House Hunting Episode 3

Episode 3: Where’s the guy behind the curtain, and why is he so angry?

The goal of this house sell/buy game is to use the equity from our house to buy something that suits our lives a little better. We would like to go from 1100 square feet to 1800-ish square feet and have 2 toilets. We need enough yard for the dogs – it doesn’t need to be big, and we need to be able to put a fence around it. Ideally we would have 3 bedrooms and a house design that has a great room (Kitchen, Living room and Dining room don’t have walls between them). We also discovered in the first week of our hunt that we want to live in a good neighborhood – which for us, just means, walkable streets and a neighbor whose front yard isn’t also a junkyard. Everything else is negotiable. Oh, except for livable – the house has to be in good enough shape that we can live in it while we repair anything thats wrong.

Here’s where the whole thing goes sideways: Low Inventory. That’s the innocuous term realtors use to describe the situation when there are not enough houses on the market. It hasn’t been this bad in almost a decade.

Ideally, we’d buy a house in Milwaukie, so here’s a fun exercise to see what ‘Low Inventory’ really means: Go out to Redfin right now and search for Milwaukie. (Yes RMLS.com lists houses before Redfin, but their UI is crap. Redfin illustrates the problem more clearly)
All houses for sale right now: –15
Exclude the short sales: –14 left
Exclude prices over 300,000: –8 houses left
Exclude houses smaller than 1250 square feet: –3 houses left
Exclude houses that have been on sale for more than a week – because we’ve already seen ALL of those and we’re down to 1 house in the entire city of Milwaukie. And we’ll look at it if it’s still for sale this afternoon.

Now, do the same thing for the entire city of Portland
All houses for sale right now: –841 (just houses, no condos, apartments or empty land)
Exclude the short sales: –804 houses left
Exclude prices over 300,000 and houses smaller than 1250 square feet: –122 houses left
Exclude houses that have been on sale for more than a week – because we’ve already seen ALL of those: –27 houses left
Exclude the ones that will give us more than a 45 minute commute: –25 houses left
Add in our craaaazy desire to have 2 toilets (not even 2 bathrooms, just 2 toilets): –19 houses left

–I got all of these counts this morning, so these are real numbers as of April 10th

Here’s where it gets exciting. Of those 19 houses currently on the market, several of them, will have one of the following characteristics. Keep in mind the market is so tight right now that sellers don’t need to negotiate anything to sell their house.

Cash Only Houses
You can list your house and tell people “Only cash offers will be entertained”. Thats code for: If you can’t write a check for the full amount of the house, don’t bother looking at it. Portland has lots of those right now and they’re not slowing down sales. They’re great for the sellers, but it does mean we can’t even consider those houses.

Teardown Houses
That means the house is in such bad condition that no bank will mortgage it and its only on the market for developers who can tear it down and build a new house. Usually 2-3 new houses where the one house was. But you have to read between the lines of house listings to figure that out – I ran into a listing that looked really good from the pictures only to find out it was a teardown when I asked to see it in person. What possible reason is there for taking flattering pictures of the rooms in a house if it can only be torn down? Why wouldn’t you just put up a picture of the yard and the outside of the house when you know no one can ever live on the inside again?

Bid first houses
Telling people they can’t see a house until they put a bid in. I had to have that explained to me because I was certain I’d misheard it. It’s a common thing to do around Portland now: You list your house and tell people they can’t step foot in the house to evaluate it unless they’ve put a bid in for the house first. You’re supposed to just guess what you’d be willing to pay based on the pictures online, put in a bid and cross your fingers. The theory is, you ‘just pull your bid’ if you don’t like it. But if you do like it and discover you overbid based on what you actually see in the house, you’re SOL. And I can tell you that the pictures online are NEVER a good enough representation of any house.

And then theres this nifty trick
Listing a house for sale on the RMLS website for just a few hours then pulling it back off the site. When contacted, the listing agent said they were doing it to ‘advertise’, and it wouldn’t be on the market for real for another 3 weeks. And no, they wouldn’t entertain any early visits or offers. I believe the technical term for that is “AssHat”.

So say you’ve gone through the entire backlog of P.O.S houses and made certain sure there was nothing there you want to take on. Now, you have to play the game to get a house with all the above oddities in play. Here’s the last 3 pieces of the game I know about. <>

Good houses inside Portland are only on the market for 24 hours sometimes less. We looked at a house this week and we put our bid in for it above market price. 24hours after it was put on the market, it had 6 offers and it went to someone who bid a lot more than we did. I got a listing today for a house that will be on the market for 12 hours. 12 hours.
The top of our price range is the bottom of someone else’s price range. When we bid for a house near the top of our range, we are competing with people who have buckets more money to throw at a house. Our realtor was telling us about a client a few weeks ago who bid 40K over asking and was outbid. I’m looking at you St. Johns. Stop wiggling your friendly neighborhood, good friends and pretty houses our way.
If you bid significantly over the actual value of the house, you must cover that overage out of your own cash, because the bank won’t include that in a mortgage. So we need to be very careful to never bid over the amount we think a bank will estimate the house at.

So my friends I’m left hoping that the bubble will burst and dreading it all in the same breath. We’re looking at more houses tonight. Wish us luck.