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Buying a home in "distressed" area?

Home Real Estate Investing Buying a home in "distressed" area?

  •  doclude 
    Participant
    Status: Physician
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    Joined: 06/19/2016

    The wife and I are looking to buy a home in the next year, in an area that splits between our jobs.

    Good schools, but high property costs and taxes. It has affected real estate values and we have seen many homes come down by 20% already.

    We recently saw this article, where Wells Fargo has rated the area “Distressed” and is requiring a higher downpayment. Basically they require additional downpayment for homes even though this is one of the wealthiest areas in the country.

    https://www.bloomberg.com/news/articles/2018-11-15/homebuying-in-greenwich-wells-fargo-wants-a-bigger-down-payment

     

    Should I be concerned and how would this affect a potential home we are interested in?

    #171651 Reply
    Zaphod Zaphod 
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    If the trends continue, or a slow down or worse recession comes on the prices could be affected even more. Really hard to know those kind of things up front, but just use that knowledge in combo with how long you are planning to stay.

    #171659 Reply
     Tim 
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    Status: Accountant
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    Joined: 09/18/2018

    “Fairfield County, we review a wide range of local housing and economic indicators as part of our assessment process”.

    Going from the long held industry standard is very very unusual, 20% to 25%. This would not be a short term decision nor based upon broad economic conditions.
    The county has a premium attached due to location. It could be a signal that WF expects a permanent decline as well in the 5% range. Please note, it doesn’t seem NYC or neighboring counties were impacted. Waiting might be prudent to see impact on prices.

    #171668 Reply
     ajm184 
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    WCICon18

    Depends on your perspective.

    Certainly the area is not ‘distressed’ in a conventional financial sense, rather it is a businesses undefined metric. Not knowing the inputs to create the metric, certainly a combination of i. lower home prices in Manhattan, ii. high tax burden in the State of Connecticut, iii. low state GDP growth/labor, and iv. hedge funds under pressure (as Greenwich is a fav of that type) are possibly all factors.

    Length of time in home will go a long way in helping mitigate future resale financial loss. If it is where you want to be, you can afford it/downpayment; it only matters what you are willing to ‘buy’ for and ‘sell’ for at some point in the future and the value you obtain during the time you live there.

    #171684 Reply
    ENT Doc ENT Doc 
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    What is their definition of “distressed”?  Do other banks have this definition and down payment requirement?  I would not be concerned about buying a home in a wealthy area with good schools aside from perhaps the overall cost and if said area was in a high income/property tax state.

    #171686 Reply
    Vagabond MD Vagabond MD 
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    Status: Physician
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    Hmm, I was expecting a different discussion re: distressed property.

    I guess Wells Fargo is seeing market prices trend down and does not want to institutionally relive the 2008 financial crisis. It sounds like a smart, conservative practice. If you plan on living in the area long term, it is probably not a concern for you, the borrower. Perhaps you should seek other lenders if you cannot come up with the additional downpayment.

    "Wealth is the slave of the wise man and the master of the fool.” -Seneca the Younger

    #171712 Reply
    Liked by jfoxcpacfp
    Zaphod Zaphod 
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    You could always use a different bank. The first house I bought had one of these attached to it by bank of america, I think they were the only ones. I bought another house a year later in the same zip code with a different bank and they didnt have this assessment.

    #171714 Reply
    Liked by jfoxcpacfp
     Tim 
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    Greenwich and distressed 😫 don’t seem to belong in the same sentence.
    Now, over leveraged I could empathize with easily.

    #171718 Reply
    Liked by Craigy, wonka31
    Zaphod Zaphod 
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    Greenwich and distressed 😫 don’t seem to belong in the same sentence.
    Now, over leveraged I could empathize with easily.

    Click to expand…

    Theyve had a lot of issues due to CT just gouging their populace for taxes. You have several people pulling in nearly a billion a year leave to florida and things go south pretty quick.

    #171722 Reply
    jfoxcpacfp jfoxcpacfp 
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    Earnest refinancing bonus

    Greenwich and distressed  don’t seem to belong in the same sentence.
    Now, over leveraged I could empathize with easily.

    Click to expand…

    Yep, you have to wonder what you don’t know, hmm?

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #171723 Reply
     Tim 
    Participant
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    “Connecticut, home to several hedge fund billionaires, now tracks the quarterly estimated payments of 100 of its top earners. Kevin B. Sullivan, commissioner of the Connecticut Department of Revenue Services, said about five or six of the highest earners could have a “measurable impact on the revenue stream.”

    Mr. Sullivan said that when one of the state’s rich hedge fund executives planned to move his family and company to a lower-tax state, state officials met with him and persuaded him to leave some of his work force in Connecticut.”

    The article indicated the state actually is in contact at times. Maybe WF is doing for groups of employees being transferred to Florida. “
    😮 Whoa, why did we get 1000 loan payoff requests last week. All of them said they were moving. Dang. Great economic indicators. For sale signs or forecasted!

    #171729 Reply
    Liked by Craigy, Zaphod
     doclude 
    Participant
    Status: Physician
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    Joined: 06/19/2016

    thanks everyone–yeah we are in it for the long haul. just trying to decide whether to rent for longer but my feeling is that is like timing the market.

     

    if anything, the situation doesn’t seem to be improving.

    #171825 Reply
    Zaphod Zaphod 
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    thanks everyone–yeah we are in it for the long haul. just trying to decide whether to rent for longer but my feeling is that is like timing the market.

     

    if anything, the situation doesn’t seem to be improving.

    Click to expand…

    It seems like housing effects are slow to propagate through the system, maybe thats broad and specific locales can be faster. It still boggles my mind that the market in RE didnt bottom until 2012, its wild, 4 years.

    #171830 Reply
    Craigy Craigy 
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    If you can afford it, buy it.

    But don’t overpay.  😉

    LEVEL 1 WCI FORUM MEMBER.

    #171872 Reply

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