Is it a CRAZY time to buy a home?

I know, bad news is everywhere.  Fear is paralyzing
the credit markets which could translate into the biggest slowdown of
our generation.  Ok, I get it.  So why are Sabrina and I doing a mad
scramble to find a way to buy a new home at such a crazy time?!

This is how it happened: We were previewing homes in
Palo Alto for clients and walked into an
Eichler home — after about 5 minutes Sabrina looks at me and says “I
want to buy this house!”  We’re not even in the market to buy a new
home but when an opportunity jumps up, sometimes you need to do
everything you can to take advantage.

The home is listed at $1.4M — a huge step up from
where we are today.  It’s in livable condition and being sold by the
original owner who bought it from Eichler 50 years ago.  We’re attracted to the fact that it has a big lot in Palo
Alto and everything is outdated that gives us a chance to start our remodeling projects all over
again!

Now for the challenge:  Being self-employed, as we
are in the real estate business, it is very difficult to get a home
loan nowadays because lending standards have tightened up and we do not
have verifiable W2-type income.  So being creative, we asked if it was possible for the seller to offer financing
— and they said yes!  They will carry a note for $1M if we give them a
$400k down payment — not a bad deal for us since we are challenged to
find a loan from a bank.

Now how do we get the $400k down payment — we need
to sell our house.  No problem!  We have a nice house in a great
neighborhood and we are Realtors.  Unfortunately the Palo Alto seller
won’t accept a “contingent” offer from us, meaning that we actually
have to sell our home first and have the $400k cash to give them before
they will accept our offer and take their home off the market. 
This is a HUGE risk for us because what happen if we sold ours and they sold theirs to someone else, and now we don't have a place to live.  That basically makes this deal very hard for us to
accept. 

Palo Alto Price Trend October 08 Chart

Why are we going through all this if the market is really bad?  Because we truly believe now is a great time
to buy a home, especially when Palo Alto market has hit a speed
bump in just the last few weeks.  Typically, Palo Alto homes are sold
within the first 3 weeks if the agent and seller have priced correctly
and presented the home in its best condition.  The recent financial
market turmoil and stock market uncertainty has made buyers in Palo
Alto hit the brakes and reconsider their purchasing decision.

There may never be a better time to “move up” then right now.  Just look at the price trend chart extracted from
MLS sales data (see photo above, click to enlarge).  It seems that Palo Alto homes are on sale at a 10%
discount over last year’s price!  Will it continue down?  Will some
good news in the economy or change of administration kick undecided
buyers off the fence?  Who knows?!  There may be a majority of people
stepping away from the table during these times of uncertainty, but for
us, we would rather be looking back in 5 years saying “I’m so glad we
did…” instead of saying “I wish we would have…”.
 

Like Warren Buffet says,
"Be fearful when others are greedy, and be greedy when others are fearful."


-mark

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