Author Topic: First Time Second Home Buyer - Advice  (Read 9920 times)

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Offline USCTrojanCPA

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Re: First Time Second Home Buyer - Advice
« Reply #45 on: August 03, 2021, 06:28:18 PM »
Is this a new thing now: sellers only accepting cash offers and all contingencies waived?
The property that was in serious consideration is a townhome (3/3) built in the 80s.

Is it possible attempt an inspection and backing out if the findings would be too costly to buyer to be OK w/ "as-is"?


I've seen plenty of "as-is" counters (meaning that the seller won't do any repairs or provide credits in lieu of repairs) but have not seen an all cash offer and all contingencies waived situation yet. I'd tell my clients to pass.

I missed the one and only open house this weekend and my agent went, seller only interested in all cash and no contingency offers. My agent commented there were 15 groups of people visiting on Sunday.

I think the seller will get what they want from someone. Is the buyer being lead astray or this is what it takes?
This property is under 900k.

They'll definitely reduce their buyer pool but they might get it if the price is right and it's a desirable floor plan and location.  I've only seen a couple of counters where the seller wanted the buyers to remove all contingencies right off the bat, but never a requirement for all cash with that request.  The normal is waiving loan and appraisal contingencies along with removing all contingencies in 10-14 days.  I'm seeing more and more counters with buying "as-is" where the seller won't do any repairs and won't provide any kind of credit in lieu of repairs.
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Offline Mety

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Re: First Time Second Home Buyer - Advice
« Reply #46 on: August 05, 2021, 03:00:17 PM »
Is it safe to say "Sell now or get priced out forever!"?

Offline Cares

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Re: First Time Second Home Buyer - Advice
« Reply #47 on: August 05, 2021, 06:14:07 PM »
With a combination of institutions buying up real estate, high demand from individual buyers, low supply, low interest rate, well-qualified buyers offering much higher down than 2008, etc.... I do not see how there could possibly be a bubble or drastic price reduction. Home prices will keep increasing or stay flat at the worst.

Basically buy now or regret later. I worked with a stubborn buyer for over 1 year because they didn't want to offer just a little bit more on several properties against my advice. After we found a property not only did they pay $100k more than when we started looking but the home was smaller and in worse condition.

Offline USCTrojanCPA

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Re: First Time Second Home Buyer - Advice
« Reply #48 on: August 05, 2021, 06:26:45 PM »
With a combination of institutions buying up real estate, high demand from individual buyers, low supply, low interest rate, well-qualified buyers offering much higher down than 2008, etc.... I do not see how there could possibly be a bubble or drastic price reduction. Home prices will keep increasing or stay flat at the worst.

Basically buy now or regret later. I worked with a stubborn buyer for over 1 year because they didn't want to offer just a little bit more on several properties against my advice. After we found a property not only did they pay $100k more than when we started looking but the home was smaller and in worse condition.

Agreed, the fundamentals (low rates, a ton of highly qualified buyers, low inventory levels, strong economic backdrop, etc) are way too strong to see any kind of pullback in prices.  I believe that prices will continue to grind higher as we currently only have about 3 weeks of inventory on the market.  If you buy a home in Irvine today and own the home for 3-5+ years it'll be worth more than what you pay for it today because the new home construction will come to an end during the time period (excluding the last remaining homes at the Great Park).  This is nothing close to what we saw in 2004-2007.  Buy now or pay more later is what I tell my buyers and they are seeing it first hand. 
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Offline fatduck

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Re: First Time Second Home Buyer - Advice
« Reply #49 on: August 05, 2021, 09:18:59 PM »
I am not in OC, but every time I have said "prices can't stay this high" I have been dead wrong.

A house a couple blocks from me, 1000 sqft on a 3000 sq ft lot, listed for 1.4. I thought surely this is the bubble. Went under contract almost immediately, for over 1.5 supposedly.  Shows what I know.

Offline USCTrojanCPA

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Re: First Time Second Home Buyer - Advice
« Reply #50 on: August 05, 2021, 09:27:57 PM »
I am not in OC, but every time I have said "prices can't stay this high" I have been dead wrong.

A house a couple blocks from me, 1000 sqft on a 3000 sq ft lot, listed for 1.4. I thought surely this is the bubble. Went under contract almost immediately, for over 1.5 supposedly.  Shows what I know.

The market took most buyers by surprise but once my buyers started experiencing the getting outbid we adjusted our approach to aggressively bidding on homes (both on price and terms) that they really liked and had fairly good success.
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Offline fatduck

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Re: First Time Second Home Buyer - Advice
« Reply #51 on: August 05, 2021, 09:44:23 PM »
I am not in OC, but every time I have said "prices can't stay this high" I have been dead wrong.

