Buy or Rent

lostintransition SG

i'd like to find out your views on this issue...

everyone has been saying that the property prices are very low right now and it's a good time to buy. we are slightly tempted and are considering to look around a little and have shortlisted a few towns. we've been monitoring the online property ads quite abit since the beginning of this year.

i've been researching on renovation costs. while property prices might be low here....i noticed that the renovation costs (& closing costs) can all add up to a very substantial amount. i cannot accept if the renovation cost is almost as much as the cost of property itself! it's just crazy...

not to mention costs associated with homeownership i.e. taxes, insurance etc. or the costs incurred when we have to sell the property in the near term i.e. agent comm, capital gain taxes...

the thing is...we are paying quite a low rent now (less than USD900 for a huge 3bedrm & 2bath house)..and everything is being taken care of (including water/lawn bills). while it's kinda restricting not being able to do whatever we want with the house....it's nice not to have to worry about the hassles/costs of homeownership.

however...it's true that rent will always be an expense instead of building equity...hence our dilemma

i'm sure some of you here who've lived overseas for a long time must have gone through the same thought processes that i have w.r.t this issue? i'd be most grateful if you could share your thoughts and experiences.

jetta SG

How long will you be here? No point buying a place if you're going to be here for 3 years or so. Check your state's cost of living, etc. I live in a high cost state so many here rent if they are here for 3 years or less.

While it's true that this is a good time to buy, there are many factors involved as you know. Firstly, have you built up a good credit history? The higher your rating, the lower your interest rate. There are many loans out there. You may qualify for one that applies to first time homeowners. Talk to a good lender and search out a good realtor. Some of the different loans are conventional, FHA, etc... If you go conventional you can buy any kind of house, no matter the condition. Most low income folks go with FHA loans but the way the loan is written, the house has to be clean. Meaning, no termite problems, cracked slab, foundation problems, etc. With short sales and foreclosures, the owner has no money to fix these problems so an FHA loan will not work with these properties.

The initial outlay is quite heavy. Before the final signatures are inked, you will have to pay for a termite inspection as well as home inspection. This can set you back about $1K. We had a house in hand this time last year and after reading the termite report and the home inspector's report (the house needed a new roof ,estimated at $10K, before we could even proceed with the sale) we walked away. We lost $1K there.

There are closing costs to think about. This runs to about $10K. I have been searching for a house to buy since Oct 08 and it's been rough. Many of the homes out there are short sales or foreclosures. The term short sale doesnt imply the length of time. It refers to the fact that the owner is short of cash. A short sale can take about 6 months to close. I am now 3 months into the short sale process and we have yet to open escrow. Escrow takes about 2-3 months, depending on many factors.

Anyway, over the length of 15 months, we have written maybe 30 offers on various homes and have only got an accepted offer twice. Once with the above mentioned house and the current one we have in hand. Each time we placed an offer, we were outbid by investors offering all cash, or other folks offering more than the asking price. It's not uncommon to hear of 20 offers (or more sometimes if the house is desirable) on just one home.

And before you even go househunting, you would stand on firmer ground if you were pre-qualified by your lender. Once you know what you qualify for you can shop within your price range. You will need to supply your lender with 3 months worth of pay slips, bank accounts, assets and liabilities.

HTHs.

lostintransition SG

thanks jetta. your detailed post has been most insightful! it's exactly what i'm hoping to hear from you folks who've been there, done that!

we are incline to stay for good but we might move around different states. even if we do leave the states...we don't mind keeping the property if it's a good investment in the long run. of course if we just stick to renting...things will be much easier if we were to move around/leave.

when you first started out looking for a place....how did you go about finding out about the short sale/foreclosure processes? did you get help from realtors or just read up on your own? are you currently working with a single realtor or numerous or on your own?

why does it take so long to close on a short sale/foreclose property? do the buyers' realtors typically try to avoid showing short sale/foreclose properties?

