Looking for Real Home Buying Advice

[rose-colored-coolaid]

We've been seeing some just plain ridiculous questions regarding how/when someone should go about buying a home in this market. But we all know that prices are falling, and they are falling quickly. Anyone who doesn't have a very large down payment will definitely find themselves upside down in the near future if they buy today.


But what if you have done all the requisite work. Let's say you have a large down payment (greater than 20%), you have a stable job, you expect to be in King County for the next 10 years, and you are at a point in your life where you feel ready for home ownership.

If you are in good shape to buy, but want to mitigate downside risk, I think you need to bargain a house down, since the houses that are listed as real deals tend to go very quickly. But I would like some advice on how much of a discount a house needs to make it relatively safe to buy now. Let me throw some numbers out.

Let's say comps are priced at KC median ($450,000ish). And let's assume that regardless of what you pay, you'll have 20% down and and extra $10k left over for repair/moving/upgrades. What is a good price to pay today on such a house? $360k is 20% off, just for a starting point.

[biliruben]

I think it's going to be rare seller that is ready to take low-balling seriously yet.

I think you either have to get lucky and nab a rare well-priced house as it goes on the market, or you just gotta wait them out.

[rose-colored-coolaid]

[biliruben]

It certainly depends on the house and the list price.

If it's a ticky-tacky house in the burbs of the mold as 300 others in the neighborhood, priced at last July's peak, then I wouldn't touch it for more than 20% off list. They won't yet take it, probably, but that's all I would pay, and be willing to eat the additional 10% it will likely fall

If it's a unique home in Laurelhurst already priced 10% off peak, I would be thrilled to see them seriously consider an offer of another 10% off, but my guess is they wouldn't accept yet.

My guess is we probably won't start seeing waves of desperation until July of 2009 around these parts.

[ira s]

A lot of it does depend on the area. In a Wallingford/Ballard/Laurelhurst, etc, we may have seen some tiny price declines but charming older homes that people seem to want don't stay on the market long, so they wouldn't even respond to a 20% less than asking price offer, i think.
On the other hand, I'm seeing nice houses on the east side stay on the market for long periods, so they'd be more inclined to look at lowball offers.
That said, I'm a little more optimistic than many on this board. I don't think, on average, we will see more than an additional 10-12% decline( some areas more, some less)...i think we'll also see a lot more short sales in the next year or so, which also offer significant discounts from market value.

[melonleftcoast]

From my experience, and my friends' experience, in the Boston area, where they have posted real price declines, you still have sellers that are unrealistic and will pull their houses off the market before they even consider a 20% (or 10% or 5%) "low-ball" offer, no matter how much information you can give them for decent comps in the area. These sellers are a waste of time.

From what I have seen and heard, it all depends on the seller. Finally, after about two years of price declines, it seems there are more and more sellers that have equity in their homes that are really pricing them to sell, and they typically sell within 5%, +/-, of the asking price.

Seattle is at the top of the "precipice", and I would think that it is going to take a while before sellers realize that they aren't going to get the prices they necessarily think they should get. I think by Aug - Oct 2008, you'll start seeing some realization from Seattle sellers, with more sellers willing to negotiate.

Buying a house is a business transaction. Selling a house is more than a business transaction because of all the personal memories and time spent there (from my personal experience). If the sellers won't budge on their price, and you cannot afford it, then move on to the next property. If you can afford it, it is what you need/want in a property, you really want to own a home, and think you'll be there for 10+ years, then consider buying it at the asking price.

Also, be realistic. I don't expect to buy a (real) $1M property for $600K.

Personally, this is what we are going to do when we are buying our next house:

Find out as much info about the sellers that we can: when did they buy, how much of a down payment did they put down, how much of a mortgage do they have, how long has it been on the market, how many price reductions, how much $ and sweat equity did they put into it, why do they want to move, where are they moving, etc. That will give me an idea how willing the sellers are to negotiate their asking price.

Then, once I think that the sellers could be willing to negotiate, look up all the recently sold comps (3 months is best) in the neighborhood AND current listings (their competition). It may be that the sellers have priced their property pretty well and we'll likely give an offer 5 - 10% less than the asking price. If the sellers have really overpriced it, then we'd do 10 - 20% less (or whatever is appropriate) and give them our supporting comps/listings.

Just my 200 cents...

[redmondjp]

[uptown]

The only real deals are probably outside King County at this point - Kitsap or Pierce. Land might be a better bet inside King County. You can then take advantage of the downturn in building to build your dream home, so you don't have to buy someone else's.

Large builders are able to build very cheaply, my old townhouse in San Jose was built for $100/sq ft during a building boom in the late '90s. They even had to import a drywall crew from LA to finish the final phase. And yes, they were well built, though of course they were not "luxury" units.

[ira s]

I've seen what I think are real good deals within King County, just not in parts of King County where anybody would want to live. You can get a lot of house for your money in the 98168 and 98178 zip codes, not more than a 20 minute drive to downtown Seattle..But yes, Pierce County offers larger discounts.

[melonleftcoast]

"Why in the world not?"

You are right, prices MAY drop that much in the Seattle area (King County), but you are probably going to have to wait several years. Like uptown said, the farther you get from the work centers (Eastside and downtown), the harder/more the prices will fall. So a house that was $1M at the peak in Pierce or Snohomish County, COULD go for $600K, but probably not this year.

Why not $600K? Because there are likely too many people that will think it is a deal at $800K or $900K this year.

And have you ever been to Atlanta? I visited in spring of 2003 and have good friends that live there. All I will say is "yack". Too many d@mned bible thumpers...literally on the street corners. I would need to be paid very well to put up with that.

[Markor]

[melonleftcoast]

Here's a good read about low ball offers from the NYT:

http://www.nytimes.com/2008/03/16/reale ... =permalink

[TJ_98370]

[RottedOak]

[rose-colored-coolaid]