Buying A House

[Taxious]

I don't know why I keep coming to you guys with my life questions, but I do.

I'm tired of renting, I'm sick of living in a shady neighborhood, and I am ready to buy my first house. Priority #1 for me is to still be close to work (downtown Denver) with priority #2 being that I want to OWN the building I'm living in (no condos, HOAs, etc.). I'm new to this process but have been learning quickly - my plan is to stay under $300k with one of those 3.5% APR FHA loans where I don't have to have a giant down payment.

Would you buy this house? (why or why not?)
http://www.recolorado.com/homes-for-sal ... -88683113/

I have been absent of the boards lately so I'm gonna go get caught up.

[Fallakin Kuvari]

225k for 2 beds and 1 bath?! Jesus, I didn't know Denver had California prices...

[Ddrak]

I would say that being built in '47 is a risk. I know nothing about Denver prices though. Is the lot really 0.09 acres?!? That's tiny.

Dd

[Kulaf]

No only no.....HELL NO.

That thing should be under 70k.

[Kulaf]

Last Sold: Apr 2010 for $150,000

100k markup in 3 years? I don't think so.

More records:

04/01/2010 Sold view details $150,000 Public records

07/11/2006 Sold view details $181,000 Public records

07/14/1998 Sold view details $71,000 Public records

So 15 years ago the thing sold for 71k and then the bubble inflated it to 181k in 8 years. So I would imagine normally it would be around 85k.

[Fallakin Kuvari]

I got ~.5 acre, 2 bedrooms and 1 bath for 88k 6 years ago. I've put about 12k into the house to convert the upstairs into a livable area with 2 bedrooms (most of that cost being a new furnace and a/c to accommodate that living space) and update the bathroom (total strip down).

Honestly, I wouldn't pay a dime more than 79,995 for that house. .09 acre and it was built in '47 with that terrible yard? What the fuck has California exodus done to Denver?

[Taxious]

I actually really like the yard space in back. I know things cost a lot in that area, you can view the "recently sold in the area" and $225k is on the low end of the prices for a 2 bedroom. I'm not sure how you guys are getting a house for less than $100k but things just aren't that cheap around downtown Denver.

[Arathena]

I actually really like the yard space in back. I know things cost a lot in that area, you can view the "recently sold in the area" and $225k is on the low end of the prices for a 2 bedroom. I'm not sure how you guys are getting a house for less than $100k but things just aren't that cheap around downtown Denver.

We live in areas where housing hasn't been inflated by morons, or where the bubble has finished popping.

[Taxious]

So.. A smarter move may be to rent for a couple more years, then look around the area again when the prices are lower and I have a larger down payment? Everything I've read makes it sound like the prices are only going up from here though.

[Freecare Spiritwise]

The main thing that decides a home's value is the comps. As long as there's nothing horribly wrong with a house, it's worth what other similar houses in the same area have sold for, period. So .. if the house you are looking at is worth what similar houses of similar condition in the same area have sold for recently, then you're not getting screwed. That's it, you should be running the comps of wherever you are looking.

Also remember the "three L's" of real estate are: location, location, location. Financially it's a better decision to buy the worst house in the best neighborhood than the best house in the worst neighborhood. The comps may seem high for that area, but there's a reason. That's what people are willing to pay for that area, because comps are based on real world sales data. So the "I wouldn't pay xyz for THAT cracker box" could be an ignorant statement if it's say, on the beach. The market is usually pretty smart-you can't go just by price or you'll live in the ghetto.

So, the trick to not getting screwed is to buy a good location, pay especially close attention to the comps, and have an especially good inspection (which you pay for out of pocket) which will tell you anything bad like a cracked foundation or bad roof or something.

You also want to look at that neighborhood for anything disruptive happening. Are they building a new sewage plant a block away? Are they getting ready to build a big freeway, or a new walmart? Get to know your neighborhood a little before you even make an offer.

If there's nothing wrong with the house, and you're not overpaying for it, and it's the one you want, buy it.

[Kulaf]

The absolutely only way I would ever pay that much for that house would be if it was in some historic part of Denver and would never lose value. Clearly that is not the case as you can see form the sales history I posted.

If the comps in that area have gone up 100k in the last three years since that home sold......GTFO of that area. You are buying your first home.....you don't need a possible albatross hanging around your neck.

[Kulaf]

Here is the listing agency for that home:

http://www.nostalgichomes.com/neighborhoods

Ok you are placing a premium on living close to Denver.......so you are going to get screwed on price over "normal" value. So if you can live with it......buy it. If you were further outside the metro area, that home is under 100k IMO.