A house a couple blocks from me, 1000 sqft on a 3000 sq ft lot, listed for 1.4. I thought surely this is the bubble. Went under contract almost immediately, for over 1.5 supposedly.  Shows what I know.

The market took most buyers by surprise but once my buyers started experiencing the getting outbid we adjusted our approach to aggressively bidding on homes (both on price and terms) that they really liked and had fairly good success.
I started house hunting in 2017, kept getting outbid, tried again in 2018, kept getting outbid, tried again in 2019 and ended up getting a good deal during a brief dip in the LA market.  So I'm thinking wow, my patience sure paid off.

Right now my home value is up like 30% in 2 yrs. Which is awesome. But I just looked up a house that I offered and missed out on in 2017, and it's up almost 70%. So I still would have been better off making a super aggressive offer back then and "overpaying."


Offline sleepy5136

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Re: First Time Second Home Buyer - Advice
« Reply #52 on: August 05, 2021, 10:30:45 PM »
I don't know about other buyers but if I ever hear an agent tell me to overbid on a home which I don't feel comfortable doing, I would question whether or not the agent is looking out for my interest. Sure, I'll get outbid many times, but that doesn't mean I'm "missing out". As long as one is consistently invested, the appreciation of homes outside of 2020 and maybe 2021 is generally not as high as equities.

I think it's completely fine to give context on the current state of the market. But there needs to be a mutual understanding that the buyer may not be comfortable putting an aggressive offer just to get a home. This is probably very situational and it obviously depends on how desperate the buyer is. 

I always follow Warren Buffets philosophy in finances. Be fearful when others are greedy and be greedy when others are fearful. (This does not mean to time the market.)

Offline USCTrojanCPA

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Re: First Time Second Home Buyer - Advice
« Reply #53 on: August 05, 2021, 10:43:55 PM »
I don't know about other buyers but if I ever hear an agent tell me to overbid on a home which I don't feel comfortable doing, I would question whether or not the agent is looking out for my interest. Sure, I'll get outbid many times, but that doesn't mean I'm "missing out". As long as one is consistently invested, the appreciation of homes outside of 2020 and maybe 2021 is generally not as high as equities.

I think it's completely fine to give context on the current state of the market. But there needs to be a mutual understanding that the buyer may not be comfortable putting an aggressive offer just to get a home. This is probably very situational and it obviously depends on how desperate the buyer is. 

I always follow Warren Buffets philosophy in finances. Be fearful when others are greedy and be greedy when others are fearful. (This does not mean to time the market.)

A good agent should provide their buyers a good estimate of what a home may sell for and what the appropriate bidding strategy should be based upon where the market is.  I found that buyers will tend to bid more aggressively on homes that they really like.  You can't real compare buying a home to live in and raise your family to investing in equities.  Real estate allows you to leverage 4x+ at super low rates and if you live in a home for 2+ years individuals are eligible for a $250k ($500k for married couples) federal and state gain tax exemption.  A home is a primarily a commodity where you live and a financial asset second.  Your comparison to equities would better work for rental properties but let's play devils advocate for a second...say you bought a home last year for $1m then most likely your home is now worth $1.2m so if you put 20% down you are up 100% on a cash-on-cash basis and oh the gains are all tax free where you'd have a possible tax of 25-35% on realized equity gains.
Martin Mania, CPA
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Offline sleepy5136

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Re: First Time Second Home Buyer - Advice
« Reply #54 on: August 05, 2021, 11:56:50 PM »
I don't know about other buyers but if I ever hear an agent tell me to overbid on a home which I don't feel comfortable doing, I would question whether or not the agent is looking out for my interest. Sure, I'll get outbid many times, but that doesn't mean I'm "missing out". As long as one is consistently invested, the appreciation of homes outside of 2020 and maybe 2021 is generally not as high as equities.

I think it's completely fine to give context on the current state of the market. But there needs to be a mutual understanding that the buyer may not be comfortable putting an aggressive offer just to get a home. This is probably very situational and it obviously depends on how desperate the buyer is. 

I always follow Warren Buffets philosophy in finances. Be fearful when others are greedy and be greedy when others are fearful. (This does not mean to time the market.)

