Now the number 7 is the magic number you should take into account when shopping for a new home.  A New York Times recent article pointed out that unless you plan on staying put in the next home you buy for 7 years, it may just not be worth it.

 In today’s market, this espeically holds true.  It may not have been during the housing heyday, when even builders made buyers sign agreements not to sell their newly built home for 1-2 year, because flipping was rampant and successful.

Consider this:  “[O]wners who sell a $300,000 home, for instance, will pay roughly $24,000 in commissions and other fees, and another $2,000 to $3,000 in closing costs on the new mortgage. Most real estate projections… suggest that prices will drop a bit and then flatten over the next two years, then slowly recover over the following five years, appreciating at an annual rate of 2 percent to 3 percent.”

Based on this theory, one would need to generate an 11% appreiciation over 7 years for buying a house with similar characteristics as above just to come out break even.  While this is about 1.5% appreciation per year, in today’s market most homes seem to be depreciating, rather than appreicating.

While this Magic Number 7 rule is an easy one to consider, my personal theory of home buying has been for the long term.  As I told an agent recently at an open house, where we chatted a bit about the markets, I’m looking to buy a home, not an investment.  In an ideal world, my home would appreciate over time – because I plan to be in it for the long term (i.e. 7-10 years).  But if it doesn’t (granted, I hope not to lose money), the return on my investment I hope would be many happy memories of having a place to call home for my family and me and good times spent with friends.

3 West Shore Rd Belvedere – 5 beds, 3.5 baths – $3,999,000:  Ok, yes this is a high price tag.  But considering the seller knocked another $1 million off the price, this had to be mentioned (but I’m assuming that this is out of the range of most folks like me) and not only wins the pick of the week, but maybe the pick of the summer/ fall.  Prime waterfront Belvedere property with boat dock and views of Mt. Tam.  This is the second price reduction;  first was a $500,000 knock off.  Originally listed in July for $5,595,000.  This may be the biggest price reduction in actual dollar terms I’ve seen and in terms of percentage – a 20% price reduction – it ranks up there.  If this is your price range, this is worth another look.

157 Woodland Ave #8 San Rafael – 3 beds, 2.5 baths – $599,000:  This is a townhome near the Bret Hart area of San Rafael.  Built in 2001, it looks to have the amenities you would expect in a newer home.  Nice views.  This is the first reduction from the original ask of $649,000.  Getting close to the 2001 sales price of $559,000.

4 White Oak Way Novato – 4 beds, 3.5 baths – $765,000:  Over 90 days (make that over 200 days) on the market, this house is experiencing the downtown that has hit Novato but seems to have spare (so far) other Marin cities.  This is the 4th mark down from the original ask of $869,000.  Vacant and looks like a REO.  Newer home so has all the extras you expect as well.  Based on sales records, I’m guessing the bank bought this for just over $800,000 at the beginning of the year.

25 Heather Way Larkspur – 2 beds, 1 bath – $799,000:  This is also the first price reduction for this cottage that is walking distance to downtown Larkspur.  It first asked $869,000.  No pics of the inside, which leads one to assume that the interior is not a highlight.  Location is prime and most likely the main driver of the price.  What a difference you get between the Novato house above and one in a more coveted area like Larkspur.

35 Queen Rd Bolinas – 2 beds, 2 baths – $1,995,000:  A nearly $500,000 mark down for this modernist retreat in magical Bolinas.  Ocean views and a bedroom with floor to ceiling windows.  Contemporary lines and fixtures all around.  On the market since June when the original ask was $2,450,000.

This week, a host of REO homes came onto the market in San Rafael.  An indication that San Rafael is still getting hit by the downturn.  A sample of the listings that just came on to the markets:

3665 Kerner Blvd #A San Rafael – 2 beds, 2 baths – $150,000:  This was the lowest of the bunch that popped up on the market.  In the canal area, where a lot of foreclosures are taking place.  Looks like the bank owns it for about $325,000.  A good starter property if you are on a budget or possibly a good investment property.

15 Stevens Pl San Rafael -  3 beds, 2 baths – $450,000:  A single family home north of downtown by Lincoln Ave.  No pics (none of these listings seem to have them).  Close to 101 may be a distractor, especially currently witht the construction going on.  Last estimated minimum value was around $570,000.

262 Prospect Dr San Rafael - 4 beds, 3 baths – $642,900:  Another single family home and further north in San Rafael. In somewhat the general vicinity of the one above but further north and not by the highway.  House is just over 2000 SF.  Plenty of room here for a large family.

