A House By The Park

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.

My opinion on real estate agents is that, as a whole, they are about 25% as useful as they were before the internet came along. That is not to say the best agents are not 100% or even more valuable than they once were, but the simple truth is that people need less from their agents nowadays because buying or selling a home can involve a degree of self-service that wasn’t practical or possible in the past.

The last time I sold a home, my agent listed it on the MLS, did a couple of open houses and then let it sit. I ended up then hiring my friend to take over and he more or less did the same thing but took less commission. The condo eventually sold after 8 or 9 months but it was only because a buyer found it themselves, online, and decided to purchase it.

Similarly, the last time I bought a condo, I found the place off-market, via a friend, and negotiated the purchase myself — directly with the seller — and all my agent-friend did was charge us about $1500 to write up the contract. I ended up getting the condo for about $400,000 (substantially under market) and the seller got the equivalent of selling it for $425,000 if we had agents involved.

Since I like searching and negotiating for properties myself, I really only need a buyer’s agent for three things:

1. Finding off-market properties because of their connections in the neighborhood.
2. Driving me to properties that I find myself and letting me in.
3. Writing up a purchase and sale agreement (99% of which is just a form letter).

Are any of those worth a full 3% commission? To me, #1 is, #2 may or may not be depending on if you end up seeing one place or 30 places, and #3 certainly isn’t.

That said, I am not up for signing an official buyer’s representation contract with an agent at this time. If an agent lets me into one property that I found by myself and I end up buying it, that agent should refund me all but a grand or two of the commission. If, however, he/she brings me an off-market property or ends up spending a lot of time on my account, go ahead and take the full commission. Unfortunately, typical real estate contracts do not accommodate this sort of arrangement so I’m staying contract-free for now. A real estate agent friend of mine has agreed to show me around any places I find as well as keep a lookout for off-market properties without officially engaging as my agent, so this is how we’re moving forward for now.

With regard to searching for properties yourself, it all comes down to one acronym: RSS.

Setting up a saved search on your local real estate site (I use Windermere) and consuming the results via RSS ensures that you find properties the minute they hit the Multiple Listing Service. RSS is so quick that often you’ll see a listing before photos of the property are even uploaded.

If you’re not up for RSS, at least choose to get your saved search results via e-mail. There’s no excuse for missing a single property when you use saved searches.

So it’s been several months now and the Seattle real estate market in the middle of winter appears to be an extremely quiet place. I’ve looked at hundreds of listings which continue to come up every week, drove by about 20 of them, and went inside of only five. Since I am already comfortable in my condo, there is no need to jump on a property unless it is perfect.

Yesterday, however, my agent took me to a property which, strangely, has been on the market for about six months and yet I never remember seeing. It turns out the photos of the property that the realtor uploaded online were so awful that I wrote the place off months ago without even checking out the specs. It’s an old 1950s tear-down on a huge 15,000 square foot lot with a great water view in the exact area I want to be in! After touring the property, I instructed my agent to contact the selling agent and feel out the situation. The price has already dropped about $500,000 since it was originally listed and I’m wondering what price would make it mine.

To my unfortunate surprise, it turns out an offer was accepted today, a full six months after it went on the market. Man, I am so mad I didn’t find this earlier.

Lesson: Don’t let online photos dissuade you from checking out a property in person.

It turns out this place is an estate sale and there are 10 beneficiaries, so I am going to put in a “backup offer” in case the first offer falls through. I’d love to figure out a way to outbid the existing bid and move into first place, but apparently in real estate, it is almost impossible for a seller to get out of a contract unless the buyer is in breach. Any interference by me could be considered what’s called “tort interference”, which you can be sued for.

Fingers crossed, but not hopeful.

It’s been a few weeks since I put my backup bid in and I had a couple of other agent friends call the selling agent to “express interest” in the property, hoping to get the message through that there are other buyers willing to bid on this property. If the current buyer misses any deadlines, I want the seller to come to me. So far, I have no reason to be optimistic except the selling agent did let slip that there was some sort of “boundary dispute”. Hopefully that is just the opening I need.

Unfortunately, the seller did not officially accept my backup bid, so even if the first bid falls through, I am not locked in. My bid was below the asking price, but I tried to price it such that it was slightly above the already accepted bid. My feeling is that the selling process has been so long and arduous for the seller that the selling agent (who doesn’t strike me as particularly experienced or skillful) doesn’t want to do anything that will jeopardize the deal. Perhaps he is thinking that if the seller sees a higher bid, it could destabilize what should be the endgame towards his hefty commission.

Continuing to wait…

Just as I received word that the property on which I placed a backup bid closed, my agent informed me of a property that was being prepared for market, several blocks north of my sweet spot but on a great street and allegedly with a great view of Puget Sound.

