First home is most expensive home in the Neighborhood

Buying & Selling Real Estate
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First home is most expensive home in the Neighborhood

Rene M.
Charleston, SC · Member since 2019 · 32 posts · 6 votes

Hello all,

I just recently got married and we are currently shopping for our first house. 

We have an accepted offer at full price - home warranty and 5k towards closing cost for this house.
https://www.redfin.com/SC/Summerville/9032-Fieldstone-Trce-29485/home/68869691

I really like the house, size and location are decent as are the schools.


My biggest concern are the comps. The last 3 sold houses were at 190, 210 and 210. If I look at the propert values of all neighboring houses, which also have the lake in the back their values are 20-30 K lower.


The house is from 2003, but has an AC from 2016. The roof is original and will come in the next 5 years...

I am fully aware that there will never be a perfect home, but in the hot markets of the last weeks in Charleston, SC I am concerned we might have caught a peak... Escpecially considering Corona, stock markets, etc.


I heard as a rule of thumb that you always want the cheapest house in the neighborhood - that would certainly not be the case. 

Any suggestions?

Thanks

Rene

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Jacob Sampson
Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
6y

You are confusing an investment vs buying the place you will live.  People rarely make wise financial decisions with there personal residence because it is serving a different purpose than an investment.  Yes you are buying near a peak and over paying for the area you are in, but if it meets your family needs and you are ok with those negatives then pull the trigger. 

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  • Matthew Ledford
    Mount Pleasant, SC · Member since 2015 · 9 posts · 1 vote
    6y

    Is your offer contingent on appraisal? Sometimes that helps keep a buyer from overpaying for a house. Your buyers agent should be advising you. My advice in the way is a solicitation of your business if you are under contract with another real estate agent.

    0Reply
  • Rene M.
    OP
    Charleston, SC · Member since 2019 · 32 posts · 6 votes
    6y

    Yes the offer is contingent on appraisal and i have a due diligence till next Monday.

    0Reply
  • Jaysen Medhurst
    Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
    6y

    Yeah, you may have a problem, @Rene M. Why did you offer full price if the comps were that much lower? You could try to renegotiate, but since it was only on the market for a few days, you don't have much leverage. If I were the seller, I may just take your deposit and put it back on the market.

    Now if the appraisal comes back and doesn't hit the sales price, that will definitely give you something to negotiate with.

    0Reply
  • Rene M.
    OP
    Charleston, SC · Member since 2019 · 32 posts · 6 votes
    6y

    I offered 230 - 5K. It was a multiple offer situation.

    As said before I have a due diligence till Monday - so I definitely don't have a problem yet... I might if I don't back out.

    I was hoping to hear from someone who knows the Charleston market/area?


    Thanks

    0Reply
  • Rene M.
    OP
    Charleston, SC · Member since 2019 · 32 posts · 6 votes
    6y

    I have a buyers agent and did order an inspection for tomorrow

    0Reply
  • Matthew Ledford
    Mount Pleasant, SC · Member since 2015 · 9 posts · 1 vote
    6y

    Please consult your buyers agent, here is my opinion and “back of envelope” help.  The inspection can give you an out too if there is something you really don’t like.   Please have your buyers agent calculate sold comps Price per square foot in The Farm at Wescott.   I’m finding an average sold price per square foot at $132.00 in that part of Wescott.  Looks like yours is 1821sf and likely will appraise around $240k given the sold data. 

    0Reply
  • John Semanchuk
    Charleston, SC · Member since 2013 · 380 posts · 157 votes
    6y

    To say it again, you should rely on your agent to assess the value and the comps.  That's part of what we do.  $ per sqft is one measurement but of course not enough to make a decision on.  Finishes, layout, updating (or not), general condition and lot quality are just some things that factor into the final value.  It might be ok to pay a little over what comps would suggest if the house is especially suited to your needs and you don't think you'll find something better. 

    The appraisal could help you out but I wouldn't count on that as a game plan.  

    1Reply
  • Matthew Ledford
    Mount Pleasant, SC · Member since 2015 · 9 posts · 1 vote
    6y

    I agree with John. Given historically low interest rates and the prospect of continuing to rent if you don’t buy... If you like the house in a sellers market it’s very difficult to get a great deal!   Use your agent to help navigate the process, that’s what we are trained to do.

