Finding a Home

 

Whether it takes you two days or two years to find a home, the search always seems to involve two stages:

  • Locating yourself in the  market.
  • The focused home search.

Locating Yourself in the Market

Sometimes, the primary issue involved in “locating yourself in the market” is deciding on the  physical location of the home. If there are no financial restraints, you will need to deal with questions regarding commuting distance, schools for the kids, or the neighborhood or community where you want to live. Is the shorter commute worth being in a “lesser” school district? Are you willing to commute from Boulder to your job in Denver so that you can live near Boulder’s Pearl Street Mall or would it make more sense to find something located midway? How does the possibility of future job changes affect this?

For most of us, these “location issues” are complicated by financial concerns. If you want to live and  work in the city of Boulder, are you willing to live in a 1000 square foot, 1960’s ranch with no garage? Would you settle for a 10-minute drive to Boulder  if you could buy a newer 1600 square foot home with a 2-car garage? Would you consider a 25-minute commute if you could get a 1900 square foot home, a  finished basement and a 3-car garage? Or, if limiting your monthly payment is of more importance to you, would you consider the 10-minute commute if you could get the 1000 square foot ranch for 20% less that you’d pay in Boulder? How about a 25-minute commute for 60% of the Boulder price?

As you begin to get serious about buying a home, you are inevitably forced through a series of these kinds of decisions. They are usually difficult, and sometimes agonizing, as you’re  forced to make a variety of trade offs. In the most concrete terms, you have to decide whether square footage is more important to you than commute time, or your  children’s education, or the social/cultural environment you’ll live in, or the physical beauty of your surroundings. If you have a spouse or partner, you may discover  that the two of you are resolving these conflicts in a different ways. What happens when you discover that she is willing to sacrifice the Boulder address for the 2-car garage — but you aren’t?

The specific issues that arise and how the trade offs are weighted varies dramatically from one home buyer to the next, but these types of decisions are always part of the process. And they are rarely easy or trivial. The personal values and life goals that give weight to these decisions have a lot to do with the way we think of ourselves and our partners — and the image that we want to project to those around us.  Would you be embarrassed to have your parents visit the home you can afford in  Boulder? What about your friends, boss, or co-workers? Would you feel  comfortable inviting members of your rock band — or ecological study group —  to a new home in Louisville or Superior? Watching yourself or your partner work  through these trade offs is often a simultaneously disturbing and enlightening process.

A Way to Move Forward

The best way to begin working through these  issues is by identifying them and clarifying the trade offs. You begin to do this as you integrate information from three domains:

  1. Information from your lender on the loan types and loan amounts that you will likely qualify for.
  2. Information on what you would like to spend, what you are willing to spend, and the location and type of housing you would like to buy.
  3. Information on the types of housing that are actually available, where, and at what price.

When potential home buyers come into our office for an initial conference, they are often at very different  stages in working through these issues. First time home buyers often arrive with very vague ideas of what they are willing to spend or what type of property they want to buy. They just want to quit renting and get into the housing  market. By obtaining information on the kinds of loans they will qualify for and the corresponding housing options, these buyers can begin to see the range of options available to them and to envision some of the decisions that they are going to have to make.

In contrast, a family being transferred from out of  state may have already worked through all the loan issues and have very clear ideas regarding the type of house, neighborhood and community they want. If these ideas match up with the communities and housing that actually exist in our market, these buyers may be well on their way to a “focused  search.” If not, they too can find themselves up against the hard issues very quickly.

Success in working through these decisions is facilitated by four things:

  1. Good and timely information on the alternatives that are realistically available in the housing market.
  2. A willingness to think broadly about the full range of available lifestyle, financing, and housing alternatives.
  3. A willingness to abandon goals that aren’t realistic.
  4. Good, honest communication between everyone involved.

This includes not only the communication between buyers, real estate agents and  lenders, but communication between spouses or partners as well.