I love off-market properties, because they afford you a bit of bargaining power before the place goes on the market. For instance, the seller doesn’t need to pay to stage the place. Also, if they haven’t signed on with an agent yet, they can save at least half of the 6% commission. Furthermore, in this down real estate market, any offer from me is doubly strong, because I can close quickly and am not overly affected by the radically reduced amount of mortgages available since the sub-prime collapse.

On to the Property

My agent arranged for me to see this new place, and upon arriving, we met the real estate agent who the seller was thinking about working with. She had not officially gotten the listing yet, but she smartly had the seller sign a one-day listing agreement in case I decided to put in an offer. This is an extremely important step for a prospective selling agent to take in ensure she gets her 3% in the event of a sale, and it doesn’t require the seller to commit to her long-term.

The house has a lot going for it. It’s a mid-century modern home on a prestigious street with great bones and a nice view of Puget Sound through several tall trees. It has a beautiful butterfly roof which creates a nice, sloping exposed beam ceiling on the inside. The entrance and main floor are on street level and the daylight basement below provides extra bedrooms and other space. It’s definitely the nicest house I’ve seen in my price range, but it needs some serious work.

The house was designed around 1960 and hasn’t been updated in awhile. The owner is an elderly gentleman who is apparently a bit crotchety and refuses to sign the Seller’s Disclosure Statement which makes me instantly suspicious, given the guy is a civil engineer. According to the selling agent, the guy simply decided years ago that he should never have to sign these things for properties he sells and that basically, “it is what it is”. I’m not letting this strange circumstance keep me from buying this house, but it’s certainly going to cause me to triple-check everything.

More importantly, however, the house has a few characteristics which I need to get cool with in order to pull the trigger. Number one, it’s probably too nice of a house to tear down, but possibly not nice enough of a house to make perfect upon an extensive remodel. The biggest issue would be going up a story. From the roof of the existing structure, the view just explodes. It goes from a 90 degree view of the water between trees to a 120 degree of the water and a nearby lighthouse above the trees. The difference is dramatic. If I buy this house, going up a level is an absolute must.

The other thing about the house is that the arrangement of rooms is not ideal. Currently, a lot of the square footage is buried in the daylight basement (with no view) and the master bedroom is pretty small by current day standards.

I’m going to take the evening to think about this and perhaps put a bid in tomorrow. Bid or no bid, however, this house has reminded me of something important to consider when you’re house shopping: whatever house you’re looking at, it’s never the last house. There will always be another one around the corner. Seeing this house lessens the emotional impact of not getting the previous one tremendously.

Today, I decided to submit an official offer on the off-market house I saw yesterday. I am not sure I want the house yet and I definitely need to do some inspections, but my agent’s advice in this case is good: go ahead and lock it up under contract and then spend the next week deciding if you really want it.

Unfortunately, I don’t agree with my agent’s advice on the price I should bid, however. I want to come in $150,000 less than what the seller wants. My agent doesn’t think I should come in more than $50,000 below. This illustrates another reason why I think the value of real estate agents is overrated: their motivation is to get you a house as quickly as possible at any price that is comfortable to you (and thus collect a nice commission). My motivation is to get a house that I want at as low of a price as possible. If I bid $150,000 less than the ask, the seller can always say no and then I can come up quickly to his price, if need be.

So that’s what I just did. We’ll see what happens.

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.

Both the sewer and structural inspections are now complete and I have three more days to decide if I want to go ahead and buy the place.

Sewer Inspection

The sewer inspection was an A+ and Hydro Physics even gave me a DVD of the footage from the inside the sewer. It’s pretty interesting. They snake a tiny camera from inside the house all the way to the sewer main in the street. Checking a sewer may seem like an unimportant thing to do, but if there are tree roots down there slowly ruining the line to the sewer main, I’d rather know about it ahead of time.

Structural Inspection

The structural inspection was obviously quite a bit more important. Initially, I had planned to get two separate inspectors in there but Dave Pioli of Criterium Pioli Engineers did such a thorough job that I didn’t need another set of eyes after all.

According to the structural inspection, the general build quality of the house was very good and there were no major issues with its condition. There were, however, signs that the house had been added onto, and probably without a permit. Pioli noticed that the exposed beams over the covered patio didn’t even butt up to each other indicating that part of the patio covering was added on later, and not with a ton of attention to detail. He also found a stabilizer bar across the ceiling of the garage that looked like it wasn’t part of the original construction. Since the seller is an engineer and he refuses to sign the Seller’s Disclosure Statement, it raises a few alarm bells in my head that perhaps he did some of this himself and he knows a bit too much.

Most importantly, however, his opinion was that the house — although structurally sound — was not a good candidate to have a story built onto it. Apparently, when you add a story on, vertical load isn’t usually a big issue; it’s horizontal shear that you have to account for. Horizontal shear occurs when forces like wind or earthquakes push laterally against the house. Apparently, on a house like this, I’d have to build what’s called a “moment frame” just to handle the load.