    0Reply
  • Barry Cohen
    Inspector · Freeport, NY · Member since 2013 · 136 posts · 36 votes
    6y

    If you want the house, and its a bidding war, sometimes you just have to pay up. That’s the way the market is these days. 

    0Reply
  • Rene M.
    OP
    Charleston, SC · Member since 2019 · 32 posts · 6 votes
    6y

    It's likely going to appraise. She showed me the comps and the per sqft price is market average. 

    But when looking in the marked I see that smaller houses generally have higher sqft prices. That's why - my potential house - which is on the bigger side and thus should reflect a discount on the sqft price.

    I really like the house, location, size, area...

    I just don't know if with the current market & Corona situation if I still would have offered the same and I know no one can give me an answer to this.

    I think I would like to be open to the seller and tell them that I would need another discount or else will back out of the offer. Is that acceptable or offensive?

    It's just that things have changed a lot in the last 2 weeks since we made the offer..

    0Reply
  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    You are confusing an investment vs buying the place you will live.  People rarely make wise financial decisions with there personal residence because it is serving a different purpose than an investment.  Yes you are buying near a peak and over paying for the area you are in, but if it meets your family needs and you are ok with those negatives then pull the trigger. 

    3Reply
  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Rene M.:

    It's likely going to appraise. She showed me the comps and the per sqft price is market average. 

    But when looking in the marked I see that smaller houses generally have higher sqft prices. That's why - my potential house - which is on the bigger side and thus should reflect a discount on the sqft price.

    I really like the house, location, size, area...

    I just don't know if with the current market & Corona situation if I still would have offered the same and I know no one can give me an answer to this.hink I would like to be open to the seller and tell them that I would need another discount or else will back out of the offer. Is that acceptable or offensive?

    It's just that things have changed a lot in the last 2 weeks since we made the offer..

    I honestly don't think anything has changed for your situation in the last 2 weeks.  You are near the top of a market and probably over paying for the area.  That is still the same.  If you offered less you probably would have lost to some other higher offer.  This is a sellers market, it was 2 weeks ago and it still is now.  

    1Reply
  • Rene M.
    OP
    Charleston, SC · Member since 2019 · 32 posts · 6 votes
    6y

    The DD is still valid till 3/18. 

    Most likely I will back out... This is just too risky for me, I don't want to be the guy who bought in 2008

    0Reply
  • John Semanchuk
    Charleston, SC · Member since 2013 · 380 posts · 157 votes
    6y

    I hope you're not losing track of your dates... earlier you said DD was until Monday but now it's the 18th?  Did you get it extended?   

    I don't think it's bad reasoning to back out given the uncertainty imposed by CV.   You are already questioning the purchase anyway.   One alternative is to simply ask to extend the DD period.  I think that's already becoming common.  

    As for whether the property is worth what you have it under contract for, there's not enough information for anyone on this forum to figure that.   You're agent should be helping you understand that and hopefully you trust their ability and intention in that regard.    It's generally true that a larger sqft house will sell for lower $ per sqft than a smaller one but there are many other factors in each individual house to consider.   

    I personally don't agree with the generally accepted wisdom that you shouldn't think of your personal house as an investment.  It's possible for your "dream home" to also be a good investment and I think that should be the ideal goal.  You might have to compromise your needs and/or the value factor and that balance is something only you can determine but as long as you go into it clear-headed, it should make sense.  It's obvious that you really like this house, but are not so sure about the value.  Dig into it with your Realtor and figure out just how much you are willing to pay (or overpay) for it. 

    1Reply
  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @John Semanchuk:

    I hope you're not losing track of your dates... earlier you said DD was until Monday but now it's the 18th?  Did you get it extended?   

    I don't think it's bad reasoning to back out given the uncertainty imposed by CV.   You are already questioning the purchase anyway.   One alternative is to simply ask to extend the DD period.  I think that's already becoming common.  

    As for whether the property is worth what you have it under contract for, there's not enough information for anyone on this forum to figure that.   You're agent should be helping you understand that and hopefully you trust their ability and intention in that regard.    It's generally true that a larger sqft house will sell for lower $ per sqft than a smaller one but there are many other factors in each individual house to consider.   

