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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Tue Jul 10, 2007 5:55 pm GMT    Post subject: Reply with quote

It sounds like a great set up. I think your homework paid off. Until you close, I'd work the phones pretty hard because it sounds like you've got some red tape with a lot of players. A good thing to do is call someone and say "Do you have everything you need to do your work?", or "What are you waiting for from anyone else?" and the old "What are the next steps that you do and what everyone else does that relates to your work?". Follow up with "When do you think you'll have that together" and "I'll get back to you later on today to check in."

Keep your eye on the 10 year yield, that will give you an indication on whether or not rates are going up or down.

http://money.cnn.com/markets/bondcenter/index.html

If the place has gas heat, I think the gas company will give you the high and low month heating bills. If it's oil, check out Joe Kennedy's company.

http://www.massresources.org/pages.cfm?contentID=41&pageID=14&Subpages=yes

Are you getting the refrig.? If you're bringing your own, check the size of the opening to see if it fits...

Do you recommend that homebuyer 101 class? You got a little over 11% off of asking so that's not too bad. If the condo went on the market this past season, it was most likely price adjusted and included a portion of the 2006 drop, so you most likely got it for about 16% or so from 2005 prices. What do you think this place would have sold for in 2005 if you had to guess? Did you have an agent? Congrat's again.
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Dorchester grandma
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PostPosted: Tue Jul 10, 2007 11:00 pm GMT    Post subject: new condo Reply with quote

John P. says

Quote:
Do you recommend that homebuyer 101 class? You got a little over 11% off of asking so that's not too bad. If the condo went on the market this past season, it was most likely price adjusted and included a portion of the 2006 drop, so you most likely got it for about 16% or so from 2005 prices. What do you think this place would have sold for in 2005 if you had to guess? Did you have an agent? Congrat's again.


Yes, I am so glad that I took the 101 class. Although many of the lessons went over my head at the time I took the class, it all makes sense now that I have actually been searching and schlepping to places. The Allston Brighton CDC has pointed me toward good loan officers and home inspectors (I used Tiger). I did have another loan officer until recently but he stopped returning my calls, undoubtedly after 3 home inspections figuring that I was not ever going to buy. I called the CDC and got another.

I like being able to call their home buying specialist with any problems that I have encountered and there have been many. The CDC counselor helped me during the asbestos fiasco by reminding me that I, the buyer, am the one who is in charge and not to forget that. Another word of wisdom "Don't fall in love with a place until you have the key in your hand."
I have a real estate agent from Haverhill who has stuck by me for the last two years that I have been looking. I find that I can trust him. I had another before but he disappeared when I looked at so many and did not buy.

I think that the place went on the market originally for 195. I found it listed at 175 and buying for 155, My realtor looked up the history of the seller's prices and knew that we could make a low offer because it had been on the market for over a year. I don't see how this condo could have brought 195 as it is relatively small. I know that she paid 169.

The loan officer tells me that the closing costs cover the attorney who will also look over the condo docs for me. Complete closing cost is $3200 which includes application fee.

Yes I have a fridge which is an Energy Star and only 3 years old. The fridge that is there looks to be larger or the same. One will go into my storage place in the basement to sell. I will bring my own washer and store the one provided as well. I will miss the back porch with the wash lines. I have saved some money by hanging out clothes (no dryer) I could not find anything with a porch and a yard in my price range so I settled on having a nice yard.
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Jul 11, 2007 8:43 pm GMT    Post subject: Reply with quote

80% of the asking price of $195k (2006 price) is $156k. So what you're saying is that you got this place for 20% off of original asking price?

To all of those who are waiting for a correction, consider this: If this place went on the market in Spring of 2005 the asking price may have even been a bit higher, say $205k ($155k is about 24% off of that). If you account for inflation of 2 years (2005/06, 2006/7) that's pretty pronounced already. I think it is safe to say that the market has done a good deal of a correction. If affordability is a big concern, wouldn't you think that the lower cost units would get the most traffic, and if this place went for 20% off of asking, what's a 1 1/2 bath cape asking $879k going to go for?

http://homes.realtor.com/ ...truncated...

