Try to formulate something besides simply belittling everybody and stating how crazy everybody is.

Not everybody – just a few and they have all found a home

Calm down, it’s OK. Yes I do expect prices to drop a lot to match value.

These are criteria I use to buy property. I have not bought a property since 2006 and yes paid 30% below market analysis based on work that needed to be done.

I do not hold properties.

People today are buying and selling properties for profit. I’m not in the game and it has cost me plenty.

Real Estate is a commodity of housing units. You can make good deals in any market. On the way up all was golden, but I am 56 and have been dealing with properties for over 25 years. For 10 years before that I worked for people who bought and sold properties.

There have been down markets before but nothing like we have today. Today you can make very good deals. I’m, get this, morally opposed to the market place we have. Lot’s of people have gotten hurt while banks make extreme profits. It makes me sick.

That said, if you are inclined, and it’s for your family, you have the same opportunites as any one else.

By buystocks @ 25:

Doug,

Just do lots of research, and consider all plausible scenarios. For me, rather than predict, I like to consider the worst and best scenarios of buying or waiting.

BUYING:
Best Case – You bought at bottom and get a 10% yearly gain on a highly leveraged asset.
Worst Case – You bought not even close to the bottom. It drops another 60% in your highly leveraged asset. Your 20% downpayment is gone forever, your asset can’t be sold without bringing the other 40% to the table, and you can’t rent for anything near your monthly mortgage. Considering wages and employment would likely decrease also in this scenario you’d likely be unable to afford payments and then need to foreclose and check in to the nearest family member’s house or neighborhood shelter.

WAITING:
Best case – The above worst case. Your downpayment is now worth lots of money. You buy a nice home and live comfortably even on the decreased wages.
Worst case – The above best case scenario. The market appreciates, and you end up paying 10-20% more for the house than you could of it didn’t wait.

We all have different risk tolerances. After I’ve put myself through the above exercise, I felt the worst case of buying would be much worse than the worst case of waiting. I was afraid of two things, buying such a highly leveraged asset in a risky environment, and of living in a shelter. So for now, I’ve chosen to keep my downpayment for now and wait.

Are you really smoking something? 60% off current values? Love the entertainment value of this site.
Waiting might be a good idea but 60% off current values worst case? How about Seattle gets wiped out from an Earthquake followed by a tsunami. Isn’t that another worst case?

Amazing to continue to see crazy talk!
Hey I also heard the world is coming to an end in 2012. Whats the point of saving your downpayment if all of us are getting vaporized in less than 3 years.
Lol

Try this exercise then, Rojo:

What do you consider the worst case scenario?

What did you consider the worst case scenario one year ago and two years ago?

What would you consider the worst case scenario in one year if housing has dropped another 10%?

I’m guessing you would of considered somebody “crazy” if they described the current state of the housing market as the worst case scenario two years ago.

My main point is don’t try to predict and speculate on a large leveraged asset, such as a house. I consider buying a house analogous to purchasing stocks on margin; yet common sense tells most people that buying stocks on margin is very risky, but common sense tells most people that buying a house is safe; there is a huge contradiction here that has financially ruined many people over last several years. That’s why it’s important to figure out the costs of both scenarios (housing plummets vs housing skyrockets), and ensure you feel good about the risks. Plus, your arrogance is not an argument, its just annoying. Try to formulate something besides simply belittling everybody and stating how crazy everybody is.

RE: HappyRenter @ 64 –

Happy renter. Just curious, is this for a existing sfh, or new. How did you pick homestreet for the pre-approval?

The last time I did my pre-approval, I just walked into my local credit union, provided some documentation and was done (Not obligated to use them when I ultimately shopped for the mortgage, ie. after signed contract.)

Hi JimN,

Sorry, I did not check back yesterday any more. This pre-approval is not for any home in particular. We just got pre-approved to borrow a specific amount of money given the down payment we are willing to make, our salaries and credit scores. Homestreet has a partnership with the UW, that’s why we checked it out first. We will shop for other lenders, too. The goal of this pre-approval was to actually figure out what we would qualify for.

I think that rules have changed from the time you got a pre-approval. For example, I found this article about the three-day requirement:

http://www.docmagic.com/compliance/wizard/2009/june-2009/hvcc-update

- Seattle by tier shows the “high” teir still declining in price while the low-and-mid tiers increase (note “high” tier purchases are less likely to qualify for the tax credit).

- Decline from Peak by City shows that for virtually all cities, the index reversed from month-over-month declines to month-over-month increases which continue through the latest data.

The First-time home buyers tax credit expires in December. Unless the credit has permanently changed the psychology of the housing market, we can expect prices to resume falling in all markets including Seattle.

