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Buying first home

post #1 of 29
Thread Starter 
I'm planning on buying my first home in the near future. More accurately, a condo. My only experience in real estate transactions is a course I took in law school by the same name. So essentially, I'm as green as they come.

The market appears to be cooling slightly, and I've been advised to wait. However, I'm apprehensive, I don't really think market timing is possible to judge. People have been saying wait for years, but the market has only gotten crazier. I'm thinking I'm just going to jump into it.

Anyway, I'd prefer to be in west LA, preferable somewhere that'll catch some ocean breeze, definitely west of the 405 and along the 10. On the other hand, I work in downtown, and I hear that downtown LA is ripe for gentrification. You think speculating that an downtown LA loft is going to appreciate in the long run is worth my strong desire to be near the ocean?

As a buyer, are there any downsides to enlisting the help of an agent? I understand that they're typically paid by the seller, but doesn't that factor into the price of the home?

General tips?
post #2 of 29
in a hot market, sometimes a buyer's agent can locate properties that ordinarily would be hard to find. we bought our condo in this situation - our agent found a property before it hit the market, and we were able to buy it without all the bidding war.

the other thing an agent does is facilitate the process, so you don't have to stress about all the forms and red tape. it's stressful enough as it is.

regarding the speculation - it depends on you, really. one piece of conventional wisdom i like is to not treat your home as an investment.

you could see it this way: use your home mortgage as a 'foot in the door' with regard to equity credit. then in a little while you can buy investment property, while keeping your home. that way you don't have that worrisome feeling when you're fixing up your home, that you're making it unmarketable. keep the bottom-line thinking for investment properties.

/andrew
post #3 of 29
For gentrification project prospects in the downtown area, you should look in the West Adams area of downtown. See this link.
post #4 of 29
Thread Starter 
Quote:
Originally Posted by faustian bargain
in a hot market, sometimes a buyer's agent can locate properties that ordinarily would be hard to find. we bought our condo in this situation - our agent found a property before it hit the market, and we were able to buy it without all the bidding war.

the other thing an agent does is facilitate the process, so you don't have to stress about all the forms and red tape. it's stressful enough as it is.

regarding the speculation - it depends on you, really. one piece of conventional wisdom i like is to not treat your home as an investment.

you could see it this way: use your home mortgage as a 'foot in the door' with regard to equity credit. then in a little while you can buy investment property, while keeping your home. that way you don't have that worrisome feeling when you're fixing up your home, that you're making it unmarketable. keep the bottom-line thinking for investment properties.

/andrew

Thanks Andrew! This is the kind of advice I was looking for.
post #5 of 29
Yes, enlist an agent. As fb noted, a good agent can often get you into properties before they really hit the market and keep you out of idiotic bidding wars. Even if you are only 12 hours ahead of other buyers you have a huge head start. As to the agent costing you money: you're going to pay the price regardless of whether you have an agent working for you or not. If the property you buy is listed with a realty firm, a brokerage fee is going to be paid by the seller. As far as speculation: I'd be very, very careful trying to anticipate an "emerging" market. Better to look at sale prices in a desired neighborhood for the last twelve months or so and see if you are, indeed, in a softening market. If you are bound and determined to purchase a residence however, where you are in the price curve might be immaterial. My best suggestion is to avoid a bidding frenzy at all costs. (Disclaimer: I am a licensed real estate agent in states other than California, and this post is not be construed as specific advice in realty matters in the Golden State.)
post #6 of 29
I am by no means an expert, but here are my $.02 based upon my purchase of a co-op in 2004.

A buyer's agent does three things you may not be able to do on your own: (1) find properties that meet your requirements (not sure if individuals have access to the MRIS database without an agent); (2) have a feel for the market and advise you on what you need to bid to be competitive; and (3) advocate strongly for your bid. I found my co-op in the Sunday Open House classified listings, so my agent didn't really help with (1). She did help with (2) and (3), however. Before I found my place, I was going to bid on another property, and my agent told me, based upon conversations with the seller's agent through her boss, that I was going to have to raise my maximum bid by a considerable amount to be competitive and strike all contingencies. That property ended up selling for $40,000 more than the asking price, and well over what I was willing to pay. My agent also told me that I would have to raise my maximum price or lower my requirements. I kept these tidbits of information in mind when I bid on the property I currently own, which I viewed as comparable. My agent was able to win the bid despite my bid being the second best (a competing bidder made an offer with no maximum price) because she was professional and the competing agent showed up in a tank top and shorts. At least that's what the seller's agent told me.

