Meet today's buyer: A saver steps up

It's always interesting to hear from recent buyers, and this e-mail caught my eye. Because the buyer is still in escrow, he asked that I refer to him as "West L.A. Buyer." Here's his story:

"I just wanted to give you and the L.A. Land blog my experience with my recent house purchase. My bid was recently accepted and I am in escrow right now.

"To give you a little background on the kind of buyer I am, I saved roughly $120,000 over the past seven years. I saved it by driving a motorcycle and living in a one-bedroom apartment I sometimes shared. I got out of debt the first year and stayed out of debt, putting all my money into fairly conservative investments. Using that, together with some money from my parents and my fiancee, we were able to put down around 35 percent down on a $385,000 purchase.

"I did wait as I saw the market going up a few years ago and I think now is a good time to buy. Let me caution, though, that the market out there is very mixed. I feel like I got a good deal on my place, but in many of my bids the seller was unwilling to negotiate much lower than their listing price. 

"I'll give you an example.  I put in a bid on a condo in West LA that was small -- only 800 feet, a one bedroom unit with a loft.  I was attracted to the building because it had many amenities, gym, pool, etc.  I noticed that other units recently sold for approximately $385,000 to $410,000. So I began the bidding process at $385,000. The seller was listing this unit for $499,000. They countered back at $495,000. Of course I stopped the bidding process and moved on.

"I give you this example because I think the places available now are a mixed picture. I found some sellers responsive to a bidding process and willing to negotiate around prices that are the current market value. I also found many sellers, though, that still wanted very high prices and were not willing to negotiate.

"For other buyers I would say move on if you find the seller non-responsive, as there are many sellers who are willing to negotiate."

Thanks, West L.A. Buyer, and good luck.

-- Peter Viles

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Bloomberg News

Comments

[Rachel]

We have saved up money for a downpayment, and we are ready to step up, but we've found there is still intense competition in our price range (the low end of the single-family-housing market in Long Beach.) We just put in an offer on a foreclosure in a nice neighborhood, and even though we bid over asking, we lost out to someone who made an all-cash offer. This all happened within two weeks after the property was listed.

What's frustrating is that a few years ago, we could have bought, even though we didn't really have the money. But we took a hard look at our finances and said, "We're not ready." Now that we really are ready, the process is so much harder.

[mike]

that is probably one of the better postings i've seen on this blog in a while. i am not a realtor!!!!! i think this poster is right. there are some good deals out there right now but you need to be ready to hold your real estate for a long time. there is no more quick money in real estate. when there was, it was just a farce.

[Tim K.]

I'm not sure what to make of this posting.

If West L.A. Buyer is looking for some kind of pat on the back and well wishes from this board, I guess you got it from Peter, but until I hear more details of what you're actually getting for your $385K purchase, I'm a bit dubious this is a good move, especially now.

You don't seem to share any other details about your life, which I can understand if you want to keep your privacy, but if you're going to try to pull a Milla here, and hide behind details and yet want acceptance from the blog posters, you ain't gonna get it.

The only thing that does seem clear is that you are rationalizing. "Now is a good time to buy" is your mantra, but fundamentally, it doesn't appear to be the case. If you are buying a condo for that $385K, you better be getting one hell of a good place in a fantastic neighborhood with reasonable HOA fees and hope your neighbors are all keeping up with their HOA payments or you are in a world of hurt.

Please post more details if you can - if the point of this post was to educate us, you haven't done much except state the obvious; i.e. some sellers are delusional. We know that already.

[TakeFive]

“…with some money from my parents and my fiancee,…”

Parents, okay. Fiancee, not so okay. Sorry to be the pessimist, but major changes are challenges to relationships (I put in money, so I should get to choose the color of the tile…). Hope you’re taking sole title until after the nuptials.

So what did you buy, house or condo? I’m guessing by the price and location it’s a condo. Seems like condo owners should be the easiest to beat down on price. What are the HOA dues over there?

[donny most]

If you've got $120K in the bank, your HGTV-loving young lady will demand that you use it to buy a house, no matter what.

Otherwise, let's have the details on this shrewd bit of contrarian speculation.

[PotsNPans]

Optimist:

Congratulations on finding what you what and on your upcoming marriage.

Pessimist:

But ...escrow has to close!

[The original RZ]

I applausd West L.A. Buyer for doing the following:
- Saving up for a hefty downpayment
- Refusing to get into negotiations with a seller who was clearly asking for way too much
- Waiting out the "bubble"
These are smart moves, and obviously smart ones at that, but so many people just didn't get it.

It's nice to hear about someone who made the right moves and is now able to afford a place he wants. (Though as I've said before, I do hope there aren't too many buyers out there currently so that the prices keep coming down)

[flip]

mike - please stay away from statements like a "good deal." You only expose yourself to endless (and frankly) justified criticism, since you offer no context to your statement. I mean, you can get an SUV right now at a great deal (to what is before), but is it still going to be a great deal 1-3 years from now. The same logic applies to the housing market. It's really an individual choice.