Final Analysis

After digesting the results of the structural inspection, I’ve come to the conclusion that if I buy this house, I’m going to have to knock it down to get everything I want out of it (particularly a view from a second story). This is a bit disconcerting to me since it’s a pretty nice mid-century modern house that a lot of people would love as-is, but it’s just a fact, unfortunately.

Since this would be a new construction project of two years and not a remodel of a few months, the qualifications of it being a “perfect property” are even tougher to achieve in my mind. I’m not willing to put two years of my life into something that isn’t going to be exactly what I want when I’m done with it. Given that it’s a little far north and the view is more of an A- than an A+, I would put the chances of me going through with the purchase at this point at about 30%.

Much to think about over the next couple of days…

Costs accrued during this stage:

After a grueling few days of deliberating, I decided to rescind my offer on the place today. I went back and forth several times, but in the end, the overriding factor was that I wasn’t convinced that after two years of construction, it was a place I’d want to live in for perhaps the rest of my life. It’s a dream property… just not my dream property.

It also helped that many people I talked to told me they “sensed” it wasn’t the right property for me. This could only be because of the way I spoke of it, and it’s good to have others tell you that you don’t sound as excited as you may think you are.

Another trick a friend suggested was to get two pieces of paper and write “Buy” on one and “Don’t Buy” on the other and then crumple them into balls and pick one at random. If you are disappointed when you unravel your ball, chances are, you should make the decision that is written on the other sheet. If you are happy, then vice versa. I ended up picking “Buy” and I indeed felt not quite right.

Even though the results of this near-transaction were disappointing in the end, it’s never the last house, and I expect more properties to start coming on the market as the weather in Seattle gets warmer.

Well, it’s been about two months since I decided to back out of a not-quite-perfect property, and in the interim, the market seems to have come to a complete stop. I haven’t seen anything close to a good fit, and although I swung away from the desire to do extensive remodeling or building after the last property, I am now swinging back towards it, considering that 99% of houses that I see come on the market are painfully boring craftsman homes or super-old brick Tudors or Cape Cods.

I’m not feeling too optimistic right now, but on the bright side, window-shopping for houses is a lot of fun and I’d hate to have already picked one out only to find a better one come on the market as the summer selling season kicked in.

Continuing to search and wait…

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.

Before showing up at the property yesterday, I asked my real estate agent what he thought the seller wanted for the place and he gave me a low price and a high price with about $200,000 of room in between them. When I was at the house, however, I saw some literature a prospective selling agent put together for the seller which suggested a number at the higher end.

My agent thought I should bid close to the middle of the range, but once again, I do not find myself agreeing with this advice. Since the middle of the range is the absolute most I would pay, I think it’s best to start low and move up if necessary. I still haven’t heard an actual price directly from the seller, so for all I know, if I do this deal in cash and waive a bunch of contingencies, I can get it for substantially less than even the seller was thinking. Maybe it will fly and maybe it won’t, but since three out of the four beneficiaries are attorneys, I can’t imagine they wouldn’t be up for some negotiating!

That in mind, I’ve decided to put my first offer in at $100,000 less than the bottom of the range my agent gave me, $300,000 less than the top of the range, and $150,000 less than what I’d feel 100% comfortable with. The offer is easy to justify, especially when using the first prospective house that I didn’t get as a comp. I’m writing in no contingencies (not even financing) except for a quick geotech inspection and hoping that the seller will value a quick close to a solid buyer who really wants to make the place shine again. If I were the seller, I would favor selling to someone who actually wants to live there instead of a developer. Also, it’s well known that end-users like me will generally pay more than developers for properties like this because our time horizons are far longer and we’re not in it for the profit.

I do not expect this first offer to be accepted, but I do expect it to be a starting point.

It’s been about 48 hours since I put my offer in, and I just heard back that the seller said “thanks, but no thanks.”

The problem wasn’t the response, but rather the lack of additional comment or counteroffer. The situation is weird in that the prospective selling agent who was at the house works in the same office as my agent and he wants this deal to go through him even though he is not the agent of record with the seller. I have a problem with this as, for all I know, the seller has no intention of signing on with this guy. To put my fate in the hands of a selling agent who hasn’t even been retained by the seller yet seems crazy and risky.

I asked my agent to get more information from his fellow agent about the reaction to my offer, and something just smelled bad to me. When asked if we should submit another offer, the other agent apparently responded with “Why, so you can re-insult him?”

Hearing that response convinced me that I needed to engage directly with the seller. I’m not going to let this deal get away because someone is trying to get in the middle of it. I enjoyed meeting the seller at the house, and he’s a professional negotiator (attorney), so I don’t see why we can’t negotiate directly. I will be calling him this evening to see what his thoughts are.

