From Kenny, in the comments:
“WOW. This one [3299 Folsom in Bernal Heights] just sold [for $1,255,000]:
Six offers. 260K over asking. 850 a foot. On Folsom! This is a neighbor of mine. I’m very fired up about this one.”
I think your other neighbors are pretty fired up too. And for the “traders” wondering what kind of money, if any, was made on this. It last traded in 2004, almost to the day, at a cool $1,000,000.
Would that be “just quotes”? Just curious.
so after taxes, interest, RE commission, the seller made nothing in 3 years….why is that so exciting? These are general assumptions but you get my drift.
[Editor’s note: That’s why I put the numbers there. For you to make your own assumptions. It’s the demand, and market activity that is interesting. Yes. I get your drift.]
Respectfully, North Beach Joe, no I don’t. Because their gain was most likely tax free. And they wrote off the interest, no doubt. So it was probably a 180-200K gain, ballpark. For just holding a place for three years they made 200 thousand dollars. While that’s hardly spectacular, is that chopped liver? I don’t think so. But that’s not what I found interesting. What I found interesting was that a small-ish place would go for over $1.2M in Bernal.
Why do people CONTINUE to not add back in gains, the money SAVED by not having to rent a similar place? WHY?
And WHY, do people not compare apples to apples? The price point is $1mil in 9/04, and now 25.5% higher to $1.225 mil in 9/07. 25.5% increase in 3 yrs is the bottom line. Once you start saying this cost, and that cost, it is all for not. The pure data point are the two sales points.
As Bush would say… “That’s fuzzy math”. Part of the interest is a write off….not all of it. Throw in the rest of the variables associated in PITI and the realtor is the only who made cash on this.
HQ..your black and white analysis is noted.
Yeah man. This property was purchased in ’04. Remember ’04, back when folks were saying “Watch out. The bubble is going to burst.” Well three years later it sells for 255K more than purchase price. Now, I’m not saying we aren’t in for a correction. I think we might very well be. Much of the country has seen one. But what I am saying is that you don’t get to say “I told you so” three years later.
Incorrect. They made about 180K or so and I or HQ, or others, could break it down for you if you are so inclined.
Again, it is important to just look at the datapoints and make a judgement from there. What if the owner only put 5% down? Does that mean his real cash gain 500%?
The point is, if there is a debate about what prices are going to do, you just have to compare one selling price to another for a like property. Now, if there was a massive remodel, that’s another story.
25.5% gain is not that impressive in 3 yrs, but it sure as heck beats renting for 36 months and getting no money back.
yes please do….here I will even help you. (Details from Property Shark)
$900k loan for 3 years
$11,577 tax
Realtors commssion? (you would know better than me)
Can you also please compare the annual return to the money market? Thanks!
ps–im actually curious and not trying to sound smug
OK. Now I get you. Here’s my thing. I don’t understand how you’re including the entire price of the loan for the three years in this equation. Not when the people lived there? It costs a lot to live anywhere in this town. Using your model I would need to add back in how much they would have spent in rent elsewhere. Do you follow? If they didn’t live there, then OK. That would be “Holding Costs.” But they did live there. And if they did an interest only loan, every cent was deductible. Also, it said they paid cash in the agents comments. Now, that doesn’t always mean they bought it with straight cash. But the loan price was low regardless.
OK, so I just looked it up. They put 250K down. A 750K loan. At 5.5% per annum (these are ’04 rates, mind) that would cost them $3400 per month. Well, that’s how much it costs to rent a house in a desirable neighborhood with views and parking. Maybe more. So you can’t include that. Just stick with property taxes, transfer taxes, and realtor fees. They did pretty OK.
they had a first and second. i don’t see any permits for upgrades so they bought it that way and just painted or did it without them.
Mortgage Details
Lender # 1 Wells Fargo Bank
Loan amount # 1 $750,000
Rate type # 1 Variable
Lender # 2 Chase Manhattan Bank USA Na
Loan amount # 2 $150,000
Rate type # 2 Fixed
since they were late with their property taxes, i’m guessing they didn’t upgrade the place:
Property Tax can be paid in two installments, or both installments can be paid in full on or before December 10, 2006.
