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Old 07-09-2007, 03:01 PM   #21
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This may just be a quibble but I assume MFG is a first time home buyer. Any home buyer should realize that asking price is a ficticious number unless there is analysis to back it. I have seen people brag that they bought $50K under asking price and further research shows that the asking price was $60K over market value! Not quite the deal they thought they had.
House value is tricky. After all, fair market value is simply the point at which a buyer and seller agree on price, assuming neither one is under duress.

Housing prices can vary by tens and tens of thousands for a variety of reasons. A hot market and emotional buyers will drive prices up. A slow market, relos, ARMs coming due, estate sales in limbo, etc can drive prices way down.

So, basically, if someone brags that they got a house that was priced at $260k for $210k, then, assuming the buyer isn't being forced to sell, that means the fair market value of that house is $210k. The person didn't 'save' $50k. A better negotiator might have been able to get the house for $200k, sure, but that doesn't necessarily mean that the buyer overpaid by $10k either.

Like I've said, I'm no longer bashful about heavily underbidding a property if the area doesn't look like it justifies the cost. I either get knocked out of the running or the seller wises up and comes back to negotiate. to that end, personally, I'd stop working with a buyer's agent / realtor that was working solely for me if they kept trying to talk up a property or talk me out of a low offer.
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Old 07-09-2007, 03:07 PM   #22
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I'm surprised. Over the past 5 years, most homes have appreciated enough that I would think you made a pretty good return on that 8%.

I'm agreed and had to check where Webzter lived. I didn't think Minnesota missed out. It does go to show you when you compare to my results that when we talk about our real estate experiences it makes a big difference in location, location, location.

So it shouldn't be rent v buy. It should be rent MN v buy CA.
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Old 07-09-2007, 03:15 PM   #23
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I'm agreed and had to check where Webzter lived. I didn't think Minnesota missed out. It does go to show you when you compare to my results that when we talk about our real estate experiences it makes a big difference in location, location, location.

So it shouldn't be rent v buy. It should be rent MN v buy CA.
It's trickier than that, unfortunately. Even at a neighborhood level just around us, some inventory is appreciating well, some is stagnant.

Ultimately, you should make the move to a house, townhouse, or condo because it makes sense at that time. However, go in with your head on straight and don't get emotionally attached to anything. House buying is a huge time committment and a significant financial committment. The worst thing possible would be to not do due dilligence.

FWIW, my regrets aren't about the lack of appreciation in my house... it's that we have a life plan that would be a lot easier to attain if we didn't have a house.
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Old 07-09-2007, 03:22 PM   #24
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BTW, mary, I hope we didn't scare you off.
No you didn't. You guys bring up good points. I'm meditating!

Mary
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Old 07-09-2007, 03:25 PM   #25
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Since I consider mortgage brokers to vy for last place in the ethical sweepstakes with used car salesmen, annuity hucksters, televangelists, and former Intel middle managers, I will assume you meant taht as a compliment...

Really, it is just my experience of having been at about the same income level and carrying a $240k mortgage.
Brewer what were annual living expenses? The last 5 years I've averaged $19,623.
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Old 07-09-2007, 03:49 PM   #26
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It's trickier than that, unfortunately. Even at a neighborhood level just around us, some inventory is appreciating well, some is stagnant.
Do you know why that is? Is it location? Type of housing? In the Bay Area the housing that got hurt was the "lofts" that were basically a 1000sf open box. When the dotcommers retreated there was still strong demand for housing by families but this type of property did not supply that demand so prices dropped a bit until the return of the young entrepreneurs.

I've also seen this in the suburbs where new developments never lived up to their hype and quickly started to deteriorate.