Editor's Note: This post was edited to abbreviate a URL which was widening the page due to the way that the forum software lays out posts. No other changes have been made, and the URL still points to the original destination - only its display has been shortened.
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shall I buy?
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PostPosted: Tue Jul 17, 2007 2:59 pm GMT    Post subject: Buying in Watertown Reply with quote

I have noticed that several people on this site are quite educated when it comes to RE. I am not. I have, however, come across a house that is ideal for my family, a toddler and one in the oven. But as you know, the price is quite high compared to historical norms--$615,000. I can come up with a sizeable down payment, around 200k and can handle the 30 year mortgage if we watch our pennies closely or the first few years. The house is quite special, but Watertown schools are not the best. I consulted with a friend of mine who has made a killing in real estate over the years. She said that the areas immediately surrounding Boston are probably not going to suffer as much as others, such that prices may actually remain the level, while dropping in real terms. Though I was not inclined to agree with this one year ago. I am now inclined to agree, as I have seen houses in Newton flying off the market for outrageous prices. Does anyone have an opinion on this? Any advice?
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Tue Jul 17, 2007 3:52 pm GMT    Post subject: Reply with quote

If you've got $200k to put down, you're in a very good position. Do you own something? Personally, I'd choose a Wakefield over a Watertown right now (better value and it seems more open and liveable). If you're into the MetroWest, Wayland is pretty good. Medfield has good schools and is worth a ride out to see.

If you can buy a houe for $615k, you're doing something right or you've got rich parents or something. You owe it to yourself to do a lot of research. It wouldn't be fair to throw that money away because you didn't put your time in to do your homework.

Watertown has a great hamburger jointed called "Wild Willies". The owner is pretty cool. Get the fries and a vanilla frappe to wash it down. The "Meat Spot" is a nice sandwich place too.
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PostPosted: Tue Jul 17, 2007 7:04 pm GMT    Post subject: Buying in Watertown Reply with quote

Thank you for the input. Despite the fact that I have a large chunk of change, I am not really financially savvy. In all honesty much of the money is from dumb luck. I am one of the beneficiaries of the bubble. I purchased a condo in DC right after 9/11 when prices slumped. It doubled; I sold. Then I purchased land in VA near Charlottesville. It tripled; I sold. None of this was to make money, it was simply to have a place to live. But now I see that I did nothing to deserve the windfall. That being said, I do not want to lose the money by putting money into a depreciating asset.

The places you mentioned would all require a two car family. By my calculations a second car would cost 5k a year extra in today's dollars and I would rather put that money into home. I especially like the fact that from Watertown or West Newton I can bike to work in about 20 minutes.

The real question for anyone who knows the area well is whether or not it is accurate to say that prices in areas such as Newton and Watertown will most likely remain steady over the next several years and not suffer the consequences of the bubble.

I also need help with math. I realize that there are many factors that the traditional rent vs. own calculators do not take into consideration and wonder what all the factors are that should be considered. If anyone has any input, I will probably sit down over the weekend and crunch the numbers as best I can.

I will also be sure to go to Wild Willies for a burger!

Thanks,

SIB
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PostPosted: Tue Jul 17, 2007 7:29 pm GMT    Post subject: Watertown Prices Reply with quote

Watertown is a different beast when comparing most towns (like Newton). Their isn't alot of houses on the market because houses are kept within the families for a very long time. Because Watertown is soo close to the Pike and doesnt have alot of listings, it keeps the values high. But if you go to the next town over (Waltham) you would find a different type of town and probably find a better deal.
I dont have the numbers for Newton but McManions near me just sit and sit. Anything in the $400k-$800k range are getting scooped up if they are priced right. Ive seen too many $500k 1200sq ranches that just sit.


Watertown numbers As of July 7th, 2007….
Active Listings (30)
List Price Beds/Baths Sq. Ft.
Average Price $577,040.00 3/3 1531
Median Price $529,900.00 4/1 1650

Pending Listings (15)
List Price Beds/Baths Sq. Ft.
Average Price $477,529.00 3/1 1506
Median Price $469,900.00 4/2 2588

Listings Sold in Last 90 Days (25)
List Price Beds/Baths Sq. Ft.
Average Price $535,856.00 3/2 2125
Median Price $509,000.00 3/2 1840

===============================================================

As of July 2006…

Active Listings (39)
List Price Beds/Baths Sq. Ft.
Average Price $610,472.00 4/1 2112
Median Price $539,000.00 3/2 1938

Pending Listings (11)
List Price Beds/Baths Sq. Ft.
Average Price $656,691.00 4/3 2400
Median Price $674,999.00 4/3 2400

Listings Sold in Last 90 Days (20)
List Price Beds/Baths Sq. Ft.
Average Price $509,340.00 3/1 1811
Median Price $459,900.00 4/1 1585
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Tue Jul 17, 2007 7:41 pm GMT    Post subject: Reply with quote

http://www.bostonbubble.com/sup/bubblechart_from_john_20060501.xls

This is what I used. Get your mortgage rate from

www.loansnap.com check today's rates (they are in my opinion the closest).