Amount Due Paid Date
First Installment
(Delinquent After December 10, 2006) 0.00
12/28/06
Second Installment
(Delinquent After April 10, 2007) 5,804.60
Late Fee: 580.46
Late Cost: 10.00
Total Amount 6,395.06
North Beach Joe…..
Lets simplify things and make some round about assumptions.
House sold 1.25 million.
If you use a commish of 5% (many agents do now) and factor in transfer tax of a little more then 1% and misc fees you get say 7% (My personal sale was at 6.95% total from my house).
Thus you get approximately .93 * 1.25 million = 1.1625 million
Thus the difference is 162 thousand dollars, this is the ‘profit’ the seller made. If the seller put 100k down then their gain is 162% over 3 years if you look at it from a leveraged point of view.
OK, now factor into things that they did pay more to own then they would rent. If we assume that they pay 2k more a month (after tax adjustments) for the house then renting it then they would have spend 72k more over these three years. Remember these are just pie in the sky estimates. Maybe it was 3k a month over rental price which would be ~100k, who knows. When you factor that in you could still have a conceivable gain of 75-100k at the time of sale, which would be tax free. Who knows the other factors but you can get the point. You can make bucks on this transaction.
People generally say the whole ‘money market beats it’ but it does not when you consider leverage. When property values rise leverage is great (10% gain on a house with a 10% dep is 100% gain) but terrible in reverse. That is why you should never buy options unless you are smart. So if you had put this money in a MM account of invested it you would have had to make something like 20-40% annualized to get the same gain, and that would be taxable income. Most people can not get this kind of gain by investing unless they are very good, and lets be honest, that is rare.
In this situation the party probably did make some money. A huge amount, maybe not. But anytime you get a tax free check for living in your house, you get a smile.
Just remember the law of leverage when comparing money gains vs houses gains. A 25% gain on a million dollar investment is much better then a 25% gain on a 100k investments.
I don’t see a second in my tax search service? And they probably didn’t upgrade the place. I remember it from ’04, and the pictures look the same. Thanks everyone. I think we probably fleshed it out pretty well.
Why do people care whether this particular seller made money or not?
It just means in general, someone buying in 2004 in that area is 25% better off than if he bought today.
I think in general people ‘care’ because they want to bash on housing in some way, either directly or passive aggressively. Just go to the CL housing form and that is all the crap you see. Button pushing and odd financial calculations to prove that home owners always seem to lose.
in this case the people made money unless there wer some unknown circumstances we do not know about. but this also shows that the person who could not afford in 2004 can certainly not afford in 2007 (sans people who get some windfall). eventually inventory will totally dry up or no more rich folks come out of the woodwork. but every day it seems there is yet another loaded person to bid up a property. pretty amazing.
As a side note there was a 2nd mortgage listed on property shark, just an fyi
Right. People cared this time because one person specifically asked if we could break it down for him.
Oliver, the market is still nuts, yeah? I submitted an offer for a client today. Apparently the offer was the eighth one delivered, and I saw a realtor I know on my way out the door. So at least nine. I was like right on time too. It’ll probably wind up getting 15 offers or something.
Kenny,
I think its nuts for the right properties and can suck for the bad ones. In the Bernal, Noe, Mission type areas it seems like the nice properties sell real well but the not so nice do not always sell so great. Me thinks that there are not as many ‘pristine’ properties out there and there are still a # of people with gobs of cash. if you have gobs of cash chances are you do not want a ‘fixer’.
I do see, however a number of ‘small’ (think cottages or houses with no garage) that sold way to high in 03/04 and now are on the market and will not sell. Think ‘I have to get in at any price’ properties where the square footage is like 600 and there is one bedroom. Those pop up from time to time and just sit. Its hard to sell some of those for the same prices they fetched a few years ago. Lots of condos as alternatives.
But nice house go like hotcakes!!!
I’d like to pinch one more factor. The relative value of what you sell or buy.
Let’s forget about how much they payd the house, and concentrate on the coming 5 years.
they sold the house 1.25, but their properties taxes were $11,577 tax (based on their buying price with some adjustment).
