Managing expectations (and regrets) in a ridiculous housing market
February 20, 2022 7:21 AM   Subscribe

We're prospective first-time home buyers in a major North American metro. The housing market here isn't the Bay Area, but it's not good for buyers -- anything in decent shape and priced right sells in under 48 hours, often with two or three offers. Inventory is super low. If you've bought a home in a similarly overheated market, what did your decision-making process look like, and how do you feel about those decisions now?

In a lot of ways we're in a good position: we're able to make competitive offers, we're intending to be in this house for the long haul (so not super worried about the "investment"), and we have no external time pressure (our current place is no longer compatible with our work life, but there's no lease ending or anything like that).

Where we're struggling is deciding to make an offer in the time we actually have -- often we'll go to a showing at noon and three hours later our realtor gets a text that offers need to be in at five p.m. This is not really how we work! We are both chronic overthinkers and there are a lot of variables to consider, especially since we're looking at homes that are likely to need at least some amount of remodeling. How on earth am I supposed to weigh all of that stuff in an hour? Already we've seen a couple of places sell that would absolutely have worked for us, but we just decided too late to make an offer.

And then: how do you decide to jump on something now versus waiting to see what comes on the market? I'm worried about buying a place that's a few blocks away from my preferred location and then two days later a perfectly located property comes on the market -- am I going to freak out? (Location is my #1 concern above all other things.) But also that might never happen, or might not happen for a year!

I don't really know! I welcome all thoughts, experiences, advice from other people who had to make huge life-alterating home-buying decisions on like, two hours' notice.
posted by robot inside a grid to Home & Garden (22 answers total) 14 users marked this as a favorite
We bought in Denver early last summer, which has some of the same inventory issues. The week we saw our house it went on the market on Wednesday, was available for showings starting on Friday, I think? But it poured down rain all of Friday and Saturday, and we were the only offer, and managed to get this place below list, which is basically unheard of for a move in ready place in the area in the past 12 months. If you're not in a time crunch, try timing your house hunting only for weeks with terrible weather or other things that will keep some folks home. Memorial Day weekend, the Superbowl, July 4th, the start of school.... all of these can reduce the number of folks out house hunting, which translates to fewer bidders and slightly less time pressure.

But also, you just have to get to the point where you're okay with making an offer. It kind of sounds like you should start making offers on some of these "this could work" places that are located right. Unless it's definitely The House in your brain, don't put in any escalation clauses, but if your offer is accepted, celebrate getting a good deal in a tough market. This is our second home we've bought, and both times I've been surprised how quickly my brain moves from The Project Of Following Every House That Comes On The Market to The Project Of Oh Dang, This Is Our House Now.
posted by deludingmyself at 7:39 AM on February 20, 2022 [6 favorites]

Basically, your fear of missing out (FOMO) is blocking your commitment.

If, as you say, there's no deadline and location is the most important thing, then practice patience and don't even look at homes outside your desired area. But you may be waiting for a long time.

Otherwise, you need to have a short list of "must haves" and "dealbreakers" that you use to make a decision and don't think, just execute. You should be able to decide on the spot if you're making an offer or not - the fact that you cannot means you have not solidified your criteria yet.

It can help to develop a list of trade-offs, "it's ok to be in this other location IF it has these features" to help you act on alternatives.

Finally, home-buying is not forever - if you find a something first that is OK but not ideal, you can still buy that ideal home later when you find it - you're not stuck in that first home.
posted by jpeacock at 7:47 AM on February 20, 2022 [11 favorites]

We live in an area with a hot housing market and we bought last year when there were only 2 houses available in our price range. We just put in an offer on the one we liked best and got lucky. We think some things were putting people off it, it had a very bad energy rating (which has been rectified, was listed lower than it actually was) and it was in September. I agree with lowering your expectations to just “could work and in the right location”… when we have recently looked there are still no houses in the area in our price range so glad we took the plunge and the house grew on us.
posted by pairofshades at 7:50 AM on February 20, 2022

On the location, a few blocks shouldn't make or break it. But, when you do see that house inn the perfect location, you have to POUNCE.

