By now we had cleared the inspection and appraisal contingencies. The ball was squarely in the seller's court. They were having a hard time getting the HOA documents, so we extended that contingency date.
Redfin initially sent me the wrong documents - I was a little confused when I started reading through them and kept running across guidelines on using the marina. Finally, we got the real documents. They were fairly simple - the HOA started back in 1980, so all the documents were typed up the old-fashioned way. It all looked pretty typical and straight-forward... association meetings, several elected offices (President, Vice-President, Secretary, and Treasurer), rules that seemed reasonable and not onerous.
The one thing that made me nervous was a sheet filled out by the HOA manager, which listed the owner-occupancy ratio as 50%. Since I was buying one of the rented units, that would push the ratio up to 60%, but that was still below the 70% that I frequently heard mentioned. This seemed likely to sink the deal, and once again I bemoaned that we were doing the HOA docs at the end of the contingencies instead of at the beginning.
There are an incredible number of people involved in a real estate transaction. In addition to the buyer, seller, buyer's agent, seller's agent, and various hired professionals, there's also an escrow officer, and, on the loan side, a loan officer, loan analyst, underwriter, and funder. Almost all of my interactions up to this point had been with the loan officer, but as we came closer to the finish line, I started getting a few inquiries from the loan analyst, who prepares documents for the underwriter. A few of the things that she wanted included:
* An explanation for why the company name on my paycheck didn't match the company name on my W-2. (We were acquired by another company, and are handled by their payroll, and operate as a wholly-owned subsidiary.)
* An explanation for why a credit bureau was reporting that I still lived at an old address. (My answer: I have no idea, I haven't lived there since 2003, it must be an error.)
That was pretty much it. I'm not sure how far they dug into these things, it felt like they just wanted a satisfying answer from me that they could document.
A day or so later, I got a conditional loan approval. That meant that Provident would fund the loan once certain conditions were met. Some of those I had no qualms about, like verifying my employment and checking my rent history. I was pleasantly surprised to see that the occupancy ratio wasn't a dealbreaker. Instead, it was the HOA budget.
Ever since Fannie Mae and Freddie Mac entered federal receivership, the government has been tightening their lending guidelines. This didn't happen all at once; rather, it's an ongoing, rolling process; another loan officer told me later that it felt like the guidelines were changing every few weeks. Right now, virtually every loan made in the country is backed by a federally-affiliated program - FHA, VHA, Fannie Mae or Freddie Mac; private money is still extremely scarce, and can have restrictions as tight or tighter than the federal ones.
I've complained about this on the blog before, but I think that Fannie and Freddie have seriously miscalculated in their approach to condo loans. I suspect that what happened is, they looked at the subprime mortgage meltdown, saw that a lot of those units were condos, and decided to make condo loans harder to get. The thing is, though, that condos by themselves aren't any riskier than single-family houses. The reasons why there were so many condos involved were because there were so many flippers operating in places like Miama, Las Vegas, and Phoenix; condo construction boomed, people were treating them as investments instead of as places to live, and as a result they became the biggest part of the bubble. In places with high costs of living and extremely limited space, like, say, the San Francisco Bay Area, condos are a very prudent and conservative housing investment. Fannie and Freddie's one-size-fits-all approach ignores that reality.
Back to my loan: in their current incarnation, the guidelines actually have a wonderful new policy: owner-occupancy ratios are only a factor for investment properties. They are not a consideration if the buyer plans to live in their unit, as I do. This is great, since it allows associations that have slipped towards renters to gradually move back towards owners; under the previous system, once the ratio ever slipped below a magic number, it became impossible to recover because new owners could not get loans. So, I'm a big fan of that change, and look forward to seeing its result.
In its place, though, is a new policy - the HOA's budget must set aside at least 10% of the budget for a reserve fund. Now, in practice, I think that's a great idea. I'm a fan of well-funded HOAs and a foe of special assessments. Once again, though, this one-size-fits-all policy couldn't capture the nuance of each association. In my case, the amount set aside for reserves was rather low - just about 3%. However, the reserves themselves were quite well funded; they had enough cash in the bank to cover all scheduled capital improvements for the next few years, with some more left over. I could certainly see why the association would want to keep fees low... I'm paranoid, so I will always sock more away, but there really didn't seem to be a need for it.
That said, a rule's a rule, and this is one that couldn't be waived. That set things into a minor panic. Everything else had been taken care of, all other contingencies cleared, but this could send the deal down in flames. Regina urged me to start checking around with some other lenders to see if someone else could make the loan. In the meantime, she and the listing agent kept working with the HOA to see if there was any way around the budget.
Regina had worked before with a lender from Wells Fargo who I connected with. I was initially quite skeptical - I didn't feel at all like switching lenders this late in the game, and especially not to someone from a big bank. I was pleasantly surprised when he quoted me a rate and fees competitive with what I was getting from Provident, one that came in below that listed on the Wells Fargo web site. I suppose that loan officers have some leeway in making offers, and can trade in some of their commission in exchange for landing a deal. There was a catch, though - they didn't care about the budget, but would still require a full HOA review, which could take a while, and might come back negative. I could fast-track the application by putting down 30%, which sets it into a different set of standards and has a speedier approval process.
That was a possibility for me; I could have bumped up my down payment, but obviously that wasn't my first choice. I also spoke with a mortgage broker who the listing agent knew. (The listing agent was with Prudential Realty, and the broker with Prudential Finance, so it seems likely that there was some back-scratching going on.) She took all my financial docs - tax returns, pay stubs, etc. - but we never got around to actually meeting due to some late nights I had to work.
