Monday, November 29, 2010

A new strategy

After getting over my disappointment with the failed purchase, I began to seriously consider another option: build my own house. I had very little information on where to start or how much a project like that would actually cost, but the idea of it was intriguing to me.

I quickly figured out that the first step is to find an architect. Browsing a few sites like this one, I found out I really liked the work of Olson Kundig Architects. I like their edgy designs and use of natural materials. So I decided to send them an email and find out more about the whole process. I received a prompt and friendly response asking what projects of theirs I liked and my general budget. Excited to be moving forward with something, I sent back an email with a few paragraphs of information that they wanted. As quickly as my exchange started, it stopped. I never received a response back from them after that initial one. Later on, I come to find out that they only talk to people who have lots and lots of money. I'll be sure not to use them when I can afford it.

Sunday, November 14, 2010

Two Opportunities: Part 2

A few months later, in June of 2010, I found a much better house. It's part of a development of 4 free-standing condos designed by Pb Elemental.

The front two and rear two are identical mirrored layouts. The rear-left one was posted for sale for $550K. Here's a picture of what the rear houses look like:

The layout is very clean and open. It has a rooftop deck, high ceilings and lots of nice details. It is also situated in a relatively calm area in the CD. Overall, a very cool property, though the offering price felt high.

I had trouble pricing out the value of the property since, from what I was told, the seller was the builder for the four houses. I did find out that the neighboring mirrored house sold for $575K in 1/2007, close to the peak of the housing market. Doing a little extrapolation using Case-Shiller data for the Seattle market, housing prices dropped about 16% since then. That would price the house out at about $483K. Now since the builder lived in that house, I assume he added some upgrades over the neighboring house, say around $20K worth. That puts the house at $503K. I offered $505K.

Much negotiation followed and I relented on my price. I finally managed to get the sellers to verbally agree to $520K, as long as I do a pre-inspection on the house so that I don't try to squeeze more money out of them. I spent $450 on one the next day and submitted my final counter-offer. Unfortunately, some buyer came in at the last moment with an offer of $541K and bought the house from under me.

This was very disappointing to me, especially since I lost $450, but at least I didn't overpay for the house. I think part of the reason why the house was priced that way was that when agents try to price out a home, they look at nearby comps. At the time, there were two new-construction houses nearby which were extremely overpriced, in the $560-580s. Those must have had an influence on the agent's, and possibly the buyer's pricing decision. Those comparable houses eventually dropped to the low $510-520s and were sold, so it looks like my value assessment was pretty much spot-on.

Sunday, October 31, 2010

Two Opportunities: Part 1

I did end up putting offers in on two houses - both new, modern construction. The first was 2518 E Union St., which is still on the market for over 2 years now:

It's the house in the back. The interior is pretty open and the finishes are decent. For the most part, it does meet my minimum requirements, but there are a few problems with it.
  • It's next to a really busy street
  • The general neighborhood is transitional
  • The easement to the back house is very narrow
  • The two houses are built very close together, making use of the garages a challenge.
I think when the houses were first on the market, they were in the mid $600s. Taking the neighborhood and placement issues into account, I valued the house at around $500k and offered that much. Unfortunately, the sellers were a bit stubborn with their negotiations and gave me enough time to convince myself to back out. In retrospect, I'm glad I did. The house is now priced at below what I offered for it.

Sunday, October 24, 2010

The Search for a House

When I'm searching for houses, I compare them against a set of requirements and preferences that I have in my head. Here is the minimal set of requirements for what a house must have:
  • Good location - I want to be able to bike to work every day, so I need it to be close to downtown. It should be north of I-90, preferably north of Yesler Ave. I don't really like a lot of the areas south of those latitudes. No offense to my south-end friends. It also should be south of Greenlake. Any further north is getting a bit far away from downtown. With that radius in mind, I like the following areas:
    • Ballard
    • Wallingford
    • Fremont
    • Queen Anne
    • Madison Valley
    • Madrona
    • Montlake
    • Arboretum
    • the east side of Leshi
    • some parts of the Central District - the CD is very diverse and each block needs to be assessed separately
  • A garage - one car is fine. I don't want to worry about my car being broken into
  • A nice living area that is good for entertaining guests
  • A good kitchen - I cook and bake a lot, so this is important. I'm also rather finicky about having good ventilation over the cooktop. If the house doesn't have good ventilation, it's big minus points
  • Somewhere to put a home theater/stereo system - this can be the living room if it allows
  • No flipped houses - there's an obvious difference in quality between a real remodel and a flipped house. I've seen very few flipped houses that weren't more than just putting lipstick on a pig.
  • Square footage - between 1500 and 2000.
This list doesn't include what I'd like to have in a house (that's to come later). One would think that, given the massive amount of inventory out there due to the burst housing bubble, I'd be able to find something that fits that criteria, but really, there isn't much out there. Over a year of active searching and touring revealed almost nothing.
  • many houses had no garage
  • many had cramped, nonsensical layouts
  • kitchens were an afterthought with zero or very poor ventilation, or cramped
  • many were flipped, had the above negatives, and only had a fresh coat of paint and new appliances
  • new construction got the closest to meeting my requirements, but was usually in a busy/bad part of town, or again, the kitchen was not up to par
It's not even the case that I was looking in the wrong price range. More expensive houses ended up being too large for what I need, not to mention unaffordable. I was starting to get frustrated. I expanded my search to include houses that were cheap, but eligible for a full remodel. The problem, it turns out, is that this is the same type of house that flippers look for. There were about 2 or 3 I found that were very promising, but ended up getting sold within a day or two to professional flippers - I can't really compete with that.

I did, however, come across two relatively good ones during my hunt. To be continued...

Sunday, October 17, 2010


I'm super-excited to announce that I'm going to be building a custom modern home in Madrona, WA. But first, I think it's best to start with some context.

I currently own a nice house on the southern border of Everett. I purchased it in May of 2005, luckily right at the beginning of the housing bubble. I worked in Mukilteo, about a 10 minute drive away, so this location was very convenient. The housing development was brand new - all empty lots - with a choice of about 5 different plans. I ended up choosing the most open plan out of the 5 and had the option to have it built in front of a neighboring green-belt.

This, being my first-ever house purchase, I naïvely thought that I would be able to have everything inside the house finished to my taste. Of course, this was not the case. Buying a spec-house is much like buying a new car. You choose the model, select from a list of about a dozen upgrades you want, then sign a check and contract. And, much like with new cars, the listed upgrades are usually very overpriced for what they are. As an example, the house came standard with carpet in the living room and hallways, linoleum in the dining room and kitchen, and had about 15 sq ft of oak hardwood floor in the entryway. I wanted the whole floor to be finished in hardwood. I was expecting it to cost $5K, but they quoted me $20K! As soon as I realized I was getting nowhere, I switched strategies.

After much battling, I got the builders to downgrade the flooring in the entire house to carpet. Carpet everywhere - the dining room, kitchen, and bathrooms. I couldn't get them to do away with finishes altogether, but I was happy with the compromise.

On the day I got the keys to the house, I diligently ripped out all the carpet, rolled it up, and sold or gave away as much of it as I could. Slowly, over the next year or two, I put in Brazilian cherry hardwood floors in the living areas, slate in the kitchen and bathrooms, marble in the entryway, added a huge deck in the backyard, and added granite countertops in the kitchen - all for less than the proposed cost of the hardwood floors from the builder.

Even though I liked many things about the house, I was growing weary of living in a suburb so far away from the city. In the beginning of 2009, I decided that it's time to start looking for a new house close to downtown.