We just bought in July in Boston which is one of the toughest markets. The house we bought had 32 offers on it. It was insanely perfect - it has a garage, porch, it's newer, and on the T. Walking distance to tons of bars and grocery stores.

So, we knew it would be tight. We had lost a few other offers. So, what worked for us was two things: one, our down payment on the house was only 10% - so, we strategically decided to not include that in the offer. The sellers followed up to ask, and we said "here is our verified pre-approval (that didn't have down payment). While we can afford to pay a large down payment, it's silly to do so in today's investment marketplace. We will be investing that money in a place other than the mortgage. We hope you understand and would choose to do the same." Our pre-approval was higher much than the asking value as well, with US Bank.

Then, we did what's called an escalation clause, but not just any. Most escalation clauses provide how high you are willing to go, and you beat other offers by $1k. We did an "uncapped" escalation clause, offering to beat any price, by $10k.

This is kind of unheard of, and the realtor pushed back asking for how high we'd go. We told them, no limit, we just need to see the next highest offer with the same waived contingencies. (This isn't that risky because if they show us an offer too high we can still back out...).

So, they showed us a very high offer. And we got the place. And it was a steal. We beat the cash-only people, and the people that fixated on the listed price, and only went $100k over with their escalation clause.

That's how you do it!
posted by bbqturtle at 7:53 AM on February 20, 2022 [5 favorites]

We are both chronic overthinkers and there are a lot of variables to consider, especially since we're looking at homes that are likely to need at least some amount of remodeling. How on earth am I supposed to weigh all of that stuff in an hour?

By looking at LOTS of houses. You will be amazed how quickly you're able to hone in on what you want after you see lots of houses. You'll start to figure out specific neighborhoods that feel right, how much light you need, how much street traffic you feel comfortable with, what you need for parking. Pretty soon, a house will be a yes or a no within five minutes of walking in the front door.

We're also in Colorado, and we bought just as things were ramping up five years ago. After seeing a lot of houses, we talked extensively and exhaustingly (and I say this as someone who goes to open houses for fun) about what we liked and didn't like about each one.

Before long, we moved from a pretty wide net based solely on zip code and price range to some very specific conditions: Not on an alley, not on a corner, not on a busy street, must have a garage, must have a primary bedroom and a full bath on the main floor. Must be within a very particular boundary that we marked on an actual map with a sharpie. When we found those things in a house that just felt right, we JUMPED, and fast. This house is the third bid we did, but I'm so glad those other two failed.

Every house is going to need some work. Every house is going to have flaws. This house certainly does, and I love it here with all my heart. But if you identify the dealbreakers and talk-talk-talk to each other, you'll quickly know which ones to push hard for.
posted by mochapickle at 7:55 AM on February 20, 2022 [9 favorites]

I agree with jpeacock.

I think every house that my wife and I looked at, we decided whether to make an offer within an hour, if not minutes, of seeing it in person. The only questions that needed to be worked out were the details of the offer. We bought last June.

Work out your list of criteria and trade-offs ahead of time, maybe also consider offer generalities. If it helps to make a decision, do the coin toss -- does your gut agree with the coin toss?

To some extent, patience is good. But on the other hand, prices keep going up, probably more than your salary is going up.
posted by NotLost at 7:56 AM on February 20, 2022 [3 favorites]

Oh! And I should add that once we figured out our dealbreakers, our agent updated our mls searches to match. Any time a new house popped up on our narrowed alerts list, I drove by and took a look, and then called the agent right away to schedule a showing. It was important to drive by first and get a feel for the house beforehand so I wasn't wasting my time or theirs if I knew it was a no.
posted by mochapickle at 8:00 AM on February 20, 2022 [2 favorites]

Flipping the framing from "am I sure I want this?" to "would I regret not getting this?" helped a lot psychologically. I also very much agree about having a pre-defined sets of needs/wants/nopes and then trusting that matrix unless you come across something that genuinely causes you to update it. In the course of touring, I for example realized I love natural light and would be miserable in even the otherwise nicest of options. Rather than trying to talk myself into something that went against such a strong value, I mentally moved it over to "needs" and am very glad to have prioritized it.

