A House By The Park

Alright, Build LLC and I are now officially signed up to build a house together. It feels great to have such an important part of the process taken care of.

One of the nice things about Build is that Kevin Eckert and Andrew van Leeuwen — the principals — are very transparent about how long things will take and how much they will cost. When I went in to sign the contract with them, Kevin gave me a spreadsheet of where all time and money was expected to go, even though we were going with a flat-fee structure of $49,180. I won’t list every line item in the document, but the main sections are as follows:

• Information Gathering and Documentation: $3,220 (42 hours)
• Schematic Design and Design Development: $29,440 (370 hours)
• Construction Documents: $10,430 (126 hours)
• Pre-construction Services: $800 (8 hours)
• General Conditions: $2790 (30 hours)
• Contingency: $1,500
• Printing fees: $1,000

All of that adds up to $49,180, which I will be paying as I go, every month. The initial deposit, which I will pay today is $9600.

Costs accrued during this stage:

Although I’ve spent a bit of time over these last several months researching and interviewing architects, the complexity of picking a firm didn’t hit home until I realized how different each one is from the other. Being a designer myself, I felt a rapport with almost all of the 8 firms I talked to, and I had even “soft settled” on one of them for a couple of months, based mainly on how much I like the principals personally and how great their portfolio was.

As the prospect of building became more and more certain though, I felt I still had some homework to do, specifically around the subject of pricing. High end custom home architects have an awful reputation for designing without cost consciousness in mind. I’ve talked to people who’ve gone through it first-hand as clients as well as other people in the construction industry and most seem to agree that although architects are very important to the process of building a house, most are not overly concerned with building you a nice house as economically as possible, but rather building the most impressive house they can, with overspending as the main by-product. I know not all architects are this way, but from personal accounts, I also know that many are, and that’s why I have to be extra careful. Since I don’t want to spend a million dollars on construction, finding the most cost-effective high end architect has quickly become the most important part of this project.

Following is everything I’ve learned about architects over the last several weeks:

→ Read the rest of this entry

After a marathon day of golfing for charity, negotiating, driving, and executing documents, we finally have a deal!!!. In the end, I agreed to pick up my agent’s commission and also indemnify the seller against any claims or lawsuits coming from the real estate agent he didn’t sign on with, and he agreed to put a clause in the contract which allowed for reasonable extension of our closing date if circumstances beyond my control prevented closing by the official closing date of July 31st. This clause was very important to me as I waived my financing contingency and put $100,000 down in earnest money. If some shmoe at a bank fat-fingers a few keys and causes this thing to close on August 1st instead, I don’t want my earnest money to be at risk.

The indemnification thing is a bit of a calculated risk for me. Essentially, this other agent feels he should be compensated as the selling agent even though he was never retained by the seller. I have worked out a deal with my agent to pay this agent a .5%-of-selling-price referral fee out of his commission so everything should be good, but I understand why the seller would ask me to indemnify him. I don’t like having to do it and I don’t think any lawyer would advise anyone to ever do it, but I figure the chances are tiny that it becomes an issue, and even if it does, the amount we’re talking about is just 3% of the sales price. It’s not a trivial amount, but it’s not millions of dollars either. I will just have this other agent sign a release form before releasing his referral fee from escrow. Since both my agent and the real estate office that they both work for have confirmed to me that he has no claims to any commission, I’m not worried about it.

As for the deal itself, it was signed about an hour ago, at around 11pm and I’m still in shock that it came together. The seller and I both drove out to the real estate office, and as I was waiting for him to show up, I honestly thought that there was a chance he was going to take our signed offer and just sit on it over the weekend as the property went on the market. To his credit however, he read over the deal, faxed it immediately to his sibling that was the executor of the family trust, got it signed and faxed back, and congratulated me on being the new owner of their beloved home.

It’s such a great feeling to have made it through this process. By taking matters into my own hands and not allowing myself to be governed by the customs of the real estate industry, I have a once-in-a-lifetime house at a great price from a great family.

The stress isn’t over quite yet though. I have five business days to do the geotech inspection to make sure this house isn’t about to fall off the cliff and only a few weeks to close financing.

While puttering around the neighborhood today, I received the following text-message from my agent:

“Off-market opportunity with commanding view. Can u meet in 45 mins?”

