Buying a House

[t-c]

Don't ever waive inspection unless you are ready for a fixer-upper, because you just never know.

Having a real estate agent with expertise in the area really helps. Don't use someone whose territory is San Jose if you're looking in Redwood City, for example. There are so many little niche neighborhoods that prices can vary by a lot within a short distance. My search area was fairly narrow (Burlingame & San Mateo), but I knew what I was looking for and didn't waiver much from it. It fell on my lap within a month, beat out other offers, paid 15% over ask, and I thought it was still a great buy.

As for down payment, the requirements are usually set by the lender. The seller doesn't care as long as you waive the mortgage contingency; the only thing that will beat you is an equal or higher all-cash offer. It's not clear to me whether you're pre-approved, but you should be if you're seriously looking.

Once you have your budget (which may not be the max loan amount) focus on houses within that price range. Looking at more expensive houses will just frustrate you, unless you set your range artificially low. C'mon, be realistic, you're not going to find a hidden treasure unless your taste is eccentric. Decide on the max you want to spend and work with that from the start. There's no point in moving your top line little by little -- you're just wasting time. In the market that is the SF Bay Area, it's better to go all in immediately.

Good luck! If you've saved $450K already, you should be able to find something decent.

 

[Dancing Fire]

I live in Hong Kong and they are selling 130 sq ft "micro" apartments (yes no joke, that's 10 x 13ft, so sqft is about or smaller than a parking space) for US$400,000. Even a regular size apartment (ie more than 500 sq ft) is a dream for most people in this city. DH and I sometimes joke we should move to NYC because housing is cheaper there!! Lol..

http://time.com/4581230/hong-kong-apartments-property-sale-rent-small-housing/

My grandfather owns a 1050 sq ft (52 yrs old) junky flat that we are trying to claim for the past 2 yrs. It has been a PITB going through the HK court system trying to claim the property. I was told that any junky property in HK is worth at least $500,000 USD today.

 

[kenny]

I hear people in SF and Manha

If you've saved $450K already, you should be able to find something decent.

I'd buy a tiny Fancy Red diamond instead.

 

[Dancing Fire]

madelise
You can wait for the next housing market crash.... Contrary to popular belief "housing prices doesn't go up forever".

 

[Niel]

You can't buy a house with 20% anymore. Everyone's been telling me 40%. And yes, 1.5M is starter home pricing here. Cheaper city = driving an hour to work.

If a cheaper city is only an hour commute away that sounds like a very reasonable compromise. I won't pretend to understand your housing market but I will say in my area it's not a lack of affordable homes it's a lack of well paying jobs. So you can find a starter home in a lovely area for 150k or less (we did for much less) but you will have to commute however long it takes you to get to work. When I first started at my current employer it was a 45 to 90 minute drive to and from work depending on the weather. Now with my children I drive 45 work every day.

 

[mochiko42]

My grandfather owns a 1050 sq ft (52 yrs old) junky flat that we are trying to claim for the past 2 yrs. It has been a PITB going through the HK court system trying to claim the property. I was told that any junky property in HK is worth at least $500,000 USD today.

To buy a parking space for your car costs at least US$300,000 even in suburban areas (50 min by Mtr subway to city center), or US$500,000 in downtown or the nicer neighborhoods. (Apartments don't come with parking. You have to buy a parking space separately.)

So $500,000 is pretty much a given for any apartment more than 300 square feet. If your grandfather's place is in an older Chinese style building (walk up) but is 1,000 Sq ft I would say you could get US$1m easily, if in good condition maybe double that

 

[lissyflo]

There's been a lot in the papers in the UK recently about house prices relative to earnings and how that ratio has been increasing for years. Latest figures for London as a whole are that average house price is 12 times average earnings. In some boroughs it's as high as 17 times the average salary. Obviously average figures can hide wide variations, but they're scary numbers, especially when mortgage companies here will typically only lend around 3 to 4 times salary (often not including the full multiple of the lower earner either if it's a joint mortgage). I guess our salaries don't need to cover health insurance etc though, so they're not quite comparable to US equivalents.

I'm very glad me and DH bought fairly early and benefitted from inflation in our earlier homes' values to trade up a couple of times, as others have said.

The only benefit of all the carnage around Brexit (for non-home owners anyway) is that house price inflation seems to have stalled over the last year or so. Or at least it's massively reduced...

