Free Ebook.

Enter your email address:

Delivered by FeedBurner

« The Good Life After Being Fired | Main | Details on Cash for Clunkers »

July 28, 2009


Feed You can follow this conversation by subscribing to the comment feed for this post.

We just bought a foreclosure a month ago.

In our market at least (Minneapolis) and in the price range we were looking at ($100,000 +/0 $15,000) there wasn't really an option to underoffer. Anything under $150,000 was selling very quickly. We offered on one house, and were beat out. The next two houses we wanted to see were sold before we could put together an offer.

At least in that price range it seems that 1st time home buyers and investors are still moving property fairly quickly.

Also, many of the holding banks claim that they will not negotiate/counter-offer. Maybe in slower markets and price ranges they will, but when they're getting good offers without counter-offering, I don't see why they would.

We got 4.875% on a fixed rate 30 year mortgage and put 10% down. We are eager to get our $8000 tax credit, and are also going to be using the 30%/$1500 tax credit for a new AC and Furnace.

It needs some repairs, but I'm handy and we love having our own place at a reasonable price!

We're building a custom house, and we got some fantastic concessions from the builder AND we'll be getting the $8,000 tax credit because this is our first home! Even in a down market, based on comps in the neighborhood we'll have instant equity on the house when we close, and we expect things to only go up from there since this is a desireable and developing area. And it's going to be exactly how we want it!

One more potential benefit of buying now...

If your house value goes up, you may reach 20% equity faster than you would just paying off your mortgage. The increased equity may allow you to escape PMI earlier than if you just counted payments.

Instant equity- there's a phrase the knife catchers will live to regret uttering.

Real estate is local, so indeed there are a few areas that never truly participated in the bubble and are probably good buys with today's low rates. Then, on the other hand, we have the other 2/3 of the country, where foreclosures continue to skyrocket, no matter what our pathetic government tries to do to stop them. Good luck knife catchers! I'll wait another year or so for even more blood to be in the streets

There are two shoes to drop on the real estate market. One, the resets and recasts for the adjustable rate Alt-A and Prime loans are set for 2010 and 2011. This means more foreclosures. Also, there is a huge number of foreclosures that banks have yet to put to market for fear of sending prices lower. On top of that shadow inventory, there are numerous people who want to sell and now that the press is calling a bottom, we may see them jump in. Hence, inventories will probably rise further.

Second, rates could see an increase over the next year or so. If rates jump 2%, then affordability goes bye-bye as affordability would require a 20% drop in home prices.

Most bear markets overshoot, and they lure investors with a head fake bull rally. I think those who jump in now will probably see some further home depreciation. I would recommend holding a bit longer.

I have purchased 4 properties in the Minneapolis Area in the last 12 months so I have experienced all this first hand and I can attest to the fact that Michael is spot on. Last year, and especially last fall/winter was the time when you could make low ball offers. After the forclosure moratorium went in place new inventory didn't come on the market and demand started to outstrip new supply. Add in the 8K credit and the new dip down in mortgage rates and the Minneapolis market at the low end has literally been in frenzy mode the last 4 months. A property comes on the market and if it's priced reasonably, it gets 5-10 offers in less than a week and it will almost surely sell above ask, sometimes as much as 10k above ask.

So while the advice in this article may be good with respect to now being a decent time to buy, atleast in the Minneapolis area it is way off on the advice to make low ball offers. Doing so here (and I have heard in many other places too) is a big waste of time. You will lose to other aggresive bidders.

When more inventory comes on this fall from the forclosure moratorium being lifted (it's 6 months from forclosure to market) then maybe you can offer under ask again, but for now the advice to make low ball offers is either 8 months to late or 4 months to early. 50% of ask seems a bit aggressive though. I don't know of any bank that would even respond to an offer like that on a forclosed property. Maybe a desparate home owner (although they will likely be offended) but a bank will almost surely just throw your offer in the trash without even acknowledging it.


You may be right, but you think when the press calls a bottom that's when people want to sell? Is that when you sell your stocks? I don't know of anyone who wants to sell at the bottom.

Most people rent out the house and are waiting if they can. The moratorium on foreclosures distorts the market as well, so does the FED backstops of the garbage assets that a lot of banks are holding.

Be careful here- rule of thumb would be to buy if the mortgage payment is similar to the rental income you'd pay to live there minus taxes. Also another rule of thumb is if the property is less than 2-3 times your annual gross salary, it's probably managable. Be careful because if interest rates rise and you have a non-fixed mortgage, that house could get expensive fast.


I have been taking a serious look at my local housing market lately. I agree with the author that this year is a great time to buy.

Lots of good analysis there as to why and when the housing market was going to collapse (and good advice on how to buy back in). What I don't see is any analysis as to why the market is near a bottom (except for the "blood in the streets" quote, which I heard a lot of folks say when they doubled down on the market when it hit bear territory at S&P 1250).

The comments to this entry are closed.

Start a Blog


  • Any information shared on Free Money Finance does not constitute financial advice. The Website is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You are advised to discuss your specific requirements with an independent financial adviser. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. All posts are © 2005-2012, Free Money Finance.