Stats about Denver's scorching hot (read: nearly impossible to enter) housing market abound, but I didn't truly understand how crazy things were until my husband and I started looking ourselves. The first time we toured a craphole and learned later that the house had 22 offers — most over asking price — we thought it was an anomaly. I need two hands and some toes to count up the times that situation has repeated itself since.
Unless you have a briefcase full of cash lying around your house or are in a tax bracket that affords you one of those gold credit cards, buying a house in Denver right now can be a soul-sucking, gut-wrenching, repeated kick in the teeth. But it doesn't have to be! Here are ten tips to navigate the market.
1. Find an optimistic realtor.
We recently walked into a cute house with an ugly bathroom. I balked, but our realtor didn't flinch. Nancy Levine pointed to every ugly thing and gave us an estimate for how much it would cost to replace the aging toilet, the outdated cabinet handles, the bad lighting. After her explanation, I realized the ugly bathroom wasn't a deal-breaker. In this market, you need someone who can help you look past the ugly sink.
2. Find a realtor who knows their shit.
Not too long ago, we toured a home with what looked like a problem with the foundation. Rainwater would pour off the roof and, because of the angle of the dirt around the foundation, appeared to go back into the house. Water and foundations are sworn enemies. Other realtors who were giving potential buyers tours at the time saw the issue and told their clients to run. Our realtor admitted it looked like a problem but acknowledged her limitations. "I'm not a structural appraiser," Nancy said (before strongly encouraging us to bring in a structural appraiser).
3. Meet with a lender way before — like, six months before — you start looking for a house.
Issues with credit can take a while to fix, so it's better to find out sooner rather than later if yours is messed up. Do some research about the lender you're comfortable working with (big bank, private lender), and after your meeting with them, make sure you have a full idea of where every cent of your money would go in a sale and just how much you'll need, closing costs included. Consider the drawbacks and perks of the different kinds of loans (FHA vs. conventional loan, for example). It helps to get a lender who speaks plain English and not just legalese.
4. Write your seller a love letter.
Silly? Maybe. Effective at breaking your offer out of the pack? Absolutely. Tell the seller about yourself (it's harder to say no to someone you know, right?). Compliment their home and the work they've put into it. Tell them what you'd do with the big back yard or guest room. Keep it brief and meaningful.
5. Don't wait — buy now (if you can).
Fact: The market will inevitably cool down, which will impact home values. A look at the last fifty years of home prices in Denver shows dips in the market, but prices have risen overall. Think of it like the stock market: You don't cut and run when things get bad. You hunker down and ride out the storm. You might be buying at the top of the market now, but things will only get worse over the next few years. And contrary to popular belief, you don't need a big down payment. You can even make 3 percent work.
Keep reading for more tips for home buyers in Denver.
6. Go month to month if you're renting.
Not only does it takes weeks to close on a home, but in this market, your first offer (or second, or third, or fifth) likely won't get accepted. Knowing where you'll sleep that night takes off at least some of the pressure.
7. Don't do anything crazy.
Because of a lack of inventory, buyers in Denver are getting desperate, offering thousands over asking price without seeing the house or even requiring an appraisal. If you have the financial means to repair a serious issue with a foundation, mazel tov. But if you're like us, you can't gamble with uncertainty. We recently put in an offer for a home whose asking price was much higher than the homes around it (what the realtors call "comps"). We could have put in an offer over asking price, but that could have screwed us in the long term. We stayed modest, and Nancy wrote a contract that still offered our potential seller some incentives. We'll be covered whether we get the house or not.
8. Think about how high you're willing to go.
If your lender approves you for, say, $400,000, that doesn't mean your budget will allow you to comfortably make a monthly payment on a $400,000 home. Ask your lender to walk you through what goes into your monthly payment, and find a home price you're comfortable with.
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9. Look at a lot of houses.
"A lot" is subjective, but the point is that you probably won't fall in love with the first place you tour. And looking at homes really shapes your priorities. My husband takes the light rail to work every day. When we started house hunting, we figured a place within five miles of a light-rail station would be doable. But once we started looking some more, we realized just how much of a pain in the ass walking five miles a day would be. By dedicating every Sunday to touring homes, we've fine-tuned the neighborhoods we like and don't like, the things we're willing to live with (not a ton of space) and the things we can't live without (walkability).
10. You will never find the perfect house.
Good location but painted mustard yellow? Paint's cheap. No back yard but a great porch? At least you won't have to mow the lawn. Focus on the positive — and make sure the negative is at least fixable.