When we finally hit a real market “bottom” in the future, it will not one moment where all cities simultaneously reverse. Prices are based on local affordability and will bottom independently at different times, with Seattle likely to bottom later.

Rojo,

You say people talk crazy — using your logic your friend should have bought that house before any price drops

” have a friend who wanted to buy a house close to where we live. The builder chased the market down by almost 200K. My friend really liked the house but kept delaying it because he was expecting it to keep dropping. Last month the house suddenly sold for the full list price after the latest drop. ” suddenly sold for the full list price? yeah after being reduced 200k lucky your friend didn’t listen to you or he would have bought when it was 200K more expensive.

Face it your where in the camp that never thought RE prices in seattle would drop — because it is magical — Hmmm, I guess you were WRONG.

Read whatever you want to read – I did not imply he should have bought at the peak. I was saying that he should have bought it at the second last price drop that was only 10K higher and made an offer 10K lower.
He is in a tough spot with 3 kids and a dog all living in a small 2br apartment with his wife going crazy. Neither am I saying he won’t find anything else. They is in the 300K combined income bracket but the desire to get the absolute minimum price is driving him crazy and putting undue strain on his family and his marriage – is it worth it? Thats what I was trying to say. Life is too short to worry about money so much, especially when you make a a decent living.

You don’t know me, so don’t make any assumptions about me!
I wonder which campt are you in – loser job, loser education, wishing could afford a house, knowing you can afford one only if you wish hard enough to have prices fall another 50%!

What I said above was not nice but I only said it make a point – don’t make assumptions about anyone you don’t know about.

You say people talk crazy — using your logic your friend should have bought that house before any price drops

” have a friend who wanted to buy a house close to where we live. The builder chased the market down by almost 200K. My friend really liked the house but kept delaying it because he was expecting it to keep dropping. Last month the house suddenly sold for the full list price after the latest drop. ” suddenly sold for the full list price? yeah after being reduced 200k lucky your friend didn’t listen to you or he would have bought when it was 200K more expensive.

Face it your where in the camp that never thought RE prices in seattle would drop — because it is magical — Hmmm, I guess you were WRONG.

RE: Rojo @ 68 –

You are rambling. I buy below market, no matter what the market.

The value of a house is what it will rent for. If you carry a mortgage the rent should cover the mortgage payment with a 0% down 10% loan.

Nothing else makes any sense unless you can sell it for a profit.

I really like the fundamentals of Real Estate. I like that term. These are the fundamentals.

If you want to pay more because it’s perfect for the family, I think that’s great. You want to and can pay it off in 15 years that is excellent, I encourage and applaud that. Owning property free and clear is the best way for a property to be an asset.

I have one word for you – slumlord!

0% down, 10% interest rate? When was the last time this could be done? I am too young to know!

Let us say one exists –
3Br, renting for 1500, 600 insurance, 3000 taxes – Price would need to be 137K.

2Br renting for 1000, 500 insurance, 2000 taxes – Price would need to be 90K

Are you really waiting for prices to go down that far? Maybe a trailer in snohomish but hey, nobody would pay $1000 for a two bedroom there.

GOOD LUCK DUDE!!!

Crazy talk continues!!

You are rambling. I buy below market, no matter what the market.

The value of a house is what it will rent for. If you carry a mortgage the rent should cover the mortgage payment with a 0% down 10% loan.

Nothing else makes any sense unless you can sell it for a profit.

I really like the fundamentals of Real Estate. I like that term. These are the fundamentals.

If you want to pay more because it’s perfect for the family, I think that’s great. You want to and can pay it off in 15 years that is excellent, I encourage and applaud that. Owning property free and clear is the best way for a property to be an asset.

RE: Rojo @ 29 –

What’s your criteria for a home purchase?

i could spend the time to write it down but I don’t think it is worth it because it is based on each individual’s need and financial condition.
All I can say is, buy something you like and will live in for 5-10 years, something you can clearly afford and that too on a 15 year note. Don’t have to get a 15 year note but should have the ability to pay in 15 years.
As for declines in the current market value, it could happen or it could not. I wouldn’t worry about it too much for the long haul. I don’t have a crystal ball and neither do people predicting a free fall. With the high diserability of Seattle area, I doubt that would happen.

I have a friend who wanted to buy a house close to where we live. The builder chased the market down by almost 200K. My friend really liked the house but kept delaying it because he was expecting it to keep dropping. Last month the house suddenly sold for the full list price after the latest drop. He had set his top at 5K below where this house sold. It would have been perfect for his family but for 5K he lost because of general fear. Now, he will start looking again but I don’t think he will wait too long to make an offer this time. He could have afforded the house at the peak, now with 200K off, he can afford that much more. There are lots of people just sitting on the fence waiting but as properties go off the market, more buyers will keep coming knowing that good houses in good locations are starting to go quickly. For him, he knew that going down by another 5-15% is not a big deal because he plans to live in it for 10 years. It was the mentality of getting the absolute minimum price that got him. I think thats whats going on with a lot of people. I know atleast 4 other people in my circle who are waiting to buy. Two of them even tried getting into a short sale but gave up because of the delays, frustrating experience.

anyway, I rambled.