Regina and the listing agent were having a hard time tracking down the HOA. The contact person's cell phone mailbox was full, and the only way they could get ahold of him was by camping out in front of his office until he showed up. When they did get him, he was helpful. The budget we had received was the official one drawn up in February at the start of the fiscal year; since then, the budget had been revised, but not yet reprinted. He produced the updated one, faxed it off to Regina. The loan analyst checked on my verification of employment and rent history and submitted everything back to the underwriter. He came back and said that the budget would need to be signed.
Regina mildly flipped out, pointing out (accurately) that this requirement hadn't been expressed before, that it always took days to get updates from the HOA, and that we were running up against the extended contingency date for loan approval, and that our closing date was in jeopardy. Then, we all went back to work. We got the signed budget, put it back in, and waited for the answer.
Friday, November 26, 2010
Friday, November 19, 2010
Inspector Gadget
I'd become mildly addicted to Redfin's forums during my home search. Redfin lightly moderates them, and tolerates an amazing range of voices. The Bay Area board contains a few cheerleaders, who tend to obsessively focus on the specialness of particular areas like Palo Alto, but seems generally dominated by skeptics who are convinced that the market has a ways more to fall. The skeptics range from people who forecast stagnant prices for the next five years to people convinced that we will see a return to 1996 prices.
Anyways, it's always interesting, and often useful. The best bit of wisdom I've heard on there was something along the lines of, "your negotiations have only begun once your offer is accepted." That proved to be very true for me, and I was glad that I was mentally and emotionally prepared for the roller-coaster that followed, rather than passively believing that the hard parts were over.
Like I mentioned earlier, we had put together an offer with a fairly aggressive 30-day closing period. That worked fine for me, but I would have been happy with almost anything - I'm renting month-to-month right now, and while I've been looking forward to shortening my commute, I don't have any particular deadlines to hit. After learning that the unit was tenant-occupied, I actually wondered whether the sellers wouldn't prefer a longer closing period so they could give the renters adequate notice. In any case, though, we decided to go ahead with the 30-days.
Most of the closing period focuses on closing contingencies. My offer had included all the major contingencies - loan approval, appraisal, home inspection, pest inspection, and HOA review. In retrospect, one annoying aspect of this period was that, perhaps partly due to the shortened timeline, I needed to do all the contingencies that I had to pay for up front, and the contingencies that the seller had to pay for towards the end. That meant that, for example, I could easily spend a thousand dollars on my loan application and inspections, only to find out later that the HOA was in bad shape and that I wouldn't want it anyways.
Redfin has a very streamlined and efficient closing process, which is both good and bad. I felt like I couldn't give a lot of input into the process - for example, Regina went ahead and ordered the inspections right away, without asking if I had a particular inspector I wanted to use. I was planning on going with her guidance anyways, but still, I would have appreciated being asked. I'm sure that if I had kicked up a fuss I could have gotten my own inspector in there, but whatever.
On the plus side, it's always very clear what you need to do at any stage of the process. A lot of that involves reading documents, signing them, and then faxing them back by a certain time. I probably put over a hundred pages through the office fax machine before it was all done - fortunately, Redfin's fax is a local call to us.
We did the property and pest inspections on the same day. I stopped by on the way in to work, met up with Matt, and waited a few minutes for the inspectors. They were both friendly and helpful; I tagged along, they voluntarily pointed out the things that they were noting, and answered all my questions. They re-noted some things that had previously come up in the disclosures - for example, that the sliding balcony door didn't have a lock - and also went into more details; the property inspector suggested that I check with the HOA to see if they had records about the door brand and model, since with that information I could easily find a replacement locking handle that I could install myself. They also found a host of other issues, nothing critical but plenty that I would want to take care of... some voids in grout, a loose wax seal on the toilet, some holes on the balcony railing. All the major stuff seemed fine, though... the electrical system was good, no leaks in any plumbing, no mold, all appliances functional.
Matt also did his own walk-through, again noting some of the same things as from the disclosures. He also observed that some of the issues noted in the initial seller agent's walkthrough were probably actually OK - for example, the disclosures had noted that the cabinets above the sink were missing doors, but we agreed that they were almost certainly designed that way.
I chatted with Regina about the results. None of the proposed repairs seemed onerous, so I released these contingencies and waited for the next round.
Anyways, it's always interesting, and often useful. The best bit of wisdom I've heard on there was something along the lines of, "your negotiations have only begun once your offer is accepted." That proved to be very true for me, and I was glad that I was mentally and emotionally prepared for the roller-coaster that followed, rather than passively believing that the hard parts were over.
Like I mentioned earlier, we had put together an offer with a fairly aggressive 30-day closing period. That worked fine for me, but I would have been happy with almost anything - I'm renting month-to-month right now, and while I've been looking forward to shortening my commute, I don't have any particular deadlines to hit. After learning that the unit was tenant-occupied, I actually wondered whether the sellers wouldn't prefer a longer closing period so they could give the renters adequate notice. In any case, though, we decided to go ahead with the 30-days.
