To Catch a Falling Knife

January 1, 2008

The race to the bottom had begun, and house prices were dropping in thousands every week, even in Irvine. On one side, there was Irvine Renter writing blogs with titles like “Speculation or Investment”, profiling the properties with an asking price totally out of tune with the market, and graphs that showed the shadow inventory as well as the current REOs with no sign of bottoming till 2012. It was doom’s day. Great Housing Bubble was bursting. On the other side, there were Realtors, convincing you that this was the bottom, and Irvine will never see these prices again. Opportunity was knocking, according to them, and you would be a fool not to pick up the keys to open that door.

Amidst all this certainty, an impending recession and growing unemployment, there were a lot of houses on the market, and there were buyers and sellers, including us. We decided to catch the falling knife, and buy a house.

All we wanted was a small three bedroom/ two bathroom house with an attached garage in an excellent school district. We saw a lot of houses, and wrote a lot of offers. Most of them were rejected. Some got better offers than what we quoted, and some just waited for the right price. Some were short sales that took forever to materialize. Today I will profile a few houses that we had put offers on, with the price that we had offered.

1. 256 Monroe #50

Irvine CA 92602

Listing Price: $599,000

Our offer: $474,000

Community: Northwood

Area: 1411 SF

This house fit our criteria, and it was the first one that we saw. When our Realtor sensed that we had liked the house, she told us to put in an offer fast, because the house already had multiple offers. We ran a few calculations using Irvine Renter’s blogs, and decided to offer $474,000. She was miffed at us, and told us that she could not submit any offer below $500,000 since the house already had two offers above $500,000.

Public records show that the house was foreclosed at $417,600 by the Bank in July 2008, and resold at $448,000. Two days after our Realtor told us about the outstanding offers above $500,000, the listing price dropped to $480,000 proving that there weren’t any other offers.

Currently, 72 Monroe from the same neighborhood is on the market for $349,000.

446 Monroe was sold at $401,000 in September 2011.

Verdict: Falling knife.

2. 59 Bellevue

Irvine CA 92602

Listing Price: $564,900

Our offer: $525,000

Community: West Irvine

Area: 1600 SF

Our offer was rejected and public records show that the house was taken off the market.

Currently, 17 Bradford from the same neighborhood is on the market for $479,000.

9 Bellevue was sold at $465,000 in September 2011.

In the same neighborhood, 1 Bradford was in the market at $589,900 in 2008. We offered $525,000 and we were counter offered at $585,000. Eventually the house was sold at $570,000 in May 2008. The house was listed at $540,000 in June 2011 and sold at $495,000 in August 2011.

Verdict: Falling knife wrapped in silk

3. 10 Wedgewood

Irvine, CA 92620

Listing Price: $525,000

Our offer: $525,000

Community: Northwood

Area: 1561 SF

This was a lovely single family home with a “teaser price” of $525,000 to lure the buyers. It was everything that we looking in a house, but we were outbid as expected. It was a single family home. There was another house on Grape Arbor with a teaser price of $525,000 and people were faxing in their offers even before the house was opened for showing.

Public records show that the house was sold for $660,000 in June 2010.

Currently, the same house is listed in the market for $698,000.

Verdict: Would have, should have!

4. 11 Sagamore

Irvine CA 92602

Listing Price: ??

Our offer: $525,000

Community: West Irvine

Area: 1500 SF

I lost the MLS listing sheet for this one, and couldn’t trace the listing price online either. But I did find an email stating that we were counter offered at $545,000. I am assuming this was on the market for $550,000. I had also written a letter to the seller, asking him to reduce the price to $525,000 quoting Irvine Renter’s speculations about Irvine market. Looking back, I am thinking that the whole house hunting process must have been so frustrating that I wanted a house to move into, rather than this house. It can happen to any buyer- after you look for a few months, and find nothing worth your attention and money, frustration sets in and you start making mistakes.

Public records show that the house was sold for $491,104 in April 2009.

Currently, the 97 Sapphire with the same floor plan in the same neighborhood listed at $385,000.

Verdict: Phew! That was close. It was probably the sharpest knife that we were going to catch.

5. 801 Yorkshire

Irvine, CA 92620

Listing Price: $505,000

Our offer: $475,000

Community: Northwood

Area: 1481 SF

Public records show that the house was sold for $515,000 in December 2008.

Currently, the 135 Islington with the same floor plan in the same neighborhood sold at $489,000.

We had offered $475,000 for a similar condominium in the same neighborhood. Our offer wasn’t accepted then. The house was foreclosed at $495,000 in October 2009, and it was again relisted in 2011. The last sale was for $485,000 in August 2011.

