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Author: Jeebuss31 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127801  
Subject: Buying new home, is this good price? Date: 4/27/2008 6:58 PM
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Hey everyone, looking to buy a house in ohio. It's a 5 level multi home, a total of 3135 sq ft(not including finish basement). We're not going through a realtor to get more discount on the home, since we're building it. Here is the asking price:

$451,086(base price, with upgrades and a structural change)
-$19,291(no realtor)
-$15,000

Offer-$416,795

Now I counter it with $375,000 and they counter back and said they can take another $12,000 off and can't go less than $404,795.

My question is if I offer $6-7,000 less and willing to walk away, will they accept it? Or should I ask them to pay down 2 points on a 30 yr fix?(roughly $6400) Any advice would help.

On the side note, this is a new subdivision. Houses range from $392-538K.
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Author: MrsPrimm Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110429 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/27/2008 8:56 PM
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My question is if I offer $6-7,000 less and willing to walk away, will they accept it?

None of us can know what the sellers will do, or their motivation.

Question is, is this true? Can you afford 397-398 ish and be prepared to walk away if they say no? If so, try it and see.

If not, how good are you at poker? ;-)

In your shoes, I would offer and see what they said. But honestly and truly be prepared to walk away if you don't get the answer you're looking for.

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110435 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/28/2008 12:59 PM
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.My question is if I offer $6-7,000 less and willing to walk away, will they accept it? Or should I ask them to pay down 2 points on a 30 yr fix?(roughly $6400) Any advice would help.....

It is money out of their pocket either way so it is really the same thing.

The amount that you are subtracting for not using a real estate agent sounds high.

In this real estate market I would look for an existing house instead of having one built, this is where you will find the best deals. A few reasons for this;

1) I would be very cautious about how you finance the house, if your interest rate is floating until the house is complete, you could end up with a much higher interest rate nine months from now when the house is completed.

2) Negotiating very hard with a house that is being build if tricky, it could be that too much of a price reduction will result in the builder cutting corners and reducing the quality of the house.

3) Many builders are under financial pressure right now. The builder could go bankrupt while your house is being build.

4) If the subdivision is not completed that would devalue the previously built houses and cause higher home associations dues if there is something like a pool that is being paid for by fewer houses. If there is something like a pool promised, it might not actually get built.

5) They could finish the subdivision with less desirable houses if they get in a bind.

Greg

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Author: dprobert Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110438 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/28/2008 1:56 PM
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What does your attorney suggest? You have retained one haven't you?

For further emphasis, I echo everything Watty said above. If the builder is a publicly traded company, investigate its finances to see what kind of shape its in. If not, ask the builder to provide proof of adequate capitalization to finish the project.

Good luck

Dan

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Author: Jeebuss31 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110444 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/28/2008 7:13 PM
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What does your attorney suggest? You have retained one haven't you?

For further emphasis, I echo everything Watty said above. If the builder is a publicly traded company, investigate its finances to see what kind of shape its in. If not, ask the builder to provide proof of adequate capitalization to finish the project.

Good luck

Dan



we haven't gotten an attorney. Most people that Ive talken to didnt go through an attorney any everything went smooth. I checked the bbb and they dont havent any complaints in the last 36months.

We decided to go with new build because we dont have to worry about big ticket items going bad after 3 years or so.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110445 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/28/2008 7:31 PM
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we haven't gotten an attorney. Most people that Ive talken to didnt go through an attorney any everything went smooth. I checked the bbb and they dont havent any complaints in the last 36months.

Not having any complaints at the BBB is significantly different than having the capital to finish the project. And the project doesn't just mean your house, it means the whole neighborhood, if this builder is the developer, too. And any other projects they are also committed to.

We decided to go with new build because we dont have to worry about big ticket items going bad after 3 years or so.

But you're willing to risk losing your deposit money and becoming an unsecured creditor in a bankruptcy proceeding if your builder goes BK and you didn't have an attorney advise you up front how to have the money held in an escrow account outside of the builder's reach?

Seriously, with builders facing the financial stresses that they are going through right now, you need to be more worried about losing your deposits than about a furnace going bad after you've had 3 years use out of it.

And even if your builder/developer happens to get your house built and closed on, but the following month declares BK, you will still suffer from it. Because all of those foundations that he's poured, and the framing that has been put up, and rest of the houses that are only partially complete will have to go through the bankruptcy judge before they can be completed and closed on. So you will sit in a neighborhood of half-completed houses, watching the value of your home drop until the BK proceedings are complete and another developer is able to take over the project.

I once bought a home that a 2nd developer completed. The foundation sat in the ground, covered over, for 5 years until the new developer came along after the 1st developer declared BK. And then it was another year before my home was built.

So be really, really sure that your builder has the capital to finish all the projects he has committed to before you sign a contract.

