Earlier this week Amanda and I went under contract for a 1962 ranch in Boulder, less than a mile away from our current home. We’re excited about its potential and also intimidated by the work ahead — it’s like a time capsule, complete with its original intercom system, whole house vacuum, mid-mod hallway sconces, and wooden wall paneling.
Purchase contracts fall though, so until we close in late-April I’ll remain coy about the property. For now, though, I wanted to share five tips that I found especially helpful through the process, for my own benefit next time or for any readers currently shopping.
1. Track drive-by’s and walk-throughs
Since mid-October of last year, Amanda and I drove by and/or walked through fifty-three properties. These tours helped us to narrow our geographic search, develop a good sense of fair market value, find alignment in our preferences, and identify acceptable tradeoffs.
Naturally, I tracked all of these visits in a spreadsheet so that the information was not lost or confused. It had ten columns:
- Status: For sale, Pending, Sold, Off-market
- Decision: In love, Viable, Eh, Hard no
- Date of drive-by
- Date of walk-through
- Most memorable for: “Chicken coup,” “Creepy basement wet bar”
- Asking price
- Purchase price
2. Find a property with a flaw that you can fix
Especially in Boulder, turnkey properties with a modern aesthetic have been prompting bidding wars. We toured multiple properties that showed really well, received multiple offers, and eventually sold for up to 30 percent over the asking price.
Early on our agent Charlie remarked to us, “I’ve always looked for properties with a flaw that I could fix,” and Amanda and I started to live by this rule. Flaws have two effects: they cull the number of prospective buyers, and they create an opportunity to build sweat equity. Examples include unfinished basements, outdated kitchens, and room for a new half-bath.
3. The excitement should last
A month ago Amanda and I toured one property that was well within our budget, nicely updated, and very close to a go-to running path. Leaving the house, I was almost certain that we’d make an offer.
But the excitement faded, with the property’s positives being overridden by concerns about its stair-filled tri-level layout, small lot, and dimly lit garden-level master bedroom and bath. A day later we shared our hesitation with Charlie, who offered us another gem: “The excitement should last.”
In contrast, since touring the soon-to-be-ours new home, we’ve remained fixated by it.
4. Avoid vulnerability to a downturn early on
When I started looking at homes last year, I quickly realized that “upgrading” in Boulder would financially stretch us. Even though we earn more income now than in 2012 when I bought our current home, and even though we have built significant equity in it, Boulder was no more affordable to us.
In trying to figure out how much I should stretch, a very successful client gave me this tip: “Go as far as you can without compromising your ability to weather a downturn early on.” He shared his experience of buying a Bay Area home just before the bursting of the dot com bubble, selling that property two years later because he was relocated and couldn’t afford two house payments, and having to bring a sizable check to the closing because the house was worth less than he had paid. If he’d been able to wait it out for another year or two, he would have at least broken even.
Amanda and I have a 10-year plan for this property, by which time it will likely be worth more than we paid for it. And if there’s an interim correction due to raising interest rates or a war in Europe, we have sufficient reserves still to manage it.
5. Make an offer with which you are comfortable, however it turns out
Based on nearby comp sales and an aggressive fix-and-flip model, I came up with two offer prices about $25k apart that included a reasonable discount for the effort and risk in renovating the property. I could mathematically justify these offers based on the expected after-repair value.
But I knew that another buyer might come to the same numbers and that I’d probably have to throw in more. But how much more? For two days we drove ourselves crazy trying to out-think other buyers. “What if they offer $X52? So we should really offer $X53.”
On my Tuesday morning run with Matt, he gave me the big picture wisdom I needed: “Make an offer that’s right for you, because in a blind auction you’ll never know what other buyers are thinking.” Amanda and I submitted our offer about a half-hour after I got back, selecting a number that felt right to us with some help from Esmerelda.
I didn’t want to have regrets: regrets that we didn’t offer more when we could have, or regrets that we offered more than we could honestly justify.