House Hunting, part two: Finding a Place

4 February 2013 · 29 comments

It’s going to be an exciting and busy week for me.

Several weeks ago, I mentioned that I was looking to buy a new place to live. After a year of living in an apartment, I had a good idea of the place I wanted to find. Plus, the Portland real estate market seemed to have hit bottom — and had even begun to climb.

Throughout the fall, I worked with my real-estate agent, Andi (a former Get Rich Slowly reader). While she and I focused on finding a property that appealed to me, I struggled to find financing. Because interest rates were so low, I wanted to obtain a mortgage.

Ultimately, I gave up the idea of financing a home purchase. Despite the fact that I had ample cash in savings, no bank would give me a loan. I didn’t have enough income to qualify. If I wanted to buy, I’d have to pay cash. It took some time, but eventually I realized I was willing to do so.

Feels Like Home

During my first three months of house hunting, I’d seen one place that really appealed to me (but it sold in 24 hours, and while I was on the road), and had failed to find financing. It was frustrating.

After Christmas break, Kim and I spent a Sunday with Andi looking at condos in northwest Portland. The following week, Andi and I found a few more to explore. There were a couple I liked, but I didn’t fall in love with anything.

On my last day in Houston, I woke to find a listing I liked: a condo in a building where I’d already seen one unit. The first unit had appealed to me, but Andi and Kim both noted that it was directly underneath one of Portland’s major bridges, a bridge currently undergoing construction — and scheduled to be under construction for the next two years. “That’d be a deal-breaker if I were buying the place,” Kim said.

Sellwood Bridge construction

The new place was on the opposite side of the building. Plus, it was on the top floor. Plus, it was a little bigger. “I like this condo,” I told my host in Houston. “I’ll have to look at it when I get back to Portland.”

The real issue was that I’d mentally decided that I was only willing to spend $300,000. When I thought I could get financing, my budget was $400,000, but because I’d have to pay in cash, I’d mentally adjusted my price range. The new place was listed for $329,000. I decided to take a look anyhow.

The condo felt right almost immediately. Though staged in a plain and simple manner, it felt like home. I loved the view of downtown Portland (distant though it was) and the view of the river. I liked the layout. I liked certain features in the kitchen and bathroom. Most of all, there was something about the energy of the place that just felt right to me. “Let’s make an offer,” I told Andi.

Making an Offer

We spent a day trying to decide on a figure. I felt like $329,000 was a little too high. Plus, I’m a frugal fellow. We decided to submit a purchase price of $310,000.

As we were drafting our offer, we got word that somebody else was making a bid. “Crap,” I said. “What do we do?”

“That’s up to you,” Andi told me. “But in a competitive situation, you don’t want to be seen as lowballing.” In the end, we offered $325,000.

Our offer was refused.

Andi called me back with the news. “The sellers want ‘best and final’ offers by noon tomorrow,” she said.

“What does that mean?” I asked.

“It means they have at least two of you bidding on the place. Maybe more. And they want you to give them their best price now.”

I spent that evening doing a ton of research.

  • How much did other units in the building sell for?
  • What about other properties in the neighborhood?
  • What were prices like for other condos in other parts of Portland?
  • What could $325,000 buy me in a nice part of town? A lousy part of town?
  • What about $350,000?

I called Kim and talked things out with her. I also called my friend Mike, who owns investment properties in town, and asked his opinion. Then I sat down and worked out numbers. How much was I willing to pay for this place? What sort of difference did it make that I was paying cash instead of financing? (When you pay cash for a property, you’re essentially shifting your investment from one asset class to another. That’s a very important distinction.)

Ultimately, I decided I was willing to pay $342,000, so that’s what I offered.

My offer was accepted.

The living room of my condo unit

Failed Negotiations

From there, things got a little interesting. The home inspection was mostly glowing. We did not perform an appraisal because the sellers balked at that requirement when we submitted the offer. After we’d combed through the reports and documents, we found a handful of things that bugged us. (Plus, we were cranky about some sleight-of-hand regarding a storage unit.)

As the deadline for my decision approached last week, we took everything we knew about the property into account and reduced our offer to $336,000. The sellers refused to budge. They exercised a “take it or leave it attitude”. I asked Andi what that meant.

“We believe it means that the other offer (or offers) the sellers received were very near your offer,” she told me. “They don’t care if you back out because they have a backup offer that’s just as good. In fact, I think it’s likely that the backup offer may have been better. In any event, it’s almost certainly at least $336,000.”