And get a lawyer to protect your interests so that if the builder does declare BK, you don't lose your deposit.

AJ

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110446 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/28/2008 8:54 PM
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Hey everyone, looking to buy a house in ohio. It's a 5 level multi home, a total of 3135 sq ft(not including finish basement). We're not going through a realtor to get more discount on the home, since we're building it. Here is the asking price:

$451,086(base price, with upgrades and a structural change)
-$19,291(no realtor)
-$15,000

Offer-$416,795

Now I counter it with $375,000 and they counter back and said they can take another $12,000 off and can't go less than $404,795.


I fail to see any circumstance where this would be a good first home for a young couple with no children in Ohio, where the median price for homes is about $100k, and the median income is about $56k.

What do 2 people need over 3,000 square feet, plus a basement for? Even if you eventually have children, this is still significantly more house than you need.

You stated in one of your first posts that you didn't want to be 'house-poor' - if you buy a house that is nearly 4 times the median house price in your state, when your current income is 2.5 times your state's median income, you are well on your way to being 'house-poor', at least in comparison to the rest of the people in your neighborhood.

I have little hope that you will pay any attention to this post, as you have ignored or refuted all the other posts pointing out the unaffordability of the home on your income, but when you posted that you were buying this house in Ohio, and not in California or NYC, I just had to comment again.

AJ

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Author: Jeebuss31 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110447 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/28/2008 9:59 PM
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What do 2 people need over 3,000 square feet, plus a basement for? Even if you eventually have children, this is still significantly more house than you need.


Aj,

I've been reading your and other posts on here. I agree with you that 3000 sq ft is a lot of space, but in this market and spiral effect of the housing market, we want to take advantage of a bigger home. Why should we have a starter home and then move into another home 5-7 years later? By then the economy should recoop and not get the best deal? Both of our job is very stable(one being in a health profession and other in a business account). I failed to include we're putting a 30% down payment and still have 3 month reserve.

By all means, everyone has different standards and we rather live out and enjoy it. Yes, we should be cautious and if one of us were to lose our job, then what? But that can happen to anyone and we're not going to live in fear.

But back to the original question, which you didn't answer, whether rant on about my poor decision given only the basic information I gave on here, is this a good deal or should we counter offer?

Thanks

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110448 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/28/2008 10:33 PM
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I agree with you that 3000 sq ft is a lot of space, but in this market and spiral effect of the housing market, we want to take advantage of a bigger home.

Right now, the spiral is down, not up. In every MSA in Ohio, the prices have dropped from 07Q3 to 07Q4 by an average of 11%. While 08Q1 figures haven't been published, none of the monthly figures I've seen lead me to believe that prices are going up. http://www.nahb.org/fileUpload_details.aspx?contentID=34325

Why should we have a starter home and then move into another home 5-7 years later? By then the economy should recoop and not get the best deal?

Because you can't really afford the bigger home. And what if you aren't able to have kids and never 'need' the 3000+ square feet? Or what if you do have kids, but still could have gotten by with a 2000 sq foot house, plus a basement, and one of you wants to be a stay-at-home --parent? And what if you end up moving before the economy recovers?

By all means, everyone has different standards and we rather live out and enjoy it. Yes, we should be cautious and if one of us were to lose our job, then what? But that can happen to anyone and we're not going to live in fear.

Not 'living in fear' or 'enjoying yourself' is completely different than purposely buying 2 - 3 times as big a home as you need.

But back to the original question, which you didn't answer, whether rant on about my poor decision given only the basic information I gave on here, is this a good deal or should we counter offer?

Well, since you are so much more informed than I am, why do you really want my opinion? You already know it.

AJ

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110451 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/29/2008 12:27 PM
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...We decided to go with new build because we don't have to worry about big ticket items going bad after 3 years or so.....

New houses have thier advantages, but where did you get the idea that new houses are problems free?

Some of the most major problems with construction will show up in the first few years along with a zillion small things.

One of my favorite "new house" stories is someone I work with bought a large house for just two people, and they had a guest bathroom over their garage that they never used. After they had lived in the house for maybe six months, one day the husband decides to take a shower in the guest bathroom because something was going on in the other parts of the house. It turned out that the drainpipe from the shower had ever been attached to anything and it drained directly into the garage, into their convertible, that had the top down. Talk about Murphy's Law!.

The home may come with a warranty but it is often difficult to get the builder to come back and fix the problems.

If you do have a house built, you should put it into the contract that you can have the house inspected a various phases of construction and when the house is completed. Before you take possession of it you should have a house inspection done just like a "used" house.

