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Old 09-01-2009, 09:42 AM   #21
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Originally Posted by DangerMouse View Post
I should add that we have probably talked outselves out of proceeding with purchasing anything in this area. It just seems ridiculous to be paying $750k for a 3 bedroom townhouse and not even get an attached garage to store the man-toys. Add in the $500 pm. HOA fees and I hate the thought of what we would be committing ourselves. If for this price we were getting something that even resembled a desirable residence where we could stay forever it would be a different thing.
I was going to ask the annoying "Geez how much is rent in silicon valley if small townhouses are $750k/mo?". I held my tongue but see you came to the same conclusion as what I was thinking. Why pay a huge mortgage, huge taxes, huge insurance bill, and huge HOA when you can probably rent for a fraction of the total cost of ownership (of course you don't get to share in any appreciation/depreciation).

I know at the peak of the bubble I saw some California markets where the own vs rent cost was 3:1 or 4:1. Places you could rent for $2500 a month were selling at carrying costs of $7500-$10000 a month. Of course now we see how that story ended... Extremely bizarre to me since you can knock a zero off those carrying costs and get a modest home where I live (not as nice as the CA home, but a place to lay your head at night nonetheless).
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Old 09-01-2009, 11:47 AM   #22
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FreakEconomics has a great chapter, which describes that the primary motivation of both the buying agent and the selling agent is not to get the best price but rather make sure the deal goes through.
Note-none of what I have to say has anything to do with anyone on this board, or their wives or husbands, who if agents undoubtedly are very helpful. It has to do only with my own experiences, and those of my good friends and acquaintances.

Anyone who occasionally drops in on the real world knows this Freakonomics observation has to be true. The salesperson wants some% of something, the surer the better. There are a million things that can queer a deal; get 'er done is usually a practical salesman's motto. And if he/she forgets this, the sales manager/broker will quickly help them remember by reminding them of the many positions for former RE agents waiting tables, driving medical lab samples around town etc.

Another negative in my mind to getting an agent, even a pretty good one, is that they don't want a long period of showing you around. They want to convince you that what they have is a good deal, by setting up manipulative comparisons. They want to create in you a psychology of scarcity, and they want to minimize the real information that they give you because they never know whatever they might disclose that might cause you to walk away. And this doesn't even get close to the outright fraud that is less common but can be very important.

Even highly recommended agents withhold information if they think that knowledge is deniable should you be dissatisfied and come back to them. I walked into a co-op with a newly refinished, very nice hardwood floor. Nothing else in the apartment had been modernized. The unit directly above was the same. I asked the agent (who recently had moved out after living there for 11 years) what had happened to explain this rather odd redo. “Nothing I know about”. Right. So I hung around and talked to some members. A pipe in the walls in the unit above had burst, flooding that unit and the one below it. Next time the guy called me to tout another place I told him about this. “Oh yeah, I think I remember something like that a while back”.

This may be different if you can refer a lot of high earning couples or families from your work say, especially if it is a corporate environment where many will be transferring in from other cities or countries.

As far as research, here in King County at least I can go online for free, and look up the past history of the place. Sales prices, work permits, taxes, and recorded liens. In a fair amount of condo looking over the past 2 years, I have never had an agent offer me any of this information.


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Old 09-01-2009, 12:22 PM   #23
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I agree with HaHA, a home buyer needs to educate themselves. Zillow provides a lot of information. I don't know if information about building permits is available online however. It would be on a city's website - I know in Portland it is.

What I have learned: In SV there are many fine neighborhoods and a few not so swell. The reputation of the local school impacts a home's value as most of the parents there have high expectations for their children. In some of the 'value' neighborhoods parents factor in the cost of private school tuition in the amount they will offer on a house. If you don't have children, and don't plan on any, those neighborhoods can be a good place to look.

The appraiser you will need to deal with is the mortgage company's. They are now really conservative. Once you have studied recent home sales and know what you think a house is worth you can make an offer contingent on the mortgage company appraisal.

In the education process put together your own team of inspectors, this goes too for new construction. In that area don't overlook a termite inspection.

What drives home values in SV is the impact of stock options, not wages.

Whether it is wiser to buy or rent really depends on your finances and values. If you save the difference between a mortgage payment and your rent for retirement renting may well be the smartest move.
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Old 09-01-2009, 01:02 PM   #24
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Without a doubt the SV real estate is a monster like no other. The good thing is with sites like Zillow and Redfin it is possible to gather the comparables that you need.