Most of the closing period focuses on closing contingencies. My offer had included all the major contingencies - loan approval, appraisal, home inspection, pest inspection, and HOA review. In retrospect, one annoying aspect of this period was that, perhaps partly due to the shortened timeline, I needed to do all the contingencies that I had to pay for up front, and the contingencies that the seller had to pay for towards the end. That meant that, for example, I could easily spend a thousand dollars on my loan application and inspections, only to find out later that the HOA was in bad shape and that I wouldn't want it anyways.
Redfin has a very streamlined and efficient closing process, which is both good and bad. I felt like I couldn't give a lot of input into the process - for example, Regina went ahead and ordered the inspections right away, without asking if I had a particular inspector I wanted to use. I was planning on going with her guidance anyways, but still, I would have appreciated being asked. I'm sure that if I had kicked up a fuss I could have gotten my own inspector in there, but whatever.
On the plus side, it's always very clear what you need to do at any stage of the process. A lot of that involves reading documents, signing them, and then faxing them back by a certain time. I probably put over a hundred pages through the office fax machine before it was all done - fortunately, Redfin's fax is a local call to us.
We did the property and pest inspections on the same day. I stopped by on the way in to work, met up with Matt, and waited a few minutes for the inspectors. They were both friendly and helpful; I tagged along, they voluntarily pointed out the things that they were noting, and answered all my questions. They re-noted some things that had previously come up in the disclosures - for example, that the sliding balcony door didn't have a lock - and also went into more details; the property inspector suggested that I check with the HOA to see if they had records about the door brand and model, since with that information I could easily find a replacement locking handle that I could install myself. They also found a host of other issues, nothing critical but plenty that I would want to take care of... some voids in grout, a loose wax seal on the toilet, some holes on the balcony railing. All the major stuff seemed fine, though... the electrical system was good, no leaks in any plumbing, no mold, all appliances functional.
Matt also did his own walk-through, again noting some of the same things as from the disclosures. He also observed that some of the issues noted in the initial seller agent's walkthrough were probably actually OK - for example, the disclosures had noted that the cabinets above the sink were missing doors, but we agreed that they were almost certainly designed that way.
I chatted with Regina about the results. None of the proposed repairs seemed onerous, so I released these contingencies and waited for the next round.
Friday, November 12, 2010
Rebound
Real estate really is a game. It's a game where the rules are constantly changing, and no two rounds are the same. I've spent well over a year reading up on every aspect of the process, both nationally and locally, and still was regularly surprised by what happened during my own search.
Case in point: about a week after I turned down (or was rejected by) the Mateo Avenue condo, I got a call back from Regina. The sellers were wondering if I would be interested in seller financing. I was fairly familiar with this idea based on my research; the basic idea is that, since I had offered $X and they wanted $X+30k, they would lend me the $30k in a separate loan. There can be some advantages to seller financing - you can get a better rate than from a bigger lender, and you can more easily get approved. I figured that the sellers probably realized that I was the only serious buyer they had encountered, and that they thought I wouldn't go above $X because it was the most I could afford. In reality, I could afford more than their asking price, I just didn't think it was worth that much. I wasn't interested in taking out a $30k loan for an overpriced home.
I told Regina that I wasn't interested in financing, but, if they were willing to drop their price, I'd still be interested in the property. We went through some back-and-forth, and they ended up coming down $20k. That was still $10k over my initial offer. I mulled it over for a while - it was more than I thought it was worth, but it seemed like this might be my last and only chance to get a decent condo that I could afford in the area I wanted. In the end, I decided that I'd go for it.
Rather than put together a new offer, we got back a counter from the sellers with the agreed-upon price. It also came with an "as-is" addendum. I talked with Regina for a while about what this meant - basically, it said that the sellers wouldn't be making any repairs for stuff that had already been disclosed or for "minor" problems found during the inspection. It's intended to acknowledge that this is an older property and that stuff won't be perfect, and that I'm buying it with that understanding. I wanted to make sure that I wouldn't be giving up any rights to ask for repairs or credits for major issues found during inspection. I was safe on this front, so I signed the counter and the addendum, and we entered contract.
Case in point: about a week after I turned down (or was rejected by) the Mateo Avenue condo, I got a call back from Regina. The sellers were wondering if I would be interested in seller financing. I was fairly familiar with this idea based on my research; the basic idea is that, since I had offered $X and they wanted $X+30k, they would lend me the $30k in a separate loan. There can be some advantages to seller financing - you can get a better rate than from a bigger lender, and you can more easily get approved. I figured that the sellers probably realized that I was the only serious buyer they had encountered, and that they thought I wouldn't go above $X because it was the most I could afford. In reality, I could afford more than their asking price, I just didn't think it was worth that much. I wasn't interested in taking out a $30k loan for an overpriced home.
I told Regina that I wasn't interested in financing, but, if they were willing to drop their price, I'd still be interested in the property. We went through some back-and-forth, and they ended up coming down $20k. That was still $10k over my initial offer. I mulled it over for a while - it was more than I thought it was worth, but it seemed like this might be my last and only chance to get a decent condo that I could afford in the area I wanted. In the end, I decided that I'd go for it.
Rather than put together a new offer, we got back a counter from the sellers with the agreed-upon price. It also came with an "as-is" addendum. I talked with Regina for a while about what this meant - basically, it said that the sellers wouldn't be making any repairs for stuff that had already been disclosed or for "minor" problems found during the inspection. It's intended to acknowledge that this is an older property and that stuff won't be perfect, and that I'm buying it with that understanding. I wanted to make sure that I wouldn't be giving up any rights to ask for repairs or credits for major issues found during inspection. I was safe on this front, so I signed the counter and the addendum, and we entered contract.
