Any real estate experts hanging around today?

[farmgirlinwv]

We are looking at buying a home in a new subdivsion in Va. They still have room to build several more homes. I think they need to sell the ones they have before they can finish. The area has houses nicer than the one we're looking to buy and older houses worth much less in the area. On the street we're looking to buy on 2 homes have gone into foreclosure in the past month or so. One of these homes is exactly like the one we're considering. This home is less than one year old. It sold for $30,000 less than the company is asking for the home we're considering. My question is this: do these foreclosures effect the market of this area? (There are 2 nicer homes in this area that have been on the market for almost a year.) Should we offer less? Also, we think that the market will really slow down after the $8000 tax credit stops in April. I could really use any insight into this market. This is our first home purchase.

Thanks for any help,

Farmgirl

[G5052]

Some real estate agents will downplay that in new developments because usually the builders have a "bottom line" that they want in order to come out ahead that may be above the foreclosures. In other words, you can try to go lower, but the builder may have a certain price point that they won't budge on.

 

I'm not in real estate, but have several friends in developments like this where the foreclosures, current houses on the market, older houses, and unbuilt lots are all come into play in regard to the prices.

 

We live on a road where two builders built a few houses each, and then individuals built houses on the remaining lots. The lot sizes and houses vary, and we've had no foreclosures. So our values have dropped, but not as badly as the developments with more uniformity and foreclosures.

[farmgirlinwv]

Thank you. I'm sure you're right and that they have a minimum price that can't go below. We just don't want to end up upside down in the home from the beginning if prices would drop more.

There's a lot to consider. I've emailed our agent, but he's trying to sell it. I don't know how much he'll tell us. He didn't tell us about the foreclosures or the other homes on the market so long. The house is priced to sell though. I appreciate your insight. Maybe being in a mixed area of values is not all bad.

[prim*rose]

Like the other poster said, builders won't often go below a certain number, BUT they may offer other incentives to get your sale. We got a lower interest rate, several upgrades, etc. because the builder wanted to sell.

 

As for foreclosures, in our experience, the foreclosure list price is a "teaser" - the agents price it low to get multiple bids. We've never had an offer accepted for list price of a foreclosure.

 

Good luck!

[farmgirlinwv]

Like the other poster said, builders won't often go below a certain number, BUT they may offer other incentives to get your sale. We got a lower interest rate, several upgrades, etc. because the builder wanted to sell.

 

As for foreclosures, in our experience, the foreclosure list price is a "teaser" - the agents price it low to get multiple bids. We've never had an offer accepted for list price of a foreclosure.

 

Good luck!

 

Thank you Primrose! Maybe they will add a fridge for us. The foreclosure prices weren't list, but what they actually bought them for. It never hurts to ask. We do like the house. If the market comes back up in the next 5 years, it should do well. I hope! We are going to decide in the next couple of days.

 

Farmgirl

[gingersmom]

I would be leery about buying in such an area.

 

If you had to sell your house, do you think anyone would want to buy it with foreclosures on the block?

 

What if the builder never builds houses on those empty lots?

 

Unless you plan on being there for the next 20 years and can afford to ride out the highs/lows and I would not do it.

[farmgirlinwv]

Well, I was hoping that in 5 years or so the economy would be better. Foreclosures would much less common. The company building these homes has been building in our area since the 40's. I don't think they would just leave it. I still don't know.

[K-FL]

Foreclosures/shorts have impact on the appraisals (comparable sales must be w/in the last 6 mts) so, yes they effect sales on non-foreclosure/short sale homes. IMO, the builder would really have to sweeten the deal to make up for a $30k price difference unless the foreclosed house has been stripped/damaged, etc or will take more time to close than I'm willing to wait.

[i.love.lucy]

Do you have your own agent? The agent you are working with sounds like he or she works for the seller/builder of the homes - which means their loyalty and fiduciary duty is to them, not you. Is the agent and actual realtor or just an employee of the builder? Here in Texas they are almost never actual realtors (unless the builder is tiny) - they are employees of the builder with the accompanying loyalty and responsibility.

 

They might want to tell you that now that you have been in their development and picked out a house that you can not bring in your own agent, but you can threaten to walk. Ask them if they really DO NOT want you to have your own representation and they will back off that line of thinking real. fast. No reputable builder would refuse you your own representation, and pay them accordingly. They want to protect themselves and their relationship with the real estate community.

 

I will say though that the price they can afford to come down to has less to do with actual market value than it does them having a magic number that they have to meet. It has all to do with cost of materials, lot takedown, etc, and often they can afford for that house to sit there awhile, not forever, but for a while. Long enough to get the foreclosures off the block and make theirs the attractive option.

 

I know all this because I worked for 2 major homebuilders for 3 years, and then in real estate for 5 more. My builders almost NEVER cared what people were asking for resales in our neighborhood, nor whether or not there were foreclosures. We had to take down a certain number of lots per quarter, had to build a certain number of spec homes, and only weighed the specs against the sales we had on the books that might "bust" because of a contingency that didn't sell. The buyer pool for the "new" home is often a different animal than those that would consider a resale home. Those builders know the buyer is out there and have deeper pockets to wait for them than the resale homeowner does.

 

They can and WILL come off their list price though. If I were you I'd consider getting your own agent who can help you do more of a market analysis of the sales in the neighborhood and can help you figure out what you want to offer. The builder might say no, but you can negotiate upward from there.

 

HTH!