Regarding remodeling/repairs, you'll want to practice quickly estimating what things will cost and how much of a hassle they'll be, and decide beforehand how much of each you can tolerate. If you're not certain, then it comes down to how much risk you can tolerate: as a fellow over-thinker and planner, I'm guessing not much, but that's okay, you have to be true to yourselves. In any case, don't buy stuff right on the edge of what you think you can handle, because it can always turn out to be worse. But otherwise, if you have good parameters in place, you can make confident decisions, and then stop following the market once you've bought something. Tell yourself every "for sale" sign you see has deal-breaker-level problems hiding behind it, and move on.
posted by teremala at 8:35 AM on February 20, 2022 [4 favorites]

Flipping the framing from "am I sure I want this?" to "would I regret not getting this?" helped a lot psychologically.

I agree with this framing. Right now, the choice is almost always between being willing to put an offer in right away, or you are choosing not to buy the house. The option to sit and think on it is rarely realistic. If you think you would regret not making an offer, then move forward quickly, but if you are neutral then let it go rather than stew on it. If you've looked at enough houses, you can probably tell if the house is priced about right and if the condition is about right (for whatever criteria you are looking for), and you know what you are looking for in terms of location, so it is easy to discard any option that doesn't measure up to those major categories.

Then, we did what's called an escalation clause, but not just any. Most escalation clauses provide how high you are willing to go, and you beat other offers by $1k. We did an "uncapped" escalation clause, offering to beat any price, by $10k. ... We beat the cash-only people, and the people that fixated on the listed price, and only went $100k over with their escalation clause.

If you have the budget for it, being willing to offer more money than anyone else is going to work most of the time. That said, I'm sure there are as many opinions on this as there are people, but we were advised not to use an escalation clause that moves in small increments, because on a transaction that involves hundreds of thousands of dollars, a small increment may not be compelling to the sellers; a large escalation amount, like your $10k example, is going to stand out more. (We ended up choosing not to use escalation at all, and just offered what we thought the house was worth and we were willing to spend; depending on where you are living that might or might not be a workable approach.)

Also, be kind to yourself. It's a terrible time to be a buyer, with limited options and having to compete with both cash buyers and institutional investors. You can do everything right and still have terrible trouble finding a house to buy. (And, now that this has been going on for a while, the articles are starting to come out about all the people for whom buying in a hurry, not using contingencies, or overpaying ended up being a terrible choice.)
posted by Dip Flash at 9:02 AM on February 20, 2022 [2 favorites]

By looking at LOTS of houses. You will be amazed how quickly you're able to hone in on what you want after you see lots of houses. You'll start to figure out specific neighborhoods that feel right, how much light you need, how much street traffic you feel comfortable with, what you need for parking. Pretty soon, a house will be a yes or a no within five minutes of walking in the front door.

This. We bought 4.5 years ago in the Bay Area. We saw probably 60-70 houses over the course of y'all months. By the end, we were very good at telling from the listing photos which houses might be options and could decide if a house might be worth making an offer on within just a few minutes.