Friday, November 5, 2010
Ball One
I knew that my lower offer would have a tougher chance of getting accepted, so I made clear to my agent that I was happy to do anything outside the price to make the offer more attractive. I included a sizable 3% earnest money deposit (the maximum allowed for liquidated damages under California law), and offered a 30-day closing window - I had been pre-approved through Provident Credit Union, and was ready to move forward with them, plus since I'm in a month-to-month lease, I could move out of my current place whenever I wanted.
Because of the slight delay getting the disclosures, we ended up submitting the offer on a Monday instead of a Friday, and gave them 48 hours to respond. I was expecting a "Yes," "No," or, more likely, a counter. Instead, I got a pseudo-counter - the seller's agent wanted to know if I'd be willing to pay just $10k less than the listing price. My response was, "Uh, no." Again, having done my research, I knew that that was way too high. Regina wanted to know what my final offer would be; I let her know that my initial offer was basically my max, but that I would be willing to go a few thousand higher to close the deal. That still left a hefty gap between us. She called back in a bit to say that they weren't interested. I shrugged, went "OK," and moved on.
I was kind of surprised by how well I took it - it was the closest I had come yet to buying a condo, and it had seemed like it had the right potential to work. It was a rare unit in the area I wanted, small enough to fit into my price range, and overpriced enough to scare off competition. Again, I continued taking a break... it seemed like by this point I'd exhausted all my options, and, barring a price drop at Belamor, I'd be best served deciding whether to switch my search to another area or resigning myself to renting. Still, I wasn't too disappointed - since I had based my price on facts and not on emotion, I could confidently say "No" and not second-guess myself.
Because of the slight delay getting the disclosures, we ended up submitting the offer on a Monday instead of a Friday, and gave them 48 hours to respond. I was expecting a "Yes," "No," or, more likely, a counter. Instead, I got a pseudo-counter - the seller's agent wanted to know if I'd be willing to pay just $10k less than the listing price. My response was, "Uh, no." Again, having done my research, I knew that that was way too high. Regina wanted to know what my final offer would be; I let her know that my initial offer was basically my max, but that I would be willing to go a few thousand higher to close the deal. That still left a hefty gap between us. She called back in a bit to say that they weren't interested. I shrugged, went "OK," and moved on.
I was kind of surprised by how well I took it - it was the closest I had come yet to buying a condo, and it had seemed like it had the right potential to work. It was a rare unit in the area I wanted, small enough to fit into my price range, and overpriced enough to scare off competition. Again, I continued taking a break... it seemed like by this point I'd exhausted all my options, and, barring a price drop at Belamor, I'd be best served deciding whether to switch my search to another area or resigning myself to renting. Still, I wasn't too disappointed - since I had based my price on facts and not on emotion, I could confidently say "No" and not second-guess myself.
Friday, October 29, 2010
Wind Up
Back to the home-hunting story:
I let a month go by after the Mateo Avenue condo hit the MLS, and finally put in an official request to tour. Once again Matt took care of me; we had gotten to know each other pretty well by this point, to the degree that we started to reminisce about the first property I'd seen way back in the previous year.
Before the tour, I'd spent some time walking around the neighborhood at different times of the day and different days of the week. I was happy with what I had seen - it isn't as fancy as the streets west of Magnolia, but the area was kept up well, there was a good amount of activity on the streets, and overall I got a good vibe off of it. I wandered farther afield, across the tracks, then back again and around the other streets. My favorite aspect was still the access - it's a good walk to the train station, and even shorter to Safeway, Trader Joe's, and the excellent public library - but I dug the spot itself as well.
We learned that a tenant occupied the unit, and waited while she got the kids and headed out, then moved inside. Yup... definitely a tenant and not the owner. Even though the tour had been scheduled for a few days, the place was pretty messy, with half-eaten pizza (at nine in the morning?) and croissant all over the kitchen. Still, by this point I'd gotten pretty good at zeroing in on the important stuff and ignoring the rest. I'd learned to pay good attention to Matt, too, and picked up on some of his observations as well.
Overall, it was nice - not a dream unit, perhaps, but one that definitely fit everything I'd been looking for, and a lot of stuff that I'd been hoping for. It had two bedrooms, which is almost impossible at my budget in Millbrae. It also had two baths - not very useful to me, but the second would be handy if I ever got a roommate or long-term guests. The kitchen was good - it didn't have a spectacular gas oven like the newer condos I'd seen, but it had plenty of cupboards and counter space, which had been fairly recently renovated. It had a nice big balcony - the view is of the back of a big-box store, which isn't great, but on the plus side there's a lot of privacy (no windows facing me), a lot of sky (no other buildings nearby), and if you look up a bit, nice partial views of the Millbrae hills and San Francisco Airport.
I spent more time this go-around than I had on my open house, and Matt and I chatted a bit. We agreed that the unit was overpriced, but otherwise fine - considering that it was 30 years old, it was in quite good shape.
I kept on pondering everything, and eventually decided to go for it. I'd put in a fair offer for what I thought it was worth, and see what happened. At worst, the sellers would just say "no," and at least I'd know to give up on it. If that happened, I was ready to restart my home search or just resign myself to renting for another five years - like I said in a previous post, I'd taken a full inventory of the Millbrae condo market, and seen that there just isn't much out there.