if we do decide to buy...we are hoping to find something that we can afford without taking a loan to avoid all the hassles of establishing credit history, get pre-approval etc....so we'll most prob have to go for the short sale/foreclose properties which i presume would be going at much lower prices? or we might have to compromise on other things i.e. space, fixtures, condition...but might end up having to pay alot of money to fix up the place (which is my main concern) not to mention the hassles

i suppose it doesn't really matter to us if the closing process takes very long (unless there are other cost implications?) as long as we can get a good bargain from the purchase.

my spouse is suggesting that we should adopt a "not-desperate" attitude. meaning, if we do see something we like that's within our budget and it's good value for money...then we can consider to make an offer. but say if there are counter-offers or if the owner/bank/agent throws up all sorts of crap...then we'd just walk away since there's no real urgent need to buy anyway. but to do so...we'll have to constantly monitor what's on the market. what do you think?

are those fixer-uppers really worth the time/effort/money?? the renovation costs seem really high in the states as compared to back home.

we've identified several towns which properties we are interested in. but because these are good areas..the properties tend to be more expensive. but the prices do hold very well which make for safer investments....so we are again in a dilemma whether to go with good/safe/upper-middle class neighbourhoods where prices tend to hold or the average neighbourhood where we are likely to get more with our budget but prices tend to fluctuate more due to over-supply or lower quality homes.

lostintransition SG

i sure hope you'll have a successful close for your current offer!

i can't believe there are still these bidding-wars..20 offers....geez, i thought the US property market is doing badly? i'm so wrong...

jetta SG

After reading your post, I think that you would be better off talking to a realtor who knows your area. Before you do, educate yourself on short sales and foreclosures. It's not as easy as you think. When you mentioned "good bargain", know that there are millions out there share the same mindset. So competition is stiff, hence bidding wars. Not to forget the $8000 credit that Obama's handing out to first time homeowners has made things harder.

Homes around good school districts which more often than not tend to be more expensive. Of course there are other factors peculiar to your neighbourhood, city, county, state, etc.

Fixers are a good deal only if they are cosmetic fixers because it's an easy fix. Stay away from cracked slabs and any other foundation issues. $$$$$$!!! The hubby and I are diy-ers and are proud to say that we've laid the floors in our current house, painted all the walls, installed this and that. I love power tools.

As for looking for a good realtor, many people just go with the one they are recommended. I will be the first to dissuade you from doing that. Rather, you should pick a few and interview them all to see which one understands you, has your best interests at heart, is knowledgeable and tenacious. Through my experience with buying my current home and the long search for the next one, I have become so interested in real estate that I'm thinking of becoming a realtor. We shall see.....

I can totally relate with your situation since I felt that way before I bought my current home. Had I waited I wouldn't be in negative equity territory *sigh* If I were in your shoes, I'd wait. Since you are still new to this country and have not been here a year, it would be better if you got to know the system a little better before jumping into the fray. JMHO.

HTHs.

Arapahoe SG

I recall there are courses to attend on house buying to learn all the negociating terms and factors.

i think is good to plan but also I do not think that US property market will just jump overnight...As you know by now there are trade off between location and prices....

lostintransition SG

WAHHHH...jetta, you are one of those DIY-ers...hats off to you. i'm always so amazed with you folks who can do basically everything yourselves with the power tools! if i'm like you...i'd sure get a fixer to doll up on my own....unfortunately, i think i'm quite hopeless...not that i can't put the pieces together but i simply lack the patience and perseverance to complete big tasks

how did you learn to DIY home renovations?

yes...i too find real estate extremely interesting. perhaps that's also one of the reasons why we are thinking of looking around. property viewing is a favorite past-time of mine when i was in singapore..haha

i find the system here very different from back home in singapore. while i was able ot buy/sell/rent properties on my own back home...i'm like fish out of water here. think i really should take your advice and take my time to learn more before taking the leap. maybe if you do become a realtor...i'll engage your help! where are you based by the way? any chance you are in massachusetts!? =P

lostintransition SG

I recall there are courses to attend on house buying to learn all the negociating terms and factors.

