eHouseHunting.com Founder Jason Yelowitz Discusses the Current Housing Market

     Is this a scary housing market? Absolutely. But, as Warren Buffet says, be scared when others are greedy, and greedy when others are scared. This is not just something I preach. I live it.

     My wife and I bought a home in Reno, NV last December. We were renters from 2002 through 2006, though I had previously owned two homes prior to 2002. During our renting phase, I believed the housing market was becoming inflated and I did not feel comfortable putting my money into property. As it turns out, I would have done better to buy in 2002, and hold through both the ups and downs, but there was no way of knowing that at the time.

     In any case, by the end of last year, it became obvious that the housing bubble had popped. An article came out in the local paper estimating that home prices in Reno would fall 20% from peak to trough by 2009. Rather than wait for two to three years, we decided to hurl in some lowball offers and see if any sellers would take them. We looked at one house with an asking price of $1,088,000. We offered $875,000, figuring that if we could save the 20% drop now, there was no reason to wait. The seller did not even bother to counter our offer. (The home sold about 6 months later for $1,000,000.) Then we found a home we loved being offered for $1,200,000. Checking Zillow.com as well as other sources, we estimated that at the peak, this home was probably worth about $1,400,000. Clearly the owners were cognizant that prices were coming down and had decided to be reasonable with their asking price. We offered $1,050,000, about 12.5% less than what they wanted. They countered at $1,140,000. We refused. Then a few days later, we came in at $1,115,000. They accepted, and we felt good because we were about 20% below where we felt the peak had been, so we were not too worried the value would keep dropping below what we paid. Based on sales that have occurred after ours, it appears we were correct.

     To add to the benefit, we negotiated strongly with our real estate agent. We told her we would only use her if she refunded us 1.5% of the purchase price, which amounted to about 37.5% of her commission. She agreed. We felt ok because she would still make a whopping $30,000 off the sale, but we got $15,000 back at closing. Sounds like a fair deal, don’t you think?

     Overall, we felt fine about the entire transaction. The seller still made about $200,000 compared with what they had paid four years earlier. Our real estate agent walked away with the biggest commission of her life. And we got our dream home at a price that we consider to be "bottom of the market" even though the market is still falling. Everybody won!

     So the long and the short of it is that if you’re considering buying a home, there’s no reason to sit passively on the sidelines for years. Everyone knows the market is weak, and sellers are willing to entertain just about any offer. You might as well make a lowball offer. The worst that can happen is that you’re refused. The best is that you end up in your dream home at a price that your neighbors won’t get for a year or two. On top of this, interest rates are still at very low levels.

     So now that the world is scared, I say "Get Greedy!"