Once again, I submitted the offer wizard on the website. This time Regina got the ticket. As a side note, the wizard is still a bit mysterious to me. From my early reading on the Redfin web site, I had been under the impression that when you start an offer, you can choose which agent will represent you. That never happened with me, though. I'm guessing that if you had someone who you really wanted to use in particular, you could enter that in the notes field and get them. I now think that by default they just hand out the requests to whoever is available.
Regina was also good - as with Sean, she contacted the listing agent to find out the seller's situation and figure out what the timeline would be like. She also sent me a list of comparable properties along with her analysis of the price. She had a higher price in mind than I did, and with some good reason - her comps included recent condo sales near 280, which I had discounted because of how far away they are, but since most people buy into Millbrae for the school district, it seemed valid to include them. I pointed out another sale that she hadn't included - one which was quite a bit bigger, but sold for noticeably less, and was closer to this property than the other comps. She agreed that that was a good comp. I re-ran my numbers taking all the data into account, and settled on a fair price that was about 7% under the seller's listing price.
There were a couple of odd things about this transaction. One early issue was the disclosures; on previous offers, I had received disclosures early on and been encouraged to review them prior to making an offer. This time around, Regina urged me to put together the offer prior to receiving the disclosures. Again, that seemed strange - if there was anything in there that was a turn-off, then I'd be wasting everyone's time by making an offer; and, from the seller's perspective, it seems like they'd want me to know everything I could up front. If I make an offer for $X, based on all the disclosures, and they accept, then I can't come back later and ask them to take off $Y due to issues that they had disclosed. On the other hand, if I make an offer for $X without any disclosures, then even after they accept, I can ask them to take off $Y to deal with things that they already knew about; this makes it harder for the seller to compare offers, since different buyers will grade issues differently, and they run the risk of accepting an offer that the buyer will end up backing out of altogether later on.
In any case, I did end up getting the disclosures just prior to when we were going to put in the offer, so I did get a chance to read them. This should have been a good clue of how the process would continue. Everyone on the selling side was somewhat removed from the transaction - the listing agent was a part-timer who was helpful but not always quickly responsive; the sellers didn't live in the property; and so on. I think that if they had been a bit more organized, I could have gotten the disclosures sooner and moved forward more quickly.
In any case, the disclosures were fine, far less scary than the Palm one. Bay Area disclosures are fairly long, with a good amount of boilerplate, but still well worth reading. The seller fills out a long list of questions, mainly yes/no with space for explaining negative answers. It covers things like structural defects, neighborhood nuisances, odors, and so on. I learned the details about some recent renovations, which was helpful. The disclosures also include observations from the listing agent as part of their walk-through. In my case, there weren't any bombshells here, just a few fairly minor things that we had noticed during my tour - a missing lock on the balcony door, for example. Nothing seemed like it would seriously ding my offer price, so I gave a thumbs-up, submitted the offer, then crossed my fingers and waited.
I let a month go by after the Mateo Avenue condo hit the MLS, and finally put in an official request to tour. Once again Matt took care of me; we had gotten to know each other pretty well by this point, to the degree that we started to reminisce about the first property I'd seen way back in the previous year.
Before the tour, I'd spent some time walking around the neighborhood at different times of the day and different days of the week. I was happy with what I had seen - it isn't as fancy as the streets west of Magnolia, but the area was kept up well, there was a good amount of activity on the streets, and overall I got a good vibe off of it. I wandered farther afield, across the tracks, then back again and around the other streets. My favorite aspect was still the access - it's a good walk to the train station, and even shorter to Safeway, Trader Joe's, and the excellent public library - but I dug the spot itself as well.
We learned that a tenant occupied the unit, and waited while she got the kids and headed out, then moved inside. Yup... definitely a tenant and not the owner. Even though the tour had been scheduled for a few days, the place was pretty messy, with half-eaten pizza (at nine in the morning?) and croissant all over the kitchen. Still, by this point I'd gotten pretty good at zeroing in on the important stuff and ignoring the rest. I'd learned to pay good attention to Matt, too, and picked up on some of his observations as well.
Overall, it was nice - not a dream unit, perhaps, but one that definitely fit everything I'd been looking for, and a lot of stuff that I'd been hoping for. It had two bedrooms, which is almost impossible at my budget in Millbrae. It also had two baths - not very useful to me, but the second would be handy if I ever got a roommate or long-term guests. The kitchen was good - it didn't have a spectacular gas oven like the newer condos I'd seen, but it had plenty of cupboards and counter space, which had been fairly recently renovated. It had a nice big balcony - the view is of the back of a big-box store, which isn't great, but on the plus side there's a lot of privacy (no windows facing me), a lot of sky (no other buildings nearby), and if you look up a bit, nice partial views of the Millbrae hills and San Francisco Airport.
I spent more time this go-around than I had on my open house, and Matt and I chatted a bit. We agreed that the unit was overpriced, but otherwise fine - considering that it was 30 years old, it was in quite good shape.
I kept on pondering everything, and eventually decided to go for it. I'd put in a fair offer for what I thought it was worth, and see what happened. At worst, the sellers would just say "no," and at least I'd know to give up on it. If that happened, I was ready to restart my home search or just resign myself to renting for another five years - like I said in a previous post, I'd taken a full inventory of the Millbrae condo market, and seen that there just isn't much out there.
