Advice on new home purchase in Irvine

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dj1_IHB

New member
Hello, great forum here and I?ve learned a great deal from some very knowledgeable people on here. Was hoping to get some advice on buying a home in Irvine.



First some background: I?ll be moving from LA, target date is summer 2008. Both my wife and I are working professionals with stable work in the medical field, have two young kids. Are looking to relocate to Irvine for work purposes (in Newport) and excellent schools. Need a home with at least 4 bedrooms/3 baths, in the Irvine unified school district. Looking to put down between 20-30% and keep prices below $1m.



We?ve made several trips down to Irvine and the surrounding areas to explore and I have my wish list for areas as follows in order of preference: 1) Turtle Ridge (we love this development, but you really don?t get a lot of house for the money here, would have to stretch to $1.6m+ to get the same sqft house here as further east in Irvine, which seems like too much of a premium to me, also do not want to stretch myself too much by getting a home in this range anyway, so this is out); 2) Turtle Rock ? also nice location, just older homes; not much with 4 bedrooms in the location either though less than $1m; 3) Quail Hill ? nice development, good schools, but again need to stretch by about $250k+ to get the room count we need; 4) Portola Springs ? see below; 5) Woodbridge ? nice neighborhood, but again need to spend over $1m to get bedroom count and updated finishings etc. (have looked at other neighborhoods and developments but these were the ones we liked best).



In PS I am able to get a home with a good bed/bath count (5/4), unfortunately on small lot, for $290/sf (building only, not land). I actually like the seclusion, commute to work taking the tollway is not bad (compared to my current commute in LA!), the lot I?m interested in is buffered from the noise of the tollway, I?m aware of the fire risk but not a deal breaker for me.



I have the view as many on this forum do that the housing crash still has a way to go before stabilizing. I?m not qualified to make predictions but have to make some educated guesses to make my decision and they are as follows. The current price I?m looking at for this place in PS is 30% off the phase 1 release at the peak in summer 2006 (don?t know how many, if any sold at those prices but judging from zillow there may have been a few). Now if the market falls by another 10-15%, if I stay there for 5 years my loss will still be within reason. If it drops more than that, then I can still deal with the loss because I?m not stretching myself too much on the mortgage and can put that extra money to work for me in other investments. Looking at the rentals I don?t see the rates being much cheaper than the mortgage payments alone for the bedroom count that I need, and in my tax bracket can use some of the writeoffs for home ownership.





Here are my questions:

1) The builders will not give me a guaranteed delivery date and there is no penalty in place if they do not meet their expected delivery. I understand that there are delays with construction etc, and 1 or 2 months is acceptable, but here I am held to the contract for an additional 6 months from expected delivery unless I want to walk away from my $20k deposit. Anyone know if there are any loopholds to get out of this if they do not deliver on time? I?ve asked and they will not put anything in writing to that effect.



2) Upgrades cost an arm and a leg compared to prices I?ve shopped around for. The builders are quoting prices anywhere from 10-50%(!) higher than what I?m finding outside. I asked if I could have the property delivered without flooring, and bathroom tiles so I could do it myself afterward, but they said they have to deliver a finished product and there is no room for negotiation on that. To me a big waste of money and added cost to have them rip out the flooring before putting in the upgraded floor. Anyone have any ideas to negotiate with them on this, or possibly take a different approach I?m not seeing here.



3) I asked for a 12 month price guarantee (like some of the other builders around the country, but nobody in Irvine is doing this as far as I know) where if the next phase is released at a lower price they will guarantee that difference. They say they only give the guarantee to close of escrow, so about 6 months. Also agent said this was set at the national level and they have no room to budge on this. Not sure if anybody knows of other builders in Irvine that are giving better price guarantees or if I should just drop it.



4) Pure speculation but I?d be interested to hear your thoughts. Since PS is at the north end of the great park, any thoughts on the park being a catalyst to boost values in say 10 years or so once there is some tangible progress on the park, or is this just wishful thinking on my part.



Thanks in advance for your input.
 
