First time home buyer, looking for condo/townhome/single family around Santa Clara/San Jose/Sunnyvale vicinty

Asked by RP, Santa Clara, CA Wed Jul 21, 2010

With a budget of around $500k, we (married working couple with no children yet) have started to research for a 3Bed 2Bath kind of houses, preferably condo/townhomes, just because they are easy on maintenance (please correct me, if I am wrong). We are looking to own a house from investment point of you, also to avoid throwing away money in rent. I had below few Qs & welcome your expert suggestions.
1. Is it the right time to buy? I feel improvement in market (atleast in bay area), looking at zillow/trulia charts and hope to get in at the correct time.
2. We dont have schooling in mind yet, but is considering high API school districts worth the extra money? How much does it contribute to its resale value, if I plan to live here for like 5-6 years?
3. I was considering homes built within 2000-2010, but they come at their own expense. Speaking for bay area, are houses built before 2000 high on maintenace or does it matter?

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Underwater’s answer
Underwater, , San Jose, CA
Thu Oct 28, 2010
Others have addressed many of the issues that condo/townhome buyers face. I am not a real estate agent, but I have been a townhome owner in San Jose for 14 years. Don't assume that if you pay HOA fees every month that a repair on your condo will be addressed in a timely manner or if at all. Many HOAS are in dire financial positions due to high numbers of foreclosed properties in their communities. And because of the economy many of the homeowners are behind on their HOA dues. Some HOA communities are in bankruptcy, but thankfully mine is not one of them at this point. But I do know that mine is struggling to find money to repair fences and wood trim on our homes due to termites and weather. HOA fees go up every year, and as the homes get older the repairs get more expensive. When I moved in they were $115 a month and now they are $285. That really isn't a huge increase when you think of time, but in order to get the needed repairs done the HOA might have to vote on a special fund that all of the homeowners need to pay in to.

During the home buying process the financial statement of the HOA will be available for review, but you really need to go through the whole thing carefully, and whatever you don't understand could be addressed by a lawyer.

Here are a few of my experiences over the years-

Right after I moved in to my townhome there was a windy storm. The fence that divides my back yard with my neighbor's blew almost all the way over. It was probably at a 35 degree angle towards my neighbor. He propped it up a bit higher with some studs. It looked terrible, and didn't provide any privacy. It took my HOA 7 months!! to get it repaired. And they didn't replace the fence that it attached to because it wasn't "bad enough" yet. It is now literally falling apart on the lower portion.

Another neighbor waited 3 years for a dead tree to be removed in front of his house.

And depending on the HOA CC&R's (Covenants, Conditions & Restrictions) are written, you may have to pay for repairs that you would not be expecting to. For instance I live in a home with a concrete slab foundation. One of my hot water pipes had a hole in it, but I didn't even know about it for over a month. I have a Pergo tile floor which looks like slate, and is a floating floor. I noticed my cats sleeping on the floor in a strange spot. I felt the floor there, and it was really warm. Underneath my concrete slab was apparently a nice little hot spring brewing. My PG&E bill and my water bill for that month was over $400!

The HOA informed me that I would have to have a five square foot area of tile removed, so that the plumber could locate the leak. So I had to pay $600 for my flooring guy to remove the tiles, and later replace them after the repair. In the meantime the water kept leaking and my hot water heater kept on burning. I finally got the HOA approved plumber in my home to find the leak. Then he had to schedule the actual repair of the leak. The plumbers used jackhammers in my dining room to get through the concrete slab. I can't tell you how loud and messy that was! When they got to the pipe that was leaking, it was squirting like a geyser until all the water pressure had come through the pipes. I asked them what would happen in 6 months if another leak happened along the pipe lines. They said that the HOA won't pay for all of the pipes to be replaced until it is the third incident in a particular period of time. So the final bill for me on that one was about $1,000.00.

My garage door which was the old style and made of wood was literally falling apart. I had to pay for a new garage door, which to me was part of the exterior. But for some reason the garage door is an exception. My HOA is responsible for the electrical wiring with the walls, but I have to pay for the removal of sheetrock, and for someone to install the sheetrock and to texture it. And if you don't know how to paint, or don't care to then that would be added to the homeowner's financial responsibility.

Some HOA fees are really high depending on the property. If there is no pool, clubhouse, or lawns they will be lower. Since I am not a real estate agent, I can't tell you which current properties have low or high HOA fees, but that is a basic rule of thumb. If you are paying $600 a month in HOA fees, which by the way are not tax deductible, you have to ask yourself if you would be better off owning a single family home. The repairs on a single family home are not necessarily tax deductible either, but you have to consider the HOA fees as part of your mortgage.

