patrick.net

how much time you spend on CL daily? be honest.

RentingForHalfTheCost says

Buy: 5375/Mth mortgage + lost 20% opportunity money + 1000/Mth property tax +
140/mth HOA + 150/Mth insurrance + maintenance + realtor/closing costs, etc.
etc..

In other words, the housing bulls would say it is a buyer dream. How else
could you dump money in a home faster? Buy Buy Buy! or be priced out
forever!

First--the property tax and HOA are already in the mortgage monthly calculation. Second, you conveniently leave out the $1200+ in principal repayment every month and almost $20K/year tax break.

It's probably better to rent, but not by much.

fyi, for the Redfin / Danville property, $315 a square foot is low end price for the highest desirable cities of Sherman Oaks and Woodland Hills in the South San Fernando Valley.

Easily verifiable. At first I just looked at the lower end properties, then thought before posting I should look at the higher end house market like the example, the same holds true, much more so for Sherman Oaks actually.

RentingForHalfTheCost says

You are half correct. I just ran the numbers on a loan with a 5% 30yr of 880K (80%) and with 1.1% property tax included it comes to 5730/mth. Doesn't look to include the HOA as well. So lets do the equation again and see how it is "not by much".

Well, the number you cited was from the website you linked and was for a 4.375% loan. So, I'm 100% correct.

RentingForHalfTheCost says

Rent: 4500/mth total

Buy: 5730 (mort + tax) + 140 (HOA) + opportunity loss on 220K downpayment + 150 (insurance) + maintenance + closing costs + realtor fees. = ~ 8500/mth

Still doesn't look close to me. Principal reduction and tax breaks are minor compared to the outlay of money per month.

lol. Again--the HOA is included. You have to buy renters insurance anyway, so the difference is probably $75/month. There are no realtor's fees to buy a house.

Bottom line: I ran the numbers on the NYT rent vs. buy calculator and it came out renting is better for 7 years or less, buying is better after 7 years. About what I expected.

RentingForHalfTheCost says

1) In my 5% calc HOA is not included. Keep trying to blur the numbers.

I'm not blurring anything. Your link is the source. And 5% is not the current 30 year mortgage rate.

RentingForHalfTheCost says

Renters insurance is for your contents, not for the house. I have never carried renters insurance. If you buy a house with a mortage you absolutely have to have insurance or the bank will not front the money. Try again

Sorry, I assumed you'd want to carry it. I can assure you it doesn't change the rent vs. buy calculation.

RentingForHalfTheCost says

) You do pay the realtor fees. The money comes from you when you buy. The seller does not pull out money from his pocket. Give up the magic trick you are trying to do to justify your view. Buyers pay everything. Seller, realtors, and city collect. It isn't that hard to understand.

What the heck are you talking about? You absolutely DO NOT pay realtor's fees when you buy. Have you ever bought a house?? You pay some closing costs, but not realtor's fees.

Current 30 yr. fixed is 3.75% at Amerisave.

http://www.amerisave.com/

RentingForHalfTheCost says

Sorry, the buyer pays the realtor. I have bought and sold houses many many times. Money comes from the buyer.

i.e. Buyer pays 100K for a house divided as follows : 94K to the seller, 6K to the realtors.

It is very difficult to follow, so please review the complex math above before replying. You can ask a friend also for help, or call a family member.

OK--I'm done. You're obviously trolling.

Depends on your point of view.
#1: Buyer pays only if seller adds 6% markup to the amount seller wants to clear.
#2: Seller pays if there is no markup to the amount the seller wants to clear.
#3: Buyer always pays since they are the only entity forking over cash.
#4: Seller pays since they have to cut the check to realtor..
#5: Realtor starves if you get off your ass, market your house, and hire a lawyer to draw up the docs.

RentingForHalfTheCost says

Sorry, the buyer pays the realtor. I have bought and sold houses many many times. Money comes from the buyer.

i.e. Buyer pays 100K for a house divided as follows : 94K to the seller, 6K to the realtors.

RentingForHalfTheCost says

Buyer pays everything. Seller, Realtor lawyer, and city take. Again, not hard to follow, unless you have an agenda for being dishonest.

OK--if you want to be an idiot about it, you need to deduct all those charges off the sales price then. Which you DIDN'T do.