A good agent should provide their buyers a good estimate of what a home may sell for and what the appropriate bidding strategy should be based upon where the market is.  I found that buyers will tend to bid more aggressively on homes that they really like.  You can't real compare buying a home to live in and raise your family to investing in equities.  Real estate allows you to leverage 4x+ at super low rates and if you live in a home for 2+ years individuals are eligible for a $250k ($500k for married couples) federal and state gain tax exemption.  A home is a primarily a commodity where you live and a financial asset second.  Your comparison to equities would better work for rental properties but let's play devils advocate for a second...say you bought a home last year for $1m then most likely your home is now worth $1.2m so if you put 20% down you are up 100% on a cash-on-cash basis and oh the gains are all tax free where you'd have a possible tax of 25-35% on realized equity gains.
I was aiming more at the fact that people say one may be "missing out" if they don't "buy now". If one is invested in the market, one isn't missing out on anything tbh. It's not like potential home buyers don't already have a place to live. You're really only "missing out" if your money is sitting in cash. So if one wants to bid aggressively on a home they like, that's completely fine. But I think there are definitely buyers that are going to think twice about bidding aggressively even if it's a home they like. Because not everyone can pay $600+ a sqft and not think twice. My point is a buyer shouldn't be placed in a situation by their agent to overbid just to get it due to FOMO. The agent needs to respect the buyers unwillingness to overbid in the event they do not feel like doing so and not put the buyer in an uncomfortable situation.

Offline USCTrojanCPA

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Re: First Time Second Home Buyer - Advice
« Reply #55 on: August 06, 2021, 12:12:43 AM »
I don't know about other buyers but if I ever hear an agent tell me to overbid on a home which I don't feel comfortable doing, I would question whether or not the agent is looking out for my interest. Sure, I'll get outbid many times, but that doesn't mean I'm "missing out". As long as one is consistently invested, the appreciation of homes outside of 2020 and maybe 2021 is generally not as high as equities.

I think it's completely fine to give context on the current state of the market. But there needs to be a mutual understanding that the buyer may not be comfortable putting an aggressive offer just to get a home. This is probably very situational and it obviously depends on how desperate the buyer is. 

I always follow Warren Buffets philosophy in finances. Be fearful when others are greedy and be greedy when others are fearful. (This does not mean to time the market.)

A good agent should provide their buyers a good estimate of what a home may sell for and what the appropriate bidding strategy should be based upon where the market is.  I found that buyers will tend to bid more aggressively on homes that they really like.  You can't real compare buying a home to live in and raise your family to investing in equities.  Real estate allows you to leverage 4x+ at super low rates and if you live in a home for 2+ years individuals are eligible for a $250k ($500k for married couples) federal and state gain tax exemption.  A home is a primarily a commodity where you live and a financial asset second.  Your comparison to equities would better work for rental properties but let's play devils advocate for a second...say you bought a home last year for $1m then most likely your home is now worth $1.2m so if you put 20% down you are up 100% on a cash-on-cash basis and oh the gains are all tax free where you'd have a possible tax of 25-35% on realized equity gains.
I was aiming more at the fact that people say one may be "missing out" if they don't "buy now". If one is invested in the market, one isn't missing out on anything tbh. It's not like potential home buyers don't already have a place to live. You're really only "missing out" if your money is sitting in cash. So if one wants to bid aggressively on a home they like, that's completely fine. But I think there are definitely buyers that are going to think twice about bidding aggressively even if it's a home they like. Because not everyone can pay $600+ a sqft and not think twice. My point is a buyer shouldn't be placed in a situation by their agent to overbid just to get it due to FOMO. The agent needs to respect the buyers unwillingness to overbid in the event they do not feel like doing so and not put the buyer in an uncomfortable situation.

Yes, ultimately it's the buyer that should make the decision how much to bid on a home that they like.  I give every options to my buyers on the strategies that we can use when submitting an offer but they make the final decision on which strategy to select.  Home prices will continue to head higher given where inventory levels are and the significant amount of highly qualified buyers bidding on homes today. 
Martin Mania, CPA
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Offline Mety

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Re: First Time Second Home Buyer - Advice
« Reply #56 on: August 06, 2021, 09:34:43 AM »
I was saying that "sell now or get priced out forever" back in mid to late 2017 to early 2018. I thought the price was for sure at the highest peak. Now the price is even more spiked up so high I don't even know what will happen anymore. ;D

I guess there was a little bit of price reduction for some time around 2018-2019 when the interest rate was like 4%. But as soon as the rate went down and people started working from "home," the home prices started to go crazy again.

Offline Cares

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Re: First Time Second Home Buyer - Advice
« Reply #57 on: August 06, 2021, 09:53:12 AM »
2018 to 2019 stayed flat to slightly up. 1st half, average price increased by $x and in the 2nd half it decreased by a little less than $x.

Offline hurijo

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Re: First Time Second Home Buyer - Advice
« Reply #58 on: August 06, 2021, 10:13:44 AM »
Was still able to get our house 3.5% below asking in 2nd half 2019. The good ol' days.  ::)

Offline Cares

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Re: First Time Second Home Buyer - Advice
« Reply #59 on: August 06, 2021, 10:56:27 AM »
Below asking? What does that mean? I never heard of that term before.

I only know 10% over asking, cash, no contingencies, 10 day escrow.

 

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