Happy renter. Just curious, is this for a existing sfh, or new. How did you pick homestreet for the pre-approval?

The last time I did my pre-approval, I just walked into my local credit union, provided some documentation and was done (Not obligated to use them when I ultimately shopped for the mortgage, ie. after signed contract.)

What’s your criteria for a home purchase?

It seems that they require this now. At least, they require it from us. I asked the lender what the disadvantages are if the closing is delayed. The answer is:

The Seller may need the closing to occur on time because he is
buying another home for which he needs the proceeds from the sale.

You may have a lock in place that is going to expire, and it will
cost more money to extend the lock.

Whenever the closing date changes, there has to be a legal
document prepared and signed by all Buyers and Sellers showing agreement to the changed terms of the contract.

But I agree with JimN. I don’t see why having the appraisal mailed (or e-mailed) three days before closing would introduce a big delay.

Actually, I’m confused why this even is an issue at a “pre-approval.” The last time I got pre-approved, I didn’t need to sign any forms, let alone sign forms to waive certain requirements.

It’s my understanding that there are requirements for certain documents to be delivered before closing. My point is, unlike happy renter, I would not waive those requirements.

Of course, I wouldn’t schedule a closing so tightly that I couldn’t delay.

If you take a tight schedule and add 3 days, then there is a 3 day delay. I agree that 3 days is not significant, but if you were the lender, would you want to be required to provide a 3 day notice?

Whose interest does the lender have in mind?

Of course the lender sees it as unnecessary and a delay…

The importance of the appraisal is not the issue. What I need some clarification on is the “threat” of delay. Why would having the document in advance delay the closing? Or, if it’s a matter of days, why can’t this be planned out? As a layperson, I guess it really rubs me the wrong way if a lender would make this statement.

You are doing the right thing. Continue on this path until you are very knowledgeable with the situation.

My strategy is to have an attorney for legal questions.
A finance person for finance questions.
(These are paid for time)
A buyer’s agent (REALTOR type) for house hunting, but review with others above.
Talk to lenders about money, but review with the others above.

“Send Lawyers, Guns and Money” -Zevon

Are there in Seattle any homebuying seminars offered by institutions which are not affiliated to lenders or the real estate market? What I’m doing right now is to read about the market to try to understand myself as much as possible.

Not all lenders are bad. Some are quite honest. Many in the industry got beat down by “no closing costs” deals, as people were refinancing so soon.

I have asked this question time and time again:

I owe $500,000. Interest rates come down, so I refinance at a lower rate (no closing costs). Now my payments are lower, and the mortgage broker made money.

A year later interest rates come down, so I refinance at a lower rate (no closing costs). Now my payments are lower, and the mortgage broker made money.

A year later interest rates come down, so I refinance at a lower rate (no closing costs). Now my payments are lower, and the mortgage broker made money.

How did any of this add value to my property and where did the money come from to pay that mortgage broker?

(Note: I do not actually owe money on any property, nor did I play the game.)

There are many others who have completed many transactions without employing professional help. That’s just not my style.

I’ll leave you with this:

Did you know that “no closing costs, no point loans” can actually cost you considerably more? This gets to the wholesale rate sheet and the way the debt is sold. Essentially the higher interest rate they sell you, the more they get paid. There are times when paying a small amount at closing can save you big over not paying anything at the closing. YOUR finance guy can help you with this. Do you think the lender is going to explain how they make more money selling you certain deals?

I thought you were further along–I missed “pre-approval” in your post 42.

Do talk to the lender about what not to do in the interim to maintain your credit score.

This is correct. We don’t have an agent, neither an attorny. But we are about to sign the paperwork to get pre-approved for a loan. We have been at open houses but we will not start looking seriously until this spring. Is what we are doing wrong? Should we first get an agent and/or attorny before getting pre-approval?

The thing is, if the appraisal comes in low, you’ll likely know about it long before closing. And if it comes in at or above the contract price, there’s really little reason to even look at it, other than curiosity.

I always suggest having an attorney to review all the documents. The time to get an attorney is before any agent is selected, much less any offer is made, and this guy is way behind in that regard, in my opinion. This question should go right to his attorney, who probably would want to review everything in advance.

The lender’s recommendation is correct. Should you actually be prepared with all the closing documents, appraisal report, etc 3 days prior to the closing; there will be high risk you will run away.