You have to also realize that many developers will incorporate a new company for each major project. For example John Smith Construction, which as been around for 30 years, may incorporate John Smith Shady Pines Construction, to build the Shady Pines subdivision and when that project is done the John Smith Shady Pines Construction Company is dissolved so that if you have a major problem in a few years you can have difficulty finding anyone to hold responsible. In addition if you sue John Smith, you may find that all his assets are in is wife's name so that it is nearly impossible to collect on a judgment(I've seen this happen).

Greg

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110452 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/29/2008 12:41 PM
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.. Why should we have a starter home and then move into another home 5-7 years later?...

To make the math easy, lets assume that the large house costs $100K more that the more modest house and that you are comparing buying now to upgrading after 6 years.

These number are very rough;

1) Interest @ 6% , $100K *6% * 6 years= $36,000

2) Property taxes at maybe 2% , $100K*.2%*6=$12,000

3) Extra closing maybe $2,000

4) Heating and cooling the extra space, maybe $1,000 per year, =$6,000

5) Furnishing the extra space maybe $10,000

That adds up to $66K

Greg

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Author: dprobert Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110457 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/29/2008 3:18 PM
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But back to the original question, which you didn't answer, whether rant on about my poor decision given only the basic information I gave on here, is this a good deal or should we counter offer?

It boggles my mind that you are unwilling to pay an attorney to help guide you through this process, but are willing to take advice from strangers on a message board, especially when a sum like $400,000 is at stake. This is probably the largest and most complex financial transaction of your life.

The truth is, nobody here has any idea of what you should do. Unless aj happens to be familiar with that local market, neither he nor anybody else here can offer any kind of competent opinion whatsoever about the relative strengths and weaknesses of your bargaining position.

Good luck. (You'll need it)

Dan

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110461 of 127801
Subject: Re: Buying new home, is this good price? Date: 4/29/2008 7:50 PM
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But back to the original question, which you didn't answer, whether rant on about my poor decision given only the basic information I gave on here, is this a good deal or should we counter offer?

My standard advice when somebody asks a question about a house price--whether they are buying or selling is:
"Take the first offer you can live with, make the deal, and get on with your life."

Only you can decide if you like the house enough or not. Our opinions are worhtless on that topic.

$417K and 3135 sq ft = $132/sq ft. In most places, that's a bit on the high side, but quite reasonable if the house has quality features---granite countertops, real hardwood floors, upgrade carpet, etc.

they counter back and said they can take another $12,000 off and can't go less than $404,795.

$129/sq ft.

Big question: What are the comps? How much are similar houses selling for?

My question is if I offer $6-7,000 less and willing to walk away, will they accept it? Or should I ask them to pay down 2 points on a 30 yr fix?(roughly $6400)

Personally, I'd offer $404,795 with them paying all your closing costs except points & prepaids. That's about $2500.
Give them what they want with one hand, and take a $2500 discount with the other. Lots of sellers get hung up on the stated price, and don't care quite as much about "hidden" costs.

BTW, why are you putting 30% down? That's too much; you get no benefit for the extra 10%. Stick to 20% down and husband your cash.

BTW, too, don't pay ANY points for the mortgage. [Big long explanation omitted.] When/if rates drop, refi at the lower rate. Any points you paid for the old mortgage is gone and you won't get any of it back when you refi.

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Author: BlueGrits Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110956 of 127801
Subject: Re: Buying new home, is this good price? Date: 5/27/2008 2:10 AM
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we haven't gotten an attorney. Most people that Ive talken to didnt go through an attorney any everything went smooth. I checked the bbb and they dont havent any complaints in the last 36months.

You're going to make one of the biggest purchases of your life without an atty (costing maybe $500)? Seems to be 'penny wise, pound foolish' to me....

We decided to go with new build because we dont have to worry about big ticket items going bad after 3 years or so.

Why would you think that? A number of builders keep costs down by putting in low end fixtures and appliances so while you may get past that three year period, count on repairs/replacement later. Lemme see...within about 5 yrs one A/C unit went (the other went the next year); several years later we had the oven, MW and DW all go out. Fortunately, the washer & dryer have held, but I bought them as well as the fridge. The only appliance I haven't had to replace (yet) is the gas-burning stove.

BG

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 110957 of 127801
Subject: Re: Buying new home, is this good price? Date: 5/27/2008 3:08 AM
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<<we haven't gotten an attorney. Most people that Ive talken to didnt go through an attorney any everything went smooth. I checked the bbb and they dont havent any complaints in the last 36months.

You're going to make one of the biggest purchases of your life without an atty (costing maybe $500)? Seems to be 'penny wise, pound foolish' to me....
>>


The county bar association where I live will refer anyone to an attorney specializing in the area of the law they have questions about for a half hour consultation for $50 ---total cost.

Prior to closing on the house I bought, I took advantage of that offer and took the contract and paperwork in for an attorney to review prior to the closing. He found no problems. Probably a pretty good investment of $50.



Seattle Pioneer

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