6 Redwood Dr San Rafael – 4 beds, 3 baths – $975,000:  In the Gerstle Park area of San Rafael.  While a REO, the bank seems to be trying to get their full dollar back.  Last assessed at $970,000 and the bank owns if for just above $1 million.  Home value estimates range from a low of $1.1 million to a high of $1.9 million. 

As you know, I walked out empty handed after 4+ hours, but having enjoyed the event and feeling somewhat empowered at understanding the home auction process. 

Lo and behold, early last week, as I was cruising the latest Redfin listings, the condo made another debut on MLS.  The ask:  $225,100.  Quite a big range from the opening auction price of $139,000 and the winning bidder’s price of $175,000.  Based on my Redfin data, the bank owned it for $247,000+ and the last assessed value was just over $200,000. 

For that price, no way was I pursuing that any further. 

Fast forward a couple of days later.  Unfortunately, I was travelling and didn’t get to my usual daily Redfin updates, but the price was dropped to $179,900.  And swoosh, it was in contract within a day.

So what happened?

The listing agent knew that it had been up for auction but didn’t know why the transaction didn’t get completed.  I called REDC and while they couldn’t give me the specifics, here are some reasons why an auction property may not close:

1) Seller couldn’t obtain the financing

2) Seller didn’t have the full deposit amount needed at the auction

3) Winning bid did not meet the reserve price

My best guess is that this property fell into either 1 or 2.  The winning bid was less than $5,000 from the current list, so I’m assuming that it is not #3. 

What I didn’t know and learned is that all properties do have an undisclosed reserve price, set by the bank and like in Ebay, typically higher than the opening bid.  With this condo, REDC said that since it was back on MLS, most likely the bank took it back for some reason or another and then had it listed.  I had put in a back up bid before I left the auction for $170,000, but obviously that didn’t seem to appeal to the bank.

I still think this property is still a great value, but given the current state of the union, I’m glad I’m not the buyer since I was planning for it to be an investment property (way too small for our household).

If you are looking for some values or just want to attend an auction to get a first hand experience for yourself, REDC is holding another smaller auction next week for some Nor Cal homes, next Monday and Tuesday evening.  Unfortunately, this appears to have been recently scheduled as there isn’t any open houses being held for these properties. Check out their site for details.

Winding along San Anselmo Avenue, the downtown area can be almost divided into two areas.  One that is the heart of the downtown, with boutique clothing shops, restaurants, book stores and the city hall.  The energy fades just west of Ross Ave, where the shops and restaurants just don’t seem to have that zing.  Well, it seems that there are plans to change that. 

The Southern San Anselmo Avenue Vision Committee has grand plans to inject a bit more life into this half, with grand plans for a possible underground garage as well as adding more shops by taking over a lane of Sir Francis Drake.  More details on this ad-hoc committee’s plan is detailed in this recent MarinIJ article. 

Regardless of whether this plan comes to fruition or not, living close to downtown already has its pluses.  Take a look a current listings that will have you walking to downtown San Anselmo in no time:

26 Tamalpais Ave #E - 2 beds, 1.5 baths – $557,000:  This is the lowest price point currently that is walking distance to downtown.  A condo in a small complex with a large patio.  Fairly good size – 1331 SF.  On the market now for 81 days, it’s offering seller financing.  Though maybe a price reduction could be better.  Only a $8000 drop so far.  Probably because the current owner paid $505,000 in 2007.

26 Belle Ave #D – 3 beds, 2.5 baths – $569,000:  A condo/ townhouse less than a block to the new proposed section of downtown with a enclosed garage.  Small complex and probably the best bang for your buck in these parts.

191 Tunstead Ave – 2 beds, 1 bath – $739,000:  Just reduced by $30,000 after being on the market for 14 days, this is a charmer built in the 1920s.   Small home but a decent sized lot offers potential to add – on. 

8 Richmond Rd – 4 beds, 3.5 baths – $2,400,000:  This is a completely brand new house built after a tear down with all the high end touches and right across from the seminary.  On the market for quite some time.  Most recently agent has it listed for 64 days.  Prior to that, the 1st agent had marketed in the neighborhood of $2.6 million.  Quite a high price tag.  The lot and the now demolished home was purchased in 2005 for $950,000, so it looks like there is definitely costs to be recouped here.