Just a word of caution though - it may be different in the US but a number of areas in Northern England and Ireland have people who are still suffering from negative equity after the house price crash of a few years ago. So people are trapped in houses worth less than they paid (and regularly worth less than the mortgage on the property, as mortgage companies were lending up to 95% of value) if they can't afford to pay off the mortgage on sale. So while I'd always be tempted to buy rather than rent, there are still potential risks.

 

[missy]

Madelise I hope you can find a good house for you and your dh and that it all works out. It is super expensive and very challenging and yes disheartening. My heart goes out to you guys. It is much more difficult now to buy then when we were buying our first home.

However I stand by my comments that a starter home will be a compromise more than you even think if you do end up being able to purchase. Even I had to compromise on my first (and second and third) home. No matter how large or small your budget there is compromise. However the smaller your budget (and this is relative to the housing costs in your area which are significant so while you have a sizable budget you don't have a good budget in your area unfortunately to get the home you ultimately want) the more that compromise will have to be. I think it is worth it. You will get a smaller home/apartment and within a number of years (5-7 most usually but hard to predict for sure) you can move up to a bigger better home if you choose to.

There will be much you don't/can't get in your "starter" home. And the reason most of us have to purchase starter homes (to address another poster) is that starter home generally will allow one to "upgrade" to a more permanent home in the future. That is the way one can afford a forever home. Unless you are very lucky and have lots of cash and savings you first need to purchase a smaller home and build equity to enable moving up to a more suitable forever home. Buy a condo or a coop (if you have those in your area).

I wouldn't give up on the dream if that is your dream to own your own home. You can do it. But yes there will be sacrifice and compromise (and that may involve a longer commute time (it did for me) which may not be palatable to you) and you may not be willing to ultimately make those sacrifices. That decision can only be decided by you and your dh.

I will add it is never OK to take on more than you can financially handle. IMO. I would never buy a house where I cannot put down enough money and have my monthly payments reached comfortably. That is the kind of stress and worry I personally avoid. Not worth it. Not even for your dream home. What is that term? House rich and cash poor? That would be a deal breaker for me. And speaking of which- List (you probably already did this) all your deal breakers and then narrow down the search.

Wishing you and all the other posters searching for their first homes lots and lots of good luck. I hope all who want to be (and of course it is not the right decision for all) homeowners get that opportunity.

 

[LLJsmom]

Madelise, go for the piece of crap fixer upper in th best neighborhood you can afford. You know I'm around your area as well so I've seen it all, As long as you can move in with minimal initial fixing expenses to make it livable. Then you keep the property taxes lower and you make the improvements and changes when you can afford it. If it's a condo, still do it. Rent is such a killer and doesn't allow any equity or any tax deduction. That is how I and all my working class friends were ever able to buy a house in the Bay Area. Home values will always go up, even with the small anomalies like the big quake and the dot com bust, and I've been here over 45 years. Once you get a place , that is a good thing cause you will be able to sell for more than you paid assuming you will be there for some years. I would definitely work with a realtor, but it sounds like you already are. They may know when a family wants to unload a property quickly. I've seen people score cause a couple are getting divorced and want to sell quickly. If you've got $450k, you should be able to afford a condo. Maybe find out about all the new construction SOMA and even those properties are going up in price.

 

[Asscherhalo_lover]

What do you all think about coops though? All I ever hear is NOT to buy one since they're very hard to sell. Most of what's somewhat affordable where I am are only coop, no condos.

 

[madelise]

My deal breakers list is literally:
- not manufactured, not even partial. Yes, we've went to see a house that was remodeled, with half of it being those manufactured bungalow material!
- not dilapidated
- bad "bones" so we can't remodel/fix
- bad school district
- more than a 30 minute drive to civilization (even micro civilization) and work. I did a 3 hour round trip to work last year and lost my living. Woke up to go to work, to come home to sleep. No free time at all, and I had frequent sciatic pain I needed constant physician attention to.

I'm asking one of my fave PSer friends for a real estate person's recommendation. Maybe they can give me advice.

 

[madelise]

What do you all think about coops though? All I ever hear is NOT to buy one since they're very hard to sell. Most of what's somewhat affordable where I am are only coop, no condos.

What is a coop? I'm picturing chicken coop, but I know that's not it!