But with your desire to have good schools available at your location it will be hard to do with $500k. I live in the Blossom Hill area, and I know the schools here aren't highly rated, but I don't think they are that bad. You can buy a home around here for that price that is single family. But of course it won't be very new, and may be a fixer upper.
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Andrea Wince…, Agent, Milpitas, CA
Fri Aug 6, 2010
Hello Raxesh, I will try to address your questions with these answers:
1. You can never time the market perfectly. The best time to buy is when prices are low, which they are now.
2. Schools are only as smart as the students testing that year. Just because a school is high API now does not necessarily mean they will be that high in 5-6 years.
3. A 10 year old home may be no better than a 20 year old home. In my opinion, the just don't build homes like they used to. Some older homes may be built better than newer home. ALL homes will require some maintenance but if you want to stay away from as much maintenance as possible, go with a townhome where the HOA takes care of the exterior. You will still be responsible for the interior.
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Ruth and Per…, Agent, Los Gatos, CA
Wed Aug 4, 2010
Hi Raxesh

Fall will be better, right now you will be competing with buyers trying to get into homes before school starts.
Schools with good Api generate a lot of value and even in a down market help cushion the fall.
A home well maintained below twenty years should be just fine in terms of maintenance.

Let me know if I can help.

Best Regards
Perry Mistry
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Erica Glessi…, Agent, San Jose, CA
Tue Aug 3, 2010
This is a great time to buy a house. I am seeing less competition than in previous months when the first-time homebuyer credit "craze" was happening through the end of April, so I'm seeing fewer offers on homes in your price point.

I found lots of townhouses in your price range if you can live with 2/2, here is a list of homes that ALL feed to the most excellent Cupertino schools:

STEVENS CREEK BL $524,999 2 2|0 1,063 SqFt

CRESCENT AV $489,500 2 2|0 1,188 SqFt Sunnyvale
GALA CT $489,000 954 SqFt Santa Clara
CHANTEL CT $469,999 2 2|1 1,044 SqFt San Jose
KIELY BL $459,950 2 2|1 1,300 SqFt Santa Clara
ALBANY CI $458,000 2 2|0 1,383 SqFt San Jose
THIMBLEBERRY LN 3 2|0 1,230 SqFt San Jose
E FREMONT AV $430,000 3 2|0 1,090 SqFt Sunnyvale
SCARLETWOOD TE $420,000 1,230 SqFt San Jose
CHANTEL CT $419,995 2 2|0 1,051 SqFt San Jose

Of these, the Thimbleberry home is a three-bedroom, two bath.

You can also afford a dozen homes in the Sunnyvale zip codes of 94085 and 94086, very nice zip codes close to everything but not in the top scoring Cupertino schools.

I recommend you open up your search to well maintained, well cared for homes and not stress as much about the exact year built!

You can also afford a brand new home in downtown San Jose, like the Axis, in a two-bedroom condo that's got city views and years of warranty on everything being operational.

You really have a lot of choices at your price point. I do like being in good schools for a few reasons, one being that if you do end up starting a family, it's not a lot of fun to have to home search when the baby suddenly turns 3 and you're concerned about enrollment deadlines and age 5 beckons. It's easier to be in good schools already, with the opportunity to possibly move but not the requirement to move. I've helped a lot of families with children ages 3 and 4, and even those with children who have turned 5. In districts like Cupertino, kindergarten enrollment can be at age 4 around January of the year the child is turning 5.

Of course, good school houses are going to keep value more than other houses in a downturn, so it makes economic sense to choose in as good of a school neighborhood as your dollars can buy.

Erica Nelson
DRE 01425475
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Terri Vellios, Agent, Campbell, CA
Sat Jul 31, 2010
I do not know of any newer townhomes with good API in your price range in our area.

Interest are at an all time low so getting into a home with financing is more favorable. Depending on your down, the HOA fees, will you be able to afford the monthly payments. Will it positively affect your taxes? Talk with a trusted financial/tax adviser to determine if purchasing a home is a good financial decision for you.