Like Brat says, here in SV the school district plays such an important part in pricing. I would not even consider buying anything unless it is in the right district as when it came time to selling the buyer pool is going to be limited.

As to the cost of renting, that is also scary. We pay $3k a month for a 3 bedroom house. Now taking into account this house was purchased in 2004 for $1.2 million and it is a knock-down. Even a 2 bedroom apt in a complex backing onto a freeway in a less desirable area of SV would likely cost $2500. We figured we got a good deal on this place, as most houses in our area rent for $3500+. There are a lot of places in this area that rent for $4500+ and they seem to get rented.

We were looking at Los Gatos so go to Redfin at put in zipcode 95070 and see what comes up for less than $1 million with 3 bedrooms.
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Old 09-01-2009, 01:09 PM   #25
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As to the cost of renting, that is also scary. We pay $3k a month for a 3 bedroom house. Now taking into account this house was purchased in 2004 for $1.2 million and it is a knock-down. Even a 2 bedroom apt in a complex backing onto a freeway in a less desirable area of SV would likely cost $2500. We figured we got a good deal on this place, as most houses in our area rent for $3500+. There are a lot of places in this area that rent for $4500+ and they seem to get rented.

We were looking at Los Gatos so go to Redfin at put in zipcode 95070 and see what comes up for less than $1 million with 3 bedrooms.
$3000 a month is probably a relative steal versus buying. What is property tax in that area? 1%? So $1000 a month on that $1.2 million house. HOA fee? Insurance? 5% interest only mortgage on $1.2 million would be $5000 a month. So the ratio of buy to rent is still roughly 2.5:1-3:1 it sounds like.
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Old 09-01-2009, 01:38 PM   #26
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We were looking at Los Gatos so go to Redfin at put in zipcode 95070 and see what comes up for less than $1 million with 3 bedrooms.
What are prices like in East Bay? And on out through Davis?
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Old 09-01-2009, 01:51 PM   #27
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From personal experience, things you need to check out yourself:
Future road "improvements" planned nearby;
Future airport "improvements" ditto;
Crime statistics;
Buried underground storage tanks;
Road drainage problems;
What taxes will cost you;
etc. Some problems with the construction may be found by a home inspector. Be sure you find a reputable one and pay for it yourself. And take time yourself to get up on the roof, down in the basement, look for leaks, etc. Even if you don't know much about construction, look and ask questions.
A retiree friend bought a nice condo in a building that subsequently burned down. The insurance that the association was paying for was inadequate to rebuild the condo building. She's now renting a cheap apartment to live in. The amount the owners would have to come up with to rebuild is way more than they can afford. So she's just out what she paid for the condo.
But you'll find lots of people that do very well buying a place to live. I just feel moved to warn you that you need to take responsibility before you buy something. Don't just trust what anyone, especially what anyone selling you something, tells you.
I'm contemplating buying again, but I will be much more cautious this time. If a deal falls through while I'm researching it, it just wasn't meant to be.
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Old 09-01-2009, 02:30 PM   #28
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What are prices like in East Bay? And on out through Davis?
Rich, truthfully I have no idea as I am not familiar with the East Bay at all as we live in the South Bay.

However, looking at what is happening in the South Bay, prices are definitely down on what they were in 2006, so I would expect that same effect would have flowed thru to East Bay as I would imagine the same set of economic influences are in play in both regions. If you take a look on Redfin in your desired zipcode, you can click on any property and you can see what they paid for it. I am finding that most people who purchased since 2006 are underwater by $100k or so.
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Old 09-01-2009, 02:37 PM   #29
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$3000 a month is probably a relative steal versus buying. What is property tax in that area? 1%? So $1000 a month on that $1.2 million house. HOA fee? Insurance? 5% interest only mortgage on $1.2 million would be $5000 a month. So the ratio of buy to rent is still roughly 2.5:1-3:1 it sounds like.
Ok finally worked out this double quote thing. The whole situation becomes more complex because you have to factor in the tax advantages of owning versus buying. Obviously because it is a high cost area, salaries are high and as a consequence we pay a lot in taxes. Also because we have not deductions, we pay AMT as well as having our allowable deductions reduced. So that is also a factor in our calculations.

