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I think the feedback you're getting is spot-on. The high-end market is pretty dead here in Chapel Hill. I think you're in an excellent position and your ongoing patience will pay dividends. Don't settle and keep your offers low. Eventually you'll find a home you want with a motivated seller. All the negotiating power is yours right now. Ignore your brokers pleas for a higher offer, cede nothing and don't fall in love with a house.
Also, don't rely on your agent to do your due diligence. You can easily search the tax records on a home, find the owners and what they paid, and google them/search the court records for litigation/divorce. Any information suggesting seller desperation should be used in building your offer. This is a business decision.
SPOT ON!!!!
There are homes listed for 650 that the owners paid 225 for years ago!! Look at the records. They have room to drop prices.
Don't take this the wrong way, as your family earns way more than mine, but personally just IMO if you have to get a loan on a $600k house you're buying too much. The kind of people that buy half million dollar plus homes typically pay cash, or at least the ones in my family do. They can generate all kinds of income and it doesn't take long to save for an all-cash transaction.
If there are people out there paying cash for a house then they must be really bad at business. Anyone paying cash for a house is losing money, it's that simple. Not only are interest payments on a mortgage going to lower your taxes, but with the time/money factor, where money is worth less over time due to inflation, choosing not to extend your payments on such a costly asset is just flat-out dumb.
Ask any financial planner/broker/what have you and you will find that 99.99999% of them will argue against paying cash for anything that can be had for an interest rate so low as a mortgage rate is now.
As for advise for the OP, I suggest you just keep looking and make offers that you are comfortable with. Do not go out and buy a house because you're tired of searching. Just be patient and you will find what you're looking for.
400K mtg at 6% is 2400 P& I
500K mtg at 6% is 3000 P& I
600K mtg at 6% is 3600 P& IAdd taxes to that and you are over 4000 a month just to live in the house.48000 dollars a year just for principal, interest and real estate taxes!!!
having bought a Chapel Hill home in that price range in 2007, I have to say most home owners here are not going to lower their price significantly because they know the value of the schools and location.
Having recently sold a house in one of the "declining markets" recently, I'm a little surprised at the prevailing psychology of sellers in the area, as illustrated by the above. If one is unable to sell after a year (or three) on the market, it would seem to me that reasonable options would be to.
a. Take the home off the market and stay put
b. Rent the home at the prevailing rental rates
c. Drop the price to a point at which it will sell
But the strategy we have observed seems to be delisting and relisting repeatedly with the same price, which seems odd to me. Are people staying with high list prices and expecting to negotiate way down with "low-ball" offers, or just biding their time to see what the spring market is like, or am I missing something?
Given the current lay of the land, what would you all advise as the best strategy?
a. Continue looking for a house and "lowballing" sellers that have been on the market forever
b. Signing a 12-month lease and continue renting while waiting for the market picture to become more clear
c. Buying a cheaper home where there are more sales and the value is more quantifiable
d. Something else
If there are people out there paying cash for a house then they must be really bad at business. Anyone paying cash for a house is losing money, it's that simple. Not only are interest payments on a mortgage going to lower your taxes, but with the time/money factor, where money is worth less over time due to inflation, choosing not to extend your payments on such a costly asset is just flat-out dumb.
I'm not sure I agree.
A 500k mortgage @ 5% will yield an interest payment of around $24k your first year.
Assuming a 33% top tax bracket you'd only get $8k in reduced taxes.
So paying $24k to get back $8k makes someone dumb? That's a loss of $16k.
You are missing the opportunity to invest the money, that would have been used to purchase the home outright, in another investment. If your mtg. rate is 5.5% and you have been experiencing an 8-9% return in an alternate investment, you may be better off carrying the mortgage. Remember, invest with cheap money.
With regard to the higher end market, I am a potential buyer and I am seeing homes for sale at 2006 peak prices and above. My feeling is that folks can't or will not come to grips with the fact that their house is worth less, in some cases much less, than what they paid.
In turn, it forces a potential buyer to look for bank sales or the rare home where the seller has plenty of equity and is willing to price the house aggressively. There is simply no reason to buy an overpriced house.
Quote:
Originally Posted by wheelsup
I'm not sure I agree.
A 500k mortgage @ 5% will yield an interest payment of around $24k your first year.
Assuming a 33% top tax bracket you'd only get $8k in reduced taxes.
So paying $24k to get back $8k makes someone dumb? That's a loss of $16k.
A 500k mortgage @ 5% will yield an interest payment of around $24k your first year.
Assuming a 33% top tax bracket you'd only get $8k in reduced taxes.
So paying $24k to get back $8k makes someone dumb? That's a loss of $16k.
That's not how it works. You've borrowed money at 5% and would have to be completely inept at investing not to bring in at least 10% a year (missing very few years) over the course of a 30 year mortgage. Most years you should be able to bring in more than 10%.
OR you can pay cash for the house so that cash used is gone gone gone. Can't make any money on it.
Nogard13 is totally right. Check with any decent financial planner and they will tell you the same. The ONLY reason to pay cash for a home is peace of mind--knowing you fully own the home and no matter what lies ahead, it's yours. For some people, that is worth it. Peace of mind should not be discounted, but understand that this approach is not the best financial approach.
As for Chapel Hill, if your sole reason for buying is investment, then keep lowballing and see what happens--you might hit on someone who bites. But if you are trying to time the market perfectly, that's impossible. Or if you want to be able to settle in, call it "home" and move on with your life, then buy what you love, and over time you'll do fine. Just don't check the value of your home every 6 months--check it in 5 years.
Also years ago middle income folks were getting interest only mortgages to buy homes at that price range. I remember an article in Atlanta about a cop and a social worker buying a half million dollar home on interest only payments. They were losing their house when the loan reset. That option just isn't available anymore and as such the amount of buyers in that range are extremely small. Couple that with the fact that less people are moving here from out of state and if they are they are selling their homes for less up there and you have a perfect storm.
Don't take this the wrong way, as your family earns way more than mine, but personally just IMO if you have to get a loan on a $600k house you're buying too much. The kind of people that buy half million dollar plus homes typically pay cash, or at least the ones in my family do. They can generate all kinds of income and it doesn't take long to save for an all-cash transaction.
Hey, I saw that one too and almost fell off the elliptical machine.
What on Earth made this couple believe they could afford a bloated temple to American greed?
What galls me is that I rent an apartment but get smacked by taxes. Someone can borrow up to $1 million and get the tax code to subsidize up to over 30% of the interest based on their marginal tax rate.
What galls me is that I rent an apartment but get smacked by taxes. Someone can borrow up to $1 million and get the tax code to subsidize up to over 30% of the interest based on their marginal tax rate.
So, how are we who try to be frugal rewarded?
The rich pay a HUGE amount in taxes, make no mistake. It's a misconception that they somehow avoid most taxes. Makes a great story to hate them for not paying their share, but they do pay their share. They also are the major contributor to charities and w/o their money, most charities subsidizing those at the lower end of the income spectrum would cease to exist.
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Best strategy?
