“Let’s face it – most of us would like to buy more home than we can afford.”

This is how the article opens up.  Really?  Is that really true for most of us?  Or is it just true for those who can’t really do math?

Next it goes on:

Suppose you see a house that you really like that is listed for sale for $800,000. You are going to make a 20% down payment. You want to offer $775,000.

….

You are worried that the seller is not going to accept this reduced price offer, and you certainly don’t want to insult them, because you truly want the house. So you decide to use the seller paid buydown strategy.

Lets do the math here. 775k on a 800k home is 96.9% of the listing price.  In San Mateo/Burlingame/Belmont the average sale to list ratio is about 96% to 98% so I would say that 775k is a VERY reasonable offer, and I highly doubt that it would insult a seller.   Seriously, some of the troubled sellers would be ecstatic to get such an offer.

Next this broker reveals the strategy he is proposing.

Instead of offering $775,000, you make a full price offer of $800,000, and you ask the seller to credit $25,000 toward your closing costs.

What do you do with this $25,000 credit? You buy the interest rate down to 4.25% by paying almost 4 points, for example.

By buying the rate down to 4.25%, your monthly payment has been reduced to $3149 per month. The property taxes are slightly higher, $733 per month. The down payment is $5000 more. But look at the impact this strategy has – a monthly savings of $397 per month!

Now, here is the icing on the cake – although the seller made a contribution to buy your rate down, you get the tax deduction for the $25,000 in points paid all in the year that you purchase (check with your tax preparer to verify)!

Wow!  A savings of $397 per month!!!  Guess how much money you just let the bank  earn here.  $25,000 on the 4 points upfront, and 30 years of interest on an extra $20000 of principal.  Of course, a bigger loan is better for the mortgage broker if they are taking a fee from this.  So this is very good for the broker, but not necessary great for the consumer.  Seriously, who in their right mind  does a 4 point buy down?  It is much cheaper to offer the lower price, and then pay 1 point or less to do a refinance later if  interest rates come down.

The bottom line is that I don’t think buyers should be worried that they will be insulting a seller with an offer lower than the listing price. I think everyone should always offer what you are comfortable with and what you can afford.  If your offer isn’t accepted then just move on.  In the example given by this broker, if an offer of $678,500 were accepted then that would also lower monthly mortgage by more than $400, and the buyer would save around 25k in downpayment.   It is not like we haven’t seen homes drop more than $120k from their original listing prices here.

1532 CAROL Ave Burlingame, CA 94010

Price: $1,339,000

Last sale:

Loss if sold for asking: $12,000 or 0.9%

The interesting thing about Burlingame is that the listing price per square foot is much higher than the sold price per square foot.  Here is the graph:

So it seems that Burlingame sellers are all still holding their prices high, but the ones that sell are much much cheaper.  If this particular home were at the Burlingame average of $620 per square foot, then it would be  at only $1.07 million.  Perhaps that would be a better starting price?

1233 BELLEVUE Ave #1 Burlingame, CA 94010

Price: $818,000

Last sale:

Loss if sold for asking: $51,000 or 5.9%

This actually looks like a well maintained townhome in a good part of Burlingame.  However, buying this home at the current price would work out to be quite a bit more than just renting in the same area.   Looks like there are no defaults or late payments on this home so it may take a while for the price to be lowered because I don’t think the owners are that desperate.  There are open homes scheduled for three Sundays starting this Sunday.  You can see it on 2/22, 3/1, and 3/8 from 2 to 4 pm.

1344 BERNAL Ave Burlingame, CA 94010

Price: $1,385,000

Last sale: Aug 17, 2006 Sold $1,425,000
Loss if sold for asking: $40000 or 2.8%

I’m not quite sure what the realtor means when he says “Absolutely Done!!!”  He seems very fond of exclamation marks and I hope he does not talk like that in real life.  Anyway, this property has showings for the next 3 Sundays from 2:00pm to 4:00pm.  I would wait for the owners to reduce the price on this puppy since it is about $130 or about 20%  more per square foot than the median in Burlingame, and Redfin stated that Burlingame is one of the cities   with the most price reductions.     Chances are the owners of this lovely property will realize that they priced their home too high.