It also helped that we knew we wanted to buy and that prices were going up before our eyes. That actually helped ease the pressure because instead of looking for The Perfect House, we knew we just needed to look for a house we could be happy in and that we would definitely have to compromise. Ultimately, we bid on our house immediately (like 30min) after losing a bid on another house: they were comparable houses that were nearby, and we suspect there were fewer bids on ours because it was second. We'd discussed the possibility beforehand given the timing of the deadlines, but it was still quite the turnaround.
posted by matildatakesovertheworld at 9:06 AM on February 20, 2022 [3 favorites]

This helped us with the FOMO issue when we were in a similar position. Once you've seen a lot of options, when you see a new one that is better than all the others you've seen, you can go ahead and choose it confidently without worrying about what might become available in the future. Let math ease your worries.
posted by omnie at 9:09 AM on February 20, 2022 [5 favorites]

I'm struggling with the same thing. I work remotely and have been looking in smaller areas near my hometown, and even in these places, most houses are selling immediately for well over asking. The last house I was interested in had *19* offers (in a small town in the Midwest). The situation is even worse now than last year, I think, because there are so few houses on the market and still a huge number of people competing for them. I am slow to make decisions and there are multiple houses that I now wish I had made an offer on. My situation is a little different because my landlord sold the place I was living and I had to move out, and I'm desperate to find something. The only advice I have: I plan to turn off notifications and stop looking at new listings the second I have an accepted offer. So if something better comes up two days later, I won't know.
posted by pinochiette at 9:15 AM on February 20, 2022 [3 favorites]

It helps a lot to know which locations and layouts will work for you and how much work you are willing to don a property. Then you can just use the viewing to confirm whether the condition of the property matches the photos and so whether there's more work than you anticipated and/or whether you're interested at the likely selling price. Go see a house expecting to make a decision only if it falls into your location/layout criteria. Then if it fits and the inside matches up, don't worry that another house might be better.
posted by plonkee at 9:16 AM on February 20, 2022 [1 favorite]

My ex-husband and I bought a house in San Francisco a decade ago. After making three offers that were immediately made irrelevant by all-cash offers, what ultimately saved the day was being willing to buy a home that had unconventional financing (in this case, the house was a tenancy in common). That sorted out a lot of the chaff--prospective buyers looking to flip and make a mint--and gave us the fighting chance that ultimately was successful. If there's an equivalent sort of thing in your area, I encourage you to look into your options.

Yes, it was a brilliant step and I was beyond happy to have that little house. It was my first time as a homebuyer and my mortgage was almost a thousand dollars per month less than our previous rent had been (San Francisco, after all). Had I stayed in San Francisco I would have happily lived in that house forever. It got me into a neighborhood that was/is so remarkable that I miss it at least a little bit every day. It set a high bar for what buying a home can be, and it was exhausting, but it was exactly correct for that time in my life.
posted by late afternoon dreaming hotel at 9:27 AM on February 20, 2022 [2 favorites]

No one can predict markets very well, but it is an overheated market, driven partly by investors, buying properties to rent, and by people moving to desirable communities that don't have enough housing for everybody. I bought a house in an overheated market, the market tanked 6 months later, and it took 8+ years for it to gain value. But I stayed there for 20 years. I wanted a home, not an investment.
posted by theora55 at 10:20 AM on February 20, 2022 [1 favorite]

I was an FTB in 2020, and had many of the fears you had. The house we eventually bought wasn't 'perfect' and with more time and less pressure we probably wouldn't have offered on it but we had seen many by that point, we liked the feel and it ticked more boxes than any other so - despite the terror - we went for it.

Now I am SO glad because we could have spent years more in limbo looking for the perfect house, rather than turning the one we bought into our home. Now I still check the listings from time to time, just to see, but nothing really compares - because even the good (and possibly more 'perfect') ones are some stranger's house and not mine.

The other thing to remember is that we contain multitudes. Lots of houses would likely suit you in different ways. If a place is in the right place at the right price and you feel good when you view it, you'll likely be as happy there as anywhere else.
posted by freya_lamb at 3:17 PM on February 20, 2022 [4 favorites]

If a place is in the right place at the right price and you feel good when you view it, you'll likely be as happy there as anywhere else.

Yes to this!