Quote:
Originally Posted by toofrugalformycat View Post
From personal experience, things you need to check out yourself:
Future road "improvements" planned nearby;
Future airport "improvements" ditto;
Crime statistics;
Buried underground storage tanks;
Road drainage problems;
What taxes will cost you;
etc. Some problems with the construction may be found by a home inspector. Be sure you find a reputable one and pay for it yourself. And take time yourself to get up on the roof, down in the basement, look for leaks, etc. Even if you don't know much about construction, look and ask questions.
A retiree friend bought a nice condo in a building that subsequently burned down. The insurance that the association was paying for was inadequate to rebuild the condo building. She's now renting a cheap apartment to live in. The amount the owners would have to come up with to rebuild is way more than they can afford. So she's just out what she paid for the condo.
But you'll find lots of people that do very well buying a place to live. I just feel moved to warn you that you need to take responsibility before you buy something. Don't just trust what anyone, especially what anyone selling you something, tells you.
I'm contemplating buying again, but I will be much more cautious this time. If a deal falls through while I'm researching it, it just wasn't meant to be.
The big thing you have to look for now is with so many properties going into foreclosure, many owners are not paying their HOA fees. As a consequence these groups are running into big financial problems. So this is an area that has to be looked at carefully.

We have noticed that in the area we are looking/living there are not many foreclosures. In San Jose itself there are plenty. In the ritzier areas there are a few short sales but not the fire sales that are available in the lower rent areas.
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Old 09-01-2009, 03:15 PM   #30
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Rich, Walnut Creek is a nice community (relatives live there). Other East Bay communities... I have no clue.

Cupertino, Sunnyvale (previously mentioned) should be on your list.
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Old 09-01-2009, 03:23 PM   #31
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Martinez, Santa Clara, Campbell too.
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Old 09-01-2009, 04:20 PM   #32
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We previously lived in Sunnyvale, but didn't think a lot of the area. However, I believe there are some fabulous areas within the suburb and some not so great. It can be the poor relation of the other suburbs.

Cupertino, not a big fan. It seems noisy and crowded with so many shops. Good school districts which make it extremely competitive to buy there.

Santa Clara, doesn't really do it for me. Just another suburb,nothing special.

Campbell, a bit like Sunnyvale, some really nice areas and some very ordinary areas. They have done well with their little downtown strip.

Personally I think the best areas of SV lie outside the 85. Los Altos, absolutely beautiful, wish we could afford it. Mountain View, has changed dramatically the past 10 years, the downtown area has come ahead in leaps and bounds, would consider there as well. Los Gatos and Saratoga, both gorgeous areas with lots of greenery. We are currently living in Saratoga but would prefer to live in Los Gatos. We refer to Saratoga as being the cemetery above the ground, as nothing happens here, and the well heeled locals do everything they can to stop any development happening.
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Old 09-01-2009, 06:27 PM   #33
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I was raised in Los Altos and it was a nice place to live back then. I moved away in 1970 and have watched it get more congested since then. My parents sold their home that they built in 1956 and made a HUGE profit off it. I think they paid 35K to have the house and pool built and sole it for close to 2M.

Hope you can find something in the area you like. It's way too congested and expensive for me.
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Old 09-02-2009, 12:18 PM   #34
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The issue for those of us with kids that live in SV is finding a home we can afford in the vicinity. Oh ya, Los Altos is expensive but Mountain View is right next door at a lower price point (smaller homes and lots). Our DD's first home was on Maranta Av in Sunnyvale, an area with very nicely kept single family homes. As I recall they paid about $750,000 for a beautifully maintained and updated split level seven years ago. Other than cost, my issue with homes in the area is that almost all are split level (built in the late 60s, 70s). Stairs can be a problem when you get older.

Were we to move there I would look at condos because they are accessible and because many are convenient to transit. I have a hard time buttoning my lip as DH (who is over 70) takes to those freeways. Gees Louise!!

A buyer in that market really needs to be prepared. Sellers typically list well under comparables with the goal of attracting several offers at a higher price point. Read the RedFin San Francisco blog for a couple threads discussing the offer process. The advantage of a realtor in that market for someone outside the area is steering you to suitable offerings that you might be able to buy. I don't know if RedFin does a good job at that. If RedFin offered consulting by the hour as well as the commission rebate you would be $ ahead.

DD has friends who happily live in Campbell and Willow Glen but I believe that is seriously south of where Rich would like to locate. Anyone have suggestions for the area around Redwood City, Atherton, Woodside?
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