Calling the seller directly last week turned out to be a great idea. Our rapport is excellent and we’ve already traded several phone calls and a number of long, well-reasoned e-mails backing up our positions and compromises. To try and describe the emotional rollercoaster of this back-and-forth in a blog entry would not do it justice. It’s very trying, but it’s also been very educational. Negotiating the sale of your company is both very different and very similar to negotiating the purchase of your home.

So anyway, very long story short, I eventually came up $150,000 from my initial bid (which is still $150,000 less than the asking price), offered to put down $100,000 in earnest money and waive all contingencies except geotech, and the seller has tentatively accepted! I’m happy with where we ended up, because it was the exact dollar amount that I decided from the outset I would be 100% comfortable with. I won’t exhale until we have a signed contract, but it appears we’re within eyesight of the finish line!

Will try to get a good night’s sleep tonight after a week of tossing, turning, and overanalyzing.

Bad news.

Upon presenting the seller with our proposed Purchase and Sale Agreement, the seller called me and told me his accepting of our price was with the understanding that there would be no real estate commission paid out of the proceeds. It is customary for the seller to pay all real estate commissions so my agent and I just assumed that while he would be paying no sell-side commission, he would still be picking up my agent’s commission. In a deal of this size, that’s kind of a lot of money.

The seller is an honest guy and I’m sure this was just an honest misunderstanding, but if I were to pick up my agent’s commission, it would put me above my “100% comfortable” price.

After a long jog to think about it, I called the seller up and essentially told him we could argue for hours about it, or we could walk away, or we could just split the difference. I offered to split the difference and he said he was probably ok with that but he needed to run it by his siblings first.

Hopefully splitting the difference gets us across the finish line. Yet another sleepless night coming up…

Well, apparently my offer to split the difference was not good enough to get us over the line and unless I pick up my agent’s commission, this property is going to go on the market in three days — for $200,000 more than my offer. When driving by the house today, my agent spotted a van taking professional real estate photography so it’s not a bluff. Additionally, the seller has officially retained another agent, but he has smartly carved me out of his contract with her; meaning, if I end up buying the place, it’s still considered a direct deal.

I have a charity golf tournament that I organized which I have to play in tomorrow, so I imagine it’s going to be a stressful day of negotiating between holes and trying to get something done by the end of the day, should I decide to proceed.

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.

Since this house sits a mere 50 feet or so from a steep cliff, I felt it necessary to call an experienced geotech inspector from the area in to tell me if the property was at risk for landslides or other natural disasters. The inspector, William Chang from Geo Group NW, started off telling me what most geotech people probably tell you if you are buying anywhere near the water:

“In 10,000 years, this will all be in the ocean anyway.”

Haha… but not exactly what I want to hear. :)

Mr. Chang spent the next hour showing me topo maps and checking out the soil and the hillside looking for telltale signs of erosion. He did not find anything alarming.

And so with that, I am going to sign off on the geotech inspection and make this Purchase and Sale Agreement binding!

Costs accrued during this stage:

I’ve only had two mortgages in my life and they were both for small amounts of money and during pleasant financial times. Since the sub-prime market collapsed several months ago though, getting a loan has become much, much more difficult. My credit is great and I have a strong cash position, but even so, getting a jumbo loan is seemingly 10x more difficult than it has historically been.

Shopping for mortgages is not a pleasant process either. Most companies want you to give them all sorts of personal information before they even hint at what rates they can get you. Even places like Lending Tree that purport to streamline the process are little more than information-selling lead-generators that put your personal information in hands you may not be comfortable with.

One service that seems to stand above the rest, however, is the recently introduced Zillow Mortgage Marketplace. The great thing about Zillow is that you simply enter as much or as little info and you want, and mortgage brokers simply send you offers through the Zillow website. They don’t know your name, your contact info, or anything else you may not want them to know. They only know what you decide to tell them. In my case, income, net worth, desired loan style, and a few other things. Within an hour of filling in some info, I got ten mortgage offers via my Zillow inbox, at least a few of which would have been great to go forward with.

In the end, since I have such a small closing window (July 31st), I felt more comfortable going with a local institution who underwrote their own loans. I went with Wells Fargo and loan officer Steve Altchech, upon the personal recommendation of my real estate agent (UPDATE: 5/30/09: I no longer recommend Mr. Altchech). He got me the following terms, which are crazy-good in this tough market. Even my previous mortgage guy who wanted my business again said “Take it!”:

• 1st Mortgage: 5/1 ARM at 5.85%
• 2nd Mortgage: HELOC at 4.75%, indexed to prime minus .25%
• No points and no fees other than title, escrow, etc.

Once the mortgage market settles down again, I can think about refinancing to a fixed mortgage, but for now, I’ll take the cheap money.

All set to close on the 31st!

So we’re all set to close tomorrow and the real estate agent who was not retained by the seller apparently thinks he is still owed a commission.

Unbelievable.