<p>Just a thought - would it kill you to rent for two years?</p>

<p>Would you be willing to trade $60K in rent (about two years worth) for another 30% off the property you are looking at ($300Kassuiming a million dollar home)?</p>

<p>Becasue I would gladly hand you $60K in cash for $300K in cash if you'd like to go that way........ the builder is making you a far worse deal than the one I'm offering. Mine locks in your exposure to $240K.</p>
 
I definitely see your point 'no vaseline', guess it just comes down to a guesstimate on how low I think the market will go. I was going off a figure of 40% off the high at market bottom. For this actual property itself ($800k, so less than $1m) my downside exposure is say another 80-100k. (all guesstimates I realize). Given the inconvenience of renting, moving, etc to me for my personal situation I am willing to take that risk. It's definitely possible we'll be looking at a drop of another 30% as you said, in which case my loss is greater, but in that case I would either just hold onto the property longer or stomach the loss. I'm not trying to catch a falling knife, I have no illusions about the potential downside risk, I'm just in a position where I have that luxury of eating the loss if need be and writing it off as the cost of comfort to me and my family.
 
<p>dj1 </p>

<p>May i ask you which builder are you talking about? I've heard from others that some builders are more notorious for their stubborness like Taylor Woodrow. As the one who is also interested in Portola Springs, 290/sf sounds pretty good to me (but of course there should be more ways to deal with the builder) because I intensively negociated with the builder a month ago but all I could get was around 360/sf...so...guess what? I walked away...</p>
 
1) There is no loophole as long as you don't get one written into the contract. If the builder is desperate enough to sell, anything is negotiable, so just try pushing them harder.



2) This is nothing new. Builders use upgrades to make money. They will not "tear stuff out" etc. as they won't warranty any work not done by them. So, even if you upgrade materials yourself after the home is built, it will void your new home warranty.



3) Again, negotiable.



4) Unknown. Anybody's guess. Don't make any assumptions. :)
 
On prices: right now prices are falling to rent equivalence. I expect this process will be fast. Another year, two at most, and it will be done. You have to be awfully rich to be willing to spend 10% of the purchase price just to avoid renting one year. After that there will be further, slow, declines as interest rates increase; however, if you're planning to stay a long time there's no big advantage to further delay as declines in your house price will largely be offset by a reduced NPV to carry your mortgage.



1) If you're renting month-to-month you don't have to worry about exact completion dates. Another advantage to a delay.



2) Yeah, builders really rook you over that way. Take cheap carpet or linoleum; removal is very cheap.



3,4 - nothing to say, really.
 
Is there any advantage to a new home over a used home? This is not a sarcastic or rhetorical question. I really do not know and would like opinions. I have never lived in a new home, but from what I have heard in here, dealing with a builder and their representatives sounds worse than dealing with a car dealer.
 
<p>My last house was brand new. It was so nice to have everything new and clean. I never had to live with anyone else's dirt, scratches, stains, dents, holes, pet smells, etc. It really felt like "our" house and it didn't feel like we were living in someone else's house. </p>

<p>Plus, nothing starting to break down until we were living there 10 years. Once things started breaking - we sold. Now someone else has to start fixing the "old" house.</p>
 
<p>You'll never know for sure if you like a neighborhood until you live there. Being that rent is relatively cheap right now, why don't you rent a comparable home at PS to see how you like it. And if you do, buy a home 1 year later.</p>
 
Rent, Rent, Rent....





You don't live here yet, and unless you visit Irvine once a week, you can't possibly know which area you like best. You may find out after renting for 12 months that you prefer Aliso Viejo, Newport, or Huntington Beach, etc.





Trust me, Even if home values don't plummet anymore, they are <strong><u>NOT</u></strong> going up. You will only benefit from renting. Save your extra cash and earn some interest on it. Enjoy all of Irvine's amenities while the tax payers fit the bill.
 
I must say that renting would be my preferred option for a few reasons. First, it gives you a chance to live down here and get a better feel of Irvine, Newport, Laguna, Aliso Viejo, Dana Point and other surrounding cities. You will learn about the type of people living there, the schools (IUSD is great but the other schools are also very good). Second, your argument to waste $100k to avoid moving is a little ackward. If you really have $100k to waste, why don't you rent, take 6 months off and spend all summer with your kids? Wouldn't that be more enjoyable? Also, just pay movers the big bux and they will take care of your move, put everything in boxes and put everything back in place in your new place. Third, the new home market may not drop as much anymore, but the resale market as yet to drop by a big margin. This will give you a chance to buy a nicer and bigger home as well as a home closer to your work. The way I see it, you might not regret buying a home, but I am 100% sure you won't regret renting for 1 or 2 years.