The buyer doesn't pay the price of the house and those charges.

tatupu70 says

The buyer doesn't pay the price of the house and those charges.

of course you do.. and if the seller thinks he can inflate an additional 30K above the price..
thats amounts to getting a new car or big time vacation. In all cases the BUYER pays for it.

RentingForHalfTheCost says

Nope, buyer always (repeat always) pays. Following the money. Nothing comes out of the sellers pocket. Not hard folks.

And to make that happen the funds go into escrow so all the parties get their cut..

RentingForHalfTheCost says

Still doesn't look close to me. Principal reduction and tax breaks are minor compared to the outlay of money per month.

Probably best to move out that area if those are your options

thomaswong.1986 says

of course you do.. and if the seller thinks he can inflate an additional 30K above the price..

thats amounts to getting a new car or big time vacation. In all cases the BUYER pays for it.

lol-- I should have expected Thomas to join the crazy train here....

For the record, the buyer pays for the house. The price of which is set by supply and demand--not affected by the amount of commission the SELLER pays after the transaction is complete. Whether the SELLER pays 1%, 3%, or 6% the price is set by supply and demand.

Once more for the trolls. The buyer absolutely does NOT pay commission. He pays the market rate for the house. The seller then pays commission to his representative.

This one at 3436 Blackhawk Meadow Drive gets bonus points for having a Countrywide (and America's Wholesale Lender) mortgage when it was originally purchased in 2005. That said, they did manage a refi in 2011.
http://www.redfin.com/CA/Danville/3236-Blackhawk-Meadow-Dr-94506/home/1614312

RentingForHalfTheCost says

It still makes absolutely no sense to buy. I wish it did.

Just depends on how long you plan on living there. Less than 7 years, rent. More than 7 years, buy.

Hmmm. The audible hum and the leukemia risk from high tension power lines right across the street might reduce the resale value a tiny bit.

tatupu70 says

For the record, the buyer pays for the house. The price of which is set by supply and demand--not affected by the amount of commission the SELLER pays after the transaction is complete. Whether the SELLER pays 1%, 3%, or 6% the price is set by supply and demand.

Once more for the trolls. The buyer absolutely does NOT pay commission. He pays the market rate for the house. The seller then pays commission to his representative.

there are multiple offers.. you have heard of that line before..

the other higher offers might be real they may not real (in just made it up cause i want a new car)..

so you better pony up the extra cash cause someone else is going to buy it ( or not )

ever play poker .. am i bluffing ?

thomaswong.1986 says

there are multiple offers.. you have heard of that line before..

the other higher offers might be real they may not real (in just made it up cause i want a new car)..

so you better pony up the extra cash cause someone else is going to buy it ( or not )

ever play poker .. am i bluffing ?

WTF are you talking about? I don't care if there are multiple offers. It has nothing to do with my point.

RentingForHalfTheCost says

He pays the market rate sure. However, the market rate contain the sellers take plus the commission to the realtor. Buyer pays dude.

OK--let me show you how ridiculous this logic is:

There are two identical houses. Down to every last detail. One seller is doing a FSBO and the other is selling with a realtor with a 6% commission. The market rate for both houses is obviously the same. They are the SAME house, after all. The buyer is buying the house--and only the house--regardless of what the seller is doing to try to enhance his ability to sell the house.

The commission % has absolutely no effect on the sales price. You are 100% incorrect. The commission is paid by the seller.

RentingForHalfTheCost says

In both cases the buyer pays the commission.

The only difference is the FSBO is both the seller and the realtor.

Next

OK--now I am done. I shouldn't have replied to your trolling a while ago except that there were others that followed your lead.

RentingForHalfTheCost says

Always amazes me how people handle it when their own logic blows up in their face. At the point where you should have a 'ah ha' moment you instead run away. Good luck to you

lol--I'm not running away. There's just no use discussing an issue with a troll. You are clearly wrong. Own it.

Tat - while I am usually loathe to support people with a history of habitual lying such as RFHTC, I think he does have a point here which I think is not being explained properly. Per your example:
tatupu70 says

There are two identical houses. Down to every last detail. One seller is doing a
FSBO and the other is selling with a realtor with a 6% commission. The market
rate for both houses is obviously the same. They are the SAME house, after all.
The buyer is buying the house--and only the house--regardless of what the seller
is doing to try to enhance his ability to sell the house.

