Monday, November 24th, 2008 at 10:06 PM
Continuing Story of Today’s Buyer
Kelly at the www.voiceofsandiego.org is following the trials and tribulations of a guy recently transferred here from Denver. His wife and kids are living with her mother in the O.C. while he works in San Diego and lives on his boat. They are looking to buy a house in Carlsbad, Rancho Bernardo, or La Mesa around $500,000. His story begins with these four passages below – very similar to what many buyers are going through these days:
1. http://www.voiceofsandiego.org/articles/2008/11/17/survival/402cleveland111208.txt
2. http://www.voiceofsandiego.org/articles/2008/11/24/survival/399househunt111708.txt
3. http://www.voiceofsandiego.org/articles/2008/11/24/survival/390cleveland112408.txt
4. http://voiceofsandiego.org/articles/2008/11/25/survival/389david112408.txt
I got a mention in the last segment only because Kelly has been checking in with me to verify how the story measures up to what I’ve been seeing, and I’ve told her – very typical. I have buyers who have been looking for 9-12 months, with nothing to show for it except a good education on how crazy the real estate market is.
Buyers are energized by having outstanding internet access to the inventory, and it seems like the search would be pretty simple – just keep an eye out for the good ones!
But there are so many buyers doing the same thing that there are multiple offers are virtually every good buy that hits the market – rarely does one slip through.
It reminds me of the conversation I had earlier today. Because of the instant feedback from the marketplace, you would think sellers and their agents would recognize when their price is wrong too.
A client had made an offer last week that was 5% under the bottom of a value-range price, and we received no response. Today I caught the agent answering the phone, and when told about no counter, I suggested, “You’d think after six months on the market the sellers would recognize that something was wrong with their price”.
She said, deadpan and without emotion, “They think it should be higher”.
Today’s buyers are in full recognition of market conditions, yet sellers rarely have a clue.
Posted on Monday, November 24th, 2008 at 10:06 PM in Thinking of Buying? | 11 Comments » | 
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Do we know what kind of house they are looking for?
Damian | November 24th, 2008 at 10:55 pmIf Mr. Cleveland wouldn’t mind some advice: get a great rental. As Jim knows too well, his story sounds about like my own–except I’m not tempted to buy before my time since i’m in a very comfortable rental at a great price (no doubt to Jim’s chagrin).
Through renting, I’ve gotten used to a new area and I’ve come to like the neighborhood so much that my preferred property is now a similar home (a little larger) to my 3bed/2ba rental in the same neighborhood. It’s about 10% more to buy than rent now (it was nearly 50% more to buy when I first moved in) and I’m hopeful that with the coming months one of the REOs will break in price to the point where it’s cheaper to own than rent–and I’ll be an owner.
Get over the stigma. I’m renting for the past 2 years for the first time in 20 years, after owning my own home since I bought a condo near college at age 18. Get off that boat, enjoy your family, and be a renter for a bit!
Barring a steep inflation soon (which is no doubt coming, but probably not before the opposite, until all the assets have crashed, banks start lending, and the effects of the Feds printing press starts to be felt), you will probably benefit by taking the urgency out of this equation and waiting in the wings to snap up the right property when things are yet a little more distressed. It’s cheaper to break a lease than to overpay for the wrong property. That’s my 2 cents.
lgs | November 25th, 2008 at 1:33 amOur nephew and wife submitted the high bid on a short-sale three months ago,including a 35% down payment and maximum credit scores.
The bank holding the mortgage has still not responded.
What is the problem in your area? Are banks so overwhelmed that they cannot conduct business?
james swain | November 25th, 2008 at 4:42 amJames,
There are a few places a short sale can get hung up.
The sellers and listing agent may not know how to complete a full financial package, and the incomplete package sits at the bottom of the pile.
If they do send in a complete package, and their handler is incompetent, it could sit at the bottom of the pile.
If it sits at the bottom of the pile for a couple of months, then it needs to be updated with new paystubs – seller and agent need to stay on top of it.