I presented this agent with a release form to sign (just to be safe) in order to get the 0.5% referral fee that my agent was willing to give him and he won’t sign the release form!

Do I really need him to sign a release form? No, since he has no contract and therefore no claim to any commission, but since I indemnified the seller in order to get the deal done, I want to make 100% sure this is all settled before this agent sees any money at all. If he still has thoughts of raising a stink, he can do so without my money.

What I ended up deciding to do is to close this deal tomorrow, as planned, and have escrow hold this other agent’s 0.5% in escrow until he signs the release. If he doesn’t sign within a couple of weeks, I will just have escrow pay my agent the full commission instead.

I’m not too worried about this situation at this point, but it’s annoying to even have to deal with it. I do like having the power to keep this money in escrow, but honestly, I wish I had the power to withhold all commission related to this deal if I needed to.

This is important: most people don’t realize that the buyer’s agent contract they sign usually specifies that the buyer will be responsible for paying a 3% commission to the buyer’s agent if the seller doesn’t pay it (which they usually do). I do not like this arrangement at all and I will be writing it out of my next contract. I was still going to pay my agent 3%, but I don’t like giving up the right not to under circumstances like an intra-office commission dispute. Another thing people should change about their contracts is the termination clause. My stock contract didn’t allow me to sign on with another agent until three months after I terminated my existing contract. I ended up changing this to 14 days, but I would go even further in retrospect. Probably one week.

Alright, as of a couple hours ago, the funds are wired, the title is recorded, and the property is officially mine!  This is day zero.  Tomorrow begins the long, but hopefully fun process of building this place out.

Now that it’s officially on, I’m off to backfill and pre-date some blog entries which describe the process up to this point. But this day — day zero — is the official start of A House By The Park.

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:

Fee Schedule

Even among just the 8 firms I talked to, there are four different methods each uses to charge their clients:

• As a percentage of the cost of construction — This seems to be the most common arrangement. On the low end, I found 8%, and on the high end, I found 16%. Essentially, in a 15% arrangement, if you spend $1,000,000 building your house, you then pay the architect $150,000 on top of that for their fees. I was not aware that this arrangement was so common, and frankly, I don’t like it. If I make the simple decision to use a $50,000 material to cover my floors instead of a $25,000 material, why should the architect make an extra $3750? I don’t blame architects for charging this way because I would too, but as a client, it just doesn’t seem ideal to me.
• A straight hourly fee — This appears to be getting more popular these days. Instead of tying their fees to the often unrelated variable of construction costs, some architects are now simply presenting an hourly rate to their clients and the final bill reflects a simple calculation of the total number of hours spent. This fee structure is common in my world (graphic design/web development) but I never liked it much either. As a designer, I want to know how much money I’m making up front, and as a client, I want to know what a project is going to cost in advance.
• Hourly, followed by percentage — This was the least attractive option in my mind. Essentially, the firm charges you an hourly fee during initial design stage, and then bolts on the X% of construction costs afterwards. I asked the one firm who used this method if the hourly cost disappears if and when the client proceeds with construction and they said “No, it’s added on”. Perhaps it’s not such a bad option if the firm’s percentage of construction cost is low, but that wasn’t the case for this firm. No thanks.
• Flat fee — Ahhhhhh. Sweet, sweet certainty. This is my favorite cost structure, both as a client and also as a designer. Architects who charge flat fees generally estimate the amount of hours they will spend on a project and then give a fixed bid based on that. I love this arrangement because I know exactly what I’m on the hook for in advance. If the firm takes a little longer than expected, their effective hourly rate is lowered a bit, and if they finish quicker, it’s raised but with the benefit of the project going quicker.

Cost of construction estimates

One of the first things you should ask any potential architect of yours is “what do the houses you design normally cost?” When I asked this question, I got answers ranging from “$125-$225 a square foot” to “almost always around $600 a square foot”. What a huge difference. To put that in perspective, for a 3000 square foot house, that’s the difference between $375,000 and $1.8m in construction costs alone. Most firms I talked to were in the $300-$400 per square foot range.

What accounts for such huge price swings? Well, when I asked the $600 per square foot firm why their houses were so expensive, they said:

“When you design the way we do, it requires a different level of construction from the get-go. We don’t use any moldings so there is nothing to cover up errors with, and thus, you must have the finest construction standards and the most skilled workers to achieve the standards that we design for.”

While that level of design and construction is great if money is no object to you, money is an object to me as it is to 99% of other people in the world. I’ll save that firm for my rich investors.

Another factor to think about is that when architects quote “per square foot” costs, they are only talking about construction costs, or so-called “hard costs”. When figuring the total budget for your project, make sure to add in sales tax, permit fees, architect fees, and landscaping fees if you have them. In some cases, these “soft costs” can add another 50% on top of construction costs.