[Taxious]

Yes... I realize it's marked up stupidly because of its location and that if I wanted to live in the burbs, and spend half my life commuting to work, I could get something like that for under $100k easily. However, I plan on working downtown (I just got a new sweet job) for at least the next couple years and probably well into the future. I like the option of being able to quickly walk/bike/bus into work from my place of residence and that is my #1 requirement for renting an apartment or buying a home.

The main thing that decides a home's value is the comps. As long as there's nothing horribly wrong with a house, it's worth what other similar houses in the same area have sold for, period. So .. if the house you are looking at is worth what similar houses of similar condition in the same area have sold for recently, then you're not getting screwed.

This makes me feel better about considering this place. It looks like it's fairly priced compared to other 2 bedroom houses sold in the area recently.

Like Kulaf is saying, the sudden price change scares me too though. Is this just a bubble and if I wanted to sell in 10 years, I'd be completely screwed? Is it worth the risk of that happening?

[Taxious]

This is what my realtor just emailed me about the comps of that place:

I just looked at the comps and I'm not seeing $225k. I'm seeing a range of
Subject Min Avg Adj Comp Subject Max
$205,759 - - - - $209,660 - - - - $213,560

She sent a big .pdf to read through that elaborates on this. She also said "I could not advise you to offer more than about $213k, maximum $215k". Apparently it was renovated after 2010 so that's most likely why it took a huge jump in price after that (although I'm not finding where she is getting the info from that it was renovated). So I may be able to get it for around $200k.

Here is the listing from 2010:
2010
And the one for 2013:
2013

I must still be missing something as I don't see anything saying it was remodeled on there.

[Ddrak]

I actually really like the yard space in back.

Have you actually gone and looked? The back yard is only 30x60 feet. House is positively tiny. They've used some pretty clever photography in the listing.

Also remember that the worst that can happen when you make an offer is they say "no". I got my current block of land (3/4 acre) by offering $100k less than the list price and getting it. No harm in underbidding.

Post the comp pdf?

Dd

[Taxious]

Here is the .pdf comps report:
http://jshowers.com/wp-content/uploads/ ... Report.pdf

Yes, I have physically been to the house and looked around for a while with some friends. The back yard is much larger than I thought it would be, or need it to be. Keep in mind my current studio apartment is 306 sq ft so this house is already more space than I'll need.

Here are the pictures of what it looked like in 2010 before the "remodel":
2010 Pics
I actually liked how the kitchen looked before they ripped out all the storage and counter space in there. I wonder why they did that.

[Xican]

I think one of the major questions you have to ask yourself is how long you plan on being there, too. In my experience with home buying, if you're not planning on staying for the long-term (15+ years) you want to consider your cost, your mortgage principle and how much of them you plan to pay off in the time you'll be there. This is especially important if you're not planning to make a big down payment. You want to be able to at the very least break even when you do decide to sell.

Also, don't forget all the additional costs that're going to come with a much larger home. You're going to need to budget for new furniture, etc. and that can impact how much of the mortgage you're able to pay down. I'd really say you take time and look around a bit more. I'm positive you could find something comparable for cheaper and probably better for the equivalent amount. Granted, I don't know the Denver market, but the price here really does surprise me. I know location means a lot to you, but I think you might be better off going with something that will have a lot more marketability when you do flip it. You really don't want to take a loss on your first home and you don't want to be housebroke trying to pay off a mortgage if you're only going to break even.

My big concern is that if you want to move in 5 years and you haven't paid off a good chunk of your mortgage, you're not going to be able to afford to leave if the house doesn't sell for higher than what you paid. Talk to your realtor and see if they can offer insight on what you might be able to expect 5 or 10 years from now in terms of growth for that home. If they don't see much chance for an increase in value I'd say you're best to walk away from it.

[Kulaf]

The photo of the bathroom is what concerned me. It looks unfinished.

Bathroom.jpg

At first I thought it was some kind of weird looking wallpaper, but the shadows at the top near the trim makes it look like raw metal.

[Minute]

Short on time, but Do NOT buy that house.

[Freecare Spiritwise]

That bathroom looks wack. Did they do those corrugated metal walls on purpose? Yikes.

Another thing about comps is that the house with the shitty bathroom is worth basically the same as the one with the awesome bathroom. Unless you are a good handyman, only buy it move-in ready. Hold out for the one with the good bathroom, kitchen, etc. Sellers never make their money back on shit like marble counter tops. As a buyer, take advantage of stuff like that.

A good thing to do once you're already in escrow is take that detailed inspection report, find something on it that's maybe double what you paid for the inspection itself, and hit the seller with it at the last minute. If it's reasonable, they won't risk falling out of escrow and you just won your inspection money back with a profit.