Profile picture for heistheyare

Is this home a good deal? Please help, final decision!?

I beat 40 offers for this house- and even after we opened escrow more bids kept coming in even higher than mine. It is a home in which the neighborhood is high-end, the location is only above average.

This is in Anaheim, California, built 1956, 1650 sq ft, 8700 sq ft lot, 3br/2ba, single family home, $400,000. It needs about $10-15,000 in work. In 2007 it sold for $600,000. Another home in the same tract (1920 sq ft, 7000 sq ft lot) that was newly remodeled just sold for $470,000 a month ago.

What do you guys think? Should I do it?! Just some background- I've been looking for about half a year now and have thrown in so many bids- and out of all of them this was the only real chance I've gotten- it's been very hard to even get your offer accepted in California. What I'm worried about is- will prices continue to drop? Is there going to be a ton of new inventory released form the banks?
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August 30 2009 - Southeast Anaheim
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Answers (23)

Ask youself these questions: 
 Does this make sense for me regardless of what the market does?
If the market goes down further, will I still be able willing to make the payments and ride out the storm?
Will the mortgage be reasonable compared to the rent I'm paying now. 
Trying to outguess the market is better left to Nostradamus, so I recommend making the decision based on the "knowns" instead of the "unknowns".  Good Luck- Isabelle
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September 01 2009
Profile picture for space_acer
 What I'm worried about is- will prices continue to drop?


Yes it will drop more.  You cannot go from $177K to over 600K drop to $400K in 10 years and think its a bottom.  Even at $400K its far above the long term trends as measured by incomes and inflation. You will eventually see prices fall below $300K for such homes.

The last housing correction lasted 5 years, we are currently only in our 2nd year of price corrections. 


 
 
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September 01 2009
If you are going to live in the property than it is a good deal...Automatic equity atleast for now however, if it is for an investment a little over 8% on your money not a smart investment!

Good Luck and Best Wishes :)
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August 31 2009
I do not think this is a great deal...You are purchasing at $400,000 and it needs $10 to $15k in repairs you are going to have closing costs in and out...There is not enough of a spread for you to take that risk...I would never invest that amount of money with such little room to manoeuver.
You can usually get your deposit back. Also, how long are the properties staying on the market for? Every month that house does not sell the lower your spread gets and if there was that many people bidding against you than they can contact them and if they purchase it you will get your money back. What was the rate of return you wanted for your investment?

Good Luck and Best Wishes :)

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August 31 2009
You're purchasing an REO. You're in escrow, considering withdrawal. Since it is lender owned, did you get those repair numbers from a reputable source - the lender didn't provide them.

Prices will continue to drop. There will be a lot of new inventory released from banks - someday. The BIG drop is over but it isn't finished.

If you're looking for steals for flip or spec just make sure the price you pay is way below market. Perhaps the bottom is in sight but no one will know until they can use hindsight.

If this is your primary residence - well you know... Money is a big part of it but only a part.

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August 31 2009
which ever bank that is holding the foreclosure. go to them for the loan. if they get an appraisal that is higher. go after them in court later.
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August 30 2009
The deal is contingent on the two appraisals.  If it doesn't appraise, they will have to drop the price. that 470000 value has to be used in the appraisal. if it isn't ask why not. I wouldn't ever offer more than 50% on a foreclosed home. that 15,000 in work most likely is 50 to 60 thousand dollars. Its better to walk away than to be stuck with a lemon. Have you gone to the neighbors houses next door to see why the last resident lost the home? The neighbors will always tell you what has happened. You may not like the neighbors, they may have ten dogs and keep junk everywhere. Hey the house may be haunted. Do your due diligence.
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August 30 2009
roflmao! I balked at my first offer accepted, too. So did my brother. It's a normal feeling.

You know it's a fair price, by the way you've been shopping for so long. You know the area, the homes, the stats... you bid, you won it. Trust yourself.

I guess what you should ask yourself is why are you buying. We bought for stability for our kids, and so that we would stop experiencing rent increases. We do not expect it to have 'equity', we DO expect it to drop further in price. We do not expect interest rates to remain this low forever, so we bought for the fixed payment, with low interest, not for any 'near' future actions on our part.

We had to remind ourselves several times why we were buying. Sticker shock is annoying and really causes self-doubt. lol
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August 30 2009
Profile picture for space_acer
A near by home sale price history... comps! before the bubble.
http://www.zillow.com/homedetails/charts/25129031_zpid,10years_chartDuration/

801 S Dickel St Anaheim Ca 92805
3 beds, 2.0 baths, 1,560 sq ft 
Sale History  12/17/1997:  $177,000
This would represent proper pricing when lending was more conservative and people did not go bonkers on RE. Since 97 we only had 30-35% inflation and salaries increase in par.  We certainly never seen doubling in prices for CA homes over 10 year period.  AT BEST.. if you factor 50% appreciation, and your looking at around $250K which may be 3-4x incomes.