In true J.D. fashion, I agonized over what to do. I could afford $342,000 instead of $329,000. My research indicated that the condo was worth the higher price. Plus, there was at least one other offer that supported that valuation, as well. Still, it bugged me to have to pay a premium for the place.

In the end, I elected to stick to my guns. I loved the condo, and I especially loved the location. I agreed to pay the $342,000.

Closing the Deal

On Tuesday, I’ll sign the documents for the purchase of the condo. On Friday, I should take possession.

It’s all very exciting, but it’s also a little scary. After months of moving in slow motion, the final part of the process happened at warp speed. “You don’t seem that excited about your new place,” Kim told me last Thursday. I am excited, but I’m also overwhelmed. I don’t feel like I’ve had time to process everything. I’ve done a lot of second-guessing myself.

But I also realize that if this doesn’t work out, it’s not a $342,000 mistake. The money hasn’t evaporated. It’s simply been shifted from stocks (which seem to be high right now) to real estate (which seems to be low right now). If there’s any mistake here, it’s on the order of $5000 or $10,000, not $342,000. (That’s still a lot of money, but not an obscene amount.) Besides, I’m certain there’s another buyer out there who’s willing to pay $336,000 for the place, and that gives me comfort.

{ 29 comments… read them below or add one }

1 Joe 4 February 2013 at 08:29

I hate doc signing day. It is so tedious. Hope everything goes without a hitch. I didn’t realize that part of town is so expensive, but I guess that’s because it’s right next to the river. I think you can turn around and sell it too. The real estate market is heating up surprisingly quick in Portland.

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2 Martin 4 February 2013 at 09:35

Congrats on the purchase! Do you have a plan for the actual move/new furniture that you have a place to call your permanent home?

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3 bethh 4 February 2013 at 10:52

Congratulations! I agree the housing market here has been on an uptick – I started looking last summer and closed on a house in NE a month ago, at the top end of my personal price range. This was my first (and possibly only) dwelling purchase and I found the process of shopping for one very painful. In the Meyers-Briggs spectrum I’m heavily weighted toward being a judger-type (vs perception) which means I prefer to make decisions and loathe being in the information-gathering/shopping stage, but I couldn’t figure out how people decide which house to buy!

I was financing my place, of course, but I also found it soothing to think of it in terms of being a 20k-ish mistake, not a hundreds of thousands of dollars one. Maybe lack of excitement is normal? I was that way too – I was mostly afraid I’d jinx it, I think, and would be back to the painful shopping process.

I love the light in your place, and it’s great that you’re on the top floor. I wish you many happy years in your new digs!

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4 Crystal 4 February 2013 at 12:14

Congrats! We had our house built last year and there a million exciting moments, but the end part was not it. I did not do a happy dance until my stuff was in my new house and being unpacked. The closing process just generally sucks, so I think your reaction is more than normal. Good luck with your move!

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5 chacha1 4 February 2013 at 14:25

Glad you got the place you wanted, and hope it turns out to be “all good” for you. :-)

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6 Kathleen, Frugal Portland 4 February 2013 at 15:42

Congratulations! I love working with Andi. She’s great.

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7 Andi B. 19 March 2013 at 21:53

I think I just blushed. ;)

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8 Michael 4 February 2013 at 16:02

So. You “stuck to [your] guns” and retreated from $336k back up to $342k? ;-)

What really struck me as interesting about this was your willingness to spend as much as $400k if you could’ve gotten a mortgage but your decision to reduce that to $300k(ish) since you couldn’t.

I do understand the desire to conserve your cash on hand, but it also made me wonder about how we value dollars in the bank vs. dollars being borrowed.

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9 Tom L 4 February 2013 at 17:49

I had a similar home buying experience this year. As part of my final offer, I got the former owners to include a chandelier they had originally excluded from the sale (something you could pick up cheaply at Home Depot, but which would have been a minor hassle to replace). So now I point it out to visitors and tell them it is a $30,000 chandelier!

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10 Michael 5 February 2013 at 05:50

Also: I’m curious. What’s the flood history of that location? I know that you’re on the top floor, so you’re presumably okay, but still… The picture that you posted looks like it was taken from pretty close to the water level. Then again, the picture from the living room makes it look like your building is higher than the one next door, so perhaps you’re somewhat upslope.

Assuming that you and your downstairs neighbors stay dry, it looks like a nice location.

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11 jlcollinsnh 5 February 2013 at 08:27

interesting tale.

