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.