You can call the gas company to get the high and low month's bill for that property.

I lived in Waltham for a year and I am very good friends with someone who owns property in Newton, Waltham, Weston, Brighton..... He swears by Newton. He pointed out tons of houses that have skyrocketed in value over the years. I found it to be expensive and the living spaces indoor and out to be tight for the money. There are some really quiet and safe neighborhoods very close to Boston and the schools are great. I think people will always want Newton so it is a decent investment long term. West Newton is very nice. The "Lake" is a fun neighborhood, try Antonnies for a cannoli. Matt LeBlanc and Joe Rogan came from this area.

So have you been to Mitchie's Tavern? How about Bill's BBQ and had a lime-aid? No Waffle Houses in Newton, but I think there is an IHOP along the river....

I wouldn't think about biking to work 20 minutes. Have you seen our winters here? The roads are a bit busy. I sat on a jury that heard a case where a guy on a bike got hit by car (and they sided with the driver of the car), so be careful.

My friend say's that Waltham will be up and coming because all the towns around it are very high end. You can get into town on the bus and it is a very nice down to earth community. Try Lizzy's Ice Cream and Jakes for ribs. Belmont is not bad; I think they have buses. Melrose is a nice place to look. I'm told there is a good supply of homes there.
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PostPosted: Wed Jul 18, 2007 3:26 am GMT    Post subject: Thanks Reply with quote

John P,

Thanks for the charts. They are quite useful. How did you figure the tax savings? Thanks also for the advice on places to eat. I will be sure to take advantage of this.

Waltham may be up and coming, but thus far it has not appealed to me. It may in the future. I think that prices there will take a big dive as the next wave of foreclosures ensues. Although my savings are substantial, my salary is modest, so I do not think Newton will be a possibility for me.

I am pretty committed to biking. Having only one car saves a big chunk of change, especially when calculated over the long haul. If the biker was negligent then the jury should have sided with him. My next door neighbor hit an old lady and the jury sided with him because she just waltzed out in front of his car. It is also a great way to get exercise without going to the gym. If I get exercise while commuting and do not pay for a second car, I save at least five hours a week and $500 a month--not a bad deal.

Thanks again,

SIB
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Jul 18, 2007 2:23 pm GMT    Post subject: Reply with quote

Taxable income:

Gross Income
minus 401k contribution or tax exempt investments

then you check these charts for your tax bracket (typ. between 25% and 33%

http://www.irs.gov/formspubs/article/0,,id=150856,00.html

tax shelter for property tax:

Then go to your town or city's website's tax assessor's page to see what the residential tax rate per thousand, and then look at your assessed value of your property. You can call them and ask if you don't know.

So say the tax rate is $10 per thousand and your house is assessed for $500k that would be $5000 a year for residential property taxes. $5k a year divided by 12 months is $416 per month needed to pay property taxes. So let's say your household salary is roughly between $72k and $154k and your tax bracket is 28%, take the $416k per month of real estate tax and 28% of it is sheltered so 416x.28 is the savings or $116.

tax shelter for mortgage interest:

this is a bit more tricky, but is fun to compute.

this website is pretty good

http://www.dinkytown.net/java/MortgagePayoff.html

If you punch in a note for 400k and whatever your term is i.e. 30 years and the interest rate, say 6.5 then hit "calculate" and then "view report" you can see the breakdown of each year's mortgage payment of how much of it is for principle and how much for interest. The portion for interest is sheltered from taxes. You will notice that the breakdown of interest to principal varies from year to year starting with a greater portion going to interest and it dials back as time goes by. This is called an amortization table, blah, blah.

Anyway, for the 30 year note of $400k at say 6.5 percent, year 1 you'd be paying $26,868 on taxes. If you shelter 28% of that or 26,868 x .28 you will shelter $7,523 per year or $627 per month.

Total tax shelter savings:

$116 for property tax shelter savings
$627 for mortgage interest tax shelter
sum
$742 total


Keep in mind:

1. When comparing rent to own, for renting if you don't itemize, you do get a tax deduction for the individual or joint deduction and for renting for state so you need to model that to be accurate.

2. If you're asking for more than $417k for a note, that is considered a "Jumbo" loan and has a higher rate than one for less.

3. A "conforming" loan I think means that you'd put 20% down and you hit certain fundamentals, so read the fine print with the teaser rates, if you're only planning to put down 5% that will change things.

4. PMI is mortgage insurance. If you don't pay 20%, the bank wants to feel comfortable so they have you take out insurance for the loan if you can't extend to 20%, that's PMI.