The rule in real estate has never changed, location is the most important factor. So if you are not one to want to do maintenance you can buy in an HOA or you can buy a single family resident and pay for a gardener and put your own money aside to make the exterior repairs as needed.
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George Nowic…, Agent, Santa Clara, CA
Tue Jul 27, 2010

With a $500K budget for a single family residence and a newer home (2000-2010), you will be fairly limited in what will be available. For example, Blossom Valley, Santa Teresa and Cambrian do have properties in the $500K range but most of them are Short Sales and many of the Short Sales in those areas need repairs and in many cases are hard to finance with FHA for example. Most of these homes in these areas are much older also. Many built in the late 1950s-early 1970s. There are exceptions of course with "executive homes" which are newer and usually on extremely small lots, many with HOA fees.

You can find homes that met your criteria in Morgan Hill and Gilroy, but the school scores are not very high in that area.

In regards to school scores, it has been my experience that one of the main factors in the "HOT" areas of Silicon Valley is schools. If you look at Almaden or Cupertino, school scores are critical and drive demand. When I do a open house, one of the first questions I'm asked is always about the schools, so it's my opinion that no mater if you have schools age kids or not, paid attention to the school ratings. They will be very important down the road when you decide to sell. I hope this helps and feel free to call me if you have any specific questions.
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Sam Shueh, , San Jose, CA
Mon Jul 26, 2010
The only consideration is the investment on the return. By that the HOA(if any), PITI etc have to be measured against rental income. You want to maximize the return. HOA needs to be low or non-exist.
Yes, newer construction will bring higher returns. If it is not kept up by the tenants you expose to more and higher repair bill than a home built before 2000.

I think you will agree the newer, more expensive and higher API the more you have to pay. The rents are not much different in the valley but not the home prices. I personally think the projection on appreciation can be disappointing the next few years. At best it beats the inflation and you purchase for tax & income reasons not for the potential valuation increase. If it was me investing I would take a sfh and a condo making them two for $500K/

Sam Shueh, mba, cdpe
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Norman Aless…, Agent, San Jose, CA
Thu Jul 22, 2010
Hi Raxesh,
To answer your questions lets start with right time to buy? well that is up to you, interest rates are REALLY LOW so that is a plus point, I am reluctant to say you should buy now for investment purposes because I cannot predict what the market will be like in 5-6 years, I would buy to be able to have a place at low interest rates and ablitity to write off my interest payments, as well as liking where I live.
Yes, API does contribute to resale value because it is a MORE desired area to live.
Now as far as Townhomes, you need a good agent to protect you as it ALL depends on the association ie: how well do they hande money? any pending or future litigation? what about reserves are they sufficent to cover needed upgrades? ( other wise as Dan pointed out they will do a special assement to cover the cost.
These are just a few of the things to look out for.
As far as Newer Townhomes, I would tend to try and get the newest that I could afford and that fit my needs, because if you sell in 5-6 years the place will STILL be realitively new and that makes it a bit easier to sell usually.
If you haven't already hook up with a realtor who will understand you and your needs and will also guide you through potential pit falls. There are quite a few VERY good and experienced realtors at your finger tips right here on Trulia.
Feel free to contact me with any questions, I would be happy to assist you.
DRE# 01397256
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Dan Chase, Home Buyer, Texas City, TX
Wed Jul 21, 2010
Condo's and townhouses can have serious noise issues. The neighbors are only a few inches away and what they do can sometimes be heard where you live.

Easy on maintenance. Well, you still have to take care of everything inside the place. The outside is often taken care of for you. However, you pay a HOA fee for it to be done. You could pay money directly to a lawn mowing service (and so on) and eliminate the middleman.

Sometimes a condo needs a new roof. The money is not there. They send you a special assessment. What is so special about this assessment you ask? The specialness is that they order you to pay for that repair and you have no choice but to pay it. It does not matter if you can not afford it.. You MUST pay it.

It is said that a condo usually costs more over time compared to a house for maintenance. You may have less maintenance to do but will pay more for that nicety.
0 votes
Dan Chase, Home Buyer, Texas City, TX
Wed Jul 21, 2010
Consider the site below. Maybe they know something I do not.

The Silicon Valley is one of the places pulling out of the downturn with higher home prices and more sales. But a lack of inventory of lower priced distressed properties, including foreclosures should be aided in the second half of the year as lenders ramp up efforts to take back homes in default. San Jose home prices are forecast to inflate an average of 11.8% for the year. With some of the highest median prices in the country, nearby Los Gatos and Cupertino should edge out slightly better averages.

Houses built after about 2002 could have chinese drywall in them. The same is true for remodels done during that time.

Older houses are more likely to have less efficient furnaces and a/c. They may not be as well insulated.

Houses from the 70's back could have lead paint or asbestos in them.

Every piece of equipment has a finite lifespan. You may find an older house will soon need many repairs. The purchase price should reflect this.
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