On searching for the American Dream

I've been tight lipped blog-wise about this but I feel it's O.K. to talk about it now since it has been happening for a while now. Back in August, right around the time the Wifer and I took our B&B trip, we were cold-called by one very serious, very determined real estate agent - The Shark. Usually, when I even sense that I am going to be sold to on the phone, I just hang up. For some reason, however, I decided to entertain this call. I was told that I was a perfect candidate for a home loan because of blah, blah, blah, etc., etc., etc. I didn't believe it. We've been trying to get past that seemingly insurmountable mountain pass frozen over with high home prices since we moved here in Summer 05. To tell the truth, we pretty much had given up and decided it was just renting for us (something that I was never comfortable with).

After my phone call that August evening, I was told that we'd qualify for around $500k. At the time, that didn't really get you jack in the Bay Area. But, we have to start somewhere. Whilst on our trip, we talked a lot about the real possibility of owning a home. We were filled with excitement - it was buyers market (and still is), we could finally build equity, and we could finally paint! Then, at a small tacqueria in Half Moon Bay, I got the call from The Shark:

"The market has busted. Lenders are closing doors. NO ONE can get a jumbo loan right now!"

In a flash, our dream was gone. The Wifer saw it coming too. We've been through this housing striptease before, only to be left hard and ready but poorer and with our dreams dashed.

About a week later, we got a call from The Shark again:

"I can get you guys into a conforming loan. We can still do this!"

In case you don't know the difference, a jumbo loan is any home loan above $417k. These loans aren't insured by Uncle Sam so they are much riskier than conforming loans, loans $417k and below. In fact, I've learned so much about real estate the past two months it isn't funny.

After finding out that now we qualify for a house $83k below what we had qualified for before, I was skeptical. The places we were interested in before were above $500k.

"How the hell am I going to get a decent quality place for $417?"

And so, we set out looking to capture the American Dream on the cheap. How were the places, you ask? Well, here are some snaphots:

Primero - The "Moldy House"

'Primero' here happens to refer to the street name but it coincidentally was also the first property we took a look at. Why do we call it "the moldy house?" Well, the previous owners decided to build an enclosure around their hot tub and not ventilate it. As such, there was mold EVERYWHERE. It was completely disgusting! I can't believe we went in there - twice!
Asking price at the time: $439k
Asking price now: $399k


Manzanas - The "Apple House"

No duh on where the nickname for this one comes from! Manzanas is a cute place with a big yard (by California standards). It is clean (unlike Primero) with a lower asking price. It is a bit on the small side for a family of 5 as it is a 3/1 (yes, the 1 bathroom is a problem but we need to get into the market). We liked this one enough to put a bid on it (and that bid is still out as the house is a short sale, meaning the owner is trying to avoid foreclosure by agreeing to see the house short of the original mortgage and then having to eat the different in their mortgage and the final selling price. In fact, the market is so bad right now that almost all the places we take a look at are short sales. This is good in that we can get a good deal. It is bad in that it takes forever to hear if an offer is accepted.



Western - The Steal...with a Catch

This house was a steal for the price. 1750 square feet, only $417k asking!! Those size homes easily go for $100k above that, if not more. There was a catch to this bargain, however. This was a probate sale and the previous owner died of natural causes in the home. When we went to go see the home it was completely trashed. Cats, old nerd games everywhere (trading card games), old 80's computer parts, and the garage had vintage pinball and arcade machines! Actually, the garage also had at least 30 unopened cases of Magic cards. I told the shark that I wanted to buy em so that I could get rich off selling them on eBay.

So, except for the old lady who died here, the place is fantastic, right? Well, not quite.

1. It is right next to elevated BART tracks (rail system in the Bay Area)
2. Th neighbors on either side have junky houses
3. There is a massive, mean pitbull on the left side of the house. In fact, on a second visit it almost jumped the fence!!! Yes, that killed the deal (and thankfully not us).

Original asking: $417
Current asking: $375

See how bad the market is?!

We've looked at way more houses than this. On one property not shown here, we got as far as the counteroffer stage with our bid. This was great except that no less than three hours later, The Shark called us to say the seller decided to go full foreclosure because they were in a really bad way.

I'll close this with a request for those of you who don't live in CA. Please don't waste your time commenting on how crazy the prices are in relation to what you get. Yes, we could by a gigantic place for the same amount of money in Indiana. Thing is, however, we don't live in Indiana. We live in California - Northern California, at that. It is expensive to buy a house here because there are a lot of people who make $100k plus before adding in their spouse's income. As such, housing is expensive. Also, there is really no new land on our side of the bay. Believe me when I say these places are steals. We have a bid on one place right now (not pictured above) that last sold for $615k. You can do the math to figure out the price drop.

Hopefully the next time I blog about this it will be accompanied by a picture of a SOLD sign.