My thoughts on the current real estate market

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StarRidgeAcres

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We recently learned that the home we lease (small farm house and 6 acres) is heading toward foreclosure. It wasn't overly surprising to learn since we've known for a while the owners are having financial difficulties. So we have to look for a place to buy. Although I knew it was coming, I'm still finding the process somewhat depressing. Dealing with lenders, seeing all the houses that are empty and losing value...it's just not pretty out there.

We started with lenders first so we'd know what price range to be looking in. I thought, going into this, that lenders had tightened their strings a bit and had become more conservative in what they'd lend. And I actually think that's a great idea. People do not need to be overextending themselves and when the lenders were allowing people to borrow more than they could pay for each month and allowing 2nd and 3rd mortgages and creating a whole population of folks that were upsidedown in their mortgages. But I'm sad to report that I think they are still up to some of the old (bad) policies. We both went to be pre-approved initially. They said together, our limit was $485k, or just Robert alone was $200k. I personally think both numbers are RIDICULOUS!
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We have ZERO business buying a half-million dollar property. We'd be totally overextended, imo. Why in the world would a lender want their customer to be in a situation where they'd have difficulty paying? Isn't that what we (collective we) just got out of? And if Robert were just by himself, I think $200k is too much. I just don't understand.
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So, we decided that since Robert is technically a first-time homebuyer, we will go with him getting the home in just his name. It means we can have several options open to us that we wouldn't if I'm also on it since I've owned before. There is one program that allows him to just put 3% down, another that allows for 5% down (as a seperate loan) and that loan is completely forgiven if he stays in the home for 5 years, an another means we have no PMI to pay. We haven't decided which way we're going, but there are some options and that's a good thing.

But the real driver behind our decision to look at properties that are $200k or less is that we want to keep our payment at $950 or less per month. That gives us the flexibility to pay it off in 15 years, instead of 30. I will be 60 and he'll be 48 and that sounds great to me! Also, if one of us should lose our job, we could still make the payment and not have to worry about losing our home. If we had a $2000 per month payment it would almost impossible to keep it up, for very long, if one of us lost our job. So why would a lender even consider that? I just don't get it.

The second part of this I'm finding depressing is the HUGE number of empty/foreclosed homes out there. To date, we have looked at 21 places. Of them, 19 were empty and foreclosures.
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I find that SO depressing.
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These homes were obviously loved at one time and now are running down, have the utilities turned off, some have frozen/broken pipes, some have been vandalized, etc. It's just so sad. They will need thousands in work to repair them/bring them back to life. One we looked at and really like its potential is a 3br, 3ba, 2200sf ranch, kitchen, breakfast room, dining room, living room and great room and a full/partially finished walk-out basement. The home has real hardwood floors and a great layout. The property is 6 acres with an old barn and a new (early 2011) Morton building with concrete floor (30x55) and also a pool. It is listed (the bank owns it) for $100,000. It will take, we estimate, $35k to get it livable. But where else in the world would we find all this for $135,000????
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It's crazy. And there are TONS of properties out there just like this. The only difficulty we are having is finding ones with flat enough land for the horses and close enough for the drive to work. If those two things weren't considerations, we'd have our pick of just about anything we want.

My last thought comes from our agent. He is someone I met about 20 years ago when I also was a licensed Realtor. We've remained friends ever since. He is probably in his upper 60's now and is very successful, even in this market, in what he does. Sadly, he told us he doesn't think we've hit the real bottom yet and he also thinks the market won't turn around (completely) in his lifetime. That really bums me out. Things are already so bad, I just can't imagine it getting worse before it gets better.

So, now that I've thoroughly depressed the rest of you, what are your thoughts/experiences? Is it as bad in your area? Is this just a mid-west thing?

I'm excited about getting "our" place, but learning the banks really haven't changed their ways and seeing how despressed the market really is has made it kind of a bummer. I guess it's a good time to be a buyer, but it's so sad for the sellers. Many of the homes we're seeing have been on the market for well over a year....with no nibbles in sight.
 
