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.

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 your new home to your job that's 20 miles away so that you can live near a lake or would it make more sense to find something located midway? How does the possibility of future job changes affect this? What happens if your spouse decides to go back to work?

For most of us, these "location issues" are complicated by financial concerns. If you want to live and work in a specific town, are you willing to live in a 1000 square foot, 1950's bungalow with no garage? Would you settle for a 45-minute drive to your job if you could buy a newer 1600 square foot home with a 2-car garage? Would you consider a 60-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 45-minute commute if you could get the 1000 square foot ranch for 20% less that you'd pay outside of that town? How about a 60-minute commute for 40% of that towns' home price? Are you willing to risk an adjustable rate or balloon mortgage -- rather than a fixed rate mortgage -- to increase your borrowing power so that you can afford a 1600 square foot home?

As you begin to get serious about buying a home, you are inevitably forced through a series of these kinds of decisions. They are often difficult -- sometimes agonizing -- as you are forced to make these 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 location for the 2-car garage -- but you aren't?

The specific issues that arise and the that 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 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? What about your friends, boss, or co-workers? Would you feel comfortable inviting members of your band -- or ecological study Group -- to a new home? Watching yourself or your partner work through these tradeoffs is often a simultaneously disturbing and enlightening process.

The best way to begin working through these issues is by identifying them and clarifying the tradeoffs. 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, and (3) information on the types of housing that are actually available, where, and at what price.

When potential home buyers come into my 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, and (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 summary, it's 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. 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 a spcific town -- or a house with 3 bedrooms and 2 baths, built after 1990 in a neighboring community.

Assuming the search parameters are realistic, the focused search is generally the easier part of the process -- at least from the psychological point of view. 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: (1) that works for you, and (2) that will make a good resale property when the time comes.

In important respects, the dynamics of the focus 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 -- or a balanced market -- there may be too many homes on the market in your price range for you to actually visit them all. Once you've got 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 and satisfy some 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 the market 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.

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 home buyers will be in a better position to buy one of the best homes if they consider the following suggestions.

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. 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.
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, 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 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.
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 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.