 

[madelise]

Madelise, go for the piece of crap fixer upper in th best neighborhood you can afford. You know I'm around your area as well so I've seen it all, As long as you can move in with minimal initial fixing expenses to make it livable. Then you keep the property taxes lower and you make the improvements and changes when you can afford it. If it's a condo, still do it. Rent is such a killer and doesn't allow any equity or any tax deduction. That is how I and all my working class friends were ever able to buy a house in the Bay Area. Home values will always go up, even with the small anomalies like the big quake and the dot com bust, and I've been here over 45 years. Once you get a place , that is a good thing cause you will be able to sell for more than you paid assuming you will be there for some years. I would definitely work with a realtor, but it sounds like you already are. They may know when a family wants to unload a property quickly. I've seen people score cause a couple are getting divorced and want to sell quickly. If you've got $450k, you should be able to afford a condo. Maybe find out about all the new construction SOMA and even those properties are going up in price.

We're looking at fixer uppers. Nope, we don't have 450k. We were told 200k last year, so we've been saving towards that. It's only in the last few months I've been told to double it. So while we're reaching milestones on saving, it really feels like we're drowning.

 

[madelise]

If a cheaper city is only an hour commute away that sounds like a very reasonable compromise. I won't pretend to understand your housing market but I will say in my area it's not a lack of affordable homes it's a lack of well paying jobs. So you can find a starter home in a lovely area for 150k or less (we did for much less) but you will have to commute however long it takes you to get to work. When I first started at my current employer it was a 45 to 90 minute drive to and from work depending on the weather. Now with my children I drive 45 work every day.

The hour commutes would be on a good day :/ traffic is so unexpecting out here. I dealt with a 3 hour commute last year and spent more time in a doctor's office and in my car than I did with hubby. It made my quality of life very poor. My job doesn't end after the kids leave-- I'm constantly working. So it killed me. Like literally, I am dead here writing from my grave cus ghost Madelise needs a house haha!

I'm tackling the house anxiety before even bringing up children again in my head.

 

[madelise]

madelise
You can wait for the next housing market crash.... Contrary to popular belief "housing prices doesn't go up forever".

Now if only I have a magic crystal ball to see when that will happen...... What I'm scared of is that it won't because these tech companies KEEP growing! Wth Apple and its new bird nest or whatever, and Google's competing whatever the heck they're building. Lol do I sound like a local yet?

 

[madelise]

Don't ever waive inspection unless you are ready for a fixer-upper, because you just never know.

Having a real estate agent with expertise in the area really helps. Don't use someone whose territory is San Jose if you're looking in Redwood City, for example. There are so many little niche neighborhoods that prices can vary by a lot within a short distance. My search area was fairly narrow (Burlingame & San Mateo), but I knew what I was looking for and didn't waiver much from it. It fell on my lap within a month, beat out other offers, paid 15% over ask, and I thought it was still a great buy.

As for down payment, the requirements are usually set by the lender. The seller doesn't care as long as you waive the mortgage contingency; the only thing that will beat you is an equal or higher all-cash offer. It's not clear to me whether you're pre-approved, but you should be if you're seriously looking.

Once you have your budget (which may not be the max loan amount) focus on houses within that price range. Looking at more expensive houses will just frustrate you, unless you set your range artificially low. C'mon, be realistic, you're not going to find a hidden treasure unless your taste is eccentric. Decide on the max you want to spend and work with that from the start. There's no point in moving your top line little by little -- you're just wasting time. In the market that is the SF Bay Area, it's better to go all in immediately.

Good luck! If you've saved $450K already, you should be able to find something decent.

Lol my bottom line a year ago was $800k. There's nothing in my search results when I look at that range unless it's literally crumbling and falling apart (for the land!) or manufactured.

Hence my feeling of anxiety and dread. I've moved and that amount is changing.

 

[madelise]

Hi Madelise - wishing you all of the best in finding a place to live. We met at the GTG with Gypsy last fall. I encourage you to continue looking. You will find something eventually in your price range. Wishing you luck.

Queenie! I miss you! We should have a GTG soon.

I feel like that's why I keep looking! Hoping to find my chance. Either hubby or I will look, a few times a week. And it leads to a few-times-a-week of anxiety and hopelessness.

Yikes.

 

[Asscherhalo_lover]

Co-op, a cooperative. You don't actually own your unit, you own "shares". So when it's time to buy or sell you need board approval. Major PITA.