Verdict: Blunt knife

6. 171 Lockford

Irvine CA 92602

Listing Price: (Feb 2008) $558,800

Our offer: $525,000

Community: Northpark

Area: 1752 SF

This house was a perfect size, and a perfect location- we were taken by the guard gated community. Every room was well laid out, and except for the fact that the entrance was through a flight of stairs, there was nothing to really point out to. But around the same time we found out about the lies our Realtor was feeding us, and decided to stop working with her. By the time we found a new Realtor and re-entered the market, this house was sold at $540,000 in August 2008.

117 Talmadge in the same neighborhood was sold at $450,000. It was a short sale.

3 bedroom/ 2.5 bath detached condos are on the market in the same community for around $535,000 now.

Verdict: Kool-aid happens, even from those who read IHB.

7. 9 Hollyhock

Irvine CA 92602

Listing Price: I lost the MLS sheet, but this was listed around $600,000.

Community: West Irvine

Area: 1700 SF

This was a short sale, and we offered $545,000 to the bank. The offer was rejected, and the house was foreclosed at $600,555 in July 2008. It was sold again in November 2008 at $569,000.

Verdict: Knife in a box.

After spending so much time touring at least a hundred houses in Irvine, we finally bought in November 2008. It was a short sale that took four months to get the bank approval. When it materialized, we had almost forgotten about the offer and moved on. It is not the perfect house, but so far, our house is the “bottom” for our neighborhood. In the little improvement that the market saw in 2010, one of our neighbors sold their house (same plan) for $65,000 more than the sold price of our house, and another short sale in 2011 dragged the appreciation by $30,000.

So do you maintain a list of homes that you put an offer on?

Did you buy or sell a house during 2008/2009?

Did you speculate, or did you invest?

Discuss below or at Talk Irvine.

14 thoughts on “To Catch a Falling Knife

  1. soldbought

    not in irvine, we lived in long beach and sold in 2009 during tax credit… no heloc or loans to speak of and doubled what we had paid in 1999… rented for 2 years and we’re going to wait, then the house we were renting in a beach community was going to market per landlord… we were given a chance to make an offer, and did so about 60k less than market entry… they went to market, had open house and a week later came back and took our offer… yes we over paid, but only financed 2 times our annual income with over 40% down-payment… kids in school and this is our retirement house in a walk about beach community… maybe the kids will see the valuation when they have kids… ;-p

  2. irvine_home_owner

    Great article!

    The history behind the offers and the closes is very interesting.

    I do similar tracking with homes we’ve seen in person or on Redfin.

    There have been a couple of shoulda/couldas, a few knifers but I don’t think we would have had any regrets because we put more thought into it given the current climate.

    Still looking… but not enough *good* inventory out there.

  3. Anonymous

    Rented For several years, watched prices and waited some more. Finally saw one for a good price (not dream home, but good solid investment), made our first offer after all that waiting. After some counters, got it for the listed price matching our initial offer. Did some minor cosmetic and repair work to fix unappealing things that turned the other buyers off. Reasonably happy with the place, it was lowest neighborhood comp, may still be or at least close to it.

  4. Liar Loan

    My first thought was that touring a hundred homes is overkill, but then I remembered we toured about 36 homes in 2 months when I was home shopping. I guess a hundred would have only taken me about 3 more months had we not found the house we ended up buying.

    Nice post.

  5. villagepeople

    we have similar stories when house hunting in aliso in 2010-2011… looked at over 30 homes… probably put offers on 1/3 of them, all short sale. lot’s of wasted time, ended up buying new in irvine last year.

  6. CK

    Wow, what a great post. Nice to see IHB back to what first brought me to this site five years ago as opposed to whatever that was for the last 18 months or so. Almost wish I were still interested in Irvine real estate to join in the conversation. FWIW, we looked at about a million homes in and around Irvine between 2005-2010 and never put one offer in. Each home we viewed we ended up saying “We have to pay THAT for THIS?!” before moving on.

    We made exactly one offer 15 months ago on a home out of Irvine, and got the house. Since then I have rarely looked at Redfin or Zillow. We purchased the home we loved for a price we felt was fair (although it certainly was not the ‘bottom’ of our neighborhood) and now don’t look back and don’t worry about the day to day and month to month ups and downs of the market. After so many years of obsessing over neighborhoods, interest rates, price per sq, and everything else an extended home search entails it has been very liberating to put that all in our review mirror and just enjoy the home and focus on other activities. Such as obsessing over what new cars would best fill the 3CWG. Hi IHO!

  7. winstongator

    Not in CA, so I have a different perspective. I’ve tracked some purchase & sale prices of houses we looked at. I’ve begun thinking about this a different way. If your loss on a home is $48k, and you lived in the home for only 2 years, your loss was about $2k/month. What could you have rented for something $2k above what your mortgage payment was. Some of my calculations were even higher per-month losses. If you look at it that way, renting appears a lot more attractive!

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