Let’s assume they dont plan to spend it all in Vegas, and buy another house somewhere in the city. Let’s assume they spend 1.25 using the chinchin they got as downpayment and a similar amount mortgage.
Then, it’s their loss – their montgage monthly weigth is most likely higher, and for sure, their property taxes just got a push.
So comparing 2 months ago, in the house they sold, and 2 months from now, in the “potential” similar value house they could buy – they just got poorer.
Selling high means buying high. We were happy to sell about twice as much as we payd – but moving twice as big costed twice as much the NEW price – a big jump from if we had bought twice as big and twice as expensive back then.
In the mean time, your income most likely didnt double.
To put numbers for that example: you buy a starter condo at 300K and are happy to sell at 600K. In the same time, the house you couldnt buy then at 600K now costs 1.200K so when it looked hard to spend 300K more then, now the market asks you to cough 600K more!
It doesnt matter how much you make on one particular sale. What matters is your financial plan and if you need to upgrade to bigger/more expensive, or if you can downgrade to smaller/less expensive and actually SEE the chinchin instead of reinvesting it all. (anybody retiring to Nebraska?)
If you need to upgrade…I’d definitly place the chinchin in any MM or even plain bonds, and RENT. Some mansions in PacHts are for rent for barely twice as much as the rent for a “plain” house – while you, as a renter, dont have to cough the 500% of additional buying costs to enjoy a better house.
Oh what the heck. We didn’t get it. This place: http://sfarmls.rapmls.com/scripts/mgrqispi.dll?APPNAME=Sanfrancisco&PRGNAME=MLSLogin&ARGUMENT=Ok7KmNi58nbInAxeCH8GTVR3lPdeO9n8FI%2FJyuGSxKs%3D&KeyRid=1
10 offers. We came in waaay above asking and it was in the middle. Apparently somebody outbid my client by over 10 points.
I made some calculations based on Oliver’s original assumptions and analysis to see what the actual annual return on investment will be.
It turns out that the owner’s return on cash investment over 3 years is about 15.8% — he invested $100K in down payment + $2K additional monthly in the house (vs renting) over 3 years, so the total cash investment is $172K. The return on investment over 3 years is $95,150 — calculated as the capital gains minus the $2K additional monthly over 3 years mentioned above.
So, for a 3 year period, the annual return on cash investment is 15.8% to own this house.
Given this 15.8% is tax-free, it probably will be something equivalent of 18% gain per year taking into consideration long-term and short-term capital gains tax in the stock market.
So it’s up to the reader to decide if a 18% return on investment over 3 years is worth it or not — S&P 500 from sept 17, 2004 to sept 16, 2007 (same period this house was held) grew 10% annually, while MSCI emerging market index grew over 32% annually over the same period. Personally, I believe one could have beaten the 18% return with an investment focus on energy, emerging markets, and commodities/industrial materials over the last 3 years.
Kenny – One of my friends wanted that house, too….
By the way, I just realized that since the house was purchased in 2004, and sold in 2007, it’s not going to be tax-free because it does not meet the “owned for at least 5 years and lived in for at least 2 years as primary residence” rule, right?
Anon8mizer – I’m not going to be mean. It’s not own for at least 5 years son. It’s own for at least 2 years, and live in it for 2 out of the last 5 years. Yes, the gain is tax free. According to your math, you say their return is 15.8%, and if you’re talking what the gain was if he had to pay tax is only 18%? If you make $225,000, you are already paying 38% in taxes. Hence, to make 15.8%, you have to make a 26% return to equal a 15.8% after tax return.
Also, I agree with HQ, why on earth do you not deduct from his cost, or add to his gain the money he would have spent or saved by renting an equivalent place? Do you think rent is free?
The equation is VERY SIMPLE people. Add up your total money you spent renting/owning, including adding back the return after selling and compare. The renter returned ZERO after 36 months of renting, and that is a ZERO return on AFTER TAX income. The homeowner returned $255,000 – his cost of ownership, taxes, commissions, etc and adding back the cost he would have spent renting.
