Thursday, February 21, 2013

The Five Most Frustrating Words in Real Estate "You Must Choose Your Trade-Offs"

When buying a new home (in Austin or anywhere), the one of the hardest parts of the purchase decision process is in understanding the trade-offs of home and deciding what is most important to you in your new home purchase. These five words are often the most frustrating and complex set of decisions to consider in the entire search process--in fact, these are the basic building blocks of a new home purchase. 

This part of the process trips up many buyers for months or even years--making it virtually impossible for them to find a home because they were unable to make a choice between the key differences in the available homes in the area. Maybe it was because they were comparing homes in one area to homes in another area and they were waiting for a home that looked like Area A and was priced like Area B.  Maybe it was because they were looking for "the perfect home" that had everything on their list, but was still priced aggressively in their target budget. Maybe they found the home and lost a competitive bidding war to another buyer who wanted that home more and was willing to pay the seller's asking price. Regardless of how it plays out, Real Estate Trade-offs are real. Very real. And you can't escape them by waiting for the perfect house to come along at the perfect price. All homes, at all prices, have trade-offs to consider.

Q: So what are the trade-offs? And how do I sort through them?

The hardest part for your decision process will be in deciding which trade-offs you are willing to live with in your new home, whether it is location, price, the home itself, views, or neighbors. In many cases it will actually be a combination of these factors--each with varying degree of impact on your priorities. 

For example, here are some trade-offs that are easy to assimilate--partially because they may not apply to you:

  • If you are buying a home in parts of Florida that has been crushed by foreclosures the obvious trade off would be the low cost of houses vs the risk and time to recover for the broader market.
  • If you want to live in a community where the very best area schools are located, the trade off will almost always be expressed in a price premium to live there. Possibly a big price premium--such is the case in Austin.
  • Maybe you are willing to live in an area that is known to be a high crime district--you should expect the trade-off to be lower prices than areas that are thought to be low crime areas.   
  • If you are looking for a home in a very established community with consistent home values that seem to continue to go up slightly every year vs a community where prices are lower, new community that has no known reputation (good or bad). All things being equal, you should expect to pay more for the low risk option than you will pay for the higher risk option. Of course, your potential up-side for the high risk area is the other trade-off that you inherit here. 
  • Another easy to understand trade-off water front access. The closer you get to water, the beach or the lake--something has to give. The two biggest trade-offs for water access or views of the water are Price and size of the home. Some times this is coupled with the age and condition of the home as well.
Some decision points are almost universal, but every area may have variations and differences in what is valued and what changes the price points. These common points of consideration and trade-offs include:
  • Location
  • House features/age/condition
  • Views
  • Size of lot 
  • Amenities
  • Price
Additional trade-offs that are "unique" to the Greater Austin area include:
  • Proximity to downtown
  • Certain school districts and school clusters
  • Specific established communities
  • Homes with a great view or back to a known greenbelt
  • Proximity to the lake or golf courses
  • Note: Location, home features, views, lot size and price all still apply
  • Note: This is often a complex puzzle and requires experience to help un-bundled the complexities of an offer

In Austin, if you are willing to live on the north side of Lake Travis, there will be more options at the same price point than living on the south side of the lake--due to accessibility and amenities of these areas. If your sole priority is to live on the lake and do so for less than $300,000, you have some options on the north side of Lake Travis in Lago Vista and surround communities. By the same token, if you are hoping to be 20 minutes from downtown or want to live near Lake Austin, want to have access to amenities, new generation homes and you want a home more than 2500 square feet in size in this area--well, you better be ready to pay at least 3-4 times the median home value price--or more. Depending on the community and the home, your prices will most likely start around $700,000 and quickly go up from there.

The best way to beat the frustration of making necessary trade-offs is to first figure out which trade offs are most important to you--starting with price, location, home features, size and condition. After you know what is most important in this list, you can graduate to the next step. This process is best accomplished with an experienced Realtor that you trust who knows the Greater Austin Real Estate market and market landscape.

Good hunting! tT

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