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A family member is currently looking to buy. He looked at a foreclosed property, but unfortunately the ten acres it was on was getting rezoned as industrial, making the home value gone down and the property tax go up in the end.

I know you don't have much leeway with foreclosed properties as far as making offers, the price is pretty much what it is marked at. They may look at offers that are close but tend to take forever responding to them, likely waiting for other buyers willing to pay the asking foreclosed price. The pipes in foreclosed properties are usually cut. This is so all the water is drained, they will not freeze, and I am sure there is a slew of other reasons, but it is common practice and usually a required procedure in a foreclosed property.

There are many foreclosed properties in the small towns around here, but very very few that have acreage and aren't in total direpair in this area.

Regardless, the loan procedures as far as proof of income and identity have tightened up significantly since his last home purchase but the allowance given for a line of credit when being pre approved was stll absurd.
 
If you have a good credit rating, then the bank will loan what they feel you can afford (they are not taking in account of other bills you actually owe for the most part)....thats how people got into the bad situations....people who make $50k know they can not afford a half a million dollar home, it's about being realistic and knowing your limits, unfortinately many felt 'well the bank gave it to me so I can do it'. I really believe thats an attitude that got people into thier bad situations...this attitude did not exist a dozen years ago....my mother who is now
 
....my mother who is now 70 just said recently that when her and my father bought their first house many moons ago that the bank was willing to loan them over $80k on a salary of $15k, they knew with three kids this was no way realistic so instead they opted for a $28k house and still struggled but they made it....I do feel sorry for those who have lost their houses (especially those who have lost their jobs) but many were not thinking realistically...I would never think of taking on a mortgage more than twice my salary, but people do it and then they are surprised when the numbers don't work. Its basic math. On the up side for you this is a buyers market, and your purchase helps the economy, you will be able to get a great deal if you play it right. Good luck, hope you find the place of your dreams. (sorry this is two posts, working on a tab that I am not real good with)
 
Why not try to buy the house you are currently in.It would help the (now) owners and you may get it at a good price.Plus, you wouldn't have to move.Just a thought.
 
We did briefly consider buying the home we're in now. However, it doesn't look like that is a viable option. The current mortgage is assumable, but the amount owed is $70k more than it's worth. The owners have asked their lender about a short sale, but they were told no. It's heartbreaking for them I'm sure. And probably very frustrating as well.
 
These banks and lending institutions are setting people up for failure. I cannot believe the way things are being done. What the heck are they thinking! They are helping desperate people get into debt.

I wanted to sell our 15 acres in the valley but we wouldn't get nearly what it was appraised for so we're sitting on it and working on it for the time being. Hus wants to sell our mountain home but same thing, we may not even get what its appraised for either right now so we're in a holding pattern. Our plans are flexible because I'm not about to take a bath on either place.

There are foreclosures here too and its a buyers market. You'd get exactly what you wanted here for a song right now. On the other hand, Amazon, Volkswagon, and a couple other very large companies have located to Chattanooga with pilot offices this way so people are flocking here for work and to buy property. Gads we're even getting two new fast food places too! Homes are being built which is keeping my son's company busy so I think things are going to be breaking loose pretty quickly in my neck of the woods.
 
If you want the mortgage in Roberts name only, be sure you have your name put on the deed. Heck, I can't even get a phone in my name because all the bills are in Hus's name only. Also do check out an FFA loan. I think its call FFA ......
 
but the allowance given for a line of credit when being pre approved was stll absurd.
This is what has blown my mind also! I agree it is up to each of us as individuals to make sound decisions and not get into more than we can handle, but I think it's still too lenient to allow people to buy at 2X their salary. Or more. If you make $100k per year, I think a $200k home should do you. Maybe it's just me. I think with Robert, based on his age, never buying before, not having a lot of credit, etc., they were fairly close to where they should be. But when he got the approval letter, they told him this is the "low" end. You can actually get more if you wish. Seriously? He's technically "one" person in this scenario and he shouldn't need more. The loan person said just come back when you've found a place you want to put an offer on and we'll provide you with the "real" letter at that time.
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If you want the mortgage in Roberts name only, be sure you have your name put on the deed. Heck, I can't even get a phone in my name because all the bills are in Hus's name only. Also do check out an FFA loan. I think its call FFA ......