In some cases, good information can move things forward in rather dramatic ways. I’ve worked with several buyers who had spent up to a year looking for a home in a particular neighborhood. When I was able to show them that nothing had sold in that neighborhood in their price range for several years, they made quick decisions to change either the neighborhood or type of housing they were looking for. I’ve also worked with people who had nearly given up because they could find nothing available in their ideal area. I’ve either been able to point out good alternatives or show them that there were likely to be properties coming on the market in their ideal area in the coming months.

In sum, it is much easier to think through the range of alternatives or abandon unrealistic goals if you have all the necessary information in front of you. In addition to pulling together the needed information, one of the other important roles that good real estate agents and loan officers play in this process is in facilitating communication between spouses or partners — and even helping individual home buyers be more honest with themselves. Those of us who have worked through these decisions several hundred times can help buyers work through these conflicts between values, goals, and realities. The end result of this process, whether it takes an afternoon, a week or a year, is a narrowed focus on certain types of housing in certain neighborhoods or communities.

The Focused Home Search

Once this point is reached, we have begun the second major phase in the process of finding a home, what I call the “focused home search.” At this point, the buyer has decided to look for a house with at least a one car garage and 3 bedrooms in south Boulder, or a house with 3 bedrooms and 2 baths, built after 1990 in Louisville or Lafayette, or a house of at least 1500 square  feet in the foothills, but within 20 minutes of Boulder.

Assuming the search parameters are realistic, the focused search is generally the easier part of the process, at least from the point of view of the buyer’s mental health. In the abstract, the focused search  is simply a matter of identifying properties that seem to meet your criteria, looking at them, and finding one that works for you, and that will make a good resale property when the time comes.

In important respects, the dynamics of the  focused search are a function of the nature of the market at the time you are looking for a home. If your search is taking place in a buyer’s market, there may be too many homes on the market in your price range for you to actually visit them all. Once you have information on all the homes on the market that fall within your price range and meet your basic criteria (e.g., a minimum of 1600 square feet, 3 bedrooms and 2 baths), you may have to eliminate some communities or neighborhoods before you start focusing on specific homes that you want to see. Even then, after you’ve seen all the homes on the market of interest to you, you may end up with 3 or 4 or 5 or 6  homes that all appeal to you, that meet your needs, that satisfy many of your “wants” and that would be good resale prospects down the road.

Under these market conditions, the buyer has a number of options at this point. If the buyer is working under time constraints, such as the end of an impending lease or the need to get into a home before the start of a new school year, he is faced with the task of deciding which among a range of good options he wants to pursue. Not a bad position to be in, but not always easy either. If the buyer has no time constraints on the purchase, he may decide to monitor the market for several weeks or months in the hope that something may hit which stands out enough from the current options that his decision is made easier. A buyer in this situation is not necessarily panicked that some of the available options might be purchased by other buyers, since he has several good options to fall back on if nothing better comes up. This is a great position for a buyer to be in, as long as he doesn’t find the lack of closure or resolution too stressful.

Following the slow down in our real estate market after the the dot com bust in the spring of 2001 and then the September 11th terrorist attacks (see Local Real Estate Stats),  the market in the Boulder County area has been fairly balanced. While the number of sales and the prices generally haven’t dropped, the time that the average seller has their home on the market has increased substantially. Prior to September of 2001, we faced a very different market dynamic in the Boulder/Denver area. In 1999, 20-60% of homes in the Boulder County market were getting offers and going “under contract”  within two weeks of hitting the market (see Local Real Estate Stats).  Twenty to thirty percent were going under contract within 5 days or less.

The buyer’s task in the focused search was very different in this hot seller’s market. As we’ve indicated elsewhere (see Our People), Norris began working as a buyer agent in Boulder County in 1991. By the fall of 2001,  he had helped more than 300 buyers through the purchase process. It was not until November of 2001 that he had a client who was faced with the problem of deciding between several good properties. In the preceding decade, he had never had a client who had more than one good property to choose from at a single point in time. Prior to 2001, when a good home hit the market, you either made an offer immediately or learned that someone else had it under contract the following  day.

