I’m Buying a Townhouse
Yesterday I took the first step toward buying a townhouse: I wrote a check for nearly $17,000. This check reserves my specific townhouse unit. On Monday I go in and sign the sales contract, a 1″ thick document. I’m very nervous about the whole thing.
The townhouse (legally, a condo) is a KB Homes Cielo at Terra Serena Plan 5. As of this writing, the base price is $562,000, plus options, with a $50,000 incentive, which I can use to pay for a lower interest rate, buy options, or pay closing costs (I can’t use it to reduce the sale price below the base price, however).
I’ve posted some pictures of the framing work.
It’ll be done sometime around November, but move-in is scheduled for May. They (the sales office) say this is because the City of Milpitas does not allow move-in when adjacent buildings are still under construction. After spending some time with a Milpitas building inspector yesterday, I think this is true, but he was difficult to understand (I wasn’t sure he exactly understood my questions, either). He said that landscaping work is acceptable, as there’s little likelihood of falling objects and no deep excavation into which one might fall.
I’m going to the KB Design Studio on Saturday morning to pick up my options price list, and have a look around. Apparently July 27 is the framing choices cutoff date, meaning that certain options must be selected by then (however, Leona? at the Design Studio said they often give a few extra days to a recent buyer). These types of options include the type of stairway bannister rail, whether or not you want arched doorways, the built-in appliances you want (like a trash compacter) and most importantly, additional outlets and other electrical options. I’m most concerned about the latter, and hope that I can make my choices known in time. I have an official appointment on Tuseday the 28th, so we’ll see then.
Why Buy?
There are a lot of things going on in the nationwide housing market today that would indicate one should wait before buying right now. Record foreclosures as subprime borrowers (borrowers whose credit worthiness is below average) default on loans, or forced sales because borrows can’t make their rising mortgage payments, suggest that more homes will be on the market and that prices will fall. In fact, they’re falling in many parts of the country.
But the San Francisco Bay Area is a special place, and it seems that, while prices are holding steady, or even falling a little, declines are not nearly as dramatic here as in the rest of the country.
I got a new job in San Jose. I hate my current crappy one-bedroom apartment in San Carlos, and didn’t want to commute to work. So I started looking around the area (primarily Santa Clara) and found that rents for a nice, new (or nearly new) two-bedroom apartment ranged from $2200 to $2400 (including the ever-so-enraging pet rent they all seem to be charging now). After running some numbers, it became clear that a $500,000 to $600,000 property would end up costing me only a few hundred dollars more, including the property tax, HOA fees and insurance. It seemed clear that I should buy.
My friend Bob, who’s been in the market for over a year, showed me some manufactured properties (like the KB Homes stuff—there are many others). I’m drawn to the fact that they’re band-new, and generally have nice interior layouts (although, for some unfathomable reason, they rarely lend themselves to large entertainment systems with a couch opposite—there’s always a fireplace, or stairway, or door, or dining room preventing optimal viewing).
More importantly, KB Homes is offering very compelling financing incentives, and thanks to that I’m abel to get into a nice, if not perfect, home with very little money out of pocket. This lets me keep my stock portfolio in the market, making me much more comfortable about the whole thing. If I lose my job (and the stock market doesn’t tank), I can live comfortable for a year, longer if I scrimp. Because of the higher interest rate I’d have to pay going with a different lender, I’d have to put more money down up front, and that leaves my portfolio uncomfortably small. I plan to move in five years, but can stay longer if forced to. All in all, I think it’s the right move to make.
Hello Rick,
I found your blog on the internet. I am also interested in buying a townhome from KB homes. I wanted to know your personal experience so far with the builder. Also, did you get a agent or bought it directly from KB homes?
Regards,
Mahesh.
My experience so far has been okay. I’m very nervous about the whole thing, partly because KB has me over a barrel, so to speak (they are in an advantageous position, whereas my only real recourse is to forfeit the 3% deposit).
I’m also worried about the stock market and what will happen with interest rates and home prices. I’m depending on my stock, in large part, to help finance this purchase.
Finally, the house itself seems to be coming together nicely. But I have complaints that KB will never address. For example, the door to the storage closet is only 24″ wide. I was not told this was the case, and I feel cheated. I also doubt they’ll make it a normal-size door. I’ll probably have to do that myself, at great inconvenience.
On a positive note, the sales staff seems to be willing to let me visit the property any time I want (even though there won’t be much more done until Feb., at this point).
I did not use an agent. I recommend you do, however, if you have one you like. You’ll need to bring them with you on your first visit, otherwise, they won’t let you use an agent. They don’t have to come on subsequent visits.
Hey Rick,
I looked at plan 6 of the same community last week and they are offering that for $557k. I also put down 16k as deposit. I was very hapy till I read your post. The plan 5 is now availble for 459k!! Has the builder given you a break on the price? I dont know what the terms and conditions are for you, but wouldnt it make sense for you to forego the deposit instead of investing in diminishing asset and loose close to 83k? I am also tensed about the whole situation and like you I am also dependent on the stock market for some side income… However last few months have been quite brutal.. YOY I am up though… But I am very nervous… We have a baby coming in 2 weeks and I am very nervous!