A comment about Portola Springs, this development is having a hard time selling. The next phases are all being delayed, therefore I wouldn't like living somewhere it will take years before I really feel like a community like Woodbury or Northpark. The commute might be worse in LA, but that doesn't mean you won't enjoy saving 15-30 mins everyday if you live closer to your work. Portola doesn't seem to be a good fit for your circumstances, work in NB and kids. I would take a closer look at the Villages of Columbus.



There are some really nice rentals for $4,000-$5,000 out there. Look quickly on Craiglist and you should find nice homes like you want in the development you like. You would be renting vs owning...so what? Pride or big american dream? I don't know, but I am sure you work hard to make good money, so I would make my money hard work for me if I was you.



Hope this helps put things in perspective.
 
When you put a deposit on a new home, does the builder pay you interest on that money until the home is built and escrow closes?
 
"When you put a deposit on a new home, does the builder pay you interest on that money until the home is built and escrow closes?"



Nope.



"Is there any advantage to a new home over a used home? This is not a sarcastic or rhetorical question. I really do not know and would like opinions. I have never lived in a new home, but from what I have heard in here, dealing with a builder and their representatives sounds worse than dealing with a car dealer."



Much lower maintenance costs. Takes things a while to break. Also have the builders warranty, which I have personally used a couple of times, to get some things done for free. I've had nothing but positive experiences dealing with Cal Pac, their vendors, and their reps.
 
Thanks to all for your input, very much appreciated. While I have been resistant to renting due to the hassle of multiple moves some of the points here are very well taken. Think it really struck me yesterday when I saw a 'distressed' property in a better neighborhood (on my preference list) than PS, which is nicer than the one in PS and I could potentially get at a much steeper discount. If that doesn't work out, after all the valid arguments for renting mentioned here, I'm going to check out some of the rental properties. I didn't mean to sound flippant in my earlier comment about absorbing a $100k loss, I consider that a lot of money to be sure, but was not really convinced I would see that downside bc I felt I had negotiated the PS home down to a fairly significant discount off the market peak pricing. Also I was starting to see some activity in that range, in the last two weeks of January I saw an accepted offer on a Northpark home I looked at, a Woodbridge home I liked, and at Serra in PS for one of their standing inventory homes they had discounted. Seeing the other property yesterday though showed me there may well be better deals out there. Also lendingmaestro's comment that even if we are at bottom the likelihood of price INCREASES would be negligible so if I rent for 6 months and find PS is still the place I'd like to live I can always get in on the next phase for either the same amount or slightly higher.

By the way, monekoko, the builder is Richmond American (Manzanita). The agent I worked with there was very helpful, I had a good experience there. If we had clear indications of a bottom and it seemed fairly certain there were no better deals out there I would probably go for it.

Also my opinion on the new home vs older home is that I definitely prefer the feel of a new home to an older one. Same goes for the neighborhoods in general - just personal preference.
 
If you haven't already, I would also suggest getting (free) accounts on ziprealty.com and realty.fatwalletdeals.com. That way you can track resale homes that interest you and see how prices are going.
 
Dj1, et al: can't tell you how interesting this thread has been, due to the fact that it sounds much like the situation my wife and I are in (without the kids). We're currently renting in Woodbury, having moved cross-country to Irvine last summer looking to buy. Our favorite neighborhoods so far are the same as yours, dj1, except for Turtle Ridge (not on our list). I really like Manzanita plan 2 at Portola Springs, but the combo of taxes, Mello Roos and HOA fees strikes me as borderline obscene (>$1100/month)). Did you deal with Kim there? She's one of the better new-dev people we've met. Have you been to Cornerstone in Laguna Niguel? The models are great (natch), but they're currently building too close to the toll road. As they move up the ridge toward the models there'll be some nice view locations available. I'd much prefer to buy a newly-built place and my wife prefers to look at resales (currently). I'm now thinking we should continue to rent and keep looking (which this thread seems to generally support).
 
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