[Nick]

It does sound like this person is a fairly educated and prepared participant in the housing market (with the possible exception of the "good time to buy" statement, but I'll attribute that to bias). The only acknowledgment missing which I'd like to see from anyone buying a house now is "if the value goes down by 50% and stays there for the next 10+ years, I would be fine with it." If it were up to me, I'd mandate that statement as a separate signature-required item on every mortgage contract, just to make sure buyers understand the risk and to prevent any misunderstandings about the nature of the real estate market. That's just my opinion, though.

[West L.A. Buyer]

I just wanted to respond to some of Tim's questions from my posting. Yes it is a condo, even though prices have dropped I don't think it's possible to buy a house in West Los Angeles for around 400,000. One of the points I was trying to make is that I wanted to share the very mixed picture I saw in the market when I actually began to look and make bids. I am a reader of LA Land and many other housing blogs, and for years I kept up on all the housing market news. I thought given my large down payment, preapproval , and excellent credit, that the sellers would be more receptive. I guess what I wanted to share most with people is I think there are deals out there, but sellers will only negotiate as far as they are willing. Not matter what happens in the market. I will give you another example from my recent bids. I bid on another condo in West LA that is on Westwood. It is a two bedroom condo appx, 1200 sq feet listed for 450,000. My ceiling to buy was 420,000. We began the bidding process at 400,000. My bids with the seller went back and forth, until they came down to 429,000 and we came up to 420,000. I couldn't go any higher and we backed out. Given that I know that unit is still on the market about two months later, and is sitting empty, you would think the seller would be willing to have come down that last 9,000. Tim is there anything else you would like to know?

Thanks

West L.A. Buyer

[150 multiple choice questions]

WLB, don't listen to the people who say your marriage is going to fail because your fiance brought some money, that's crap and unimportant.

But what you touch on in your posts is a very important idea of market value and bubble value in particular, and that is capitulation. You say that some sellers are reasonable, some are in fantasy land. Eventually, all (or very close to all) will understand (capitulate) that the market is different (stinks) and compete for the few buyers (who can actually afford and want a place) that are out there. This is close to a market bottom. If you like your place, great, doesn't sound like you're all that excited about it. And if you're not mentally ready if it goes down in value going forward, then that could be a problem.

Curious, did any of the places you walked away from sell? At what price? Were there other bidders?

[mbob]

"....some money from my parents..."

uh, I guess that would entitle you to the lucky sperm division. Family wealth never hurts.

Riding a motorcycle to prosperity? My favorite sign was the one in Detroit's old Receiving Hospital's ER:

"Buy your son a motorcycle for his last birthday."

[D]

Tim K.

World of hurt?

Give me a break.

[Jeff S]

I think this posting is a welcome change. I am so tired of hearing shockg and lefty and sfvrealestate and laker argue the same tired points. I used to comment more frequently but got frustrated with the process.

Prices have definitely come off just about everywhere to varying degrees and those who argue otherwise just try to find the one exception to prove their weak point.

Are prices coming down more? I certainly think so (and a lot more)but have no problem with those who think otherwise.

West L.A. buyer has a viewpoint that is valid to be shared with other, less opinionated readers than Tim. It is a bifurcated market between the sellers who have stuck their heads in the sand and those that are more realistic. If you are interested in buying do your homework and be prepared for dealing with difficult sellers.

Is it the right time to buy? Probably not for most people but each situation is different. And markets do strange things sometimes!

FYI, in the interest of full disclosure: I sold my westside condo in late 2005 after a double in price and been renting (cheaply) ever since.

[Tim K.]

West L.A. Buyer - thanks for the response - I suppose the "mixed picture" market you are sharing with us is not all that surprising. It's like that in almost EVERY market, except huge bull markets like 2001-2005. Sellers in general all have different motivations for how low they are willing to negotiate - this market is no different. Maybe this is interesting to you, and maybe Peter felt this was newsworthy to post, but to me, the bigger question is why you felt this was a good time pull the trigger anyway.

From what I gather, you were/are a renter and were able to save money for your down payment, but not nearly enough that you felt you had to borrow from others. You were willing to commit up to $420K for a condo in West LA. Obviously, you are aware of the rental prices in the area as a renter yourself, so what's puzzling to me is your rent vs. buy calculation. It appears you are banking on appreciation by the time you sell - this is the part I'm assuming, and maybe you can share your thoughts with us on this?

I do believe there are others out there (not many mind you) that are in your situation, because this explains why we are having sales in this down market. Someone has to be buying these places, even though it doesn't appear to pencil out as a rent vs. buy decision as of yet.