Design vs. Design/Build

The traditional way of having a custom home built is to hire an architect to design your house and get you to build-ready stage and then hire a general contractor to build the thing for you. Recently, however, there seem to be more “design/build” firms popping up that will not only design your house for you but also manage the entire construction process and hire their own subcontractors to do the labor. There are positives and negatives to both approaches.

Traditional architects will tell you that separating design from build is essential such that the design side can keep the build side honest and true to what they agreed to build. In other words, let’s say the design calls for a certain type of plank to be used in the floors and the builder decides to use a different type of plank to save himself money, figuring no one will notice or care. The architect can then come in and demand that the agreed-upon plank be used instead.

Architects will also sometimes tell you that design/build firms have a conflict of interest which can cause your house to get built with an emphasis on ease of construction as opposed to effectiveness of design.

On the flip side, design/build firms will tell you that cutting out the friction between architects and builders is what will save you the most money and anguish at the end of the day. I’ve heard multiple stories of architects and builders literally yelling at each other on-site, and in the end, it’s often the client who ends up paying for either side’s mistake.

Going with a design/build firm also saves you the hassle of having to deal with two separate companies with two separate agendas. If you decide on a design/build firm up front and you’re comfortable with them, then your team is more or less set from the get-go.

I’m pretty confident at this point that going design/build is going to save a bit of money. How much “a bit” is, I’m not sure yet. By allowing the same firm to do say, $700,000 of the work, instead of one firm doing $100,000 of it (architecture) and the other firm do $600,000 of it (construction), it would seem the overall profit margin needs would be lower.

Finally, if you go with a design/build firm, it’s important to make sure it’s not a “DESIGN!/build” firm or a “BUILD!/design” firm. It should be a balanced “design/build” firm, meaning they are equally adept at architecture and construction management.

House Stalking

One of the best ways to find which firms you even want to interview is to scope out some nice, recently built houses around town and find out who designed them. In Seattle, this part was easy and fun as I just took a boat around the Mercer Island shoreline, snapped some pictures, and noted where each nice house was. Then, I located each house using Zillow’s maps and wrote down the addresses. The easiest way to then find out which architects worked on which houses is to drive down to City Hall and have the clerks look up that information on the building permit records. Below are some of the houses I found particularly awe-inspiring and which architects designed them:

Designed by Olson, Sundberg, Kundig, Allen. This was my favorite house on the lake.

Designed by SkB Architects.

Designed by Weinstein A|U

Personal recommendations

When it comes to working with new people, nothing beats a personal recommendation. If you know friends who have built houses recently, ask them about their experience with the architect they chose and if they have any pointers for you. Unfortunately, if you already have your eye on a few firms, chances are you don’t know anyone personally who has worked with them. In these instances, ask the firm if you can contact a client or two of theirs. Most should be happy to arrange this for you, although they may ask politely that you be near a decision first so as not to inconvenience too many of their clients.

It’s always a good sign when a firm proactively suggests contacting their previous clients, but if they don’t bring it up, you shouldn’t be afraid to.

Previous work and style fit

There are two aspects to evaluating a firm’s historical body of work: typical price range and breadth of design style.

With regard to price range, if your desired price range is $250 per square foot, the firm should be able to show you specific examples of houses they’ve built for around $250 per square foot. You should not accept responses like:

“Well, we typically only display our highest end homes in our published portfolio.”

or:

“A lot of our houses come in at more than that, but the end price of construction really depends on you and what sorts of compromises you are ok with.”

While both of these responses are perfectly honest and valid, my stance is that I do not want my house to be designed or constructed outside the typical range of what the architect is used to building. It’s like the difference between asking Ferrari, Audi, or Hyundai to build you an affordable luxury sports coupe. Each company could do the job, but most people would agree that Audi would probably do the best job since that’s their sweet spot. You want your house to be in your architect’s sweet spot; not above or below it.

The other aspect of looking at an architect’s past work is determining if their style fits yours (e.g. modern vs. traditional) and also how flexible they are within their own style. One of the young firms I looked at had a very nice modern style about them, but it was clear to me that, being a young firm, they hadn’t really broken outside their “bread and butter” design elements yet. When I was a rookie designer in college and shortly thereafter, you could look at every single one of my posters, advertisements, and other design work and tell it was mine. The colors you use, how you set type, and other peculiarities of the design process all come together to produce a fairly recognizable design signature. When you’re young, your design signature is very specific and limited, but once you get more experienced, you start to branch out into all sorts of cool things. Unless you love an extremely specific style, you’re probably better off picking an architect who has already branched out a bit.