Interestingly, in commercial settings, a few studies I saw a while back indicated that given identical properties, the one that was marketed did in fact net a few percentage points higher price than the one that was FSBO. Thus the conclusion of the author was the higher price was due to the marketing (affecting the demand side of the supply/demand equation), but since that additional gain was eaten up by the commission, the buyer was effectively subsidizing the cost of the broker.

Granted, on the settlement statement the cost of the agent shows up on the seller side of the transaction (i.e. the "seller pays"), but again, if there was no broker involved, the study indicated that the purchase price was in fact lower. To put it another way, if we had 2 identical properties, one with a broker and one FSBO the study indicated that if the FSBO property went for 100K - the identical brokerage property would go for somewhere around 105K. And in either case, the settlement proceeds to the seller would be the same, but the purchase price (financed) by the buyer would be higher, meaning in effect the buyer pays for the broker.

rufita11 says

Hmmm. The audible hum and the leukemia risk from high tension power lines right across the street might reduce the resale value a tiny bit.

Build a big coil. free electricity!

RentingForHalfTheCost says

WTF are you talking about? I don't care if there are multiple offers. It has nothing to do with my point.

Sorry tatupu. Your offer was the lowest of the 15. You are more than welcome to put in another offer. I can't show you proof there are 14 others and I can't tell you what you need to get this home, but if you have to ask, then you cannot afford this 2/1 fixer-upper next to caltrain.

When I was trying to buy in 06, I submitted offers which were overbid by others. Then, a few weeks later, the newspaper would list the sale at a price indeed higher than my bid.

It is possible that there was some plan whereby the realtor would buy the house himself in order to create the appearance of being overbid.

Or that the realtors, newspaper, and county assessors office were all in cahoots to falsify sales.

Or, more likely, in fact someone did pay more than I was willing to pay for those houses.

CDon says

Interestingly, in commercial settings, a few studies I saw a while back indicated that given identical properties, the one that was marketed did in fact net a few percentage points higher price than the one that was FSBO. Thus the conclusion of the author was the higher price was due to the marketing, but since that additional gain was eaten up by the commission, the buyer was effectively subsidizing the cost of the broker.

I haven't seen that study, but I've seen similar ones and don't doubt the conclusion. It makes sense that when you market to a larger pool of buyers, the supply/demand curve intersection would move slightly to the right and yield a slightly higher price.

My take on it is that the seller invested in marketing to increase the value of his house, no different than if he had put in new carpeting or granite countertops. Would you say the buyer paid for the carpeting? His investment returned a higher price.

The buyer didn't pay for it any more than he paid for any other improvements. He simply paid the market price.

RentingForHalfTheCost says

Buyer pays everything. Seller, Realtor lawyer, and city take. Again, not hard
to follow, unless you have an agenda for being dishonest.

This, BTW is mostly wrong. It depends on what the purchase contract says, or absent anything in the contract, what the statute on point says. In any event, a portion of these allocations, usually title examination and 1/2 of the transfer & recordation tax (i.e lawyer and "city take") are apportioned to the seller and reduce the amount of equity given to the seller at closing.

Again, YMMV but for the most part, none of these closing costs have been shown to come out of the buyer's pocket.

tatupu70 says

I haven't seen that study, but I've seen similar ones and don't doubt the
conclusion. It makes sense that when you market to a larger pool of buyers, the
supply/demand curve intersection would move slightly to the right and yield a
slightly higher price.

My take on it is that the seller invested in marketing to increase the value
of his house, no different than if he had put in new carpeting or granite
countertops. Would you say the buyer paid for the carpeting? His investment
returned a higher price.

The buyer didn't pay for it any more than he paid for any other improvements.
He simply paid the market price.

Regarding the physical improvements, I think it depends upon what is done, but you too likely have seen those articles that say that improving a bathroom usually nets 105% of the installation cost, whereas other things such as lining the basement only nets the seller 80% of his cost at closing. So in these cases I guess its a "yes and no" as to whether the buyer or the seller pays in the end.