I called him back to confirm my availability and get a quick overview of what we were going to be looking at. Apparently, it’s an estate sale, hasn’t been lived in in a couple of years, needs quite a bit of work, but sits on a large lot with a jawdropping view of Puget Sound. It is currently being prepared for market, but the sellers (four beneficiaries) have not signed on with an agent yet or communicated a price.

Upon hanging up with my agent, I turned to my girlfriend and said “I have a good feeling about this.”

Love at first sight

45 minutes later, we met my agent several blocks from the property and drove over in one car. Upon arriving, the first thing that struck me is that the house is only a few steps away from one of the nicest parks in Seattle. I don’t spend a whole lot of time in parks, but it’s certainly a nice amenity to have at your doorstep.

The house itself — from the front — was quaint in its own way but unremarkable. Built in the early ’50s, it was conceived in what I would consider an architectural dead spot: right between the brick Tudors of the ’30s and ’40s and the wonderful mid-century moderns of the late ’50s and ’60s. It has a carport instead of a garage, sits very low to the ground, and is covered in a combination of old-growth wood and period-popular stone siding.

Entering the house exposed right away both the greatest and worst things about it.

On the great side, the view is about as spectacular as I’ve ever seen in Seattle. It’s a full 180 degree Puget Sound view spanning from Alki beach to the south all the way past the north point of Bainbridge Island to the north. Almost as amazing as the view itself is the fact that the backyard drops right off a 300 foot cliff so no one can ever block your view. Additionally, the house is completely separated from its neighboring structures on both sides by beautiful foliage.

The view facing west before sunset. Apparently, bald eagles perch on the tree to the left.

On the bad side, however, the layout of the interior squeezes four levels into two stories, one of which is a daylight basement. Essentially, there is the daylight basement, then two bedrooms a half floor up, then the main floor another half floor up, and then two more bedrooms another half floor up. Because of all the half floors and the staircase that connects them — right down the middle of the house — the great room and other areas are chopped up a lot smaller than they could be. Without that staircase and one of the levels, the great room could be 2-3x as roomy and open. Additionally, although the house is in fine shape, it hasn’t been updated much at all since it was built.

With the above and about 100 other considerations and details in mind, this house is the first house I’ve seen which feels unconditionally like a place I could live in for the rest of my life. Much better than the last house and also the first house.

Meeting the seller

While at the house, I got to meet the seller. He is one of the four beneficiaries of the estate and the one officially handling the sale of the house. He’s an attorney (as were his parents and as are two of his siblings!) and a really down-to-earth guy. I asked him for some historical stories about the house and he told me that he had lived there from age 5 or 6 all the way up until college. He also showed me a great Sony reel-to-reel tape player and phonograph from 1960 which still sits in the living room. I told him if I ended up buying the house, I wanted to showcase that stuff in the new living room.

In talking to the seller, I could tell this had been a special house to a lot of people and it was a tough decision for the family to sell at all.

Not a question of if, but how

After we left the house and my girlfriend and I discussed it for a few minutes, the question wasn’t if I would make a bid, but instead how and for how much. The seller hadn’t signed on with a selling agent yet and was still auditioning several of them, so there was still a possible opportunity to save him some sell-side commission and thus get the house at a lower price.

I’ll be writing up an offer of some sort tomorrow. So psyched.

Well what do you know? Bidding $150,000 below the asking price was a good idea! The seller accepted the bid without even countering. Had I listened to my agent’s advice, I’d be on the hook for an extra $100,000.

Lesson: If you feel your real estate agent isn’t correct in their negotiating advice, follow your own intuition.

So now that we’re officially under contract, I have five business days to complete any inspections I’d like to conduct. Since this seller refuses to sign a Seller’s Disclosure Statement, I’m going to be extra careful. If any inspection comes up less than roses, I may back out. I’m planning the following inspections:

• Structural inspection via Criterium-Pioli Engineers
• Sewer inspection via Hydro Physics, Inc.
• Geotech inspection, if it gets that far

In addition, I’ll be calling two groups of architects and builders out to the property to give me their initial thoughts.

Today, the startup I founded two years ago was acquired. Thousands of hours of hard work paid off in the form of a few bucks, and we’re all extremely humbled to be among the small percentage of startups that haven’t fizzled out and died.

I’m not a big spender and I have no desire to go out and buy a new car, but this is the first time in my life when I’ve been able to even think about buying or building a house. I’ve been living in apartments and condos since college so the prospective of actually owning some land is starting to look more attractive.

This blog will chronicle the process of buying, remodeling, and/or building a modern home from identifying the property right up until moving in.