Did you buy wrong or did you know going in that you would probably not see much in appreciation? I know people that want to live in a certain type of housing be damned the appreciation, think geodesic or A frame houses.
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Old 07-09-2007, 03:49 PM   #27
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Brewer what were annual living expenses? The last 5 years I've averaged $19,623.
You are single (I presume) and live in a different part of the country than I, so it would be apples to oranges. If you know your budget that well, it tells you a lot more than anything my numbers would tell you. Besides, I don't track nearly that closely.
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Old 07-09-2007, 04:15 PM   #28
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Do you know why that is? Is it location? Type of housing?
...
Did you buy wrong or did you know going in that you would probably not see much in appreciation?
I think it's type of housing and buying wrong. We bought a 2 story townhouse that carried a mid-market (not a starter) price tag. So, the main failings in our very specific situation:

- Two story. These appeal to younger buyers

- Priced higher than starter inventory. This puts us in the range of 'just starting a family but don't want a yard' and 'two-income professionals that want a place in the suburbs'

- Builder has an active development two miles away. A builder needs to move inventory to be profitable to its shareholders. So, they'll make all sort of deals and incentives because the unrealized profits are spread across millions of shares and not realizing an extra $10k profit on one unit is better than carrying that same unit and not realizing any profit.

We were young and 'had to have a house' then. If we were half as savvy as we are now (which is still a long way from where we need to be), we would have been better informed and maybe not made the purchase... targeting a single family instead.

To contrast it, there are $400k and $600k single-story townhomes on the other side of the street that move slowly but steadily. These target empty-nester / retired types. There are $180-$220k townhomes a block away. These turn well and attract singles / first-time home buyers. Ours are $280-$300k and just managed to hit that spot in the market where there's either cheaper inventory to be had or new inventory (and who doesn't want brand-spanking-new!) just two miles away.
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Old 07-09-2007, 04:41 PM   #29
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Thanks Webzter

Very thorough analysis. I learn alot from people who share their experience although sometimes some people think I'm nosey/abrupt/judgememtal. My best friend told me my TV counterpart is the doctor on the TV show House. I watched it with him my first time and "ouch". This guy is pretty frank talking. This was right after my friend sat in on some tenant interviews with me. My friend did say he thought it was a good thing.

MFG sure can learn alot from your post. Thanks again for sharing.
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Old 07-09-2007, 05:11 PM   #30
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This may just be a quibble but I assume MFG is a first time home buyer. Any home buyer should realize that asking price is a ficticious number unless there is analysis to back it. I have seen people brag that they bought $50K under asking price and further research shows that the asking price was $60K over market value! Not quite the deal they thought they had.
That is why I said find a good realtor, one that can find a bargain by running comps and doing an analysis. I know several realtors in the Atlanta area and most have had to talk their owners into deep price cuts in order to move their property.
Although I'm not in Atlanta I find bargains all the time so they are out there. Some sellers have a lot of equity but are in a situation that they have to sell.
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Old 07-09-2007, 05:38 PM   #31
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Mary,
What parts of the Atl area are you looking? I live in the Smyrna area and really like it.
I owned a home in Smyrna from '99 to '05. It averaged about a 3% annual return after all costs associated with selling. Who knows what the future will bring. But I like buying rather than renting in the Atl.
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Old 07-09-2007, 06:05 PM   #32
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Thanks Webzter

Very thorough analysis. I learn alot from people who share their experience although sometimes some people think I'm nosey/abrupt/judgememtal.
No worries. I'm pretty willing to tell the world about my mistakes and shortcomings. If nothing else, I can be a warning sign to others

I've got an even better real estate story. I'll put that in a new thread.
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Old 07-09-2007, 06:18 PM   #33
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I make slightly over $100,000/yr excluding bonuses and am now interested in purchasing a home.

While beginning to explore the market, I'm noticing that my tastes gravitate to homes in the $280,000 to $400,000 range. The lower end being foreclosures.

IMHO - If you buy more than you need... you will likely regret it some day. A large house will cause many expenses in other areas. Insurance, taxes, furniture, drapes, interest on loan, etc. Not to mention that it is more to keep clean. That money could be saved and enable you to pay the house off quicker and/or save for ER.

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Old 07-11-2007, 09:55 PM   #34
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I'll chime in. I live about 10 or so miles from you (I live in Sandy Springs, right at the Perimeter). I make a comparable salary and homes up here, just outside the Perimeter, run about 400k for about a 2500 sq ft home. The only way to get something under 300k for me is to move further outside the city, which would suck.