Yes, Robert's name is the only one that will go on the deed. Once we're married (after we buy) we'll both be on it. And I think you mean FHA? That is one of the options he's been offered. The loan for the repair/updating/remodeling on a foreclosure is a 203K I believe.
 
Some additional anecdotes...

The home I lived in when I was married was purchased by me only (my husband wasn't working outside the home) in 2003 for $242,000. After we moved in, we got an equity LOC to finish the concrete work ($10k) and some finish work in the barn and also the floors on the main level of the house). When I sold it in 2009, I let it go for $218,000 and owed $216,000. It was purchased by a young couple who have since lost it to foreclosure. I looked it up recently and it's now for sale, by the bank, for $149,900. How sad is that?
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Another story... A friend at work purchased her home 3 years ago for $270,000. Her husband recently lost his job so they would like to downsize. Plus she is in her late 50's and doesn't want to work for the rest of her life. She had her home appraised two weeks ago by an independent appraiser, so there was no "number" to hit for mortgage purposes, just the real number. It appraised for $199,000. She owes $201,000.
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And my last one for the night. (I need to stop thinking about this because it's making my blood boil!) My work "husband"
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Doug recently came into some money through an inheritance. He paid off his home with it. He lives in a cookie-cutter subdivision (I can't STAND those!). He bought 4 years ago for $344,000. He owed $250ish. He paid the balance. The identical home to his, in age, floor plan, finishes (with the exception of no granite), etc. is still being built today in another section of his subdivision. It's being marketed at $199,000.
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In the next year or 2 I would like to buy a little ranch , with 5 acres somewhere in the uSA , where there are no earthquakes or tornadoes ( sorry Kansas, and California ) no large reptiles that would eat my chihuahua either , sorry Arizona . I live over seas , and toy with the idea of renting it out to someone very responsible at a great price to keep it up . I would like to retire in 15
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or so years from now , and move there . Is this a crazy idea? Are there people out there that would nurture a farm , keep it in order , fix the small things , and call for assistance on the bigger things and be honest , not ruin my place ? It would be a win ,win , situation for both of us .
 
We have a large 300 acre farm in Vermont. Just a few years ago, we could have probably sold it within a month for top dollar. Now, we'd have to virtually give it away. The market is stressed in this area and not much is selling. We also have a ranch in South East Missouri which we tried to sell but even at a giveaway price, just no interest. One person looked at it. Our agent there says lots of people are looking but not much actual buying activity. On the other hand, I think it's a great time to be a buyer. Prices are so soft and lots of people are willing to negotiate so there are some fantastic deals out there. It's very sad to see foreclosed homes and to think of all the sadness and turmoil in people's lives. I'm not talking about people who were flipping properties for profit but people who had homes they just couldn't hold onto any longer because of job losses. Very sad. Kind of reminds me of the auction thread on the main board with so many horses losing their homes as well.
 
In this area housing prices are good. Very good. There is a housing shortage in town so everything is selling at premium price. Anyone who bought 20 years ago or even 10 years ago could sell now for a huge profit. People who bought new homes 2 to 5 years ago are selling now for sizable profits. Even rural properties--anything within 30 minutes of town (I say town but it's really a small city) is selling high. If you go further out, to some of the smaller communities or acreages that are 40-60 minutes out of town then you will find some more reasonably priced homes.

When we purchased this property in December 1985 the 5 acre lots in this subdivision were selling for around $8500. When the lot next to us went up for sale in the mid 90's the guy was asking $12000, which we thought was too much. We were stupid--we should have bought it for that price. Now I'm told that 5 acre lots here have been selling for $35000 and $50000. Unbelievable!
 
Here houses are not depressed, more of a "normal" market I guess, not super high, but still selling, and not a lot of foreclosures. BUT, farmland is insanely high priced! Ethanol and the subsidies that are allowing it to be profitable have taken corn prices so high, that farmers are flush with cash, and willing to pay top dollar (and then some) for farm land. We rented my husband's aunt's land (20 acres), when she passed, the family sold it - but wanted more money than we wanted to pay, so we helped a neighbor get it at $5500 per acre. Since then (last October) land here is now selling for $10,000 / acre OR MORE. A 200 acre farm not far from us started a bidding war between two neighboring farmers and went for $20,000 per acre at auction a month ago.