It’s really that simple folks. $1.255 million for a house in Bernal at $850/sqft? Wow.
Sophie – You make a good point. The bottom line is: if you own a property you live in, you are NEUTRAL. If you are a renter, you a SHORT the property market. And only if you own more than 1 property are you long. That is why there has been an ENORMOUS widening gap of the middle class. Asset prices growth has created a big chasm between those that own vs those that rent over the past 10 years, and continues to do so this year with prices up over 10% in prime SF areas.
anon8mizer
Your math seems to be a bit off. If you started off with 172k your math makes sense. But if you are adding 2k a month then it is closer to 18% bacause it is dollar cost averaged. But that is pre-tax so you would have probably make 20 something % annualized after you take in long and short terms gains remembering that short term holds are considered taxable income. The 2k amount if probably a bit high as well looking back.
also, any sane investor would not put all their capital into one instrument so hitting that 18% (or more realistically 20%) is very hard for most investments as most people would not have invested all their money in one specialty niche. also, most renters I know do not have 100k of capital to through at higher risk investments. investing in hind sight is a bit easy to do.
a house is usually one of the only things people dump a huge lump sum into because they want a home to live in. if a person had 100k for a down payment chances are they would not put it in higher risk investments over a house.
you must live in the house 2 of the last 5 years you have owned the house. so if you own a house for 2 years and a day and lived there the whole time you are fine. if you have owned if for 5 years but lived there 1 year there are issues. that is why you see so many sales at the two year mark for a lot of first time buyers.
if these people were forced out because they could not have afforded the place (unpaid tax?) it could have been the best thing for them. they now have a bunch of cash and hopefully can manage it well.
Hi Kenny, nice house. Did i read the link right? 920sqft is the size of the house for $1 mil? Or, is it bigger and a misprint? What do you think it ultimately sells for?
If you don’t mind keeping track of it and coming back to us with the final sales price, that would be great!
Yeah, it was 920 feet. However the thing about it is that it has another legal head height level below it which is undeveloped and the same square footage. If the new buyer pumps in 300K it can easily be a very lovely 1800 sq feet with drop dead gorgeous views at a coveted location. It’s a highly unusual property, to be sure. Still tho, 10 offers, now? Doom and gloomers should maybe take notice of some of this stuff once in a while. Only once in a while. Is that too much too ask? I’m not talking about anecdotal evidence either. There is a ton of evidence that the market isn’t tanking, yet.
anon8mizer — the gain was tax free. It’s two consecutive out of five and you’re only allowed to do two such exemptions in a row. And 2K per month more than renting? Really? That seems high. Houses rent for 4K now. 3K four years ago, no?
All – u are right about the tax-free status. I checked with my tax guy and the rule says you need to live in the property at least 2 out of last 5 years, but you don’t have to own the property for 5 years prior to the date of the sale. I got it confused with a 1031 exchange situation where the exchanger needs to own the property for at least 5 years and live in it for 2 of the 5.
As for the 2K additional per month… If you compare ‘apple to apples’ and assume the owner would rent something similar to the house he eventually bought, then you are right — It probably would be somewhere around $500-$1K. Although some of us were doing great living in a rent controlled GG bridge view maria apts where we paid virtually nothing, so it depends on the situation of the buyer (But I still bought…)
Oliver – I will revisit the cap gain and net return on cash investment to see if I made a mistake there, but you are right about diversification. 18% or 20% is very hard to do for most, and if one can do it the beta will be very high. It’s not that it’s not do-able (Peter Lynch did it with 30% CAGR – $1000 in 1977 became $28,000 in 1990), but most of us are not Peter Lynch…
anon
you are right about not being peter lynch, not many of us are. I think I was him for about a day… then reality set in.
if you drop the ‘extra cost’ to only 500-1000 bucks a month then you need even a better rate of return and need to be peter lynch on steroids. but most people are not, nor do they want to take the ‘risk’ or invest the time. however the ‘flippers’ (not the fixer type but the tract home type) are unfortunately learning the laws of leverage right now and would have done much better by keeping their cash in the bank.
in sf over the last number of years it was mostly better to ‘buy now’ instead of ‘save up for a down payment’ like many tried as prices eclipsed them.