-Thanks
Manny
Hey Manny,
What about my post, specifically, changed your mind?
If you’re happy with the plan 6, don’t worry too much about the falling price. KB offers a price adjustment 45 days prior to closing, so if the price continues to fall, they should give you a price break. I don’t know how they account for the original incentive. I’m sure that they give you this price guarantee precisely so one doesn’t abandon it as you suggest; otherwise, you’re right, it would make more sense. I’m planning to get a 7-yr fixed interest loan, which I hope is more than enough time for the market to rebound.
Interestingly, they’re offering a price adjustment today to those of us who have lost significant value already (83K in my case). I’ve been told that I will also get to adjust again 45 days prior to close. I think they’re doing this because they know the prices won’t come back up, and if it makes me more likely to stick it out, it’s worth it for them.
I’m fairly excited about the dropping prices; I’m getting closer to having a conforming loan (lower interest rate), and the thought of a lower monthly payment is nice, too. However, I hadn’t really been looking at the prices of the larger plans. Now I’m thinking I could have a bigger house for what I was originally able to afford. The only downside is that I went through the excruciating upgrade process, particularly with respect to electrical choices, and probably wouldn’t be able to get a bigger plan by May and get to make similar upgrades (I don’t know how long it will be before they open up the next buildings, and I don’t want to wait anymore). Also, I like that my unit only shares one wall (and a floor) with the neighbors. Still, there are advantages to having all three floors; sigh. I guess I’ll just have to enjoy the savings and stay where I am.
As to falling stock prices: I don’t have much stock, but it’s enough to cover my down payment, pay the capital gains tax, pay off debt, and pay for some appliances and additional upgrades to the plan 5. It *was* enough to buy a few toys, too, but the value has fallen a lot in the last couple of months. I can’t really advise you in your situation, but I’d recommend making sure you’re not stretching to afford the home. The sellers and lenders seem to really encourage us to buy the biggest home we can afford, but that leaves so little room for emergencies, I don’t recommend it (especially with a kid on the way). At least you’re a “we”…I’m doing this alone, and I really wish I had someone in it with me, for moral support at least, let alone a second income.
I’m not too worried about prices falling right now; I’ll be much more worried if they continue to fall after April. Even so, unless NASA accepts me into the astronaut candidate program, I can stay there for years.
Hi Rick, Manny,
I am also considering a purchase at Cielo ( plan 8 ) which is now listed at 588K. I was wondering if you could share your thoughts on the area – especially – on the effect of the jail next door. Manny, I know you have a kid coming so this is something you might have thought about. I know that prices are fairly volatile now but in the next 5 years they are likely to rebound. As far as the price adjustment goes, is that something thats in the contract or do they do that on their own accord. What kind of negotiating power do I have ? Do they drop the base price, give more incentives ? Anything you could tell me about your experience would be most helpful. Thanks.
Hey Rick
Thanks for the response! There are 2 things that made me nervous (didnt realize I said it too many times LOL!). The first thing was the falling prices… however your explanation has made me feel better. However, there is still the second issue (not from your post) of construction quality of KB Homes. The web is littered with complaints about the construction quality of KB Homes (much more compared to other builders). Did you visit the contruction site often? What is your perception of the quality of workmanship? Also, did you look at D R Hortons properties which are close by and offer similar prices and amenities? I am in my early thirties and this is my first home. My wife and I work in hitech and have pretty good jobs and have saved up a decent down payment (almost 20%)… But I have seen the downturn of 2001 when we were both laid off and unemployed for sometime…. so I am being very cautious before making such big financial commitment!
Thanks for all your advise
-Manny
Rohit,
I don’t recall exactly what the contract says about the price guarantee. I think it’s in there. When you write the deposit check, they give you a copy of all the paperwork to look over. You then have a few days to look at it (I had a lawyer look at it), and you can still change your mind. Then you go back in, sign the actual contract, and begin the process of securing financing; signing the contract will start a chain of events with Countrywide, if you choose them as your lender.
So far, they’ve been dropping the base price, *and* lowering the incentive amount. I don’t know if they account for the (rather large) incentive they gave me when adjusting my price.
As to negotiating power, well, it’s hard to say. There’s really no negotiation of price, even in this time of desperation for sellers. Once you sign the purchase agreement, your only leverage is your willingness to give up your 3% deposit. I think they’d rather sell a home than keep 3% (at least, the way the market is now), so that will give you a little bit of leverage.
About the jail: at first I was concerned about it, but decided that it’s really a non-issue. The biggest problem has to do with a potential buyer’s perception of the community, when you decide to sell in the future. I’m hoping that because so many people are currently buying homes at Cielo, this won’t really be a problem. It’s not a supermax prison, and even though there have been escapes, I don’t think the risk to our neighborhood is that great. There’s a big wall, and it’s the first place the police will look for escapees.
Manny,
I don’t think I looked at D.R. Horton. I looked at a few others (I don’t remember which, now), and decided I had the best opportunity to save money with KB.