Once again, I submitted the offer wizard on the website. This time Regina got the ticket. As a side note, the wizard is still a bit mysterious to me. From my early reading on the Redfin web site, I had been under the impression that when you start an offer, you can choose which agent will represent you. That never happened with me, though. I'm guessing that if you had someone who you really wanted to use in particular, you could enter that in the notes field and get them. I now think that by default they just hand out the requests to whoever is available.
Regina was also good - as with Sean, she contacted the listing agent to find out the seller's situation and figure out what the timeline would be like. She also sent me a list of comparable properties along with her analysis of the price. She had a higher price in mind than I did, and with some good reason - her comps included recent condo sales near 280, which I had discounted because of how far away they are, but since most people buy into Millbrae for the school district, it seemed valid to include them. I pointed out another sale that she hadn't included - one which was quite a bit bigger, but sold for noticeably less, and was closer to this property than the other comps. She agreed that that was a good comp. I re-ran my numbers taking all the data into account, and settled on a fair price that was about 7% under the seller's listing price.
There were a couple of odd things about this transaction. One early issue was the disclosures; on previous offers, I had received disclosures early on and been encouraged to review them prior to making an offer. This time around, Regina urged me to put together the offer prior to receiving the disclosures. Again, that seemed strange - if there was anything in there that was a turn-off, then I'd be wasting everyone's time by making an offer; and, from the seller's perspective, it seems like they'd want me to know everything I could up front. If I make an offer for $X, based on all the disclosures, and they accept, then I can't come back later and ask them to take off $Y due to issues that they had disclosed. On the other hand, if I make an offer for $X without any disclosures, then even after they accept, I can ask them to take off $Y to deal with things that they already knew about; this makes it harder for the seller to compare offers, since different buyers will grade issues differently, and they run the risk of accepting an offer that the buyer will end up backing out of altogether later on.
In any case, I did end up getting the disclosures just prior to when we were going to put in the offer, so I did get a chance to read them. This should have been a good clue of how the process would continue. Everyone on the selling side was somewhat removed from the transaction - the listing agent was a part-timer who was helpful but not always quickly responsive; the sellers didn't live in the property; and so on. I think that if they had been a bit more organized, I could have gotten the disclosures sooner and moved forward more quickly.
In any case, the disclosures were fine, far less scary than the Palm one. Bay Area disclosures are fairly long, with a good amount of boilerplate, but still well worth reading. The seller fills out a long list of questions, mainly yes/no with space for explaining negative answers. It covers things like structural defects, neighborhood nuisances, odors, and so on. I learned the details about some recent renovations, which was helpful. The disclosures also include observations from the listing agent as part of their walk-through. In my case, there weren't any bombshells here, just a few fairly minor things that we had noticed during my tour - a missing lock on the balcony door, for example. Nothing seemed like it would seriously ding my offer price, so I gave a thumbs-up, submitted the offer, then crossed my fingers and waited.
Friday, October 22, 2010
Freakish Depth
This is probably a good time to sing the praises of Property Shark. I should start by saying that Redfin has one of the best web sites, period - not just the best real estate web site, but best overall. It combines an almost comically broad range of useful information about homes, and somehow manages to present it in an engaging and highly readable manner. It's responsive, fun, informative, and incredibly addictive.
As I previously mentioned, I had attended a Redfin homebuying seminar late last year. It was very informative and helpful, and one of the things that pushed me toward working with Redfin. The presenter included an extremely useful list of helpful web sites, and made particular note of Property Shark, which she cheerfully explained had a lot of data that even Redfin doesn't have.
And, boy, does it ever. Property Shark isn't nearly as pretty as Redfin, but the amount of information it has is amazing, maybe even a little scary. You can search for properties in any supported area, and pull out an incredible amount of information from there. Things like:
As you can see, I'm a fan. I think Property Shark is a harbinger in the same way Redfin is: the real estate model is moving from the traditional closed, secretive, divided world that kept consumers at arms-length from the transaction, and moving towards a more modern Web-ish approach of empowered consumers who drive their own searches and be responsible for their own education. It will be fascinating to see how the real estate world I sell in will be different from the evolving world in which I bought.
As I previously mentioned, I had attended a Redfin homebuying seminar late last year. It was very informative and helpful, and one of the things that pushed me toward working with Redfin. The presenter included an extremely useful list of helpful web sites, and made particular note of Property Shark, which she cheerfully explained had a lot of data that even Redfin doesn't have.
And, boy, does it ever. Property Shark isn't nearly as pretty as Redfin, but the amount of information it has is amazing, maybe even a little scary. You can search for properties in any supported area, and pull out an incredible amount of information from there. Things like:
- The owner's name
- The owner's address (thus providing one of the only ways that you can determine the owner-occupancy ratio of a building or area)
- Complete sales price for the property. You might see that a house sold for $40,000 in 1945, for $120,000 in 1990, for $800,000 in 2006. If you see that it's on the market today for $700,000, you know that the seller is already accepting a major loss on the property.
- The loans on the property. So a house might show, for example, a $417,000 first loan from Wells Fargo, and a second $105,000 loan from Citibank. Again, this is amazing information. You can check to see whether the seller is likely underwater - if they bought in 2006 or 2007, have loans close to the purchase price, and are asking for something close to the last sales price, then they are probably already as low as they can go without negotiating a short sale. Conversely, if a home sold 15 years ago with a sensible loan and the owner is asking twice as much for it now, they may have considerably more flexibility.
- A ton of maps! There's a population density graph, which seems to operate on a neighborhood-by-neighborhood basis, that shows the number of residents per square mile in an area.