Software

I don’t know a whole lot about architectural design software (except that it seems extremely unwieldy and slow compared to things like Photoshop and Illustrator), but in my trips to visit different architects, I did notice a substantial gap in the quality of final 3D renderings depending on which software was used. The best renderings I saw were done in the latest version of ArchiCAD and they were so realistic that they looked like actual photos from a few feet away. Pretty spectacular. Which software your architect uses probably isn’t going to make a huge difference in how your house turns out, but it sure is nice being able to see a photorealistic 3D rendering of your home before you sign off on everything. Ask to see some final 3D renderings from another project in order to see what your potential architect is planning to provide for your approval.

As for software you yourself can muck around with during the design process, stay away from the CAD stuff and look no further than Google Sketchup. It’s the only 3D software I’ve ever come close to being comfortable with, and I’m a graphic designer! Its super easy to learn and super quick to work with.

Who is actually doing the design?

Many of the biggest and most famous firms around town will be very quick to impress you with essays and awards from their principals, but if you dig deeper, you may find that often times, the real design celebrities won’t be the ones actually designing your house. In a firm of 100 people, it’s just not possible to have the principals do everything. Instead, you may get someone just a few years out of school, with other people at the firm helping out. There is nothing wrong with this approach, but you should just keep it in mind as you make your decision.

On the other end is the small firm of 10 or less people where the principals are a lot closer to every project. Some people may prefer this arrangement instead.

And the winner is…

After months of research and deliberations, I have chosen Build LLC as my design/build firm.

The reasons I’ve chosen Build are as follows:

• They epitomize the balance of top quality design and top quality construction management in a single firm, thus saving me money without sacrificing expected results.
• They are a small firm of four people and the principals will be doing the actual design work.
• The principals are great guys who were spoken highly of by other architects I interviewed.
• I talked to a past client of theirs for almost an hour and he gave Build one of the most glowing recommendations I’ve ever heard.
• Build was able to show me a house they recently completed that is very close to the style I’m looking for and it came in at just over $200 a square foot (quite affordable). No other firm was able to show me such a close style and price match.
• Build gave me the option of paying hourly or a flat fee of just under $50,000 for architectural services. I chose the flat fee, and I feel it’s less than half of what I would have paid at some other firms.

Through the process of settling on an architect, I never thought I’d know for sure that I’d picked the right one until the job was done, but I’m fairly confident now that I have picked the right firm for my needs. We’ll see for sure in 14 months or so when everything is done, but for now, I feel like I’ve made the most researched decision a client can make.

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 $48,000. 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

All of that adds up to $48,000, 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:

The day after the deal closed, I called a few surveyors to see who charged a reasonable fee and could come out to the property in short order. It turns out they are all in the $3000 range, but some of them will charge you an hourly fee with a “not to exceed” number (better). I ended up going with Brent Eble and Emerald Land Surveying, Inc. who were able to come out to the property the very next day and charged an hourly rate with a not-to-exceed number of $2900.

Three weeks later (today), I received my survey drawings and 3D CAD file with a total bill of $2695. Not bad. I’ve already forwarded the file onto my architects and they told me everything looks great, but unfortunately, I am not able to easily import the CAD file into SketchUp. I plan on mucking around with some design ideas in SketchUp, so it’s a bit disappointing that the surface mesh the surveyor provided doesn’t seem to work very well in the only modeling app normal people like me can use. It imports, but as a series of lines instead of a true, clean surface mesh. I’ve already tried to re-convert the .dwg file from AutoCAD and ArchiCAD but since I don’t know those apps very well, I’m not making a ton of progress.

Anyway, the important part is that the survey is now done so the architects can get going on the designs.

Good old-fashioned drawings from the surveyor.

Costs accrued during this stage:

Within a few weeks of buying a new house, you should start receiving mountains and mountains of new junk mail thanks to the fact that you’re now considered “fresh meat” to a lot of marketing and mortgage companies. There appears to be good news and bad news about getting off of these mailing lists.

The good news is that you can opt out of most of them by spending two minutes filling out a couple of quick forms on only two sites. The bad news is that mortgage offers, specifically, seem to be immune to the opt-out lists. The reason is that when you take out a mortgage, your mortgage information is part of the public record, and solicitors routinely cull these records in order to generate leads for their mortgage refinance businesses. On the bright side, quantity of mortgage junk mail seems to start out high and then taper off as your loan becomes less and less fresh.

You might as well do what you can though by opting out of both direct marketing mail and also pre-screened credit solicitations:

DMAChoice.org gets you out of the former, and OptOutPrescreen.com gets you out of the latter.

On Friday, I went in to Build to look at some initial “pre-design” work. What is pre-design work? Well, it’s mainly an attempt to apply some loose parameters to the project before actual schematic work begins. Things like:

“Should the garage stay where it’s at, or do you feel strongly about moving it?”

“Do you feel strongly about the location and bearing of the master suite?”

“Would you prefer the great room to be completely open or do you envision separator walls dividing the space a bit?”

To help answer these questions, Build drew up this matrix of four such questions and three possible answers to each question:

By seeing this matrix illustrated above, I was able to more clearly form opinions about what I like and what I don’t. Although it doesn’t come close to answering every design question, it doesn’t aim to. It’s designed solely to cast the boat off in the right direction.

