Tuesday, July 8, 2008

House Hunting, Part I

With the Las Vegas housing market tanking, I decided to take a look at buying a house out here. The process started with Brad and me drooling over the new developments near him in Summerlin. A little research on realtor.com showed me that I could get a resale of the same homes that they are currently building for as much as $100,000 cheaper! Thus, the house hunt began.

My realtor is Brad's business partner, and it is so nice to have someone that Brad knows and trusts to be leading the way. Our first day out wasn't very successful, as I found that the foreclosures on the market aren't in the pristine condition of the model homes I had seen. The second day had some better finds, which leads me to...

House #1

I had already seen a couple of homes with the same floor plan that I liked very much - an upside down house with the kitchen, living room, master, and office upstairs, and the guest quarters downstairs. But, as soon as I walked onto the balcony of this house, my heart skipped a beat. This house had an incredible 180-degree panoramic view of the Las Vegas valley, including an unobstructed view of the Strip. Additionally, it had a huge pool-sized yard and no neighbors on any side. My realtor and I got really excited and sat down to look at the comps in the neighborhood to decide what to offer, and that's when the bad news arrived...this house was priced at $359,000 but would not appraise for over $300,000 based on the comps. It turns out that the house had been purchased at auction a few weeks earlier for less than $200,000 by a company that specializes in flipping properties. They put in new carpet and appliances, painted the walls, and put the house on the market for a $160,000 profit! My realtor tried to get in touch with the listing agent to negotiate the price, but she refused to return his calls. I learned my first lesson on the Las Vegas real estate market:

Even though the market has tanked, some people are still trying to get the money they would have gotten a year or two ago.

I loved the view of that house, but there are plenty of houses on the market. And I couldn't feel bad about not getting a house when my hands are tied - even though I could qualify for a $360,000 loan, I couldn't get a loan of that size on that house because the house must appraise for the amount of the loan. So, we moved on to the next round of houses, and along came...

House #2

This home was 1-story with a huge great room-kitchen area and an absolute oasis backyard. It had large trees for privacy, an in-ground hot tub, and a tranquil waterfall that flowed into a pond. The floor plan was perfect, not too big and not too small. Unfortunately, as with the 1st house, it was priced way over the probable appraisal value. It was listed at $334,000, but based on the comps, we figured it wouldn't appraise for more than $300,000. The owners had just moved into a new house, so we knew they would be anxious to sell. And, we knew that they paid around $150,000 for it in 2000, so we went ahead and made an offer at $300,000. As expected, they countered the offer, but we weren't going to budge because we didn't want to offer more than it would appraise for. Again, I was disappointed, but it was impossible (and would be a waste of money) to go any higher. Last week, the listing agent of the house called to say that they had lowered their price to $324,900. My realtor told her that the new price still wasn't low enough but that they should consider our offer of $300k on the table whenever they want to take it. Yesterday, the house changed to contingent, so I guess they got an offer at near their asking price. Unless that person is paying cash, I can't imagine them getting it appraised for anything over $300k because the identical house without the spa backyard just went into contingency at $260k. So, with this house, I learned my second lesson of the Las Vegas real estate market:

It completely sucks that someone can come into this market having sold their house for an exorbitant amount and pay cash for a house that is priced too high for financing, thinking that this house is steal compared to the market they came from (e.g., California).

Again, there were plenty of other houses on the market, so I moved on. Sure enough, on our next outing, I found the house that completely crushed my spirits...

House #3

Ahh, this house was just amazing. It was a foreclosure, so it needed a little bit of work (some appliances, a good cleaning, some touch up paint), but it was actually in very good condition. It had great curb appeal and everything was upgraded inside. It had the perfect office for me at the top of the stairs with double French doors with small vertical windows on either side and a nook that was just begging for built-in cabinets. The beautifully tiled shower had two shower heads. And the yard was to die for - although the was no landscaping, it had an in-ground pool overlooking a greenway (no neighbors behind) with a spectacular view of Red Rock. Best yet, the price was incredible: $291,900. I absolutely had to have this house. My realtor and I started on the paperwork, and when he called the listing agent to ask a question, he was told that there were multiple offers, so we had to make our highest offer. Ugh! My mortgage broker said that the house would likely appraise between $295,000 and $310,000. I didn't want to offer too little and lose the house, but I didn't want to offer too much and not get it appraised at that price. We decided the best bet was to offer $295,000, which was more than it was listed at and was a safe bet for appraisal. My realtor called the listing agent to find out if the offer was competitive, and to our shock we were told that there were multiple offers over that price. At that moment, I learned my third, and tearful, lesson about the Las Vegas real estate market:

Banks are putting foreclosures on the market at a price that seems too good to be true, which leads to competitive bidding that drives up the price of the house.

This house took me some time to get over it. Ask anyone who spoke to me that day, I was not a pleasant person to be around. I felt like I was on the dating scene, having head-over-heels first dates, just to have some bombshell dropped on me during the second date and getting my heart broken. After a few days of ignoring the house hunt all together, I got back on the horse that threw me with a refreshed attitude and a harder shell. Which led to...

House #4

This house was very well-kept inside, with a nice floor plan, and a killer backyard with a pool, spa, waterfall, and big trees for privacy. My realtor had the forethought to call the listing agent before I got my hopes crushed by another house. She told him that they had a few offers but none were acceptable because the owners needed to sell near the asking price ($289,999) or they'd have to do a short sell (they're already paying some out of pocket to cover the mortgage at that price). We were fine with that news because the house is in perfect condition and has a beautiful backyard. But, when we ran the numbers, the comps came in at around $250k. And so I was introduced to lesson number four about the Las Vegas real estate market:

Even when a house is listed at a seemingly good price, banks may be selling foreclosures in the area at rock bottom prices, driving the values down, but homeowners may owe more than that and cannot lower their own prices.

At this point, I've seen more than 60 houses. I'm not kidding. When I started out, my goal was to be moved into a new place in August before my lease runs out so that I don't have to sign a new year-long lease. Fortunately, my property manager said that I can go month-to-month in my current house (that I hate!) for $100 extra per month. So, now I don't have the time constraints on my search. Another good thing is that after looking at that many houses, I know what I like and what I don't like. I really, really, really want a pool. I don't want to put $50k out of my pocket into the house only to get about $10k back when I sell.

I found this
MSNBC article that describes the bidding wars that have erupted over these cheap foreclosures. This is obviously a very frustrating market right now. Everyone says that the Las Vegas market is suffering and that now is the time to buy (or in the next year). But, from what I've seen, the good properties are going at a high price and the crappy properties are just sitting on the market. So, much to my realtor's chagrin, the process continues.

I just don't understand - I watch people all the time on HGTV look at three houses, make an offer, and move into their new house within 30 minutes. Why can't that be me? :)


Kirsten said...

HAH A...TV makes it look so easy of course to encourage you to buy/sell...it's NEVER that easy & timing is key. You're learning alot & seriously think resale & how much u want to put into house....ARM vs 30yr fixed is a good way to look at this!
HAng in there...I thnk dating is still worse ;-). TTYS

Chris Shouse said...

I feel your pain as an agent that works mostly with buyers I have had a completly frustrating summer as have my buyers. Good luck with your search:)