We are on the flip side of the process, currently interviewing realtors for listing our house for sale. It’ll will be right around the price range of your condo. Hope we have several buyers vying for it as did your seller.

But this will be the third year we’ve tried selling. Buying is a whole lot easier and more fun.

Good luck!

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12 Elaine 5 February 2013 at 10:27

Congratulations! Although you wanted a mortgage it must still be a great feeling to be able to pay in cash. I hope I can get there someday. I’m sure it will be nice to finally have your own place to settle into. I’m curious to know what it’s like living right on a river.

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13 Olga King 5 February 2013 at 10:39

Exhale. It’s always nice to have a home. :)

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14 rubin pham 5 February 2013 at 10:51

jd:
for you 340k out of 2mil is nothing. you got a good deal.

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15 jdroth 5 February 2013 at 11:03

Haha. I love the speculation about how much I have. I wish I had that much. Then it really wouldn’t seem like a big deal that I’m shifting so much into real estate…

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16 jdroth 5 February 2013 at 11:02

A brief update:

The listing agent let me into the condo yesterday to take some measurements. While we were there, I picked his brain. Turns out, he sold the unit to the current owners a few years ago. He said something else about having sold it before too (although I may be wrong about that). He’s very familiar with the place, and he thinks I got a good deal.

The listing agent also told me there were four offers on the place, and that I had “made a very smart move” when I offered $342,000. I’m not sure of the implications there, but I think he’s saying that the other offers were very close. (I actually offered a $342,076, so maybe there was another offer of $342,000?)

I’m very excited about moving. In fact, I wish I were packing right now instead of writing. ;)

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17 Somsiah 6 February 2013 at 02:10

There, the excitement you have been looking forward for. Very happy to hear you found a place to call home. Let us in on the decorating part. Gotta be fun.

Somsiah

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18 JoDi 5 February 2013 at 11:58

Congrats on the new place! Maybe this sounds strange, but I think it’s pretty cool that you’ll be living near a bridge undergoing construction for the next couple of years! Seems like a fun project to watch, and it’s not like it’s going to go on forever. By the time you decide to move it will be over with, and it seems like it can’t hurt the value to have nearby infrastructure upgraded. Looks like a beautiful view too!

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19 bethh 5 February 2013 at 14:23

oh packing – it always induces an existential crisis for me. I was in my last place for six years, then had most of my stuff in storage for a few months while I found my house. The move into my new digs only took a couple of hours (I know objectively I don’t have that much stuff), and I had plenty of help, but I still felt both delighted to have my stuff back, and oppressed by its very existence.

It will be interesting to hear how you feel about your belongings once you’ve finished the house -> apartment -> condo path. I’m in the midst of finding furniture on craigslist (nightmare) and am focused on having lots of spots for guests to sleep – both for visitors and with an eye to doing a home exchange at some point in the future.

If friends offer, let them unpack your kitchen and assemble your furniture for you! It’s immensely helpful, even if you wind up making changes later. Good luck in the move!

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20 Tracy 5 February 2013 at 22:17

Congratulations on your condo! I hope the paperwork and moving goes smoothly. When I bought my first house I paid too much. I didn’t negotiate. I listened to my agent who I later realized was looking out for herself. I was the ideal buyer with no contingencies on a house to sell first. I should have put a lower bid in – I really had nothing to lose.

When I signed the papers and owned the house before the sellers had finished moving, and they barely cleaned. It was discouraging, but all in all it still had that “right” feeling you mentioned. We don’t live in the house now, but it’s a rental property, and I am hoping it regains the lost value over the next few years. We’d sell it if it did.

A random thought – you called Andi a former GRS reader – the use of former struck me as funny. She no longer reads the blog? Doesn’t seem like a positive endorsement for GRS…. Sorry that’s hugely irrelevant.

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21 Andi B. 19 March 2013 at 21:52

Ha! That was such a random insightful comment I had to respond. I still read GRS on occasion, but what had initially resonated with me was J.D.’s personal story. When blogs change their format and become more commercial or informational websites, I find myself reading them a bit less. I’m a huge believer that different things speak to you more at different times in your life. I still use GRS as a reference site, but I probably wouldn’t be considered a regular reader.

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22 Anna 6 February 2013 at 18:16

I paid about $5,000 more for my place than I thought it should go for (although the final price was still under my budget), but had to pay that because there were other bidders. I worried about this at first, but then worked out that as a percentage of the overall price, it was a very small difference.