I personally believe you should split your capital up and put as little into a house as possible, but I also believe in DIY fixing as much as possible. I bought my first house in 2003. It was around 400k. I could have put 5 or 10% down and would have had the same rate on my first. I opted for the 5% down and invested the other 5% aggressively and way outperformed my heloc rate.
Overall if you are a good investor any money you have in the house is ‘dead money’. Unfortunately most people have to put every dime into their house and can not really diversify that much.
the one benefit of just making money on a house is doing the taxes and just general accounting. a few years back my bank forgot to send me a statement and i ended up getting audited at no fault of my own. that alone was a huge headache. selling the house was at least one line or so on the tax forms and is pretty straight forward.
anon if you really want high beta try investing in energy and mining stocks (gold, silver, uranium) on the toronto exchange. the dollar is dead and there is mega money to be made there (or lose for that matter).
Oh, I bet 755 Sanchez sells for ~$1.35M. At 920 feet, even in a top tier neighborhood such as Liberty Heights, wow! It has two car parking, but still … Whoever buys it at that price better have 400K or so to put down. The appraisal is going to be scrutinized, to say the least.
I was still thinking about this thread last night, and there is something really wrong here.
we are talking about someone’s HOME – not a house….
let me tell you a story.
a couple of people, reselling the house 4 times as much.
* they were tapping into equity, so when they sold, most got wiped by payment to lenders – which created huge problems because they couldnt afford to move out of the house and find somewhere to buy nor rent. (they realized that a week before closing)
* She HATED – as in HATED the house where she lived for 14 years
* they divorced 2 months after selling
cost of homeownership for them? negative – just because they messed up their lives. maybe or maybe not OVER that house, who knows.
Another one
a couple of people, buying a fixer in a prime PacHts location. they fixed it to a FABULOUS house. One of the best house (plus a top address) I visited in SanFrancisco. The final 2% of the remodeling (as in buy the right furniture, hang your Picasso…) was done in a hurry, to sell so they could split their chinchin at the divorce court.
I’m not saying that everybody is divorcing over their house, but you should keep in mind that the PLACE you live in is you HOME, the place to rest your SOUL.
Buying your home in the only goal of making money, fliping it, trying to do the best financial investment you can is WRONG. it’s like waking up on the wrong side of the bed. You cant mess up you HOME/soul resting place with financial worries. (the regular worries of buying a home in SF AND making the monthly payment are hard enough)
So my conclusion is double.
If you cant afford SF – it’s OK to rent – and invest in RealEstate somewhere else – where your worries are about an anonymous place you might not even visit ever.
If you buy in SF your HOME – it’s OK not to make a ROI of 10%+ – as long as you found a house that you kindof can afford, and where you can be happy – and wont have to sell for miserable reasons.
Now we are not bulletproof. Divorce, death, etc happen. But having happy memories of your (now-sold) place are not something you can buy afterward.
Anyway. Again – I think numbers are fine. And it’s important to crush numbers down BEFORE you buy – as in financial planing. But once your OWN and LIVE in your HOME, they might be a cost of living that might not always be wiped up by a strong market. – and that’s OK.
755 sanchez needs to write into any offers that an appraisal cannot break the contract. i wish i had when i got an unsolicited offer on my place about a month ago.
Sophie –
I agree with most of your point that your house is your HOME first and foremost but you DO have to look at the cost and also the potential future cost.
The reason is multi-fold.
A lot of people in SF who buy their first home consider it a *starter* and do not plan to stay there for years, nor raise a complete family. So in that respect you do not want to overpay for a property because when it comes time to sell you DO want to make some money to upgrade. You do not want to be the bagholder when you sell. In many parts of the country my friend first house is a house they could grow up in and have 3 kids in . In SF a lot of people can not buy their dream house as the first property but still want a HOME. So you need to balance how much you pay with the time you want to spend in the house.
Examples:
I bought my first house for around 400k in ’03. It needed some cosmetic fixes and an upgraded kitchen. My house showed terribly, bad paint, not staged, empty, etc.