In any event, the only point I was making was where 2 properties were physically identical (same improvements or lack thereof) and the only difference was the broker or FSBO. In this case, the buyer effectively pays because as you note, the supply demand intersection has changed - so you can say (somewhat perversely) the market has changed.

BTW, I saw this once in practice where my client was trying to sell his raw land FSBO at price X. He didn't have much luck so eventually he got a broker who also listed at price X. When the broker got an offer at price X, and presented the settlement statement to my client, he was suddenly dissatisfied with his cut which was reduced by the brokerage fee. Accordingly, the seller rejected the offer and had the broker relist the property at price X + 2.5% (the customary amount for commercial prop).

As you can imagine, the potential buyer got pissed and that deal fell through, but eventually the broker found another seller and closed a the new price X + 2.5%. It was interesting because it was one of the few times that I have actually seen where a study was validated in real life.

Houses like this make me want to grow really long arms and give my house a hug.

I wouldn't piss on Danville if it was on fire.

CrazyMan says

Houses like this make me want to grow really long arms and give my house a hug.

I wouldn't piss on Danville if it was on fire.

Crazyman - I was recently looking at some old (circa 2010-2012) threads about the future of the high end "fortress" markets, and there were at the time some fairly bold statements/predictions from you about how those fortress areas were going to get creamed (and not just in real prices mind you -- oftentimes we are talking percentage terms here). I can show you these if you like, but I think you know what I mean.

In any event, later into 2012-2013 we didn't hear much more of that from you until you re-emerged having bought in Boulder Creek. That said was there ever a "come to jesus" moment when you realized those declines weren't going to happen? Alternatively, if that is not the case, do you still think they are going to happen? (again percentage terms, not real declines via stagnation/inflation)

I realize this seems like out and out trolling on my part, but in all honesty, I am somewhat fascinated by the collective doomish psychology of this blog back in those days. It was so combative back then such that anyone who had the temerity to suggest that prices would hold (not necessarily rise, but hold) they were often shouted down from the gallows as being a cockeyed optimist. Granted, you weren't one of the more frequent "doomers" but in terms of your effective confidence or certainty big declines were on the way, well you were right up there with the best of them.

No, I don't really care actually. It doesn't bother me at all :)

I was wrong, obviously. It happens. I never thought the govt. would come in and prop up the house of cards that is housing and the US economy to the extent that it has.

That being said, I came across a short sale that I couldn't pass up, at an interest rate that was peanuts. 3000K sq ft custom house, on an acre, for less than 500K, at 3.5 percent.

It wasn't really a "come to jesus moment". I just came to a point in my life where I was about to have a family and needed more space, so I basically threw in the towel and said fuck it :)

That's Bettencourt Ranch, not Blackhawk. It's a lower-priced subdivision and a decent neighborhood, though as desirable as some other pockets.

Blackhawk, even in the good times, is generally the slowest-selling market in the Danville-Diablo-Alamo stretch. Too many huge and expensive homes, many built in the 80's and needing updating, and too far from the freeway. But, yes, you are right... it has slown more over the last couple of months.

CrazyMan says

No, I don't really care actually. It doesn't bother me at all :)

I was wrong, obviously. It happens. I never thought the govt. would come in
and prop up the house of cards that is housing and the US economy to the extent
that it has.

I wish I had more time to respond, but (and I mean this with all sincerity) this response has largely restored my faith in the potential usefulness of this blog. FWIW - Accountability is a big big deal for me. Anyone can say just about anything no matter how bold, shocking, or otherwise, so long as they are willing to put their ego in check and be held accountable if what they said turns out wrong (as Tatupu says - "own it")

That being said, for most here, its as if the words I WAS WRONG are so verboten that if they dare mention them, if they dare let their fingers put those words on text, its as if they will instantly burst into flames and cease to exist (witness my current attempts to hold Thomas Wong accountable for his utterly asinine statement that SF has been in economic decline for 50 years).

I assumed you like most would deflect, flail, spin, ignore, etc. yet you did none of those -- you simply manned up and owned it. It happens to all of us eventually, and here I am no different. Still, in all seriousness you just gave the single most courageous answer I have ever seen on this blog. This makes you one of the good guys, IMO. Cheers!