    I personally don't agree with the generally accepted wisdom that you shouldn't think of your personal house as an investment.  It's possible for your "dream home" to also be a good investment and I think that should be the ideal goal.  You might have to compromise your needs and/or the value factor and that balance is something only you can determine but as long as you go into it clear-headed, it should make sense.  It's obvious that you really like this house, but are not so sure about the value.  Dig into it with your Realtor and figure out just how much you are willing to pay (or overpay) for it. 

    While I agree the ideal is that a personal residence be a dream home and a good investment I think it almost never happens.  Since it isn't generating rental income you have to rely on appreciation. And since it is your dream home you will likely live in it for an extended period of time (meaning it isn't a flip).  Given those two factors, I don't think there are many dream homes whose appreciation outpaces interest, taxes, insurance, and maintenance over an extended period of time.

    0Reply
  • Lynn McGeein
    Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
    6y

    If the only reason you're paying this much is due to multiple bids and you are comfortable where you are for the next few months if needed, definitely re-evaluate during your due diligence period and exit if you find you're making a financial mistake. If it's your perfect forever home and exactly where you want to be, that's different. If it's not, then buying the most expensive home in the neighborhood as the economy is stalling globally may not be the best way to begin your married life.  If you're having doubts, discuss them with your wife, and decide if you're both comfortable moving forward given the changing circumstances.    

    0Reply
  • John Semanchuk
    Charleston, SC · Member since 2013 · 380 posts · 157 votes
    6y
    Originally posted by @Jacob Sampson:
    Originally posted by @John Semanchuk:

    I hope you're not losing track of your dates... earlier you said DD was until Monday but now it's the 18th?  Did you get it extended?   

    I don't think it's bad reasoning to back out given the uncertainty imposed by CV.   You are already questioning the purchase anyway.   One alternative is to simply ask to extend the DD period.  I think that's already becoming common.  

    As for whether the property is worth what you have it under contract for, there's not enough information for anyone on this forum to figure that.   You're agent should be helping you understand that and hopefully you trust their ability and intention in that regard.    It's generally true that a larger sqft house will sell for lower $ per sqft than a smaller one but there are many other factors in each individual house to consider.   

    I personally don't agree with the generally accepted wisdom that you shouldn't think of your personal house as an investment.  It's possible for your "dream home" to also be a good investment and I think that should be the ideal goal.  You might have to compromise your needs and/or the value factor and that balance is something only you can determine but as long as you go into it clear-headed, it should make sense.  It's obvious that you really like this house, but are not so sure about the value.  Dig into it with your Realtor and figure out just how much you are willing to pay (or overpay) for it. 

    While I agree the ideal is that a personal residence be a dream home and a good investment I think it almost never happens.  Since it isn't generating rental income you have to rely on appreciation. And since it is your dream home you will likely live in it for an extended period of time (meaning it isn't a flip).  Given those two factors, I don't think there are many dream homes whose appreciation outpaces interest, taxes, insurance, and maintenance over an extended period of time.

    I can't speak for elsewhere, but it's been a different story in Charleston.  Appreciation has been substantial for a long time for anyone holding 5 years or more except maybe for the 2006-2008 time slot.  Anyone who bought then is probably still in the black but not by that much.  Of course this only applies to "sensible" purchases and not anyone who is overpaying for a property.  Which is pretty much the point I was trying to make... if you balance the personal home/investment property mentality when buying, you are likely to be able to make your personal home a good investment as well.  Remember it's also providing you a place to live which is an expense that shouldn't be ignored in the calculation.

    0Reply
  • Matthew Ledford
    Mount Pleasant, SC · Member since 2015 · 9 posts · 1 vote
    6y

    Work with your agent.  I’m with John, ya gotta live somewhere.  If your rent is cheaper than the mortgage and you don’t mind building your landlords balance sheet you keep renting and save your cash.  The market is shifting and showings have slowed with the virus quarantine. Hard to tell what it will rebound to in April-May with interest rates still low.  The Charleston inventory is very scarce given demand, for some time we have had a strong sellers market.  I would predict Charleston will be shifting to a more balanced market in the next quarter with caution over the market, jobs and supply chain speed bumps.  That doesn’t necessarily mean dramatic price drops, just longer days on market for listings.    https://www.showingtime.com/im...

    0Reply
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