Also, I felt a bit ill and not very excited after the purchase – buying was a bit stressful!! But as soon as I moved in, I felt really good about buying it. Over time I enjoy my home more and more – and I have watched the market since I bought and have seen very few equivalent properties.

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23 TJ 7 February 2013 at 12:04

Great story, J.D., as always with your writing, I’ve learned something I didn’t know before. I have to ask, though — maybe there’s something I missed in reading your post above, but I’m a little puzzled by your agreeing not to do an appraisal. In my part of the country, appraisals are a standard part of buying a house or condo — you can’t get a loan without one.

It just seemed unreasonable to me for the seller to balk at an appraisal. Maybe it’s different in Oregon — is that the case?

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24 jdroth 7 February 2013 at 12:15

TJ, you’re both right and wrong. Here in Oregon, an appraisal is part of the process if you want to get a loan. So, yes, that makes sense. However, the key piece you’re missing here is that I’m paying cash for the condo. With a cash transaction, no appraisal is needed.

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25 HappyFund 8 February 2013 at 12:25

Did you at least leverage the fact that you were paying in cash? I am not sure if that really would’ve made a difference for the seller, but buyers buying with a loan usually have a “contingent on financing” clause to their offer. That really just means there is a risk that the buyer could back out if they can’t secure a loan. Even if the seller gets to keep the security deposit, it’s a big time waster and the other offers probably moved on.

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26 Jen Patterson 8 February 2013 at 17:48

That’s exciting JD! My daughter is fascinated by the Sellwood Bridge. She and Dan spend several hours watching the day that they scootched the old bridge onto the new pilings. They are always finding out some new news and excitement about the new bridge. They will both be jealous when I tell them your new place has a great view of the bridge. I get a little rush now when I drive over it on my way to L&C, knowing that I am on the old bridge and right next to it will be a beautiful solid new one. Your view looks INCREDIBLE. Super happy for you!

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27 Claire 9 February 2013 at 16:50

How exciting, congrats! While I agree that paying cash for a home means shifting assets from stocks, a fundamental difference is that a home has utility value. You get a place to live, and hopefully one you enjoy; you can’t live in a stock. And I presume you paid rent for your apartment, so the condo is not a new expense per se.

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28 Kate 13 February 2013 at 09:47

I look forward to finding out how you enjoy condo ownership. I bought a gorgeous condo in 2010, and although I got a great deal (bankruptcy situation), dealing with strata ownership has been nothing but a hassle. There are 42 units in the building, and no one (including the strata council, which I am now on) ever reads the financial statements. There are constant budget overruns, which no one can ever explain, and we have had three different building management companies. The first two were horrible, and cost us thousands and thousands of dollars. The third (current) one is not bad, but still needs constant monitoring. For example, they have been overcharging us on their management fees by $400 per month for the past 6 months, and our Treasurer never noticed. I find that people just don’t pay attention to what is going on, but they get angry when things are not fixed right away, or when their monthly fees go up. No one wants to take responsibility for managing the finances, or has the skill to do so. This work all falls to volunteers, none of whom seem to have any financial knowledge. Based on this experience, I would not buy another condo.

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29 Diane C 17 February 2013 at 23:35

This should make you feel better about what you had to pay to get the home that suits your needs. New husband and I are looking for a home that is “ours”. His father recently died and we’ve discovered that his mom has dementia. None of our houses has a first floor bedroom, and MIL is way too physically healthy to be placed in a dementia facility, so a different floor plan is in order. We live in a high COLA and set a budget of 800K for a 3+BR, 2+BA home. We found the perfect house, but it was a short sale. The bank only wanted to see the highest and best offer. There were at least a dozen offers, all over asking. We ended up bidding 928K with no appraisal, no inspection, and as-is condition. We are putting over 50% down and are pre-approved for our mortgage. (Yeah, we could get a bigger loan, but we don’t want to.) The house is overbuilt for the neighborhood (fortunately, not in an ostentatious way). It is only three blocks from DH’s work. DH is also a painting contractor and is a build-it-right, fix-it type guy. He can do the inspection and any necessary repairs. We know we may be paying “too much”, but this home will suit our needs for the next ten or so years. With so many other bidders, we feel that when the time comes to sell, we will have no trouble finding a buyer. We may not make a killing on it, but it will be our family’s shelter as we embark on this next phase of our lives. We are working with a trusted RE Broker and with our Financial Planner’s approval. For all the bad news we hear about real estate, I’m here to tell you that it is roaring back to life in the SF Bay Area. Gads!
Congratulations on your new (and comparatively reasonably priced) home, JD!

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