i think is good to plan but also I do not think that US property market will just jump overnight...As you know by now there are trade off between location and prices....

ya...guess i'll put that on hold...learn more in the meantime but keep a lookout.

just an observation....but i find the realtors/financial advisors/bankers (at least where i'm based) here super bo-chap....they aren't as "hungry/eager" as the ones back in singapore. their businesses too good that they don't fancy new clients? or do clients need to dangle the BIG carrots first before they bite?

jetta SG

how did you learn to DIY home renovations?

Pai seh, all that high praise. I am self-taught and credit HGTV diy shows and the like as my guru for several years. I just never realised how much I enjoy working with power tools.

Both of you have only been here a few months so you still have lots to learn, no offence. I'm a little luckier if you can call it that because I can ask the hubster about stuff and why Americans do the things they do. I *still* don't understand American football. (make that don't want to. lol)

I'm nowhere near you instead I'm on the opposite coast.

As for the attitude of realtors, etc, the housing market is in a state of flux and they are making money hand over foot now. So unless you're a serious buyer, they don't have the time for you. Not so last year. They were begging for business then. Here in the states, real estate highs and lows cycle every 10 years and they say we're at the bottom of the market but I'm a naysayer. There are many unnatural factors in play right now like the $8K carrot for first time homebuyers. Which largely explains the feeding frenzy, imho. There are many loans set to reset soon and we'll be seeing more foreclosures on the market.

The hubster and I have lived in 3 states and two countries and like you, we've always enjoyed attending open houses and viewing new developments. Construction here is different from that in Singapore. There we build with concrete. No so here. You can put a hole through drywalls with a punch. lol. I love trolling through Home Depot and Lowes just to look at finishes, attend diy classes, etc.

Many of us view homes online. Check out www.realtor.com and once you key in your preferred zips and requirements, you can get regular notifications on any status changes, new properties, etc. Another site I love is www.zillow.com. Zillow also provides you with estimated resale prices of all homes in America. When we first discovered Zillow, we started zillowing all our relatives' homes just to see how much each home is worth.

jojobeach SG

If you are able to purchase a house in cash. Forget short sales and foreclosures, just do your homework and head for the AUCTIONS.

The banks/lenders/mortage are also big players in the real estate market. The good ones won't be given away for you to steal. Good properties stay within the industry and sells for a tidy profit later.

The foreclosures are the shitty ones for cheap and lots of clean up. These are the ones nobody wants at the auctions.

Pre-short sales are the distressed sales. You may get a deal outa other's misfortune, but these are extremely hard to come by. These sellers do have some equity on the house but are unable to make their next mortage payment.

Good luck hunting.

jojobeach SG

Pai seh, all that high praise. I am self-taught and credit HGTV diy shows and the like as my guru for several years. I just never realised how much I enjoy working with power tools.

I'm nowhere near you instead I'm on the opposite coast.

Jetta,

Use REDFIN.COM

lostintransition SG

tell me about it!...i was just asking my hubby why people don't use concrete/bricks for their walls over here? i feel quite insecure with the thin walls! the first time i stepped into Home Depot...i thought i had died and gone to heaven. i can spend my entire day there!

hahaha....and i thought i'm the only "property voyeur" around! i use zillow quite abit too =P i'm surprised at how "transparent" the property market is over here....you can find out about the past transaction prices of a particular property, who owned it...or is now owning it etc. and i thought the americans guard their privacy like dunno wat?!!

lostintransition SG

If you are able to purchase a house in cash. Forget short sales and foreclosures, just do your homework and head for the AUCTIONS.

The foreclosures are the shitty ones for cheap and lots of clean up. These are the ones nobody wants at the auctions.

