Thursday, April 30, 2009

Thinking About Buying a House

C and I have been casually looking at buying a house ever since we've been married for the past two and a half years. I think now is the time to get serious with the $8,000 tax credit for first time home buyers.

I'm glad that we've waited this long to make a large purchase. We could have purchased a place earlier, but since we live in SF, housing here is expensive. We've been squirreling our money in liquid accounts since I never knew when we were going to get serious. We could have made a lot more money in CDs or bonds, but I've been lazy. We have enough for a down payment, now we just need to find a place we like that we can afford. We've waited so long to buy a place since we have not been able to find a place we like that we can afford. In the past I told C that I think there are non-monetary benefits to owning a home, but we just couldn't find a place that was right for us.

The upper limit of what we're willing to pay is probably $800K. I saw a great house that I liked listed for $1.08M. That is way out of our price range, but I was wondering . . .how low can an offer be without offending the sellers? There was just a price reduction and the place has been on the market for 6-8 weeks. C and I are planning on seeing it this weekend and then we'll know if we want to make an offer. There's still a lot more we need to do if we're going to be serious about buying a place, like getting pre-approved. I've been hesitant to do that so far since I don't think we'll start to seriously look until this summer.


Anonymous said...

We're looking at houses on the peninsula, and our realtor told us that regardless of the % difference between the asking price and your offer, any $ amount more than $50K below, when you're looking at houses in the $1M+ range, is likely to be taken as a semi-insulting low-ball. Obviously that's just her rule of thumb, though - who knows about the house you're looking at!

Anonymous said...

A couple comments (found you via First of all, you are WAY better off renting in SF than buying. I write a lot about Bay Area real estate on my blog over at; I recommend you download my property cash flow worksheet that you will find there and run the numbers.

Since you're a PF girl, I think you'll like tinkering with the spreadsheet. You will find, I predict, that the house doesn't cash flow at all as a rental. Which means the price will continue to drop.

The $8K is 1% of the value of the house you can afford, so don't let yourself get swayed by it. Did you know that houses in SF are dropping by 1% every month? You'll basically be underwater within a couple months regardless of the $8K.

By the way, if you make a small enough amount to qualify for the $8K, why on Earth would you buy a $1 million house? Check my blog for my financial details and my income level -- despite my income, my boyfriend and I are happily renting a 3BR duplex in San Jose for $1650.00/month.

We don't come anywhere near qualifying for that $8K, but I wouldn't let it sway my decision if we did -- we couldn't buy an equivalent place and pay less than rent, so we rent!

Good luck with your decision. You seem like a wise investor.


Frugal Babe said...

I can see the point about not wanting to insult a seller, but they can just say no if they don't like your offer. If you have a limit above which you're not willing to go, it can't hurt to offer that amount on a more expensive house and see what happens. The worst case is they say no and you're back where you started. But maybe they say yes and you get a great deal. I'd say don't worry about insulting people - they can ignore you if they don't like it!

Mrs. Accountability said...

I don't see what the harm could be by offering $800K. What if they decide to go for it? Do people really get insulted if you offer too little? Don't they just say "No thanks" and that's that? I mean, if you know the person living there, or if they are a neighbor, or coworker, then I'd feel weird, but a total stranger? Who cares? Can they blackball you in the house buying community so that everyone will know you offered much lower than they are asking? I'd go for it. The worst that can happen, unless there's a lot more to this than I know about, they will just say "no thanks". It doesn't hurt to ask in my opinion. Good luck with your house search.

calgirlfinance said...

All - thanks for the great comments!

@Anon, thanks for passing on that comment from your realtor.

@Erica, I downloaded your spreadsheet. Thanks. The house would cash flow as a rental because we're going to put a significant amount down. It probably won't do as well as stocks in the long run, but there's non-financial benefits as well. We wouldn't buy a $1M house for $1M, but we're willing to put out $850K for the right house. Our ideal price is about $650K, but we'll see.

@FrugalBabe/Mrs. Accountability, I agree with both of you that we should just put in a low offer if that's what we want to do. The sellers need to sell, so you never know what they might accept. My mom actually accepted a pretty low offer on her house last year relative to the list price.