Rising interest rates are looming, inflation is inflating the cost of everything, and limited inventory is putting the Boston buyer in a pricing predicament. A pickle if you will, and not the sweat and sour kind that I adore with a turkey stuffed sandwich. This pickle is the prickly kind that warns you not to make an emotional decision. It would be so easy, and understandable, to attend an open house and run into swarms of other would be buyers, and think to yourself, this will be the only property. Look at all these people, they are validating my belief that its a good one, one that I shouldn’t let slip through my fingers. That’s emotion talking. It’s the evil voice in your head that has you placing offers that are overblown, on properties that you may, or may not, even like that much. It’s the voice that responds to the “Best and Last” offer request with an increase in your price.
That voice must be silenced. Try asking it: “What if I am only bidding against myself?” How stupid would I look then. It’s the voice that must be silenced with reason, with data, with an understanding that there is no more powerful a place to be, than to be in the place you are willing to walk away from. I am not suggesting that you don’t have any emotion at all. That wouldn’t even be possible, would it? A little passion, a little desire, is necessary to ensure you bring your best to the home, the investment, the property. You owe her that. She’ll likely have had lots of owners before you came along. Many will have neglected her, cheeped out on renovations, deferred her maintenance, when attended to it was what she really needed. There would have been bad design decisions for which she had no input. Some owners might have treated her better, but left her to start a family, and what she needs is someone that will both invest in her, and be invested in her. Emotion, you can’t get away from it, but you can’t let it rule you either.
Run the numbers, consider the supply chain issues, the cost of labor, if you can in fact get that crew to show up for you, and remember that inflation will make even the most mundane materials astronomically more expensive. You’ll long for the early days of the pandemic when you were only dealing with increases associated with the bottleneck when those inflationary costs start to land on your renovation spreadsheet. This is real, and I hope that you are a fan of Mies van der Rohe, because you will be getting a whole lot less for a whole lot more.
I’m not saying don’t bid. To the contrary, bid away. You’ll get so much more insight into the market by playing in it. I love putting bids in on properties. I put one in just this week. I looked at it once, went back again to take a harder look, to evaluate the cost per sf, the location, the amenities, the necessary renovations in the next few years, and put in a price that I was certain wouldn’t result in a win, but was more than fair for the property. I lost, but learned that there were eight bidders, and that an over ask, no finance contingency, and no inspection contingency wasn’t enough to seal the deal. That’s good data. It will make my next offer that much better.
I passed on two others that I took hard looks at. One needed the type of work that comes with a thirty year tenant, and nary an upgrade during that time, and the numbers didn’t pencil out. Too high a price for the assumed risk, for a property that I never intended to live in. You’ve got to be willing to live in it, or rent it, until you can sell it for a profit, or fish and cut bait so that you can free up your cash to make a smarter decision the next time.
The last property was dreamy. Needed the kind of love I could have given her, but was out of my price range. I knew it when I looked at it, but feel better knowing that she had three offers at over ask. How do I know, I asked. It was on the sunny side of the street, but if you are stone cold broke, no amount of sun will warm you up if you’ve made a decision that leaves you house poor.
The year is off to an exciting start. Stay warm this weekend.