Don't rush into buying real estate, especially your first property. That might sound odd coming from someone who actively invests in real estate, and even opts towards not paying down student loans as fast in order to do so. The most important part of any negotiation, and this holds true with real estate negotiations is leverage. If you have leverage, you're able to use something to your maximum advantage. In negotiations, this is usually the ability to walk away from a deal. This can be extremely difficult when buying your first property, because it's likely that you lease where you live, and you only have a limited window of time for when you can move into a new property. My wife and I found ourselves in this exact situation when we were looking to purchase our first home. We lived in an apartment with one of my friend's from pharmacy school, so with the rent split 3 ways, we were able to live in a brand-new apartment building that was easily the nicest place in the entire neighborhood.
The problem arose when our roommate decided to move to Wisconsin, and we suddenly found that the places we could afford weren't very nice, and many places were selling extremely quickly and higher than the listing price. The first thing we did was reach out to our current landlord to see if we could continue on a month-to-month basis. We lived in our apartment building for several years since it was originally completed, but the management company couldn't take on the risk of moving an apartment off the heavy renting cycle of the summer months. Next, we tried to find an affordable apartment that we could rent for 12 months or less, while we continued saving up a down payment and let the market cool down. After touring at least 20 units, our search turned up nothing of interest. The rental apartments that we could afford were all run-down, too small, and way outside the neighborhoods that we wanted to live in. So our last effort was to find an affordable place to buy that we could live in for a few years, fix up a little bit, and rent out when the market cooled down and the time was right to buy a larger place.
Finding a condo we could afford in a neighborhood we liked was almost as hard as finding an apartment. We hired 2 different real estate agents (this is a huge no-no for realtors, but we never signed any paperwork), and saw just as many condos for sale as rental apartments. This was the summer of 2018 in Chicago. Everything we looked at either sold way over asking, sold a few days after listing, or both. We were already stretching our initial budget with the homes we were looking at. There's no way we were comfortable with paying thousands more for places that were sitting for months and selling for a lot less just a year ago. We were starting to get desperate, and were worried that we weren't going to find a place to live when our lease ended. Finally, my wife found a place that was just posted on one of the real estate sites that day. It was only 2 blocks away from our current apartment, and the asking price was about $20,000 less than the comparable condos we were looking at in the neighborhood. We set up a showing with Ryan, our real estate agent for the next day.
At the showing, we knew we were the first ones to see it, because the listing agent didn't know what was behind any of the doors. She had clearly never been to the apartment before, and told us that she didn't have any additional showings lined up for that day. After the showing, we decided that we liked the condo and we told our agent that we wanted to put in an offer. The condo was originally listed for $215,000, and we put in an initial offer of $210,000 the same day we saw it. The very next day, the listing agent informed us that they have multiple offers on the table and would need our best and final by 2 pm. This is an extremely common practice in real estate negotiations, and we'll never know if they actually had other offers or not. Regardless, we couldn't risk it. We desperately needed a place to live. We ended up going all the way up to $223,500. I thought $220,000 was the highest we could pay while still getting a really good deal, but we absolutely needed somewhere to live, so we decided to pay a little extra to try and make sure we got it under contract. We did purchase the condo, and it's since been renovated nicely, but we could have saved thousands of dollars if we weren't in such a pinch.
Had we planned better, we could have held firm at our first offer of $210,000 and accepted that someone might be willing to pay hire and we would find another opportunity later. That's exactly what happened with the current place we have under contract. Fast forward to the winter of 2020, and we're still living in the same condo, the housing market is still doing well, but some places are sitting for weeks and months with very little interest, and several places have even lowered their prices along the way. We aren't desperate to move at all, but I'm always looking for a good deal. We are so comfortable where we're at, that we just finished remodeling our bathroom. It was our biggest challenge, but the results were amazing! It looks nothing like the original bathroom. Anyway, I have many different saved searches on Redfin for different small apartment buildings in the suburbs, larger apartment buildings in Chicago, and larger condos in desirable neighborhoods that we might like to live in, and a few days before Christmas in 2019, a large, renovated condo on the top floor was listed just a block away from our current home. I told my realtor right away that we were interested in seeing it, and he set up a showing.