We toyed with the idea of buying an investment / winter property in Georgia last winter, and in fact I looked at several places on a business trip to Atlanta, but we decided the whole "absentee landlord" thing was going to be more work and worry than it was worth - although I have to say, there were some pretty sweet deals on horse properties there at that time.
 
Around here there are a number of foreclosed properties, including one about a mile away with a huge house, several acres, run in sheds, several turnouts, 11 stall big horse barn... and an indoor arena that collapsed this past year under the snow. That is common around here that collapsed farm buildings haven't been fixed to add to the problems. Very depressing. We consider ourselves very lucky that we were not-overextended, so when my husband lost his job last year we have been able to manage and even re-finance at a much lower rate. And even buy another mini!

Here is something to think about - when I was 26 years old and single (back in 1971) when it was almost unheard of for single women to buy property, I purchased a house on 2.5 acres to have my horses in my backyard. The cost - $19,900, and that mortgage rate was about 7 1/4%. Even in this horrible market, that house must be worth at least $200,000 today. The guidelines in those days were to pay no more than 2.5 times your annual income for your house. I think it might be a good thing if those guidelines were revived - or ANY guidelines at all.
 
I haven't checked in our area but I imagine land prices are going up in a big way. I know there is no way we would let our place go unless it was a huge offer as we are sitting on top of the Utica Shale. Gas leases are going up in price, around $5,000 per acre and the owners also get royalties for any gas or oil taken from their property. We are part of a large group that has banded together and hired a lawyer so we can get prime dollar in leases and also make sure we have very tight contracts in place to protect the environment from any "mistakes" made by the oil company.

We will see how it shakes out, I have hopes (but like Charlie Brown and Lucy with the football, don't want to fall on my butt counting on it).

I will be eligible to retire in about 4 years (actually could now at a reduced rate), but can't afford to keep up our lifestyle without this ship coming in. Otherwise I keep working.
 
Southwestern Ontario rural properties are selling around 10,000.00 per workable acre.

A 100 acre farm on the edge of Clinton, a neighbouring town sold for 1,100,000.00 to the adjacent farmer with a dairy quota.
 
You know, I think things have become a ridiculous mess, in part because the Government was mandating that banks give the American dream out for pennies on the dollar... I used to be a mortgage loan officer, in the early - mid 90's, but it was for "the" home town bank. It was 20% down, none of which could have been borrowed, and strict debt to income ratios. My first 3 questions were: How will you pay us back? How will you pay us back? and How will you pay us back?

People were NEVER late on the payments. H and I have a LITTLE house, like 1600 square feet MAYBE. Still, what do we do? We use the living room, kitchen and bedroom. Have 2 bedrooms and a Florida room we don't use at all and the dining room... I think I ate in there 1x twelve years ago -- in other words, small but more than what we "need" or even use. But, regardless, I love it... Little 1950's red brick Sears home
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This is "all" we have. Could have more, but why sweat it over rooms we wouldn't even use? Plus, who wants to spend too much time INSIDE a house when horses are outside?
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I have been reading this with alot of interest. We bought our place in 1982...The real estate agents kept telling us we could afford xxx.xx for a monthly payment.....we knew what we could afford and stuck to it. We were able to buy this due to a divorce, paid just the market price at the time, had to get a 2nd mortgage to make up some difference and the interest rate was 18%...and we considered ourselves lucky......we refinanced about a year later to put up a barn and the interest rates had fallen so much in that year that the payments were less but we had a barn. Yes the house is small, but it is only the two of us....and yes we spend most of our tme outside when weather is decent. And i hate to clean.....so it all worked.

Whole point is the real estate and mortgage market is a mess.......buy what you can afford and be able to sleep at night. My husband was laid off in Sept. still looking for job and we are doing fine, yes we have cut back but we are okay......
 

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