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NEW YORK -- Like many other California renters in early 2005, Nick Basile and his fiancée, Jackie Neuffer, felt the pressure of ballooning home prices.
The couple, fresh out of college, decided to act. They snapped up a house last summer in the San Joaquin Valley town of Visalia where prices had already spiked 40 percent in the prior 12 months.
"We figured we better buy before things really got out


NEW YORK -- Like many other California renters in early 2005, Nick Basile and his fiancée, Jackie Neuffer, felt the pressure of ballooning home prices.

The couple, fresh out of college, decided to act. They snapped up a house last summer in the San Joaquin Valley town of Visalia where prices had already spiked 40 percent in the prior 12 months.

"We figured we better buy before things really got out of control," says Basile.

They focused on buying a new house and found a model near Fresno that they liked. The price though, at $305,000, was too high.

Fast forward a few weeks. They discovered the builder was developing a community in Visalia, 35 minutes south of Fresno, where they already worked as environmental consultants. There was a model home with a similar style to the Fresno house, but the going rate was even higher, at $310,000.

Meanwhile, the Fresno home had shot up to nearly $400,000. That kind of action can make even a strong home buyer's knees buckle.

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"We decided it was now or never," says Basile.

The Visalia homes were being sold in a lottery process. "It was unreal," says Basile. "There were 50 families packed into a model home. We were shaking."

The last name drawn, theirs, gave them the right to buy a home. The remaining model wasn't their first or second choice, and was priced a little higher than they wanted, but they got caught up in the home-buying fever. "Jackie was shouting, 'Shut up! I can't believe it,'" says Basile.

They felt lucky. Some of the other buyers had to attend four or five drawings before they were picked. As those unlucky bidders bided their time, the prices kept rising; Basile and Neuffer now have neighbors who bought a few months later and paid nearly $100,000 more.

The couple ended up spending $329,000, which they financed with an interest-only ARM with a home loan for the down payment. They knew their salaries would cover the monthly payments and they reasoned that if they ever got in trouble they could always sell -- at a profit.

What they didn't count on was that they soon began to miss their native East Coast. This past summer they decided to move back and they put the Visalia house on the market in August.

Slow out of the gate

At first they took the for-sale-by-owner route, paying a flat fee to list on the local multiple listing service and handling all the other aspects of the sale themselves. They first priced the house, a three-bed, two-bath 2,150 square foot contemporary, for $409,000.

That price drew nothing more than a few chuckles from prospective buyers. One of the main problems was their builder was still churning out these homes and, to move inventory, he was undercutting Basile and Neuffer's (and every other seller's) price.

"The builder can't give away the houses," says Basile. "He's selling them for $324,000 with swimming pools, granite counter tops, spas, landscaping -- all things we didn't get."

Basile and Neuffer are still betting that their house can command a higher price than the builder's because their home is in a better part of town and a more-in-demand school district.

But they kept dropping the price in $10,000 increments as they had only attracted two showings in three months. They held an open house; nobody attended the first day, and three couples came the second.

Then, a couple of weeks ago, they both got confirmations of job offers back in Saratoga Springs, N.Y. That added some urgency in their quest. They hired a real estate broker and lowered the price to $364,900, which even if they get, will probably still leave them with a net loss after commission and other closing costs.

Plus, they'll be out a total of about $10,000 in prepayment penalties for paying off their mortgage and home equity loan early.

Finally, last week the agent showed the house four times, telling the couple that two of the buyers expressed interest. They're keeping their fingers crossed because they can't afford to keep up two households and don't want to be long-distance landlords.

Even if they rented the place, the numbers wouldn't add up. "Our payment is about $1,700 and we could only get about $1,500 for it," says Basile.

That doesn't even take into account property management fees, taxes, lawn service and other expenses. They'd be awash in red ink every month.

Now, if their agent doesn't come through, they're considering trying to find a friend to rent it on a short-term basis and then put it back on the market during the spring selling season.

In the meantime, they'll head to Saratoga Springs, which has not experienced the big price swings California markets have gone through and where the housing dollar stretches a bit further.

The ordeal may have made them a little more real estate savvy -- and gun shy -- but they seem remarkably serene. Basile is not exactly kicking himself.

"I still think it was a good idea at the time," he says.

© 2006 Cable News Network LP, LLLP. A Time Warner Company ALL RIGHTS RESERVED.

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