After the showing, my wife and I decided we wanted to put in an offer, but our realtor advised us to wait. He told us that the time between Christmas and New Year's is so slow, that no one would be likely to see the place, and we would be better off waiting until January to put in an offer on it after it had been sitting for a few weeks, as opposed to putting in an offer right away, and seeming a little desperate. We agreed that seemed like a good idea. That's why I was so surprised when my Ryan texted me at 9:30 pm on December 30th and said that the seller reached out to him and wanted to let us know that he was taking the best-and-final offers by tomorrow (New Year's Eve) at 2 pm. We thought it was wild, and realized the seller wanted to get rid of the property fast. It was listed for $299,900, but was probably worth closer to $350,000, so we were ok going all the way up to asking price if needed.
The biggest advantage that we had was that we were ok if it sold and we continued passively looking for good deals. We have a manageable monthly payment that allows up to save and invest aggressively, and we just finished renovating our current condo, so everything is already brand new. With that, we decided to come in at a price of $290,000, and our realtor agreed. We wanted to make sure that we got a great deal if we were going to be moving again. If not, we knew we could always wait for the next deal.
Remember, your first deal doesn't have to be a home run. Sometimes it helps just to get in the game and start learning. Just make sure that the first place you buy doesn't eat up so much cash that you can't save up for the next place, or your next big investment. I honestly don't know what our next big investment will be, and I know we have a busy 2020 ahead of us, but I'm excited to see how we can learn and grow from this experience, and I'll always be looking for our next good deal.
At the showing, we knew we were the first ones to see it, because the listing agent didn't know what was behind any of the doors. She had clearly never been to the apartment before, and told us that she didn't have any additional showings lined up for that day. After the showing, we decided that we liked the condo and we told our agent that we wanted to put in an offer. The condo was originally listed for $215,000, and we put in an initial offer of $210,000 the same day we saw it. The very next day, the listing agent informed us that they have multiple offers on the table and would need our best and final by 2 pm. This is an extremely common practice in real estate negotiations, and we'll never know if they actually had other offers or not. Regardless, we couldn't risk it. We desperately needed a place to live. We ended up going all the way up to $223,500. I thought $220,000 was the highest we could pay while still getting a really good deal, but we absolutely needed somewhere to live, so we decided to pay a little extra to try and make sure we got it under contract. We did purchase the condo, and it's since been renovated nicely, but we could have saved thousands of dollars if we weren't in such a pinch.
Had we planned better, we could have held firm at our first offer of $210,000 and accepted that someone might be willing to pay hire and we would find another opportunity later. That's exactly what happened with the current place we have under contract. Fast forward to the winter of 2020, and we're still living in the same condo, the housing market is still doing well, but some places are sitting for weeks and months with very little interest, and several places have even lowered their prices along the way. We aren't desperate to move at all, but I'm always looking for a good deal. We are so comfortable where we're at, that we just finished remodeling our bathroom. It was our biggest challenge, but the results were amazing! It looks nothing like the original bathroom. Anyway, I have many different saved searches on Redfin for different small apartment buildings in the suburbs, larger apartment buildings in Chicago, and larger condos in desirable neighborhoods that we might like to live in, and a few days before Christmas in 2019, a large, renovated condo on the top floor was listed just a block away from our current home. I told my realtor right away that we were interested in seeing it, and he set up a showing.
After the showing, my wife and I decided we wanted to put in an offer, but our realtor advised us to wait. He told us that the time between Christmas and New Year's is so slow, that no one would be likely to see the place, and we would be better off waiting until January to put in an offer on it after it had been sitting for a few weeks, as opposed to putting in an offer right away, and seeming a little desperate. We agreed that seemed like a good idea. That's why I was so surprised when my Ryan texted me at 9:30 pm on December 30th and said that the seller reached out to him and wanted to let us know that he was taking the best-and-final offers by tomorrow (New Year's Eve) at 2 pm. We thought it was wild, and realized the seller wanted to get rid of the property fast. It was listed for $299,900, but was probably worth closer to $350,000, so we were ok going all the way up to asking price if needed.
The biggest advantage that we had was that we were ok if it sold and we continued passively looking for good deals. We have a manageable monthly payment that allows up to save and invest aggressively, and we just finished renovating our current condo, so everything is already brand new. With that, we decided to come in at a price of $290,000, and our realtor agreed. We wanted to make sure that we got a great deal if we were going to be moving again. If not, we knew we could always wait for the next deal.
Remember, your first deal doesn't have to be a home run. Sometimes it helps just to get in the game and start learning. Just make sure that the first place you buy doesn't eat up so much cash that you can't save up for the next place, or your next big investment. I honestly don't know what our next big investment will be, and I know we have a busy 2020 ahead of us, but I'm excited to see how we can learn and grow from this experience, and I'll always be looking for our next good deal.
Comments
Post a Comment