Also, remember that you definitely can spend forever looking for a house that's better than what you've seen so far. But every month that you spend looking for that better house is another month you're still in your current place (which is incompatible with your work life, as you mentioned) and missing out on enjoying life in a house that's good enough. In other words, don't let the perfect be the enemy of the good.
posted by sunflower16 at 3:49 PM on February 20, 2022 [2 favorites]

Echoing what a few others have said - you need to look at as many houses as possible to settle on what your deal-breakers are and follow up to find out what the actual sale price was, so you know what the market actually is, not what people are giving as their asking price. Once you know what you want, you need to be prepared to make offers immediately (ie at a showing, before you leave the property) even if your offers are somewhat low-ball-ish. Once you've made an offer, you're in the game and the agent will almost certainly be after you if there's a higher offer to try and get you to top it. I'm on the other side of the globe from your market, but this is a universal truth in a tight market - there's no time for thinking it over or wondering if you should make an offer because, if it's a good deal, someone else will grab it every single time.

Because you seem comfortable with the idea of some re-modelling, you're in a strong position to pick up something that others who are looking for the perfect house just as it is will pass on. It means you can turn something that's good, but not perfect into your perfect home with a bit of effort.

Good luck!
posted by dg at 8:19 PM on February 20, 2022 [1 favorite]

I am a stock and option trader. One of the many sayings I learned is "If you think long, you think wrong." Having said that, another rule is to be disciplined. Wait for the house that you think works for you and then make your highest bid. If you get it, great. If not, move on. I purchased a house in a huge sellers market. My agent suggested I bid like 7% under the ask. I was buying a house cross country. I was sick of flying coast to coast for two days on the weekends. The last time I went I saw 4 houses. I came home and told my wife I liked 3 of them and would live in any of the 3, but this one was my favorite. She said, "Ok. Whatever you do I will never 2nd guess bc I ain't flying out there again either." I told the agent that I wanted to take the offer. She tried to get me to bid lower. I said take it at his price. I was firm on that price and would not pay more. No negotiation. Turned out that 3 people ended up bidding the offer. I got it because I was first.

So, my advice is to be firm on the top price you are willing to pay, bid it, and if you get it, great. If not, move on to the next one. No matter how much or how high you pay, the house is 4 wals and a roof and you can always live in it. If it is your "forever" house, do not worry about paying up. Worry about the house either meeting your needs as is or if you can reasonably change it to meet those needs. Our first concern, because we had 3 kids under 3, was the school system. We wanted a specific school system and were willing to pay up to get it. Even with high high taxes, it was cheaper than sending three ying yangs to private school in the NY area. I needed to be on a "good" train line at a "good" station since I was going to be taking a 5:30am train into the city. And an 8:00pm train home.

Prioritize you wants and needs and bid decisively for the house that first meets your list.
posted by JohnnyGunn at 9:03 PM on February 20, 2022 [1 favorite]

I bought in November/December in DC, which sounds like a somewhat similar market to what you're describing. I am someone who likes to think a lot about my home, but I was also accustomed to hot rental markets where the best rentals went similarly quickly so I had some experience with the mindset of needing to move fast to be competitive.

The way we learned to make quick decisions was by viewing lots of places (by which I mean viewing in person, NOT just looking at redfin photos), even when we weren't quite ready to buy. From those places, we really started to think through our lifestyles and our dealbreakers and what was realistic to expect and what we wanted to prioritize. We also used that time as a way to talk through our comfort with different offer structures (perhaps this is obvious to others, but it wasn't to me - there is a lot more you can do other than just the obvious-but-risky stuff like waiving contingencies to make your offer attractive - you can offer quicker inspection timelines, quicker close, local lender, no-fix inspection, etc). Basically, we "practiced" making the go/no go decision many times on different places even though we knew that it was still a bit earlier than our ideal moving timeline.

By the time we were seriously ready, we were able to make quick decisions each time we saw a place because we'd already given a lot of thought to different options and considerations. As it happened, for the place we ended up buying, my husband was the one that saw it while I was out of town so I had to pull the trigger sight unseen - but I was comfortable with that, because A. he knew my preferences well and because B. I was able to see it in person during the inspection a few days later (so I could have used our inspection contingency to drop out, losing only the cost of the inspection, if I didn't like it).