 


 
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August 30 2009
Profile picture for Mr Caveat
@ rob

california is run by crazy hippies...(no offence)

it seems like every day Sacramento comes up with another way to kick the can down the road... for all i know they are just a couple more crazy ideas away from banning foreclosures outright. just when it looked like a glut of foreclosures should have been coming right after the moratorium ended, they passed their work-out law that still has us dealing with foreclosures that were delinquent last x-mas... its crazy. pretty soon banks wont have any recourse against delinquency at all.

so i wont be predicting anything in CA about foreclosure rates.

hyperbole off/rant off
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August 30 2009
california is holding back foreclosures. [go to dr housing bubble's site, look at the graphs for foreclosures and NOD filings] something like 100,000 homes have entered the foreclosure process and not come out of it yet, while both state law and moratoriums have slowed the process.

add to that the $8k credit, and you have more first time buyers looking.

MORE BUYERS, LESS HOMES = ?
 
bidding wars on homes!

The 8K ends in a couple months, and with loan delinquinces and job losses both continuing to rise, clearly there will be more homes available. A crisis delayed is not a crisis solved.

I would say, buying a $400K home anywhere, today is about the most foolish financial move possible.
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August 30 2009
Profile picture for BMFPitt
The farther a house price is from $80k, the worse an idea it is to buy while the bribe is still in effect.  Plus you're in a still-bubbly area.
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August 30 2009
With today market prices (which don't take the inflation rate into account), that house value is about $380k.
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August 30 2009
Profile picture for frisky1
Unfortunately, everything you've described sounds like you are buying into a bubble. Maybe not the crazy bubble of 3 years ago but still dealing with a high level of irrational exhuberance. Maybe wait until the 8k is gone and interest rates rise to 8 or 9 percent. at least look in Jan and Feb when no one else is. You'll prob have your pick of houses.

I'd also suggest that buying in the best neighborhood in an area that you say isn't quite as good is not smart. if I were you, I"d be going for the not so great houses in the better towns.
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August 30 2009
Follow your information and recent sells in your area, $400k for that house is neither good deal nor over price, its inline with the inflation rate, 'your house' wills not loss nor gain significant in the future.
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August 30 2009
Profile picture for Mr Caveat
good answer! glad to hear that you aren't looking at some granite countertop/ stone floor/stainless steel in a neighborhood that really was designed to appeal to a different income bracket.

that said, $615 a sq foot?  its not really my area, but it does seem in line with SOME other sales... that said, i still cant imagine it will be worth much more than 320k 3 years from now.
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August 30 2009
Profile picture for heistheyare
address is 807 s. dickel, anaheim, ca
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August 30 2009
Profile picture for heistheyare
To answer some questions, jkonstant- I shoudl rephrase, I did not "beat" 40 offers, right now the way it's going in california is, everyone throws in their bid, and the seller picks one person to work with and that's- no counteroffering involved. I've put in about close to 30 really generous bids in the last 6 months and I never heard back from ANY of them- not even to counter. Also, the reason I know there were more offers (and of course I'm skeptical like you, but I'm just giving out info I received) is that currently we are trying to negotiate down the price due to the appraisal (which is kind of not even correct because the appraiser had to take low comps because nothing in that particular neighborhood had any recent sales for quite some time). In negotiating down the price, the bank will not budge in price at all because they have others who are willing to put 40% down and offer more money. And in addition, our realtor happens to be our cousin.

NTETS, square foot is 1650sq ft, and by high end neighborhood I don't mean excessively tricked out, I mean that every single home are kept really nice, with big front yards and big lots- seems like it has good neighbors.
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August 30 2009
Profile picture for Mr Caveat
did you post square ft so that we can determine $/ sq ft?
by "high end neighborhood in an average location" you mean "excessively tricked out neighborhood where upgrades have lost meaning and value?"

my gut says it will probably lose another 25% at least over the next 3 years... thats just an average.
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August 30 2009
"I beat 40 offers for this house- and even after we opened escrow more bids kept coming in even higher than mine."

1. So 39 others didn't think it was worth it.
2. How do you know more offers came in afterwards and that they were higher? I bet a realtor told you that. I bet it was a realtor who is getting paid if you buy it.

The latest stats I found show that California has the 3rd lowest ownership rate in the country at 57.5%. I'm guessing the other 42.5% are not worried about values declining. Only you can decide whether to join the miserable or not.
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August 30 2009
Profile picture for space_acer
The median home in SoCal was around 200K before the bubble in 1997-1998. 

http://www.housingbubblebust.com/OFHEO/Major/SoCal.html

Prices inflated like you show above 600K-700K.. yet inflation and incomes have gone up by 30-35%.. we already know RE prices only appreciate at rate of inflation over the long run.  Now they are dropping .. but the bottom is more near...

$260K-300K.. ( prior med price 200K x 30%) ..

Look up what prices of the property your interested and address nearby homes were around 1997-98, before the bubble stated.  Add in 30-35% to get close to a comfortable price range. (which is the bottom like Riverside on the above graph and matrix with price history/inflation)

Yes, prices will continue to fall until we get back to median prices being 3-3.5x median annual incomes as was the case in prior decades. 

If anyone tells you CA RE prices are always higher, they are lying to you. The population in CA is 30M and we have nearly 1M realtors in the state... thats a lot of vested interest living off commissions. 

 

 
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August 30 2009
If you mad the offer on the house I assume this is really a house you would be interested inowning. If the price is fair why are you nervous now?
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August 30 2009
What is the address?
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August 30 2009
 
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