 

[Dancing Fire]

So $500,000 is pretty much a given for any apartment more than 300 square feet. If your grandfather's place is in an older Chinese style building (walk up) but is 1,000 Sq ft I would say you could get US$1m easily, if in good condition maybe double that

Yup, walk up with no elevator. It was purchased new in 1965 for $48K HKD = $8K USD back then. We live there for 1 yr before we immigrated here to the U.S. in 1966. It is sad b/c we have the deed of trust here in the U.S. and we still can't sell it (long story) b/c in 1969 when my grandfather passed HK was still under Qing dynasty law till 1971.

 

[Loves Vintage]

Here's what I think.

You could move to a completely different area and find new jobs and probably buy a house pretty easily. If you moved to CT, you could buy a nice starter home for 250k, or a moderate home (2500+ sq ft) on 1.5-2 acres of land in a great school district for 450K+. If you don't want to move to a completely different area, that is fine, but if that's the case, then I think you should accept that you will not likely find a home in the area in which you live that you can reasonably afford. AND that's ok. If your priority is to stay where you are, that's ok, but accept that home ownership is not a priority and again, that's ok too! Just because you've always thought you should buy a home doesn't really matter, unless you make it matter in your own mind. Things change. The world around us changes and isn't as we anticipated. I'm guessing you're renting an apartment now, and based on your dealbreaker list, your apt is probably better than what you'd be investing a ton of money in. Sometimes, it is good to just enjoy where you are. Set a date in your mind where you can re-evaluate if you want, but stop beating yourself up for a super-unusual real estate market that is completely out of your control.

 

[Dancing Fire]

Now if only I have a magic crystal ball to see when that will happen...... What I'm scared of is that it won't because these tech companies KEEP growing! Wth Apple and its new bird nest or whatever, and Google's competing whatever the heck they're building. Lol do I sound like a local yet?

Remember nothing goes up forever.... We waited for the crash of 2006 before we helped DD #1 to buy a house about 6 yrs ago when it bottomed, but now DD #2 is looking to buy a house in this crazy market..

 

[SMC]

Don't ever waive inspection unless you are ready for a fixer-upper, because you just never know.

Agree with this. Nowadays, buyers are doing "pre-inspections" which are almost like inspections except that they do them before they make an offer. That allows them to waive the formal inspection and write a "clean" offer. This was a pain for us because you have to shell out a few hundred dollars each time you make an offer and you're not even guaranteed you'll be able to buy the house! But it was necessary in our market.

Waiving financing is also risky, since there is always the risk that it won't appraise, so I'd get your agent's opinion on that before you do that. We ended up waiving financing (and official inspection) to get our offer accepted. We were prepared to pay the extra amount out of pocket if the house under-appraised (thank goodness it did not!).

I agree with LoveVintage, if being where you are is a priority for you, then you might have to let go of your dream of home ownership for awhile. The housing market in the Bay Area isn't going to go down anytime soon - there is a real lack of inventory in the area, and houses aren't going to people who can't afford them. And as you said, madelise, the tech companies aren't going anywhere.

 

[ringbling17]

When did you buy your first house? And how old were you? For those of you who have adult children, are you seeing a trend in a delay or nonexistance in home ownership?

Very few of my same-aged peers are home buying. I feel like I've been raised to buy a home instead of rent, but as I save every month, the cost of homes increase every month. It feels like I'm chasing a moving target.

My financial advisor 2 years ago told me to save as if I need $X as a down payment for "in 5 years". Now I'm told to save $2X as a down payment for "in 3 years".

Ya. Moving target. It's disheartening.

We bought our first home when I was 28. It was located in one of the five boroughs of NYC - 5 years old- 3 bedrooms 2.5 baths. About 1750 sq. feet.
Bought our second home 5 years later
when I was 33. Newly built home- detached 4 bedrooms, 3.5 baths and an in law suite with kitchen in the basement, same neighborhood as the first one , just about one mile away. About 3000 sq. Feet. We spent the most money for this home. It cost us the most and we added an Inground pool and extensive pavers outside, we even redid our whole driveway. The inside of the house was new so we didn't have to change anything other than the paint.
Bought my current home when I was 38. My husband retired and we decided to move to New Jersey. 9 years old- 5 bedrooms, 4.5 baths, about 5200 sq. Feet. A lot more land than what I had in NY, over an acre so it's more private. This home was significantly less than the second home we bought and is about 1 hr. 15 minutes from my old neighborhood. The home cost 27% less than my second home.
Some things we didn't factor in- a bigger home means more maintenance, more utilities bills so even though we save on the mortgage, we actually pay more to own the house. And the taxes are very high compared to NYC.
I love where I live now but the taxes are bad!
I've worked at four different hospitals since living here, some 35 minutes away to as close as 10 minutes away from my home.
We are very close to Philly which was important to me bc I didn't want to live so far from a big city. I'm a foodie! Also important bc there are a lot of hospitals for me to choose from if I ever decide I want to work in Philly.
I think the area we live in gives us the best of both worlds.