If it is a tough appraisal, and one that causes the bank to lose a boatload of money, it’ll sit at the bottom of the pile.
If the sellers have money and/or a decent income, it’ll sit at the bottom of the pile.
If the sellers are current on their payments, it’ll sit….
In summary, if it’s an easy one to underwrite and the bank isn’t losing that much dough, they tend to get processed quicker.
Jim the Realtor | November 25th, 2008 at 5:10 amDamian,
Not sure what kind of house, but let’s guess:
Two kids = 4 bedrooms min., and probably up to 2,000sf. Their previous house was 1,100sf, but with two young kids (4 yr old twins) they could use some more space.
This is where the choice to compromise comes into play. Would they be willing to take a 3 br, 1,200sf house just to get it over with? Or are they willing to hold out, and possibly rent as lgs suggested?
You need a good agent too – one that has a good track record and can endure a 6-12 month journey, yet can react quickly and make a powerful presentation when the good ones come up.
The sales history of all agents is available on the MLS with a couple of clicks, and I check every buyer’s agent who makes an offer on my listings. I want to know if the agent has a history of closing deals, and in a multiple offer situation, the agent’s experience is going to be considered.
Jim the Realtor | November 25th, 2008 at 5:13 amI lived this similar scenario (minus getting comped for closing costs) last summer, and concluded after the headache to just rent. So now I’m living by the beach at the same cost of living as the ‘inland’ house I sold last spring. This guy needs to get off of saving a couple grand for closing costs, and enjoy living by the beach in north county for a year which will end up saving him thousands in the long run. He can find a good place to rent for his family that is similar/cheaper to buying a 500K home. Not to much sympathy here.
justrent | November 25th, 2008 at 7:45 amGive them a year. I have a feeling sellers will be singing a different tune this time next year when the housing market is even deeper in the holw.
ToadB | November 25th, 2008 at 8:29 amRent. I laugh at people who think there’s a stigma to renting. This guy is sending in offers sight unseen? He seems like a nice guy, but I just can’t feel sorry for him.
My wife and I went looking in Encinitas/Carlsbad again after 11 months of sitting on the sideline. It’s still just depressing. We’d much rather continue to rent than pay $800k and up for a tract house we’re just not that excited about.
Yes, sellers are clueless.
The Blur | November 25th, 2008 at 9:01 amI made the mistake of purchasing an home to protect relocation benefits. Trust me when I say I would have been better off turning down the $15K benefit and renting. I am sure the same applies for Cleveland.
It is pretty amazing the amount of knife catchers. Especially when you consider the amount of neg-ams loans written in SD.
The other amazing issue is the amount of units that drop out of escrow. People like to use the terrms the credit market is frozen. Even though they have not saved any money for a Down Payment and believe somehow that taking on a mortgage payment double the rent they are paying will put them in a better situation.
Lastly, can this guy really not find a $500K home in La Mesa? I find that very hard to believe.
LV Renter | November 25th, 2008 at 9:15 amJust a thought on not losing the relocation benefit. Interest and taxes on $500K is $3,000+/month. There is also maintenance and HOA.
Rent in a large townhome in RB is $2,000 or less. How long would it take for him to be better off not taking the relocation benefit?
SHORT SALES
LV Renter | November 25th, 2008 at 9:22 amI read of one case where then bank turned down a short sale near the last moment cause the seller had leased a car with an ~$1,000/payment two months before potential closing. If someone has the ability to pay the bank is not required to take a huge loss so the seller can drive a Mercedes, BMW, Range Rover, etc.
I forgot to mention in my op, the owner is living in the house now and hasn’t made any mortgage payments for months. She’s living for free so has no reason to push anyone to close a sale.
It’s really the lending bank who’s screwing up here,imho. They aren’t receiving any interest or principal payments while our kids are just waiting for them to act.
james swain | November 25th, 2008 at 2:05 pm