 – I’m not sure I understand what you mean— Do you mean make a payment every few months so that it shows some months are late but not full blown foreclosure? That only postpones the agony, it doesn’t solve the problem. We can’t sell, we can’t rent it for what we need for the mortgage, and we don’t have enough to keep making the payments. So I’m kind of over worrying about my FICO score at this point.
Kary L. Krismer » Feb 10, 2009 at 2:23 pm
lilypad, you probably should see an attorney ASAP to discuss your options (including the one about the buyer if there is a buyer still hanging around).
lilypad » Feb 10, 2009 at 3:19 pm
RE: Kary L. Krismer @ 89 – I appreciate your concern—I have talked to an attorney. I posted a lot about our situation a while back, I have medical issues, the house is too expensive on one income, but we have no other debt so it’s not like bankruptcy is an option. As for a buyer, I’ll believe it when I see a written offer on the table. Right now, it’s just the same as all the other potential buyers who told us they loved our house and it was #1 on their list…and then they disappeared back into the ether. I’m not trying to cut our agent out of any deal—there is no deal, at the moment. I was just wondering how long I have to worry about it. I am a very honest person and I just wanted to know how long to keep it on my radar.
The Mama of 2 » Feb 10, 2009 at 3:47 pm
RE: The Sam @ 27 –
You “need” and artist studio and a bigger place for kids. I honestly don’t think you know what you need, your wife just sounds like she has a lot of wants. I had big dreams of a $700K 1000 sq. ft house in California before having my first child. It didn’t happen we had our first while in a 800 sq. ft 1 bedroom. We moved to this area and out of the 1 bedroom place when the first child was almost 2, and I was 6 months pregnant with the second. When we moved all of our stuff that was in that 1 bedroom apartment fully furnished and filled every room of our 3 bedroom apartment. Did we really need to double our sq footage…no…did we want to…yes.
The reason I say all this is two fold…you don’t NEED a house or more room nor does your wife. Your mentality is what created the bubble in the first place and causes people to go into debt.
My advice. Chill out, sign up for 6 months or more where you are at. Tell your wife if she wants kids to have them and when you see the right house put in your offer. Don’t give yourself a deadline of when you have to be in a house otherwise you are only going to hurt yourself and your family, and don’t stop living life while you wait for the right house.
We are like you…only a little older, with two kids, more savings, and probably a more secure job (though we all would be stupid to take that for granted in this economy.) Have faith that when the right house comes along everything will click and if the right house doesn’t come there is a good reason….like you maybe moving 1000 miles away in 2 years for greener pasture. :)
Blurtman » Feb 10, 2009 at 4:55 pm
We are in a period of galloping asset deflation. Cash is king in this environment. Don’t try to catch a falling asset kinfe.
The big banks are all insolvent. Deleveraging will only increase.
Hunker down for now and enjoy life.
2kt » Feb 10, 2009 at 8:11 pm
RE: Sniglet @ 49 –
One should consider many things before buying a property. At this point 50% decline is just as likely as Microsoft making Zune a great success.
Jonness » Feb 10, 2009 at 9:22 pm
Hugh Dominic @78:
I’m exactly there. The house is 60′ set back from the high-water mark and about 20′ above it. The property backs up to a few miles of protected shoreline. The house is brand new, very well built, and the builder used high quality materials throughout. There are no neighbors, and the zoning restrictions and land layout prevents anybody from building in the vicinity. The asking price is below replacement cost. When you stand on that shoreline and look out across the most pristine remaining portion of Puget Sound, the dopamine just pours through your brain. It’s like waking up from being dead to the astonishment that you now have what you’ve been missing all these years. It’s my current drug of choice, but unfortunately the letdown is severe when you realize you must ultimately abandon her in favor of economic common sense.
I’ve been playing this game for 3 years thinking about money, and suddenly something greater than money grabbed me and shook me back to my senses. Ultimately I won’t buy the house in this market, but I now realize that I cannot just buy any old house just because it’s a good value. From here on out, I’m looking for my dream house and waiting for the prices to fall to the levels where I can afford it and have no risk of losing it all to the next great depression.
At this moment, I’m much less concerned about the cost of the house than I am the outside risk of losing my job in this massive downturn. I’m experiencing the fear aspect of the greed/fear cycle that ultimately will drive home prices MUCH further in the downward direction.
Jonness » Feb 10, 2009 at 10:05 pm
By Sniglet @ 61:
It’s good to hear from you again Sniglet. I was getting your model mixed up with a blogger that has a theory somewhat similar to yours, but he keeps lumping asset values in with money supply. This has made it really difficult for me to figure out the big picture. So when I came upon this simple MV=PQ formula, it was like a lightbulb went off in my head. I realized it is not loss of money supply that is ultimately driving down prices. It’s loss of velocity, which creates a loss of price. People percieve they lost money because the price of their assets declined from peak. But really an asset is valued at the buying and selling price (ultimately the same thing from different perspectives). Inbetween those points, you have psychologically induced noise. If the noise goes up high enough, it increases velocity. If it goes down low enough, it decreases it. In the meantime, the money supply increases (govt. pump), which should drive up PQ. But the now plummeting loss of velocity (hoarding of M) ultimately won’t allow that to happen.
I think what I’m finally beginning to realize is a part of what you’ve been saying all along. For whatever reason, I need that little econo101 formula to put it into perspective though.
Jonness » Feb 10, 2009 at 10:12 pm
I thought I would add. It seems to me one thing standing greatly in the way of the govt. money pump being able to excite velocity back to its bubblicious levels and support bubblicious prices is sane lending standards. So I think the best they can really hope for is to put a floor under the price collapse.
lowertheprices » Feb 12, 2009 at 11:22 pm
Best advice is to WAIT! But no harm if you keep making, very LOW offers. It will help sellers smell the coffee.