 

[partgypsy]

My rule is to emphasize location, lot over the actual house or building regarding buying. If needed can do a complete gut, but you can't change location. Sometimes people get hung up on aspects of a house that are fixable. I would also pass if there is a significant issue with the site itself, topography, erosion or drainage/water issues. I have a higher tolerance to building issues versus living in a crappy neighborhood, unless there are signs the neighborhood is gentrifying.

 

[LLJsmom]

Ugh, so sorry Madelise. If possible I would still jump on anything that you can tolerate and afford, even if you don't have the $450k your realtor says you need. I wish you more luck this summer. What cities are you considering?

 

[Snowdrop13]

My rule is to emphasize location, lot over the actual house or building regarding buying. If needed can do a complete gut, but you can't change location. Sometimes people get hung up on aspects of a house that are fixable. I would also pass if there is a significant issue with the site itself, topography, erosion or drainage/water issues. I have a higher tolerance to building issues versus living in a crappy neighborhood, unless there are signs the neighborhood is gentrifying.

+1 to this. My DH has some real estate experience and always says buy the worst property in the best area you can!

 

[Queenie60]

Madelise: My nephew just bought a home in the Blossom Valley area of San Jose for about $1,000,000. In great condition and in a very nice neighborhood. Keep looking, something is out there. If you wish, contact me as you have my email. I work for a realtor part time and my nephew is a realtor; I know there are decent priced homes out there in your price range. I wish you well lovely lady!

 

[zoebartlett]

Madelise, I'm late in seeing this thread, but to answer your original post, I was 34 when my husband (then boyfriend) and I bought our condo in 2005. We had been together just over 2 years at that point. We lived in the condo just 3.5 years until we moved out of state and rented it out. We owned that property until selling it in 2014. By that point we had returned to our home state but we never moved back to the condo. We decided to rent elsewhere for a few years.

This past October, we finally bought a house. I'm now 43 and my husband is 45. We love the neighborhood although we still haven't met many neighbors. People tend to keep to themselves, which I wish would change. Otherwise though, we're so happy here. It's the perfect house for us.

I wish we had been in a position to buy when we were younger but we've sort of always done things differently than most people we know. We have no kids, so that didn't factor in (although we're in a family friendly house in a family oriented neighborhood).

 

[diamondseeker2006]

Wow, as Yenny said, we really have it made as far as real estate goes in the southeast. However, the people who really have it made are the ones who buy extremely high priced homes in other areas and then transfer or come down here to retire! Our pay is less here, but it certainly is easier for people to buy homes.

In our area, nice quality new homes around 3500-4000 sq ft, 4-5 bedrooms and 3.5-4.5 baths, lots at least .75 acre, have been selling for $400-430k in the last year. You can have a comparable home on the lake for 1 million or more (also mansions, more $$$). The market is very active here now with prices rising and homes selling very quickly.

Our daughter bought her first house as soon as she got a teaching job after graduating from college. it was only 1000 sq ft, but it was in a cute neighborhood with mostly larger houses than hers. Her house payment was less than a 2 bedroom apartment here. It was a no-brainer even though she had very little down payment. She got married about 3 years later and they bought a larger home.

 

[qubitasaurus]

Mochiko I heard that Hong Kong has put an additional 30 % tax, ontop of the house price for foreign buyers. I am wondering if this has impacted the house prices in Hong Kong yet?

Houses here were going down, due to the new taxes on foreign buyers. But it is still painful. I live in a 1 bedroom apartment 30 minutes drive from the city, and I think it currently costs 1.4 million to buy (we also have to pay $120,000 in taxes as we are not citizens. So at the moment we still rent.). We were hoping the market would continue to cool for a little bit longer, but there is a lot of talk about it heating up again as people shift money from Hong Kong to here (the taxes here are 15 % for foreign buyers, which is a lot more attractive than the 30% taxes in hong kong. Which could easily mean paying 300-400 k to the government, ontop of paying for the house). I am really wondering if this has hit the volume of transactions in Hong Kong yet -- we are close to buying, I am just hope it doesn't cause another jump in the property market here. Madelise i feel your pain .