5. A "piggyback" loan is one where people put down 5%, borrow 15% at a bit higher rate (usually tied to the prime rate) and then a primary loan for the 80%. Even though you will have 15% at a higher interest rate, it often comes out cheaper than paying PMI (mortgage insurance).

Individual and Market Sweetspots:

My "sweetspot" was the low $500k's because 80% was just under the "jumbo" amount and it hit perfectly on the .28 percent of gross household income and about 3 times household income.

The "market sweetspot" aligned as well. We put an offer in on a house that was accepted for $515k for about a 2,500 gsf house. It fell through do to stuff... and I found a 3,500 gsf house in a much better neighborhood in the same town for $543k. At this point balls came into play as well as having a very supportive partner/teammate (my wife).

I had found that there was a very big jump in value in the market for not a big premium. The market doesn't follow a straight line at certain price strata.

You need to hunt around, know what your sweet spot is and align it where the market sweet spots are.
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Jul 18, 2007 7:46 pm GMT    Post subject: Reply with quote

Man, now that I'm thinking about it, if I had $200k, you have to think about how long that could turn into a million. I mean I don't know where you have that parked but I do think that you need to weigh where that money could do the most for you (invested in real estate or rent and invest in another vehicle).

I love your frugal style. After the John Mayer concert last night, I was talking with a guy at a bar who told me that he'd pay for an expensive car even if he lived 1/2 mile from work just to feel special in it.

The other thing I'd consider is that you did score $200k. If you went to Florida, you could buy a really nice place with a pool from a desperate seller for $350k and be a friggin pool-boy to service the small mortgage. You could be a driftwood scupltor or pick up sharks teeth and sell them to pay for the $150k mortgage. The burn rate up here is pretty high, your gas bill to heat your house here will cover the cost of the car down there. If you love your work up here, that's another thing. The reality is that money shifts from one asset to another. Most real estate agents and stock brokers don't have a clue and the money has to go somewhere so it falls into their laps. Well, it fell into yours and like you said if you put it into a falling asset, it might fall into somebody elses lap. You need to do some homework and explore all of your options. The fact that you don't make a big salary makes me think that why not move to a place where that doesn't hurt you as much. If you can get comperable pay in a lower cost of living and you have $200k, send me a post card.
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Jul 18, 2007 8:05 pm GMT    Post subject: Reply with quote

Hoooolly Smokes, I wasn't kidding.

http://homes.realtor.com/ ...truncated...

You and your family might have to shoe-horn yourselves in to this 5,000 s.f. 5 bed, 3 1/2 bath, home on the water for $400k.

And do you think there might be some room for negotiation? Try 851 properties in Port Saint Lucie for sale between $300k and $400k. I'd bet you could get that place for $320k.

So, either you go down and be a beach bum, or I will have to make fun of you when I see you with the wet black stripe on the back of your ass when you drive your bike to work in February. Just kidding, but think about it....

If you go down there go to Tulies and get the talapia Smile

Editor's Note: This post was edited to abbreviate a URL which was widening the page due to the way that the forum software lays out posts. No other changes have been made, and the URL still points to the original destination - only its display has been shortened.
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Mike



Joined: 01 Nov 2006
Posts: 28

PostPosted: Wed Jul 18, 2007 9:00 pm GMT    Post subject: Reply with quote

wow, john. do you just sit on realtor.com all day looking at houses? haha. that is one sweet house for $400k. i think i'm going to have to join my aunt one day in FL and just chill on the beach. work hard for 20 years here, then retire down there when the kids hit college. sounds good Cool
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Thu Jul 19, 2007 12:19 am GMT    Post subject: Reply with quote

It's pathetic, I know. I'm amped up about Admin's June report because it will unveil the peak of 2007.

I see the current market under some downward pressure. I see the stock market bubbling right now. I see Florida going through a more deep correction than Boston. What that all tells me is that if someone is planning on retiring and they just got a really big boost in equities (stocks) in the past year, they see their property value dropping and see a tremendous value opportunity (timing), you might see all those who hoped to get down to Florida just get enough of a reason to pull the trigger. If this happens, it will increase the supply of homes in Massachusetts. This past poster has made me aware that maybe you don't have to be actually retired to move; if you have a little nest egg and can buy down a big chunk on a nice house and you can have a mortgage payment the size of your cable bill, we might have more people leaving not just the retirees. I still stand my my earlier guess that the deep drop will occur this year and it will remain flat for a couple/three years (maybe a modest increase).
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