In reading the tons of articles that swirl around on the rescue plan, it seems to me that those who are opposed to the plan feel that Wall Street is getting what it deserves.  Banks and other financial institutions, they argue, got greedy and gave out credit to anyone who asked.  They too, rode the home buying frenzy, thinking home values would keeping going up, up, up and got the average joe into loans that were probably unsuitable and loaded with risks.

While I agree with all those points above, what I have found particularly interesting is that everyone is pointing their fingers at everyone else.  This whole credit crisis, I believe, is the responsibility of not only the banks and financial institutions, who doled out more credit than they should, but also the consumers who readily took on credit that maybe they shouldn’t have.  Like a marriage or partnership that doesn’t work out, there are two parties to this transaction.  And it is the responsibility of both parties to understand what they are getting themselves.  When it doesn’t work, it’s easy to lay blame.

Yes, I think the banks and financial institutions went too far with exotic mortgages, no-doc loans, minimal down payments, etc.  However, let’s not forget that on the receiving end were homebuyers that probably also thought buying a home was an instant profit making machine, since prices kept skyrocketing.  With no-doc loans, many probably stretched a little bit and in interest only loans, they too were making a bet on the housing market.

This credit crisis is more serious than I had imagined.  It has seemed to spill out of just the housing market to affect everything else.  I haven’t been a fan of bailing out anyone.  Especially as a taxpayer that sat on the sidelines and didn’t take on a mortgage during the heyday I wasn’t too sure that I could pay in the long run.  However, I do support the plan, only because this credit crisis seems to have infiltrated not just the housing market, but everything from car loans, credit cards, small businesses, etc.  I just only wish that folks stop pointing fingers and be willing to admit that they probably contributed to this problem.

A handful of homes this week in Marin have fallen out of contract, going from “contingent” back to “active” status. The reasons are unknown, but I would guess that one common trait is that the seller is probably very disappointed to go back to the drawing board and is very eager to get their property sold. I.e. they may be very negotiable and this may present an opportunity to take advantage.

Four homes this week that fell out of contract:

60 Marina Vista Ave, Larkspur - 3 beds, 1.5 baths – $629,000: This Larkspur home is surrounded by trees and looks to sit in the hills above Larkspur. It’s noted as a contractor’s/ owner’s special but the pics don’t point to anything apparent. Not only did this drop of our contract, the seller also dropped its price – most likely in hopes of getting this back on track again. On the market for over 100 days, it first listed in June for $799,000.

219 Monte Vista Ave, Larkspur – 2 beds, 1 bath – $849,000: Another Larkspur drop out and if I can recall correctly, this is the 2nd time it has fallen out of contract. In a great neighborhood clsoe to downtown, it’s in the vicinity of upgraded homes. Large lot of redwood trees. One note – possession is subject to tenant rights. Hmmm… maybe this is the catch.

28 Jefferson Ave, San Rafael - 3 beds, 2.5 baths – $699,000: In San Rafael by the Civic Center, this is an almost brand new home built in 2004. Vacant and looks well maintained with hardwood floors and granite countertops.

13 El Camino Dr, Corte Madera – 3 beds, 2 baths – $799,000: Off of Paradise Drive in Corte Madera, this has been on the market for 66 days. No pictures of the inside so hard to tell of the state of things here.

First, it started providing links to databases to look up the payroll of Marin County public employees.  Very informative, since as taxpayers, it’s great to see how our money is spent and how the employees of the county are being (or not) managed.

Lately, they released two other databases geared towards the Marin real estate market.  One allows you to look up recent Marin home sales data and the other provides information on Marin foreclosures.

The sales database provides a list of recently sold homes in the area, which one can search by city, zip or specific address.  It provides the sale price and when it was added to the database (i.e. assuming that was the sale date).  What it doesn’t tell you is what it was listed for, but hopefully you’ve been keeping a keen eye on certain properties anyways.

The foreclosure database also allows you to search foreclosed homes by the same criteria – city, zip, address, date, value, etc.  Unlike other online foreclosure sites, these lists look accurrate and you don’t have to pay anything.  Results tell you the date of the foreclosure, the lender and the value.  From there, you pretty much have to figure out how to take advantage of it.

As potential home buyers and with everything else, knowledge is power.  Educating yourself and seeking out information will arm you to be a sharper and smarter buyer.

My picks of the week:

15 Joan Ave, Novato – 3 beds, 1.5 baths – $349,000:  A single family home for a condo price.  This 1,100 SF home sits on a good size lot of almost 7,500 SF.  Not a ton of pics of the inside, but the one peering into the kitchen doesn’t look too bad.  This is the first price reduction since it listed about a month ago for $399,000.  Short sale here, as the owner last paid $575,000 in 2004.  The owner before that shelled out $433,500 in 2003.  Ouch.

