Edmonds Real Estate Review: How to buy a house on purpose – Part 1

When I started in real estate, it was a frenzy. People seemed to believe that they could (and must) buy the first house that struck their fancy, with no money down, and maybe even an interest only loan. And if they didn’t like it, in two years they could sell it for a profit and buy another one. For a while they were right.

Then 2008 happened. Suddenly buyers were weary. We had always sought to protect our buyers; but now more buyers started being a little more selective about what they bought, and who should act as their agent in that purchase. Now buyers sought to buy below their means, and they even had some savings for a down payment! This was a welcome, and refreshing change. For the most part, with the housing crisis not so far back in the past, people still want to buy smart.

But how do you do that? Where do you go to become a savvy buyer? Who can you trust?

First, slow down. Be deliberate.

Get ready

First, go get an agent. Take this seriously, interview! Get a few referrals, and spend some time with each agent. Interview at least three. You need to trust that they will work only in your best interests, that they will be available when you need them, and that they have the knowledge and skills to identify, negotiate, and close on the best house, for the best price. If you are worried that by showing them that high approval letter from the bank will cause them to advocate you buy above your comfort level, you haven’t found the right agent yet. When I am interviewed, I will often suggest they go see a couple homes with me. Knowing what a tour feels like will teach you a lot. Are you learning about the house? Is the agent adding value to the experience? Or are you being sold? Buyers’ agents are just that: buyers’ agents. It shouldn’t feel like they work for the seller.

Before you spend too much time surfing the web looking for your dream home, get real about your budget. Decide how much you want to spend a month, and bring that information to a mortgage lender. Within that there are many choices. We recommend you get referrals, and choose three to interview. They will all offer largely similar products, so choose service, availability, and accountability. Your lender will be a critical member of your team. If they can’t be reached on the weekend, you may not get the house you want.

Now, the bank will likely approve you above your comfort level. No problem, get a nice high approval letter that will show the seller you are a strong buyer; but remember that monthly payment you budgeted? That’s what you are going to use to determine what you can really afford. Now when you jump on Redfin (or whichever platform you like), you won’t go falling in love with a home above your means.

The hunt

Now the fun starts! We always take buyers on two or three tours that are intended to be strictly educational. While they may have an approval in their back pocket, we have no intention of buying. The education is critical, and can only be done correctly by getting in houses. Lots of houses. You need to learn about location, lot, roof, siding, windows, plumbing, electrical systems….etc. Don’t be seduced by paint color, fresh mulch, and staging. You are looking for a good, solid house with as little incurable dysfunction as possible.

We like to approach the process from a fairly untraditional, but effective perspective. Rather than looking at each house and seeking reasons to buy it, we try to prove that each home we see is not the right house. We look for dysfunction, both curable and incurable. This reductive point of view assumes that maybe 1 in 10 homes is worth buying. Once you know a home has too many problems, it’s on to the next one. It is only when we fail to find reasons not to buy the house, that we consider that it may be a good fit. Then the question becomes is this good house your house? Maybe, that’s when you need to be less pragmatic and more emotional. If you can imagine living in it, and it’s not going to break the bank (for example I am disinclined to sell someone a “fixer” to someone without the means and fortitude to do the fixing!), maybe it’s time to write an offer. It bears mentioning here that it is generally better to pay a fair price – maybe even one with a small premium – for a good house, than to get a “deal” on a house that nobody else wanted. The exception is when the reasons it hasn’t sold (dysfunctions) can be fixed (curable) and the house could then be a better, more livable and marketable home. In broad strokes, we like to avoid incurable dysfunction (bad lot, sloping floors, bad floor plan), but accept, maybe even seek, curable dysfunction (ugly paint choices, nasty carpet on top of hardwood floors…etc.). Curing dysfunction is how you earn sweat equity. And for the right person, that’s a great way to get into a better home than you thought you could afford.

It bears mentioning that fixers and sweat equity aren’t for everyone. If you don’t want to work when you get home from work, choose a home that has as little dysfunction (of either type) as possible.

Once you’ve identified a home you want, it’s time to switch gears a little and start working out a strategy. I will address this topic in part 2.

– By Jacob Pickett

Jacob Pickett of the Black+Pickett Real Estate Group born in Seattle and raised in Edmonds. He has been a realtor in the Greater Seattle Area for over 10 years , and enjoys the fact that no two days are the same in the real estate business. He and his wife are parents to two children — a boy and a girl.