A house two blocks away 2 months later sold for around 535k. This house was the same floor plan, was staged well and had an updated but not great kitchen.
A few friends of mine bought loft condos around the same time around the 500k point plus like 400 bucks in dues.
I put about 15k total into the house (kitchen fixes, paint, new exterior paint) and made our home (my wife and I did most of the sweat equity and hired freinds) way nicer then the house that sold for 535k.
We sold our house more then 2 years later and made quite a lot of money on the property. We then bought a new house for about 80k more then we sold our old house for. The new house had 3 bedrooms and more parking. NOW we have a place we will call HOME for at least 10 years and we did it by looking hard at he financial aspect but ALSO looking for a good deal that we saw potential in.
My condo owning friends tried to sell their condo for like 9 months because they wanted to start a family and buy a house. They never sold it because they could not afford the house they wanted and are still living there.
Many Realtors during the boom (think 2003-2005) always said ‘don’t think about the price but think about the monthly payment’. That is crap when it comes time to sell.
Unless you have a trust fund of external source of income you need to think about he price, the payments and your personal future goals in buying a HOME, especially if you only plan on being there a few years.
And YES, it is ok to rent if you want to. I never understood the desire to be ‘house poor’ and miserable just to say you own a place. Your sanity and happiness are key to life. Not owning property.
I agree with what you say. totally. but I also guess that if you had to delay the sale of your first house/home, you wouldnt have cryed over it – and would have lived there happily a few more months.
I’m not saying that you shouldnt flip houses. But the place you LIVE should be more, you should like it more than just an investment property.
going back to 3299 folsom – we were (it’s so fun)playing with numbers. but nobody said that it was a homey house (I dont know – I didnt visit), and that the sellers might have had some great time there, and have parties, friends over, dinners, see the birth of their kid … whatever.
So yes, they probably made a good deal – but we cant evaluate with dollars the happiness (or lack off).
And yes, only thinking about the monthly payement looks like you try to fool yourself in BUYING your home (how much happiness can I buy), instead of paying for a building/house and creating your home in it. So you/re more likely to loose money when reselling, and you lost each month some emotional value by not investing the right proportion of soul and money at the begining.
I know I dont make sense… but simplifying this folsom house to numbers was starting to be very un-human.
Disclamer: this is just talk. I dont know anything nor anybody, and I’m not assuming anything. I just give general ideas.
Sophie –
I agree that there is an emotional factor in owning a house which any number crunching will not be able to put a price on. Before I bought I lived in a one bedroom apt that was too small to throw dinner parties. When I bought it was very important to me that the house came with a formal dining room so I could cook and invite friends and family over. I am glad I found a Marina-style fixer with good bones and was able to fix it up the way I wanted it. Now it’s a gathering place for friends and family, and the good times and memories and new friendships from this place so far have been priceless.
That said, I don’t think anybody should buy a house without going through a detailed number crunching exercise like the one Oliver did to know how much money you are putting in, what your investment/ownership time horizon will be, how much money you will get out, and compare the return on investment against other ways to ‘deploy’ your money.
Now, if people do too much of the number crunching, there is a tendency for them to become paralyzed by analysis, and to begin ‘measuring out their lives in coffee spoons’ as T. S. Eliot put it, That’s not a good way to live, either. But I do think people should arm themselves with knowledge, and know their options and alternatives, and reach their own, educated, conclusion — independent of the ‘sky is falling’ nay sayers and the ‘everything is going up’ cheer leaders — and act upon their decisions.
Yea, i talked about a house as a “home”…not an investment…way back..
now at least you’re all listening to me.
anon8mizer. Yes for the “a detailed number crunching exercise”. Except that it has the “what will tomorrow be?” unknown. Future rates? future job loss? future realestate deals in the same nanomarket? future urban politics in the nanomarket?
Buying on the potential ROI% dream leads – in my small experience of people around me – to overspending/overbidding like crazy, because they think it’s a safe bet – so if it’s safe to invest the 100K downpayment, THEN it must be safe to invest an additional 50K downpayment because the property is more than planed.