[sj]

Thank you for sharing your experience with us LA LAnd readers and congratulations on your pending home ownership. Your successful bid is a positive exprience for you because you've done your work (saving, building credit, paying attention to market condition, etc.) and found what you are happy with.

If you want to live in the west side and have a purchase price ceiling of $420K, condo is perhaps the only option. However, like what Tim K. wrote, the size of your complex and the occupants can make your HOA due an ever increasing expense. My co-worker's HOA (a big condo complex in Culver City) has gone up from $300+ to $600+ monthly in the past few years.

Nonetheless, you have a done deal and you must enjoy your new place to the fullest. BTW, Craigslist is a great place to find wonderful furnishing items without breaking the bank. Have fun decorating! =)

[puckhead]

West LA Buyer,

You have my sympathies. Not because you bought a house/condo because it sounds like you did your research and did it the right way, but because you are about to have judgment passed down on you in a big time manner. Enjoy the home.

[Cal]

What was the rush such that you felt compelled that you had to buy now?

[TakeFive]

Posted by 150 multiple choice questions :

“WLB, don't listen to the people who say your marriage is going to fail because your fiance brought some money, that's crap and unimportant..”

How does one have a failed marriage with a fiancée?

But on to the larger point – thanks to WLB for making a contribution to this blog about real life events, as opposed to the conjecture that usually gets thrown around. Further, saving $120K, knowing your limits, and actually negotiating probably puts you in the 90th percentile for a buyer. Well done.

Bad news? Condos are for renting, unless you can get them on the cheap. I say that as someone who has lived in a condo, been an HOA board president, seen prices soar, then plunge to a far greater magnitude than single family residences.

I know Westside prices limit your options, and that compulsion to be a homeowner is strong, but condos will take a much bigger dive than SFR’s which are still trending downwards. Why not just move into the area you like and rent? Seems like having 120K in your pocket while prices are declining sure would make up for the renter’s blues.

[mike]

i think most of the people on this blog are bitter about the real estate market.

and for flip... i would assume that is how u were making your living at some point was by flipping...which is no longer possible.
as to the good deal remark i thing any real estate in a good area that can be rented is a good deal if you get it at or below market rate. but i've said it before and i'll say it again. YOU HAVE TO HOLD IT FOR A LONG TIME FOR IT TO BE A "GOOD DEAL"

[IToldu2CashOut]

Normally I would say anyone who buys now is an idiot, but this guy seems to have at least gone about it in a smart way by making low offers. I think he will have to hold a long time though to be able to sell and not lose money. Probably over ten years. If he is cool with that this will be a descent move for him. he's definitely falling for the trap that most buyers are falling for now, believing that home ownership is this wonderful thing that he just has to be a part of. He'd be better served by stepping back and considering the advantages of renting until buying makes more sense and prices drop considerably more. In a few years his 385 will buy him a much nicer place.

[JDZ]

West LA Buyer -- thanks for sharing your story. Everyone on this blog will want to jump in on whether or not you paid the correct price, but that's really for you to decide.

I like that you went out, saw homes, and put in offers that more closely reflect today's (or tomorrow's) prices. It has frequently been said that the seller sets the asking price, but the buyer sets the purchase price. If more of us went out and made lowball offers, it might help bring prices down. I'd expect many sellers aren't getting any offers, but if they got 5 for $200k less, they might start looking at their pricing strategy.

Something to think about. Thanks.

[jag]

West L.A. Buyer,

You have made all the right choices until your recent condo purchase. I don't understand what the urgency of jumping into a condo today is. You have worked so hard to save and have waited several years to ride out the bubble and out of sudden you purchase a condo? I would think as a L.A. land blogger you would have known prices will continue to fall. Read Freddie Mac's CEO post posted today.

There are two bloggers that will fully support you on your purchase and they are .................... LEFTY and SHOCKG!

[Nick]

Eh, I might be negative on housing, but I also support his decision (subject to the caveat in my earlier post). There's nothing wrong with someone buying now if they can afford it and understand the financial possibilities. I don't have to think it's a good investment to support someone's right to make it. Besides, it has at least one tangible indirect benefit to me: by buying from a seller who was willing to negotiate, and presumably at a below-market rate, he is directly setting a lower comp, and thus directly making all nearby houses a little more affordable. Thus, already he has done more to benefit the people of the country in the last six months than Congress, the Fed, the FHA, and the GSE's combined, so that's gotta be worth something.

I say good show, WLB, and may you enjoy your new home. :)

[Laker]

West LA Buyer,
How much this unit (or any same comparable one in that building) cost in 2001?
You can use redfin to find that very easy.

What is the condition of the place?
Is it a fixer? move in condition? if not, how much you need to put in to make it livable.

You have a very nice down payment, what is your debt to income ratio DTI was the loan you are qualifying.

Congrats and Thanks for your input.