Good luck hunting.

where do i obtain info regarding auctions? i love auctions...ohhh, the thrill of it. i bought a property through an auction once in singapore....but it seems that singaporeans are a bit "pan-tang" about auctioned properties...esp the mortgagee sale ones 'cos the chinese think those properties bring bad luck.

are pre-short sales the Lis Pendens ones? i saw several properties listed as Lis Pendens and they look quite attractive indeed. so for such properties, i'd have to negotiate with the owners rather than the banks right?

i notice that some of the foreclosed properties have been ripped bare....that's terrible!

jojobeach SG

i notice that some of the foreclosed properties have been ripped bare....that's terrible!

Pre-short sales or distressed sales, short sales, auctions and foreclosures are ALL "pan tang-ed" properties. They are a result of some poor sod's/family's financial misfortune.

Auction procedures defer state to state. Check your local newspapers for the auction listings. Please remember that auctions are for experienced investors and carry risks(if you fail to do your homework properly).

Realtors are often investors themselves in the distressed properties market. Don't be surprised to see your trusty rookie agent sitting in at them auctions too.

Lis Pendens just means there's a legal claim/liens on the property by creditors, that is why it's priced more attractive, BECAUSE if you purchase that Lis Pendens property YOU will have to PAY off the creditors. Your agent will need to do his/her homework to find out what are the outstanding LIENS/CLAIMS against that property for you to do your maths.

Foreclosures are to be sold AS IS. And the previous owners are UNHAPPY people. So they trashed the place, ripped out the appliances and .... sometimes smear shit on door knobs. There are plenty of horror stories that comes with foreclosures... but.. you can still probably get a good deal IF you are willing to GUT the insides and do a 100% renovation.

When you purchase a property with HOA ( Home OWners Associations) or AOAO ( Association Of Apartment Owners).. MAKE SURE YOU CHECK their financial status and get their 3 years meeting minutes to figure out if there's no mismanagement. If you buy into a property with BAD associations managements, you're gonna get screwed.

Lots to learn my friend. IMHO, if you don't intend to stay for long. Ya better off renting.

Arapahoe SG

I wondering if there are online courses on buying property that you can sign up to learn. or some home buying association that you can sign up and learned within your community?

jojobeach SG

ya...guess i'll put that on hold...learn more in the meantime but keep a lookout.

If ya want them agents to be hungry for your business.... you just gota SHOW THEM THE MONEY.

Ya havn't got no money in yer local bank, and ya can't get yerself a pre-qual.. they no want to be treated like a sucker either sister !!

Ya must understand, this is a CAPITALIST country ya stayin in. OK ? Good.

BotaHead SG

hello jojo

jojobeach SG

HTHs.

Jetta,

You'd have an easier time getting your hands on an "APPROVED" short sale property.

With the inspection reports, you coulda used it to re-negotiate a lower price with the seller and fix it up the way you want yourself.

jetta SG

Jetta,

You'd have an easier time getting your hands on an "APPROVED" short sale property.

With the inspection reports, you coulda used it to re-negotiate a lower price with the seller and fix it up the way you want yourself.

Jojobeach

Thanks for the advice but you're preaching to the choir because I have and I did.

Upon reading the home inspector's and termite expert's reports, we backed out. This was a year ago. Besides, it's not that easy with multiple buyers on the market. The planets would have to be in line for one to be that lucky. We found ourselves in that position because the previous buyer had backed out for the same reasons. The listing realtor called all his realtor friends to tell them about his approved short sale. Since we were the first one to bite, we got to spend the nearly $1000 on the home inspection and termite experts. Lucky us.

We have found another and were very very lucky to have an accepted offer. However, I know know know that this property will have termite issues too. We are now four months into the short sale process and the end is nearly in sight. Wish us luck.

jojobeach SG

Jojobeach

Thanks for the advice but you're preaching to the choir because I have and I did.

With pre-existing termite issue on the recent short sale property.. are you gonna back outa this one too ?