Interestingly enough, East Palo Alto and Daly City actually made the list for least discounted.  That is probably because most of the listings in these cities are  bank owned and so the starting price tend to be very low.  The report mentioned that East Palo Alto actually had homes sell for above asking, and I’m not really surprised because there are decent single family ranchers selling for under $200,000 now in East Palo Alto.  I’ve been to that city many many times, and some areas are not that scary looking.

So the lesson to sellers here is that they should not overprice their homes.  If they don’t hold on to unrealistic expectations of what their home is worth then they might sell their homes quicker.

1561 WESTMOOR Rd Burlingame, CA 94010

Price: $775,000

Last sale:

Loss if sold for asking: $75,000 or 8.8%

Sep 05, 2008 Listed

Here is another Burlingame rancher that’s being listed for way too much.  Seems like it took just about 2.5 months to sell in 2006.  I wonder how long it is going to take this time.  Open house is today 1/25 from 1pm to 4pm.

Price: $1,298,000

Last sale:

Loss if sold for asking: $2000 or 0.2%

In any other place, this is just a post war rancher that will probably sell for $200k or less, but here in Burlingame it’s $1.298 million.  There doesn’t seem to be much to justify this price.  The current owner took out a $960k adjustable loan in 2005, and perhaps it’s adjusting soon.  Anyway, this home is overpriced even for Burlingame.  A comparable property that’s larger than this home is at 1641 Albemarle Way and is around $300k less.  Both properties have open homes this weekend on 1/25 from 1pm to 4pm.

1561 WESTMOOR Rd Burlingame, CA 94010

Price: $775,000

Last sale: Aug 28, 2006 Sold $850,000

Loss if sold for asking: $75000 or  8.8%

This small pre-World War 2 home is pretty much backed up onto El Camino Real so it might be a little bit noisy and it is still $705 per square foot .  There is an open house this weekend on 1/25/09 from 1 to 4.

3115 Canyon Rd Burlingame, CA 94010

Price: $1,599,000

Last sale:

Loss if sold for asking: $281000 or $15.8%

The listing for this home doesn’t show that it’s bank owned, but if you look up the county tax records it shows the address of the owner as 7255 BAYMEADOWS WAY, JACKSONVILLE, FL.  It also had a tax default last year.  If you search for that address, it shows that it’s Washington Mutual, which is now JP Morgan Chase.  Whoo hoo I guess?  It’s probably possible to negotiate this back to pre-2004 prices since WaMu’s REO portfolio is humongous.

City of Atherton

Atherton currently has this home at 486 Walsh Rd listed for $175k below its 2000 sale price.  Its 2006 sale price is much lower, though.

City of Belmont

Now there are 8 properties in trouble in Belmont and that isn’t too big of a difference since last month.  One new property is at 1222 North Rd, and another property at 2824 Monte Cresta Dr.  just reduced its listing price for $100k, making it below its last sale price.

Raw data available: belmont930.csv

City of Brisbane

Brisbane’s number is down to 5.   There is nothing really new in this city.  Very few new listings were put up.

Raw data available:  brisbane930.csv

City of Burlingame

Burlingame is holding on to 5 troubled properties.  All of them are above the $1 million mark.

Raw data available: burlingame930.csv

City of Colma

531 B St was finally sold in September after being on the market for nearly a year.   528 B St is still on the market and suffered a $30k pricecut in September.

321 Hoffman St  is now pending with release after being relisted in September.

City of Daly City

The number of troubled properties in Daly City is now 166, and that’s a decrease of 21 from last month.  It seems that a lot of properties sold in August, and that corroborates the news today that home sales numbers went up.  The biggest loser of September is 185 Belcrest Ave, which is down more than $270k.  Another home of note is 467 Winchester, which is down more than $320k.  This reappeared on the market after it went off so it is a relist to freshen up the listing.

Anyway, here’s the full data: dalycity930.csv

East Palo Alto

Following the trend in Daly City, the number of troubled sellers also went down in East Palo Alto.  Now there are only 81 troubled sellers.  One listing of note is 1511 Kavanaugh Dr.  Supposedly this sold for only $1000 on 8/12/2008.  I’m not sure if that is a mistake or if it really sold for $1000.  Another listing I noticed is 2390 Dumbarton, which suffered  a $300k pricecut on 9/11/2008.  That’s a truly amazing pricecut on a house first listed for $496k.

Raw data available: epa930.csv

More to come!