In that market, the buyer faced several difficulties not encountered by the buyer in a more balanced market. First, with 20-60% of homes going under contract within a week or two after they hit the market, there often weren’t enough homes on the market for a buyer to look at in the beginning of the search process so that the buyer could get a clear sense of the range of options available to them. To deal with this problem, we often drove by homes that had already sold or set up showings to look at homes that were already under contract. This gave the buyer some perspective on the kinds of properties that were likely to come on the market in the coming weeks and months. Having a very clear picture of the range of options available in a given price range was critical to buyers in this market, since they often had to make decisions about whether to make an offer on a home within hours of it hitting the market, or risk losing it to another buyer.

In the following section, I outline some of my thoughts on how buyers can prepare themselves and structure their search to meet the challenges of buying a property in a hot seller’s market. Some of this is less important to a buyer working in a balanced market or a buyer’s market.  But note that even in a more balanced market, between 5% and 10% of homes typically sell in 5 days or less (see Local Real Estate Stats).  And the ones that go under contract this quickly are not a random selection of houses. They tend to be the homes in a given price range that are in better condition, that are in better locations,  and that are priced better. In a word, even in a slower market, there is a segment of the market that moves quickly, and where you as a buyer may end up competing with another buyer for an outstanding property. Whether the hot market is the whole market, or is limited to the top 5-10% outstanding properties, home buyers will be in a better position to buy one of the best homes in their price range if they consider the following suggestions.

  • Be Flexible: Try  to arrange your life so that you give yourself several months to search for a home, and maximize flexibility with respect to when you can close and move. If  you are moving into the area, this usually means moving and then renting for several months while you look. If you need to sell a home, this may mean a  bridge loan and a double move. If you are renting, try to negotiate a month-to-month lease. If you put yourself in a position where you need to buy something in a two week time frame, finding a good property will require a lot  of luck. And if you are lucky enough to find an outstanding property, you may  lose out to another buyer who is in a better position to accommodate the  seller’s preferred closing dates.
  • Get to Know Your Market Niche Quickly: Once you have focused your search, try to look at the available properties as quickly as you can. Include outstanding properties that are under contract. This will give you a better feel for the full range of properties on the market, so you’ll be in a better position to make the right decision when the time comes. Remember, if you look only at the available properties —  ignoring those that are under contract — you will get distorted picture of the market. The available properties are the ones that buyers have passed over. The properties that are under contract are the ones that other buyers thought were good buys.
  • Know What Sold in Your Market Recently: Another way to develop this market knowledge quickly is to look at the properties that sold in the prior year. If you’ve decided that you want a 3-bedroom, 2-bath home, built in the 1980’s or 1990’s, and located in Louisville or Lafayette, have your agent print out the listings of all of the homes sold in the past 6-12 months that meet these criteria. Get these mapped out and then drive by and look at the houses, their locations, and the neighborhoods they’re in. While you won’t be able to see the interiors, an afternoon driving by these homes will give you a very clear picture of the  kinds of properties that are likely to come on the market over the next several months.
  • Get Organized: Once you’ve developed a good feel for the market segment you’re looking at, organize a plan of action with your Realtor that will allow you to get out and see new listings within a day or so after they hit the market. You will have days when you can’t make it. So will any Realtor.  And even if you see every property on the first day it hits the market, you can still lose your dream home to another buyer who was just a bit quicker or a bit more willing to meet the seller’s demands. But if you want to have the opportunity to see and make offers on the  best properties, you and your Realtor need to be on the ball.
  • Be Proactive: If  you get a very clear fix on the characteristics and location of your ideal  property — if you decide you want a newer tri-level in one or two  neighborhoods or a 2 bedroom condominium in a specific complex — you or your Realtor can contact the owners of relevant properties and ask if they are  thinking about putting their property on the market in the near future. We do several transactions this way every year. This “proactive approach” gives our clients a chance to see the property before other buyers do. It gives  them the time to think calmly and rationally about the property because they are not worried about other buyers making an offer. And, sometimes, it saves them some money since there is no listing commission to be paid.