Also, have a really really great buyer's agent. If yours isn't helping you be competitive, find one that is. Ours was a proactive communicator, helping us to move fast and make attractive offers, without ever pushing us to do things we were uncomfortable with (including total patience for the initial "information phase" of our search). Because she wasn't pushy about the hard limits we had, we also totally trusted her when she told us "to be competitive, you need to X" and we followed her advice.
posted by mosst at 7:17 AM on February 21, 2022 [2 favorites]

Just got off a facetime call where I ugly cried all over my husband who is up in Canada right now trying to find us a place to come home to. It is absolutely terrible to watch your buying power erode before your very eyes. But we're also anxious indecisive people who don't want to make a mistake!

You've gotten great advice: list/must haves, see lots of places in person, and especially this excellent one: Once you've seen a lot of options, when you see a new one that is better than all the others you've seen, you can go ahead and choose it confidently without worrying about what might become available in the future.

here is what is helping me:
- imagine my day to day life through this house; come home, put my keys here, my jacket there; cook, read, shower... how does my life flow fit here?
- imagine all my shit shoved into this house... in detail... does it still fit?
- if you regret not bidding, WHY? And why did you not bid for that place at the time? really unpack that. What were you afraid of? And what were you really afraid of? You might say "oh I was afraid the kitchen repair would be expensive" but you're really afraid of making a mistake.
- get a gut feel. Like those two regrets; hone in on that gut feel that said "THAT was it." Being over thinkers you probably override your feeling of liking something. But you know an immediate NO and you know if something is stuck in your head, that means you like it to some degree.
- Debrief after the tour. Here's what I like, here's what I didn't like. Do I like it enough to put up with what I didn't like?
- call up insurance places as if you're buying a specific place to get a sense of what they are concerned about.
- Call up inspection companies, find a good one, get a sample report and use that as a guide of what to look through when looking critically at a place.
- call up remodelling places as if you're buying a specific place. How much is a kitchen? roof? windows? just new countertops? drywall repair? So you're not completely blind as to costs here. Knowledge will calm you down. Gee I could always fix these stairs for $20k.
- bring a friend for support. My family has been viewing with my husband and that's great to get an emotionally less involved person's input.
- lastly... throw in a low bid with conditions on a place you like just to go through the feels and get some skin in the game. It really does get easier. We've bid on 3 places now.

It is OK to make a mistake. You will love the house. Then think OMG what have I done? Then love it. Then haaaaaate it. Then love it again. Even my sister who bought an amazing house (in a snowstorm btw; weather does give you an advantage!) still two years later complained about the fixtures and how dark the kitchen was. Don't sweat it.

And I always think of the cute house I toured where the real estate agent said "yes, the couple bought it two years ago, completely remodeled it into their dream home... and now they're selling because he got transferred." Life circumstances changes. Even the most perfect place can be taken away. So don't worry.
posted by St. Peepsburg at 8:33 AM on February 21, 2022 [1 favorite]

We have bought in a heated market (like, nationally known for being heated) not once but twice (2016 and 2021) - it was possible and has worked out well for us. The first time we made several offers where we were beat, and were able to purchase new construction with much less competition. The second time, inexplicably there were no other offers, so we got it. I credit buying in seemingly the last week in the fall anyone listed their house before the winter/holidays started. In terms of knowing when to go for - you need to know what you want. Both of our successful offers were on homes we had zero doubts about - left the walk thru and knew 100% we’d offer, and offer as aggressively as we could. We DID see a number of home we were waffling on after - like, it might be ok if we renovated, or I suppose I could live with that - but no. If the home is right you know and you go for it. That’s always I can say - know what you want, follow your gut, and go in hard when you know you want it. In terms of finances, we are now paying LESS on our mortgage on a quantitatively nicer home because our old house appreciated so much in the 2 months we held it while we moved.
posted by annie o at 8:30 PM on February 21, 2022

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