- There's a population age map, which shows the median age of each neighborhood. (This is an area where you can really visibly see Millbrae's strong dichotomy between young and old.)
- There's an environmental hazard map, which shows EPA-designated hazardous sites, which range from scary brownfields to innocuous photo development chemicals.
- There's an earthquake hazard map, which shows which areas are vulnerable to liquefaction, sliding, or other problems. (Lots of this in the Bay Area, but Millbrae is surprisingly safe.)
- A flood zone map. This was yet another incredibly useful find; usually, you can't find this out until near the end of closing or with a ton of legwork to track down paper FEMA maps from a government agency. The map breaks down areas in a 100-Year Flood Zone, a 500-Year Flood Zone, or other area of concern. Having access to this let me determine which areas I could feel safe about and which needed concern. Nearly all of Burlingame east of El Camino Real is in a flood zone, and a lot of the western area is as well; Millbrae had a few tendrils of 500-year flood zones, but none ran through the blocks where I was interested. Success!
- The public records for a property. This seems especially invaluable for FSBOs or older transactions; you can find out the official square footage, number of bedrooms, and so on. The Bay Area (and probably much of California) has a pretty significant problem with people performing unpermitted renovations, done without county approval, in an attempt to dodge a property tax increase; you can spot where a seller's statements don't line up with the official word, and be prepared to deal with the extra headaches involved with an illegal property addition.
As you can see, I'm a fan. I think Property Shark is a harbinger in the same way Redfin is: the real estate model is moving from the traditional closed, secretive, divided world that kept consumers at arms-length from the transaction, and moving towards a more modern Web-ish approach of empowered consumers who drive their own searches and be responsible for their own education. It will be fascinating to see how the real estate world I sell in will be different from the evolving world in which I bought.
Friday, October 15, 2010
Searching through the Rough
Around this time, I started to have a crisis of faith. By this point I'd been closely following the Millbrae-area market for about half a year; the more I learned, the more I liked the area, but also the more I realized what a difficult thing I was looking for. There just are not that many condo developments in the area. As a matter of fact, I had a complete list of every one in the whole city.
Burlingame had just a handful of options:
I decided to take a little break - after all, the commute wasn't killing me, and perhaps the situation would change. Along the way, I kept monitoring an interesting property. In addition to my Redfin emails, I also had subscribed to Craigslist RSS feeds that reported on condos advertised in Millbrae and Burlingame. Most of these duplicated information in the MLS, but some were FSBOs, and one in particular caught my eye: a FSBO condo on Mateo Avenue. It seemed overpriced, but otherwise matched what I was looking for. I decided to wait and see what would happen.
The property didn't seem to be advertised too heavily; after that first Craigslist post, nothing else came up, and I never saw it on any of the major FSBO web sites. About a month later, it popped up again, this time with agent representation but without being listed on the MLS. I decided to keep my distance - it still bore the same high price, and without the MLS connection I wouldn't be able to use Redfin. It also had mysteriously lost about 90 square feet between the time it was a FSBO and when an agent took it.
About a month after that, it finally hit the MLS. Still at the same price. I decided to wait for now - I didn't want to play my hand by seeming too eager, and by now I knew the market well enough to feel pretty sure that it wouldn't get snatched up at the current price. I knew from advice and observation that well-priced homes were selling quickly while overpriced homes languished for a month or more, so I figured that waiting for a while would give the seller time to adjust to more realistic expectations.
After a couple of weeks, the seller hosted an open house. I still wasn't ready to officially tour, but decided to drop by. It's kind of funny that I didn't do my first open house until towards the end of my search; I'd been scared off by warnings early on about attending open houses without representation. Listing agents can use them to scout for new clients, and if you aren't already represented by an agent and decide to make an offer after attending an open house, the listing agent becomes your agent, which leads to a conflict of interest. By now, though, I was happily represented by Redfin, and didn't think I'd have a problem.
As it turns out, I needn't have worried. I attended two open houses, and both were very pleasantly low-key, with no pressure to sign a register or do other stuff I was worried about. First I attended a house-house open house: an interesting, very old small house on Magnolia Avenue that had dropped by hundreds of thousands of dollars from its initial listing, and, if it dropped another two hundred thousand, would finally hit my range. It was nothing spectacular, but still intriguing: nice large lot, cute small house, a bathroom that had probably been renovated in the 1940's, an old-fashioned detached garage, very little set-back from the sidewalk. I thanked the agent and moved on to Mateo.
Once again, I had timed my visit to coincide with the arrival of Caltrain. The open house was on a Sunday, so I had a narrower window. The building is on the east side of El Camino Real, about a block from the tracks, but set much farther back than the California Avenue building had been. The agent greeted me when I arrived, then took a call while I wandered around. The train came by while I stood near an open window. It was audible, but infinitely better than the California Avenue one, and without any vibration. With time, I was confident that it would just become background noise, like a passing car; similarly, my current apartment is near a light rail line, and after the first few weeks I no longer noticed the sound.
The unit itself seemed crowded, but mainly because of all the furniture. It was occupied by tenants, and while it had been cleaned up, it didn't show as well as the other condos I'd seen. Still, nothing seemed wrong with it, and it was in better shape than the Palm Avenue unit that I had started making an offer on. I wandered around, checked for mold, looked under the sinks, played with the doors and light switches. Everything seemed in good order.