[newbie]

Foreclosures/shorts have impact on the appraisals (comparable sales must be w/in the last 6 mts) so, yes they effect sales on non-foreclosure/short sale homes. IMO, the builder would really have to sweeten the deal to make up for a $30k price difference unless the foreclosed house has been stripped/damaged, etc or will take more time to close than I'm willing to wait.

 

:iagree::iagree:

[farmgirlinwv]

I appreciate your thoughtful responses very much! We do have our own agent. Every house we've seen though, he says they won't come off the list price much. He didn't tell us about the foreclosures on the street or even find this house for us. Basically, all he has done is show us houses. I thought that a company would have a *magic number* they can't go below because of cost. Older homes similar to this one, w/ maybe a little larger lot, are list priced at $15,000 or more than the asking price of this one. They have already come down about $20,000 on the original price over time. Zillow has it being on the market 200 days. Our realtor said we need to make an offer this week. Is our realtor supposed to give us comps? Are we supposed to ask? He hasn't told us much. What does a realtor usually tell his clients? I know the higher the price, the more he makes. So, he really has no impetus to help us get a deal, kwim?

 

We're going to look again tomorrow. We just don't want to overpay w/ the market the way it is. However, we will pay just as much or more for an older, similar home as we will for this brand new home. So, it does seem like a good price. We thought a new home would have better resale value in 5 years when we may want to move to a more rural area.

 

I appreciate your help. We don't know any real estate people. Most of them seem most concerned about their commission, rather than our paying more than might be neccessary. I have done all the research on this property (and others we've looked at). Our realtor has done none, or he hasn't shared it.

 

If anyone is in RE, do ya'll expect the market to really slow down after April 30th. It would seem so.

[K-FL]

Lucy can confirm or refute, but IMO, the only magic number a builder might have is profit or loss. They do developments to make $$ so obviously they want to sell for more than they've spent--just like any other retail item. In today's market, builders are hurting, just like the rest of us and need to move inventory. One advantage to a home that's been lived in is that folks will do "niceties" that are cost-overruns for builders like window treatments, carpet/appliance upgrades, etc.

 

As to April 30th: I would expect home "season" to be in the summer in VA due to better weather & folks not wanting to move until the dc are out of school.

 

Get on-line & search for your local MLS. You can usually see everything for sale & put in your requirements ($$ range, bed/bath, lot size, pool, etc.) Your agent sounds either inexperienced or overwhelmed.

[i.love.lucy]

I agree with K. Your agent doesn't sound like he's doing anything for you. But I would chalk it up to inexperience not greed about commission. Think about it. The difference in a 3% commission on a $200,000 vs a $230,000 is $900, and even at that by the time he splits it with his broker it's even more insignificant. No, I doubt that's it. You might want to really have a heart to heart and tell him your concerns, that you want him to be able to help you make sure the price is right ,etc. Or else you will want to speak to his broker. He won't want that. Sometimes agents are missing some key training in "customer service". And it's a shame because it's such a service oriented business he will never be able to be successful without referrals!

 

And depending on your interest rate, a difference in price of $1,000 only makes about $8 difference in your payment. So you can add that up and figure one house is X and another at $15k more is $120 more a month. That's not too earth shattering.

 

I'm still trying to absorby my coffee and not remembering, but are you choosing between a foreclosure and new where the fc is $30k less, or are you worried that an fc has sold already at $30k less and affects the appraisal and fair market value of the one you are considering? If so, fc's do affect appraisals but do not have the impact you might think they do. One or two fc's in a neighborhood do not bring down the whole neighborhood's value in the same way as if ALL homes in your county have dropped in value $100k or something.

 

If I were looking at a new home under these circumstances, I would choose the new over the resale. A newer home will hold it's value longer. Older homes have advantages like often time larger lots, mature trees, location closer to work areas, etc. But the newer a home is often it will hold it's value in a flatlining or declining market.

 

I'd have a heart to heart with your agent. Tell him you want to see the comps for the neighborhood and you want him to do a CMA (Comparable Market Analysis) so that you can see exactly what's been sold - especially those homes within about a year of age as the one you are considering. New spec homes are often sold via MLS to get out to the realtor market so he should be able to find a few.

 

Then make your decision based on what feels right for your family. Remember, real estate is an investment, yes, but what are the odds that you are going to sell in 9 months, or even 2 years? Only you can know that. If it seems (barring crazy unforseen circumstances) that you will probably not sell for about 5 years, then I'd say don't worry about a difference like $15k and go for the one that fits your family best and feels right. Real estate is an emotional sale, not purely retail based on investment. Do you love the house? Does it make you all tingly inside when you are in the new one vs resale? You know which one you want.

 

I believe we will still see more downturn in real estate as more ARMs reset this year and there will be more foreclosures. We are not at all out of the woods. BUT, now is a great time to buy and in 5 years you will probably want to kiss your agent on the lips for the equity you'll be sitting on. :tongue_smilie:

[farmgirlinwv]

Thank you all so much! It's so nice to hear from someone who knows RE! I told our agent to have comps for us to see when we go tonight to look at the house again. We were thinking a new home would hold it's value better, but you just don't know. It's our biggest purchase, obviously, so it's a little nerve racking. We really wanted some land, even .4 acre or something as opposed to a lot in a subdivision. However, we'd have to pay 20-30K more for an older home. So, this seemed like a better deal. We're going to look again tonight. The down side to this home is that it will be messy and noisy for awhile as they will be building more homes soon.

 

Thanks again!

 

Farmgirl (in the city!)

 

Edited to add: Our agent has been selling RE in this area for over 30 years! He's very laid back.