And yes, the seller pays the buyer's agent fee, which is built into the price of the property. You may be able to negotiate a lower price if you are working without an agent (particularly for a for sale by owner), but in my opinion, these potential benefits do not outweigh the benefits of an agent.

No one can predict the future of the housing market. Your monthly mortgage payment (which is what you should keep in mind when deciding how much house you can buy) is dependent on the price of the house and your mortgage interest rate. Prices may be headed down, but interest rates may be heading up, so it may be a wash in the end. Plus, you are paying rent during the time you are looking. If you find a place you like, go for it!

Based upon my time living in downtown L.A. in the Fall of 2002, you couldn't pay me to live there again. It is truly the worst downtown in terms of amenities I have ever seen. Perhaps things have gotten better in the past 3+ years. It is my (completely speculative) belief that due to the spread-out nature of the Los Angeles area, neighborhoods in L.A. will be slower to gentrify than in other cities. Is someone will lives in Westwood really willing to drive 45 minutes to check out a hot new club in downtown?
post #7 of 29
Beautifully put AC. To add to the "for sale by owner" thing: I can't believe all the people I know who've bought a FSBO (to "save" the brokerage fee) and ended up with a mess on their hands. Best price doesn't always equate to best deal.
post #8 of 29
Another thing to keep in mind is that a buyer's agent is just that, and since you're new to this, you need someone to walk you through this and be on your side (remember what a "fiduciary" is from law school?).

Also, a buyer's agent is going to know right away if a house is priced too high.
post #9 of 29
Quote:
Originally Posted by Ambulance Chaser
Based upon my time living in downtown L.A. in the Fall of 2002, you couldn't pay me to live there again. It is truly the worst downtown in terms of amenities I have ever seen. Perhaps things have gotten better in the past 3+ years. It is my (completely speculative) belief that due to the spread-out nature of the Los Angeles area, neighborhoods in L.A. will be slower to gentrify than in other cities. Is someone will lives in Westwood really willing to drive 45 minutes to check out a hot new club in downtown?

First: Ignore me...talk to a real estate agent you can trust

If you're still interested, here are the thoughts of a displaced Angeleno.

I moved to Boston last summer, and downtown LA was definitely on an upward swing. The new development was also being fairly heavily promoted (I recall many glossy ads in Los Angeles magazine among others). That being said, the downtown still has a long way to go. I wouldn't want to live there with a family, but single it could be interesting. You would also want to scope out the (sub)neighborhoods well. The west side of downtown was certainly nicest, but don't go too far past the 110, or you'll end up in Rampart. I expect (based on almost nothing at all) that the Wilshire corridor would appreciate pretty well.
post #10 of 29
Thread Starter 
Come to think of it, I have no idea why I'd want to live in downtown. I lived in k-town for a period of time, and my apt was burglerized and in a seperate incident, I was robbed at gun point. I can only imagine the neighborhood in downtown being worse. Although I realize these things can happen anywhere, I vowed not to knowingly put myself in these kinds of situations anymore. So, ok, speculation aside, downtown is out.

I'm going to start looking on the westside and live with the rest of the yuppies in this town. Thank you all for your advice, I will certainly work with a broker. If there are any other conventional wisdom type tidbits anyone could offer, I'd love to hear them.
post #11 of 29
Quote:
Originally Posted by faustian bargain
in a hot market, sometimes a buyer's agent can locate properties that ordinarily would be hard to find. we bought our condo in this situation - our agent found a property before it hit the market, and we were able to buy it without all the bidding war.

So true. Our agent was able to find out about our future home before it was even listed.
post #12 of 29
Renault, let me know if you need an agent referral. My wife is an agent--she doesn't cover the westside but may know someone good out there (I definitely know some bad ones who work the west side).

