Sunday, February 8, 2009

Some Details on our New Domicile

We signed a stack of papers on Saturday, and close this coming I feel a bit more comfortable sharing some of the details now. (The process is very different from closing in VA, where you get the keys the same day.)

For quite some time, I have been tempted by the floor plan, overall modest development size and location of our future home. We have visited on numerous occasions. Back in August we saw the lot our home would sit on. It fell out of escrow sometime in December. So the week between Christmas an New Years, we threw out an offer, 5% below asking and 15k toward closing (the 15k toward closing, if we used their mortgage company, was their standard offer for everyone who walked in the door). 5% below asking put us just beneath our 20% DP cap, and $179 a square foot.

I've never really been very good at bargaining, and house shopping is no exception. The builder accepted that day, with no counter. Of course we were thrilled, as we didn't think they would accept. After thinking about it, I felt a little lame as we must have offered too much. On the other hand, they may have been eager to report one more home pending by COB 2008, as we signed and turned in the purchase agreement on New Year's Eve. To make myself feel better, I went online to the SacBee home sales database, and as of October 2008, there had been no sales below the price we had agreed upon (since that time, I have come to find out that two homes on smaller lots have closed at prices slightly below ours, within 1%).

However when I look at comps in the area, there really aren't any homes in such good shape, with a similar lot size, and proximity to Hwy 50, at or below our price (especially when you consider we won't pay a dime toward closing). I'm sure there will be soon though. Prices seem to be dropping fast lately. In fact, there are now many upscale tract homes to be had in the surrounding area for under 400k.

All this to say, I don't feel we got any type of "deal." We put in an offer on a home that really suits us, at a price we could afford (comparable to rent when the tax incentives are included).

There also was some luck involved. When it comes to interest rates timing is everything these days. I had done my original calculations at 5.25% and we ended up with 4.625% (which now gives us a larger chunk of change to spend on the backyard). Side note: I was rather anxious about using the builders lender, thinking they would make up the 15k in marked up fees etc., but they have been very competitive, and offered good service to boot.

As much as I tried, the builder would not budge on the realtor commission, because he never came with us on our visits (especially the first one). We plan to pay him out of pocket once we close. He showed us homes on 6 different occasions, and answered many e-mails inquiring about listings.

My one current misgiving is that we may miss out on the $15,000 tax credit, as the last report I read suggested it won't take effect until enactment, which is likely a week or two away. Sigh.


Made Decision too Quickly said...

Regarding the $15K tax credit: see if you can renegotiate the close date and offer the seller an incentive to do so. Explain the situation. Perhaps offer to split the proceeds from the credit 50-50. It's a win-win if they can put it off a couple of weeks and if they're reasonably flexible.

b_kroskey said...

I'd have to think that you'll be able to apply the $15k credit when it comes time to complete your return (or amend it or even claim it in '09)...

Look at the Rebate checks of '08 - you can still get it in '09

Look at the $7,500 credit - you can claim it on your '08 return even if you bought in '09...

There's no doubt there's a huge difference in the two, but you should know the details by Tuesday!!!

HOUSE2008 said...

Congrats! Yeaaa! on buying a house. Now that I've lived in mine for 7 months my perspective is it was worth it. A home to me is no different than a well made suit. It to be used & taken care of and that's it. I care not if the price goes up or down. Don't worry about what others cost around you, comps & such. Just don't count on the home as part of your equation towards retirement & you'll be fine. It's a home & you can't take it with you. So have FUN!
Speaking of backyards, I just had a patio put in. Whohoo! My wife seems to like it. It's amazing what they can do with colored concrete. Good job too boot.

HOUSE2008 said...

$15K tax credit.. You'll still qualify for the $7,500 tax credit.

Jacob said...

Who knows about the tax credit, if there is an agreement in congress this week it will be signed before Friday anyway.

Or it is possible it could apply to anything bought in 09 anyway.

Or you still could get the $7500 credit (but there are income restrictions) which would not need to be paid back (if the current bailout plans stay intact).

I wouldn't push the closing back or do anything to mess up the deal. The rate you are getting is great. You can still save money in a bank for over 4% and eventually that will go up, while your rate is way low. Prices may be lower next year, but I really doubt interest rates will ever be sub 4%.

Congrats on the new place. If I were you I wouldn't look at comps anymore. Prices will go down and if you bought for an investment then it was the wrong move. But you bought because it was the right home for you and you want to stay there a long time so who cares what prices are in the next couple of years.

Husmanen said...

Plus, the area you bought in has tons of kids and families. It has a great 'home' feel to it.

I agree with Jacob, stay away from the comps and the data for a while. Plus you won't have any time, painting, backyard, moving furniture etc.

Home Depot and Lowe's will be your new places to 'hang'

The best...

Buying Time said...

I have been joking around with Mr.BT that Valentine's will be bitter sweet for me, as he will have a new valentine (the house).

The last two years (renting), have been a bit tough for him, as he loves having projects to work on. Thus the new home works out perfect for us, as it is very livable (no major remodeling needed that disrupts our life), yet, there is still a fun project that can take up as much or little of our time and $$ (the backyard).

Buying Time said...

"Or you still could get the $7500 credit"

If I remember correctly, this is focused on first time buyers so there is a three year rule...and we have only been renting for 2.25 yrs.

To be honest, even if we did qualify for it, it seems like a lot of hassle on your taxes.

Jacob said...

Yes it does have a 3yr requirement.

I think the bailout will be past this week, so that may work out for you still.

Marginal Utility said...

It would have cost you to wait anyway. If you locked in 4.625, that's great, the current rates are about 5.25. The cost to buy down to 4.625% would be about 3 points. I don't know what you spent, but on a 400K house, it's 12K so either way, it worked out for you.

Mike said...

I bought my house in August last year. I see comps for sale now between $20-$40k below the price I purchased.

I don't mind this since I bought the house fully knowing the price would go down further. I am enjoying the house and I live only one block away from elementary school my son will be starting this year.

However, only bad thing was when the rates were down to 4.5% about a month back, I could not refinance my 6% loan due to the fact that I had to put in $30k of cash again to make up the price difference to have 20% down based on new appraised price.

But it sounds like you won't have this problem with 4.65% interest rate. Congrats & enjoy home ownership again. I certainly am.