Still, the fact remained that it was overpriced. This wasn't just a subjective feeling, and wasn't taken from the popular online home estimation tools like Zillow and CyberHomes. I kept crunching possible values based on different methodologies, and kept coming up with a pretty consistent price range that was quite a bit less than the asking price. At the simplest end, I took the price per square foot for similarly sized and aged units in Millbrae/Burlingame that had recently sold, and adjusted it for this unit's size. I also took the most recent sales prices in the complex (which required going back to 2004-2005, during the boom but before the peak of the bubble), and tracked where those prices would go assuming that they followed the same overall price changes of Millbrae as a whole. Doing this quantitative work helped me gain a lot of confidence, and made me more secure in deciding to wait until I could get a better price.
- Park Broadway - Nice, but expensive, and too far away from the station and downtown for me.
- 88 South Broadway - Insanely expensive.
- Belamor - Too expensive, uncertainty around construction status.
- Palm Avenue - Perfect location and nice size, but worrying HOA situation.
- 15 Magnolia - Only 10 units, never available.
- 75 Magnolia - Only 4 units, never available.
- Mateo Avenue - Only 10 units, more on this later.
- 1396 El Camino Real - Too far away from the station and downtown, practically in San Bruno.
- Windwater Mills - On a busy street near the high school, plus some worrying online reports.
Burlingame had just a handful of options:
- California Avenue - Great units, but pricey and too close to the tracks.
- Ogden - In retrospect, I wish I had pursued the one-bedroom from here at the end of last year, but I had been too focused on Belamor. Nothing else entered the market during the spring or summer of my search.
I decided to take a little break - after all, the commute wasn't killing me, and perhaps the situation would change. Along the way, I kept monitoring an interesting property. In addition to my Redfin emails, I also had subscribed to Craigslist RSS feeds that reported on condos advertised in Millbrae and Burlingame. Most of these duplicated information in the MLS, but some were FSBOs, and one in particular caught my eye: a FSBO condo on Mateo Avenue. It seemed overpriced, but otherwise matched what I was looking for. I decided to wait and see what would happen.
The property didn't seem to be advertised too heavily; after that first Craigslist post, nothing else came up, and I never saw it on any of the major FSBO web sites. About a month later, it popped up again, this time with agent representation but without being listed on the MLS. I decided to keep my distance - it still bore the same high price, and without the MLS connection I wouldn't be able to use Redfin. It also had mysteriously lost about 90 square feet between the time it was a FSBO and when an agent took it.
About a month after that, it finally hit the MLS. Still at the same price. I decided to wait for now - I didn't want to play my hand by seeming too eager, and by now I knew the market well enough to feel pretty sure that it wouldn't get snatched up at the current price. I knew from advice and observation that well-priced homes were selling quickly while overpriced homes languished for a month or more, so I figured that waiting for a while would give the seller time to adjust to more realistic expectations.
After a couple of weeks, the seller hosted an open house. I still wasn't ready to officially tour, but decided to drop by. It's kind of funny that I didn't do my first open house until towards the end of my search; I'd been scared off by warnings early on about attending open houses without representation. Listing agents can use them to scout for new clients, and if you aren't already represented by an agent and decide to make an offer after attending an open house, the listing agent becomes your agent, which leads to a conflict of interest. By now, though, I was happily represented by Redfin, and didn't think I'd have a problem.
As it turns out, I needn't have worried. I attended two open houses, and both were very pleasantly low-key, with no pressure to sign a register or do other stuff I was worried about. First I attended a house-house open house: an interesting, very old small house on Magnolia Avenue that had dropped by hundreds of thousands of dollars from its initial listing, and, if it dropped another two hundred thousand, would finally hit my range. It was nothing spectacular, but still intriguing: nice large lot, cute small house, a bathroom that had probably been renovated in the 1940's, an old-fashioned detached garage, very little set-back from the sidewalk. I thanked the agent and moved on to Mateo.
Once again, I had timed my visit to coincide with the arrival of Caltrain. The open house was on a Sunday, so I had a narrower window. The building is on the east side of El Camino Real, about a block from the tracks, but set much farther back than the California Avenue building had been. The agent greeted me when I arrived, then took a call while I wandered around. The train came by while I stood near an open window. It was audible, but infinitely better than the California Avenue one, and without any vibration. With time, I was confident that it would just become background noise, like a passing car; similarly, my current apartment is near a light rail line, and after the first few weeks I no longer noticed the sound.
The unit itself seemed crowded, but mainly because of all the furniture. It was occupied by tenants, and while it had been cleaned up, it didn't show as well as the other condos I'd seen. Still, nothing seemed wrong with it, and it was in better shape than the Palm Avenue unit that I had started making an offer on. I wandered around, checked for mold, looked under the sinks, played with the doors and light switches. Everything seemed in good order.
Still, the fact remained that it was overpriced. This wasn't just a subjective feeling, and wasn't taken from the popular online home estimation tools like Zillow and CyberHomes. I kept crunching possible values based on different methodologies, and kept coming up with a pretty consistent price range that was quite a bit less than the asking price. At the simplest end, I took the price per square foot for similarly sized and aged units in Millbrae/Burlingame that had recently sold, and adjusted it for this unit's size. I also took the most recent sales prices in the complex (which required going back to 2004-2005, during the boom but before the peak of the bubble), and tracked where those prices would go assuming that they followed the same overall price changes of Millbrae as a whole. Doing this quantitative work helped me gain a lot of confidence, and made me more secure in deciding to wait until I could get a better price.
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