The west side condo market can be very volatile. I owned a condo near Westwood several years ago, and was surprised to find out that the price we paid for it was less than what the original owners had paid for their places when the building was new in the late 80s. In slow markets, condos are often harder to sell than houses. You can minimize some of the down side risk by buying in the westside areas with good elementary schools (Westwood charter jumps to mind), since condos are often ideal ways for young families to get into a good school district.

Be VERY careful with condos in regards to construction quality, noise issues, and neighbor issues. I was in a small building that had very bad sound insulation, and upstairs neighbors who slept during the day and ran a home business at night. You want to be on the top floor if at all possible, and if not, make sure you set up a time to see the place with someone walking around above you.

Also, read the HOA minutes *very* carefully for any evidence of neighbor-to-neighbor disputes, construction issues, or anything else that raises a question about the quality of the building and its management. Some HOAs will carefully write their minutes so that they minimize such issues, and agents may not pick up on such things (purposeful avoidance in some cases).

I have a pretty good home inspector as well--he's done inspections for a large chunk of the "who's who" of LA attorneys, which some people take as a sign of his quality (i.e., he hasn't been sued into the ground for errors).
post #13 of 29
Quote:
Originally Posted by Ambulance Chaser
Based upon my time living in downtown L.A. in the Fall of 2002, you couldn't pay me to live there again. It is truly the worst downtown in terms of amenities I have ever seen. Perhaps things have gotten better in the past 3+ years. It is my (completely speculative) belief that due to the spread-out nature of the Los Angeles area, neighborhoods in L.A. will be slower to gentrify than in other cities. Is someone will lives in Westwood really willing to drive 45 minutes to check out a hot new club in downtown?

It has gotten a little better in amenities, but still lacking. There are still no good markets or movie theaters, but things have been cleaned up quite a bit around Staples, and there are more restaurants opening towards the "old downtown." If the Grand Avenue project gets off the ground, I think it will change the character of downtown quite a bit.

BTW, there is historical precedent for decent clubs in and around downtown, though they may self-consciously cater towards a non-Westwood type of clientele.
post #14 of 29
As a real estate broker and someone who's been in the real estate industry since 1986, my first piece of advice is to find a good buyer's agent. Secondly, since this is going to be your first home and not just an investment, forget all the speculation about what might or might not happen in downtown L.A. List the set of features you desire in a neighborhood and a home and find the neighborhoods that match those desires. Then inform your agent of these things. Finally, go out and look at the homes your agent finds for you. That is the only way you're going to determine which home you want. Just like a fine suit, when you see the one you love, you will know it. As to waiting for a ripe time. Only a fool will tell you he knows exactly what's going to happen with the real estate market. Unless he's a real estate tycoon, I'd take any such advice with a grain of salt. The fact is, ownership is better than leasing or renting. The money you give out every month in rent never comes back. At least with a mortgage, a portion (though small at first) will always go towards principal (and back into your pocket) unless you're foolish enough to take an interest only loan. If you can afford to buy a home you should. In the U.S. and California especially, real estate is one of the soundest investment a person can make and the risks are very low if you use some common sense. Good luck on finding your new home. It will be a stressful time but also an exciting time.
post #15 of 29
Thread Starter 
again, thank you all for your advice thus far. very helpful.

Is being "house-poor" defendable? I'm trying to decide how much I can afford. It doesn't help that I'm up to my eyeballs in school loans. How close to the edge of my net income should I go? Whatever doesn't go into my home, if any, I plan on putting into savings and/or a 401k.
I plan on getting modest raises annually, should I just pray I don't get canned? Is it more prudent to build in a buffer for savings at the expense of buying something cheaper?

Now that you've all helped me to decide that I need an agent, any tips on choosing a good one? I've met some at openhouses, they all seem nice enough. How can you tell if they're going to be good? And at what point is someone your agent? Do you have to sign something, or is it more like, if you take someone up on their offer to receive some listings, you've created a relationship. How do you rate experience in the business versus specialization in the area or pricepoint?
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