We all hope our investments will be profitable when we NEED to sell. But this is NOT a sufficient reason to buy. It would be putting all your (emotional and chichin) eggs in the same basket. You need to have a financial plan INDEPENDANT OF THE PROPERTY considered. (should I say planS as in “if we need to sell… ” “if we need to stay…” and other most likely scenariis)
Before you househunt, you are the same person as the one who will make an offer on such and such property. However, the exitement/exhaution/frustration/love whatever will twist your carefully planed budget so it “would” fit the property you crave.
So yes. Do a carefull planing BEFORE you see houses and in WRITEN for your own sake. Then house hunt. If your plan doent not match the market (most likely), go back to your plan and start it again with higher numbers (and higher risks), then house hunt again. Buying a house just because you like it and because you want to live there and now is nothing short of a mistake.
From what I read from all of you, you all DO have a very clear and sound picture/knowledge or your finances. But I’d bet the silent readers dont, and say the neighbor of the folsom property thinks “me too, me too” – without even considering that one story NEVER transfer to another story. and one math NEVER transfer to another investment – without indivudual adjustments.
Those maths only apply to the given property, and to the “if only I had bough the house at that time” – which none of us did anyway.
So again, money is important, but financial planing shouldnt be linked to the color of the facade, or the karma of the house number. And yes, financial planning will eventually have an emotional factor… when you decide to invest and not expend the family for 3 more years, or the opposite.
Anon
You bring up good points and sounds like you bought a place you could make your own.
Buying a house is about ‘balance’… My personal believes are (not true for all or many..)
You should be able to make your payments.
You should also look at the property potential.
You should look at median price and what you paid.
You should also look at contingencies for emergencies.
You should not bank on future raises and such or ‘low interest rates’.
Whatever loan you get approved for, take only 75-80%.
If you can balance it all it should work out. If you get too emotional and get stuck in a ‘bidding war’ and pay 100k more then the norm you have a double edged sword. You may love emotionally your house but you may also loath the fact you impulse spent 100k more and that might effect you when you sell if you do.
I do have friend who honestly can hold thier house forever and are well off but I am not like that nor do I have ‘help from parents’ or some other source. There are a lot of people like that also buying now (think 30 year old newly wed buying a 1.5 million buck Noe house). For them it might not matter what they spent because they got the house they love which probably requires no work. I am the type of person who wants to buy places that need a little work to craft my own home, my own vision if you well.
A home should be an extension of yourself and you should never ‘get in at any price’ because as you know the days of 4% arms are not here anymore.
Also, some Realtors really pushed the ‘put all your $$ into your house’ during the boom times because ‘housing beats all investments’. However, if you ever were to ask that Realtor how you could retire they could not answer. Unless you ‘cashed out’ your house and moved to like another state you would be screwed.
Buy a place you love, you can pay for and will not stress over every night and you should be happy. If you can not afford that then think about renting of buying a condo and still having some cushion to enjoy life with.
All very good comments above
is it me or are the comments and posters on here so much more valuable than the crap du jour on socketsite?
[Editor’s note: I love you! Spread the word! And you just earned a spot as tomorrow’s “comment du jour” on theFrontSteps. :-) ]
Totally, James. I feel like the point of this blog site is to try to make sense of the market, and not to TELL YOU what’s going on. That’s huge.
I think an interesting takeaway from this – the mere fact that there’s even a debate about the actual return from an asset that’s appreciated by 25% illustrates just what an impediment high brokerage commissions can be to an otherwise fluid market.
I fully believe this current real estate slowdown will ultimately put serious pressure on real estate commissions. When your property is worth 25-50% more than you paid, you might flinch a little at paying 6%, but you’re still overall happy about walking away with a nice gain.
When average gains are more like 0-5% over the next few years, I think a lot of people will start to care more about paying 5 or 6%.
Good point LC. I believe there should be a FIXED fee, esecially for homes over $1 million. Let’s say that fee is a scaling fixed fee, so perhaps $20,000 for over $1mil, $30,000 for $1.5 to $2mil etc.
Here is another one of those 25% poppers in 3 years.