My rent is 930 for a 2br. My expenses are about 23k/year (not counting taxes or savings) as a single guy. I anticipate them doubling when I get married next year, to 46k/year, before factoring in the cost of a mortgage.

I'm gonna probably go for a 250k house in Alpharetta and put down 20%, but it'll take me a few years to save that much.

I disagree with Arif about it being so easy to find your dream home for that price. Unless you are hanging out on the courtroom steps, going through REO inventories, looking at condos, or willing to live a decent ways outside the city, you won't find a home for that price that doesn't need decent amounts of work.

East Atlanta is kinda pricey ITP. I went through Candler Park and the East Lake areas recently and I definitely couldn't afford to live there.

Let me know what you find though. I'm hardly an expert in all the comps of the various neighborhoods, so I'm sure there are some gems to be had
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Old 07-11-2007, 10:25 PM   #35
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I'll chime in. I live about 10 or so miles from you (I live in Sandy Springs, right at the Perimeter). I make a comparable salary and homes up here, just outside the Perimeter, run about 400k for about a 2500 sq ft home. The only way to get something under 300k for me is to move further outside the city, which would suck.

My rent is 930 for a 2br. My expenses are about 23k/year (not counting taxes or savings) as a single guy. I anticipate them doubling when I get married next year, to 46k/year, before factoring in the cost of a mortgage.

I'm gonna probably go for a 250k house in Alpharetta and put down 20%, but it'll take me a few years to save that much.

I disagree with Arif about it being so easy to find your dream home for that price. Unless you are hanging out on the courtroom steps, going through REO inventories, looking at condos, or willing to live a decent ways outside the city, you won't find a home for that price that doesn't need decent amounts of work.

East Atlanta is kinda pricey ITP. I went through Candler Park and the East Lake areas recently and I definitely couldn't afford to live there.

Let me know what you find though. I'm hardly an expert in all the comps of the various neighborhoods, so I'm sure there are some gems to be had
I'm looking in Lithonia, Stone Mtn, and Conyers (very nice n'hoods here)
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Old 07-12-2007, 07:34 AM   #36
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Brewer what were annual living expenses? The last 5 years I've averaged $19,623.

-----

If this is the case - why don't you have 20% for the downpayment? You'd have it in a year! Although you are probably not counting taxes in your expenses, I'm guessing. Just curious.

BTW - when I bought my place 7 years ago, I made about what you do and had a $240K mortgage. With property taxes and everything, I wouldn't have felt comfortable getting a mortgage above about $275K. I could have paid it, but it would have been a drain on my FIRE goals.
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Old 07-12-2007, 11:26 AM   #37
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I'm looking in Lithonia, Stone Mtn, and Conyers (very nice n'hoods here)

If your commute permits - check out the west side of Atlanta & Cobb county.
I think you might like it.
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Old 07-12-2007, 01:07 PM   #38
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IMHO - If you buy more than you need... you will likely regret it some day. A large house will cause many expenses in other areas. Insurance, taxes, furniture, drapes, interest on loan, etc. Not to mention that it is more to keep clean. That money could be saved and enable you to pay the house off quicker and/or save for ER.
IMHO, you might be better to buy more than you need at the moment because moving is expensive. If you expect to eventually get married, have kids, have elderly parents move in, etc buy a house that will accomodate that the first time so you don't have to pay real estate comissions, legal fees, taxes, movers, etc more than once.
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Old 07-12-2007, 01:16 PM   #39
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wow, these #'s blow my mind, being that i live in socal...you can get a track home in the boonies for about $400k, but everything around these parts is $600k plus...and i doubt most of my neighbors make that much more than me and my SO...
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Old 07-12-2007, 04:24 PM   #40
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Wait until you have the 20% AND 3 to 6 months emergency cash on hand.

With your income and current rent it won't take you long to accumulate that amount. If your not successful accumulating you would have been in a real bind if you had signed that big of a mortgage.

As brewer mentioned plenty of other costs and fees come with home ownership. Also unexpected repairs couple thousand here and a couple thousand there and before you know it your talking real money.
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