I brought out my own inspector when we did the “frame walk-through.” (Actually, we had to schedule a separate appointment a few days after the official walk-through.) He charged me $300. He caught a couple small mistakes, but overall was very happy with the quality of construction.
All new construction will have issues after you move in. The warranty should be sufficient to cover it. My attorney said that their warranty seemed to be in-line with California law, in terms of a builder’s obligations after sale, so he felt pretty good about it.
The real test will come when something does go wrong; how well will KB deal with it?
Oh, and I am still pissed about the undersized door in the storage room downstairs.
Hi Rick,
I have reserved a plan 7, which is now going for 586K (a week ago it was going for 581K). Is there anyway we could find out the historical sale price of a given plan since they started selling cielo? Is the noise pollution because of 880 of any concern? Are the window panes good enough?
Thanks,
Vishnu.
Vishnu,
I don’t know of anyone who keeps the historical price data (other than KB, of course), but it sure would be nice to see. I know that mine was $562K, then dropped as low as $479K, but went back up to $484K very recently.
In my own unit, I can hear 880 traffic with all the windows closed, if I’m quiet. I wish it were quieter, but I have very high standards for silence. I think if you have anything making noise in your unit, you won’t hear it, but that’ll depend on how close you are; the models are much quieter. Also, my unit is on the end of the row, and not quite as hidden by the adjacent row of townhomes as your plan 7 might be.
Of course, I wish the windows were triple-pane, and I wish they had completely clad the exterior in OSB. Instead, the OSB is used only where structurally necessary. If you look through the photos, you’ll see what I mean. The entire structure is covered in waterproofing material and stucco, and of course it’s all insulated.
It’ll certainly be better than where I am now (which is ludicrously loud).
Hi Vishnu, Rick,
I booked a plan 6 sometime back and went inside when it was dry-walled. As it stands, there are no townhouses in front of my unit and you could definitely hear 880 with the windows open. Once the windows were closed you could barely hear it. I think once the row of townhouses opposite mine get built up, the noise is not likely to be much of a problem. It all depends on where your unit is.
As far as prices go, i’ve been tracking them for a few months now and they seem to be on an upward trend.
Hi Rick,
Has KB adjusted your price already? I was told by them that that will only adjust 45 days prior to closing.
I am in the same situation as you. The house value has significantly gone down since we booked it.
Thanks
Hi Rick,
Has KB adjusted your price already? I was told by them that that will
only adjust 45 days prior to closing.
I am in the same situation as you. The house value has significantly
gone down since we booked it.
Thanks
A very nice writeup/blog. Lot of useful information, could open a separate website (wouldBeKBOwners.com
)
I am planning to buy a home there and some of the information here was really useful. Great Job
I’ve started a social network at http://www.terraserenamilpitas.com that we can use for discussions about our community. I’m not sure how successful or useful this will be, but I thought its worth a shot given that we are likely to have similar questions. I also hope to meet some of you through this network and possibly make new friends. I hope you consider joining. Thanks.
Just moved into a Plan 6 over the weekend. I guess many of you who bought around the May-July time frame last year (i.e. the first row of townhomes) after the single-family ones will be doing the same.
For me the price reduction in Jan was pretty much it. The prices were reduced significantly in one weekend (at least) last month, but I didn’t get the reduced price, coz apparently it was a incentive and not a base price reduction, though effectively it was a price reduction.
Care to share your experiences?
I moved in yesterday (spent the weekend packing up the old place). I got a big price reduction a few months ago, and a $5K reduction a few weeks ago. I don’t know if it has gone down significantly since then.
With the prior reduction, they took away my $50K incentive. They could’ve at least given that back, but I’m so happy to be out of my old crappy apartment and have the bulk of my stuff hauled up the excessive stairs, I’m good for now.
I’m scheduled for the september/october timeframe. Would you guys mind posting where you got your mortgage from and perhaps some rate information ? Thanks.
my move in date is late nov. any advice?
thanks guys!
I’ve started a social network at http://www.terraserenamilpitas.com that we can use for discussions about our community. I’m not sure how successful or useful this will be, but I thought its worth a shot given that we are likely to have similar questions. I also hope to meet some of you through this network and possibly make new friends. I hope you consider joining. Thanks.
Welcome! This is a group for all the home owners in single family/townhomes in Viento/Cielo at Terra Serena at Milpitas, CA. This forum is to discuss any concerns, general happenings, announcements, or other issues and just keep in contact with each other. Please keep posting pertinent to the community. Only members can post messages, read the archives, view the members list, create pages and upload files.
http://groups.google.com/group/terraserena
Hi Rick / others,
I currently am lookingto move into Terra Serena. Unfortunately Cielo is sold out through KB. Can you let me know if there are any homes in the community that are for sale by current owners or foreclosure. Also what do you think prices will be at the moment. Would you guys recommend this community?
Thanks
Rick
I’m interested on any thoughts you might have on the community as well. It would be awesome to have a place where you can search or find easy info on the houses that are available.