Jump to content






Are Homes a Good Investment


  • Please log in to reply
35 replies to this topic

#31 Steve Heard

Steve Heard

    Owner

  • Admin
  • 13,752 posts
  • Gender:Male

Posted 22 April 2011 - 02:55 PM

The banks and real estate agents will place a home on the market for well under what the comps support, but that will result in multiple bids ABOVE the listing price. I have seen some go for 20-25% over listing. In the end, it all comes down to what buyers are willing to pay.


I remember many years ago I had a client who wanted to buy a place in San Francisco. It was listed at $550,000, so she called the listing agent, went to see it and said she'd take it. The listing agent said, "he wants $625,00." "Then why is it listed at $550,000?", she asked. "That's how we do it here. Everyone knows to expect to pay $50,000 to $100,000 more than list price."

With a few exceptions, those days are over, my friend.

Last month, for example, of the 89 homes sold last month in Folsom, only 10 sold for more than asking price. Of the 10, only 3 of them were 5% or more above asking. The average was 97.84% of the price the home was listed for when the offer was accepted.

What does it mean to say the value of your house has gone up when all the other houses you might buy have gone up essentially the same amount? When you buy a second house it's probably going to need to be bigger and more expensive than the prior one. It seems like there's no way to cash out, unless you go live somewhere horrible that you hope is going to improve, and call it an investment.


It's called, 'trading dollars'. When your house goes up in value, so does everyone else's in town and vice versa. If you bought a small house for $200K, sold it for $300K and bought another for $400K, your equity goes a long way rather than coming in cold with only your savings as a downpayment.

People who really do well are those who downsize or move to another region.

About 5 years ago, a friend's dad found himself working at 72 years of age, pushin wheelchairs at SFO to supplement his retirement so he could keep paying on his $360,000 mortgage on his house in Daly City.

One daughter moved up to Sac and convinced him to follow, citing better weather, newer homes, and he'd be close to the grand kids.

I remember he cried while signing the papers. He had bought the house for $35,000 in 1973 and raised his family in it. He felt that by selling he was losing, but he could barely afford to keep it and really needed and deserved retirement.

We listed the house at $778K and it sold in 2 weeks for $835,000. Exactly $800,000 more than he paid for it. He paid off the mortgage and bought a 2 year old, 1500 sq ft single story home in Natomas near his daughter for $345,000 cash. So, when someone asks if homes are a good investment, I guess we could say, 'It depends.' If one bought a home in 2005 for $500,000, it's probably worth about $300,000 now, so no, for that guy a home was not a good investment.

For the guy who bought for $300,000 in 2001 and sold for $500,000 in 2005, it was a great investment!

As for the guy who bought for $35K and sold 30 years later for $835K, he told me it was the smartest thing he ever did.

Steve Heard

Folsom Real Estate Specialist

EXP Realty

BRE#01368503

Owner - MyFolsom.com

916 718 9577 


#32 AMETHYST PRODUCTIVITY

AMETHYST PRODUCTIVITY

    Living Legend

  • No Politics!
  • PipPipPipPipPipPipPipPip
  • 2,248 posts
  • Location:Willow Creek

Posted 22 April 2011 - 04:05 PM

Just found out last night that the house we bought in 2001 for $150K and sold in 2005 for $380K is on the market for $136K. Those people are not very happy right now. Unfortunately, we lost our shirts on the next one.

Kimberly Purcell
Productivity Consultant - Amethyst Productivity

 


#33 rpo

rpo

    Hall Of Famer

  • Validating
  • PipPipPipPipPipPipPip
  • 1,336 posts

Posted 22 April 2011 - 08:44 PM

I remember many years ago I had a client who wanted to buy a place in San Francisco. It was listed at $550,000, so she called the listing agent, went to see it and said she'd take it. The listing agent said, "he wants $625,00." "Then why is it listed at $550,000?", she asked. "That's how we do it here. Everyone knows to expect to pay $50,000 to $100,000 more than list price."

With a few exceptions, those days are over, my friend.

Last month, for example, of the 89 homes sold last month in Folsom, only 10 sold for more than asking price. Of the 10, only 3 of them were 5% or more above asking. The average was 97.84% of the price the home was listed for when the offer was accepted.


I actually made that observation just on REO's and short sales that I have seen thus far in 2011. All were in the bay area. I would estimate that 1/3rd of my clients are ending up in a bidding war for well over the listing price. Sometimes they even put in multiple offers because they *think* someone else beat their first offer without any proof at all!

#34 Redone

Redone

    Hall Of Famer

  • Premium Member
  • PipPipPipPipPipPipPip
  • 1,865 posts

Posted 23 April 2011 - 07:28 AM

I actually made that observation just on REO's and short sales that I have seen thus far in 2011. All were in the bay area. I would estimate that 1/3rd of my clients are ending up in a bidding war for well over the listing price. Sometimes they even put in multiple offers because they *think* someone else beat their first offer without any proof at all!


On the REO you're looking at the Agent doesn't set the price. Seller (bank) gets a either a Broker Price Opinion or a full appraisal then they set their price.

It's against MLS rules now to intentionally list a home with a low price. For example, listing for $ 1 just to start off a bidding war.

#35 rpo

rpo

    Hall Of Famer

  • Validating
  • PipPipPipPipPipPipPip
  • 1,336 posts

Posted 23 April 2011 - 11:16 AM

On the REO you're looking at the Agent doesn't set the price. Seller (bank) gets a either a Broker Price Opinion or a full appraisal then they set their price.

It's against MLS rules now to intentionally list a home with a low price. For example, listing for $ 1 just to start off a bidding war.


I have seen it happen at least a dozen times so far this year. On a few occasions, there were 20+ offers and the final sales price was $100,000 over the list. Not one comparable sale supported the list price being set so low.

#36 momof1

momof1

    All Star

  • Premium Member
  • PipPipPipPipPip
  • 386 posts
  • Gender:Female
  • Location:Folsom

Posted 23 April 2011 - 04:03 PM

If done right, (i.e. don't borrow against your equity to woebegone just to keep up with the Joneses), buying a home during your working years leads to mortgage & rent free living in your retirement years. And if you manage to pay off your mortgage prior to retiring, in this economy, nothing feels better than knowing your home can't be foreclosed upon if you lose your job. Talk about a great stress reducer, owning your home free & clear feels mighty darn good, trust me, you should try it sometime.




0 user(s) are reading this topic

0 members, 0 guests, 0 anonymous users