Much better and efficient to have the whole stack thrown at you at closing with little yellow stickies helping you find the exact pages you need to sign and initial.

If the estimate comes in too low, the price needs to be adjusted down, or you need to run away, in my opinion.

If the estimate comes in above your purchase price, then the deal continues.

You should know your estimated value before even getting that far. You already made an offer that was accepted.

How helpful is such an appraisal report? What is it for?

Tim, I’d be willing to do some research/ write an article if you want a post on buying bank owned property.

Depends on the market. I doubt you think this holds in single family housing. Oil and Gas mining, on the other hand, has very few players.

Doug,

If you buy, it should be out the bank owned inventory. The market has not hit a bottom yet, especially in the mid-to-high end….and certainly not in Seattle. All the positive Real Estate news is low end, and the appreciate is the speculators back at it in Arizona, and So. Cal.

People trade everything nowadays. Oil price$150, Dow 30000 2005. The maket is controlled not by suppply/demand but by a few traders. Damage or no damage. Ask people bought in 2007 who truly want to live in the house. Or ask a trader who merely want to load and unload one stock for profit. You will get two different answer. At least, I did see the bubble and never buy into the bubble economy. However, I do see value pop up in a recession economy and want to take advantage of this buy opportunity if there is a one.

(I should note, however, that there is a bit of prospecting, as some things that look like $20 bills might be fake, but the overall gain is probably positive. Bill Gates cannot pickup $20 bills and net out ahead.)

I do know there are people who blame sellers for selling at a too high of price. There are those who blame the lenders. There is plenty of ‘blame’ to go around.

In any event, when you buy a house, it could go down in value.

RE: Rojo @ 29 – The young economist looks down and sees a $20 bill on the street and says, “Hey, look a twenty-dollar bill!”

Without even looking, his older and wiser colleague replies, “Nonsense. If there had been a twenty-dollar lying on the street, someone would have already picked it up by now.”

Agreed, you could stumble upon a property priced lower than current market value but it is not easy – it is not easy at all! Why would somebody sell 20% below current market value that is already 20-30% off depending on the area. The problem here is that even bank owned properties are not selling that low either. Highly distressed proporties are selling at around 30-35% off peak. Now, I am not sure about others, I would not want to buy a highly distressed property for another 5% off. I don’t and want to benefit from other people’s misfortunes and move into a house where there was unhappiness, broken dreams and maybe intentional sabotage.

The key is finding something you really like, can easily afford it, plan to live there 7-10years. Everything else, especially thinking about like like an investment should be secondary. If you can’t stomach that, rent or stay put for some time till you see whats going on.

Prices going down further is a possibility but going down to 20-30% of peak prices is just crazy talk. Remember, Seattle might not be special but it is still a very desirable area to live in with strong influx of people. While renting my condo, I alone met 4 couples who were relocating to Seattle from other parts of country.

RE: Back to bascic @ 30 – I heard this same sort of speak about the Detroit market, GM stock, and several other things.

Here is what we know. You can lose the full purchase price. If the purchase price is 22% less, then you can only lose 78% of the former purchase price.

Yes, I know a guy who rode GM stock from about $70 down to essentially zero. He kept saying, “It cannot go down any more.”

Some bubblehead still think house as a trade tool like stock which could flip in second to make profit. No wonder Seattle housing inflated so much that average Joe couldn’t afford it in 2007. House should be treated as 1/2 shelter ans 1/2 wealthy builder but not a stock. I see old couples purchase and live in a house for 20 years and sell for retirement. I also see people flip and turning quick cash. All sorts of people. Did these people creat any value? Nothing. It’ too easy to get rich quick buy clipping your mouse. But the damage to the society is huge.

Here is what we know. You can lose the full purchase price. If the purchase price is 22% less, then you can only lose 78% of the former purchase price.

Yes, I know a guy who rode GM stock from about $70 down to essentially zero. He kept saying, “It cannot go down any more.”

Without even looking, his older and wiser colleague replies, “Nonsense. If there had been a twenty-dollar lying on the street, someone would have already picked it up by now.”

My criteria to buy is if I can sell it for a profit the day I close. That means about 15% below market value. Today that would need to be 20% below market value of closed sales. Now you are in a very hard process of just making offers. Most professionals look at stuff that has been on the market a long time. Find out why the property hasn’t sold. Make the offer based on repair costs, people respond to that better because it’s subjective.

Probably more information than you ever needed but take your time.

Here we go, another one!
When in the history of real estate could you ever buy something that you could buy and turn around and sell for profit with any change or enhancement? It might be possible for investers who buy in bulk – like a 1000 houses from a back at 25 cents to a dollar and then make profit on 500 out of these 1000 houses.

For normal people, I don’t see how this could be done!