1600 10th ave. Multi-unit apt, I believe. Bought on 8/4/2004 for 965K. Sold last week or so for $1.25m.
how did the english get their realtor fees down to 1-3%? i hear they laugh at us for still paying such ridiculous fees to ours here.
1 % ? for working with someone for months and months, at times? Ouch.
6% for someone that didn’t go to college and only works 2 days a week? Ouch back at you!
Real estate agents who work two days a week and didn’t go to college are have already gone the way of the dodo. My point remains.
when was the last time you went outside the city looking for a house kenny? i totally disagree with you. the entire east bay is still dominated by bitter housewives as the defacto realtor. wasn’t much better on the penninsula or in the north bay either.
Then interview till you find someone better. Come on man. That was a stereotyping slam and you know it. Nobody gets ahead in America without working hard.
no argument there bud but you didn’t answer my question. you are presuming that the realtors in the city represent the rest of their bretheren and i would argue that is nothing but fantasy. do you watch king of the hill?
;)
I’ve met some sharp realtors outside the city. I’ve been to probate court in Oakland. I’ve dealt with some real old school Marin sharks. Everything is everything. And one truth is that people generally don’t suffer fools lightly when it comes to large sums of money! Or they shouldn’t … King of the Hill? I’ve seen quite a few episodes. Is there a realtor lady on there or something?
i can’t find it on you tube, sorry:
King of the Hill Glen Peggy Glen Ross
Season 11, Episode 6
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Episode Description
Originally Aired: April 22, 2007
When Peggy takes Connie on as her protégé, Connie’s journalistic attitude pushes Peggy to change her writing style. Needless to say, she loses her job at The Arlen Bystander, but quickly rebounds with a job in real estate under the infamous Chris Sizemore, the brains behind Arlen’s largest real estate office. Her new job is at first exciting, but when she challenges the big bosses, she is fired.
see if you can. it’s hilarious. fake husband wife team in the office, chris elliot as the cheazeball broker/owner, junk yard runs to stage houses with period pieces.
you gotta see it.
has anyone seen ‘closing escrow’?
classic! you guys owe me one for getting the comments on this section going. Thanks for the explanation on the property. With hat in hand…”I was wrong”
The house right next door just went up for sale. Asking 1.25 mil as well.
Bedroom: 4
Bathroom: 2&1/2
Year Built: 1903
Lot Size: N/A
Square Footage: 1872
List Date: 9/4/2007
Parking Spaces: 2
MLS#: 330185
Forgot to add:
MLS Listing #330185
“Large, amazing property that has just been extensively remodeled, w/fab dntn vus from 3 levels of decks. 2car detached gar in rear of property is accessed frm a small lane. Upper level: 3 br/1ba+new dk w/fab vus.Main level:Big FDR,LR,nu 1/2 ba,huge amazing nu kit+ another big dk w/same incredible vus.Lower level:Completely rmdld big 1Br suite w/own st entrance,+ vus.Another big dk is off this level.On the bottom level there is another area that can be used for storage or a den.Special property!“
They just did a LOT of work on this house – foundation upgrade, new decks (alas it’s that gross “trex” stuff), expanded 2 of the floors. I was kind of surprised when it went on the market.
[Editor’s note: And apparently already in contract.]
That one went right into contract after two weeks. I can’t wait to see what it gets.
755 Sanchez sold for, fasten your seat belts, $1.465M. Nearly 400K above asking for 900 sq ft. Wow.
http://sfarmls.rapmls.com/scripts/mgrqispi.dll?APPNAME=Sanfrancisco&PRGNAME=MLSLogin&ARGUMENT=Ok7KmNi58nbInAxeCH8GTUUwqGC%2BJK%2FGzsunhodASqU%3D&KeyRid=1
After seeing some of the stuff that’s been happening this week I’m getting off the fence. I don’t think any sort of correction is in the near future for SFRs in San Francisco. $1.8M+ on Oak st.? That Pierce cul de sac home got into contract with a $2.05M list price? It’s going like gangbusters for big, nice homes right now. That $2.8M Shrader house got into contract after 8 days. Big houses and fixers, man. In even moderately desirable neighborhoods, the market is blazing.