260 Bolinas Rd, Fairfax – 2 beds, 2 baths – $499,000:  This was  a price drop pick several weeks ago but it looks to me that the owners are very aggressively reducing the ask in homes to move the property soon.  Last listed for $569,000, this is another over 10% reduction.  The home value estimates from Zillow, eappraisal, cyberhomes have the bottom of the range to be in the $530K – $600K range.  Maybe this is worth another look. 

133 Convent Ct, San Rafael – 5 beds, 3.5 baths – $1,595,000:  For those in a higher price point, this is another $100K slash on this house in the Dominican area of San Rafael.  Lots of house for the buck.  You get over 3,000 SF and about 1/3 of an acre.  This translates to just above $500 per SF, which isn’t shabby.  First listed back in July for $1,795,000.   Owner paid about $1.2 MM back in 2004.

15 Live Oak Way, San Rafael – 4 beds, 5 baths – $2,850,000:  Ok, this may be out of most of our price range but this price reduction definitely belongs as a  pick of the week.  On the market since April, this is the first price cut.  And what a price cut it was… a cool $1,000,000 knocked off the original ask of $3,850,000.  That’s an over 25% reduction.  Over 5,000 SF brand new home on 7+ acres with green building techniques in mind – too bad I don’t see this type of dramatic reductions more often in my price range.

Prior to going I had done my diligence by attending the open house and visually “inspecting” the property.  Given that I live around the corner, I knew it was a well maintained complex.  By doing some Google and other property website searches, I also learned that the bank owned the property, most likely winning the 1st foreclosure auction for around $247,000 and the assessed property value was just over $200,000.  My max budget:  $170,000.

Held at the Oakland Marriott City Center, the auction was an all day event, starting at 9:30am.  The property I was eyeing was pretty far down on the list and it was recommended to arrive by 3pm.  Very courteus of REDC to provide these guidelines so bidders didn’t have to loiter around all day.  I arrived pre-reigstered with all the other required items (cashier’s check for $5,000 and blank check for the balance of the 5% winning bid) and got a handy dandy number.  The auction was in full swing with folks from all walks of life.  I wasn’t sure what type of crowd to expect, but it was just an international smattering of folks, from people who looked like they were looking for a home on the cheap to investors willing to renovate some of the fixer properties.

I had never participated in a live auction before, but after watching a few, I got the gist of it.  Each property had a starting bid and a previously valued to price, to give bidders an indication of what the property was once either sold or valued for.  However, this was a deceiving number as it reflected the highest price the home peaked at, at the height of the bubble.  The current value is probably nowhere near that now.  As evidenced by the property I was interested in.  It was previously valued to $400,000.  Ha.  And it didn’t sell recently when it was listed for $279 something.  

Overall, there seemed to be good deals.  Most homes went for under $200K.  Just a couple of examples:

2020 57th Avenue Oakland – Sold for $135,000

119 Silver Ave Richmond – Sold for $65,000

More than a handful of properties came back for “2nd chance.”  Not sure what the circumstances were (maybe the winner didn’t qualify for financing) that brought these homes back, but even better deals were had.  As the day went on, many bidders left, so when the 2nd chance homes came back, there was less competition.

This house in Richmond first went for $260,000.  It then came back for a 2nd chance and the next winner probably had some remorse, as it then went for $285,000.  Surprisingly, in the last 20 minutes of the auction, probably a good 1-2 hours after the 2nd winning bid, it came back on the block again.  Two bidders went at it and the final price:  $215,000.  Good for them, too bad for the bank.

As my property came up, my heart did start to race.  I didn’t want to get caught up with the whole fervor of the auction.  The auctioneer and the folks working the floor were definitely professionals.  They were animated, charismatic and kept things entertaining and lively. 

Unfortunately, I didn’t win.  The listing went by quick and I was outbid by $5,000.  I must admit I have a tad bit of regret, as in the whole scheme of things, an additional $5000 is not that much relative to a $170,000 purchase price.  But I’m proud I stuck to my guns.  And now I tell myself, I don’t have to undergo learning to be a landlord.

The auction is going on for a few more days.  For those of you in the South Bay, the San Jose area homes are going on the block this Saturday, the 27th.  Unfortunately, it’s too late to attend the open houses.  But if you are bored, it is worth a visit to see it in action.