As a further exploration of the above drawing, Build produced three rough concepts, each using a different permutation of the options above. The results are below:

I can’t say I want my house to look entirely like any of these three concepts, but seeing them drawn out helped solidify my opinions about the four questions and then some. Particularly, I’ve decided that:

• The garage should stay where it’s at, on the south end.
• The master suite should probably be in the middle, or the north.
• The west facade should use integral columns and be as open as possible.
• No decision on the horizontal separation of public and private space yet, but leaning towards a vertical separation.

In addition to that, the drawings solidified my opinion that the great room should be double-height and at the southwest side of the house.

All in all, a very useful meeting! So far so good!

When you buy a property with an existing house on it, you have several choices ahead of you. You can:

1. Move right in and accept the house as is.
2. Do a classic “remodel”, putting in new floors, carpeting, bathroom fixtures, and/or kitchen appliances.
3. Tear the whole thing down and start from scratch.
4. Tear 99% of the thing down, start almost from scratch, and call it a remodel.

Options a and b are pretty straightforward and if your house already has a great footprint and layout, you probably don’t need to think about c or d. But what if you need to completely reinvent the property? What is the best way to accomplish a total transformation with as little friction as possible?

In the United States and other countries with similar building conventions, it’s usually option d. All cities are slightly different, but generally if you keep even a single wall up, it officially counts as a “remodel”. I’ve even heard stories of people keeping a tiny portion of an existing wall up, calling an inspector out to bless it, and then knocking the wall down and rebuilding it within 24 hours.

If you get your project blessed as a “remodel” by your city’s planning department, you save yourself a lot of extra permitting, extra costs, extra arguments with the city and/or neighbors, and extra time. You’re also more likely to get special “out of code” allowances from the city if you need them. For instance, the carport in my current structure does not conform to code anymore (it’s too close to the street) and the western-most edge of the house is technically in an environmentally critical zone. If I built from scratch, the chances of getting approval to re-create these out-of-code elements would be small.

The 3D Connexion Space Navigator

I’ve mentioned Google SketchUp before as the only 3D modeling application I could wrap my brain around. Even as a professional designer who has used Photoshop, Illustrator, and a host of other applications for over 10 years, all other 3D and CAD programs are just way too complicated for me.

The great thing about SketchUp — besides the fact that you can learn it in a day or two — is that it helps you figure out in your own mind what you want your new home to look like and produces great models that you can e-mail to your architects for guidance. I’ve never had a problem expressing myself with words, but when I met with my architects a couple of weeks ago to go over pre-design concepts, I found myself sketching clumsily on vellum paper and trying to artfully explain in words what could be expressed in about five seconds with a 3D mockup. After the meeting, I went home, spent a couple of hours in SketchUp, and produced the following model:

A view of the back of the house. This would be the side facing Puget Sound.

Is it pretty? Nope. But it illustrates several important concepts I wanted to get across:

• Double-height great room on the south side
• Nana Wall on the northwest side connecting the dining room to the deck
• General bedroom arrangement with a deck facing northwest from the master
• Plenty of glass
• Stained wood siding but only used sparingly

None of these things are meant to prescribe exactly what the house will look like, but it’s invaluable to be able to put something like this in front of your architects with only a few hours worth of work. I have another meeting with them tomorrow and they could either match the model closely or go off in another direction entirely and either could work out great, but with this model, I can at least compare their solution(s) with something that I think would work for me. I made sure to tell them not to take any style cues of the admittedly rudimentary model, but only general layout cues. We’ll see what happens. I’m excited.

While we’re talking about SketchUp, I thought I’d mention a SketchUp companion product you might want to purchase if you plan on spending a lot of time in the program. It’s called the 3D Connexion Space Navigator and it’s essentially a three-dimensional mouse which lets you zoom, pan, rotate, and orbit your model by moving your hand in a three-dimensional motion. It’s bizarrely effective and it saves you from having to constantly switch between tools in SketchUp just to view your model from the right perspective for the task you’re working on. The thing is as heavy as a large paperweight, which is necessary because in order to pan up, you actually pull up vertically on the device, and to zoom out, you push it away from you. If it was light, it would move all over your desk, but since it’s so heavy, it stays in place as you exert light amounts of force on it. Really, really cool. I got mine at Amazon.com for $57.97 including shipping and tax. Props to my buddy Danny over at Mavromatic for suggesting this.

Costs accrued during this stage:

About a week ago, I met with Build to review their first design concepts. Build presented two separate concepts based on the pre-design meeting we had two weeks prior.

Overall, I have to say that I am thrilled with the progress. Both designs exhibit the exact design esthetic I’m looking for, while differing enough in their floorplans to present a great set of options for moving forward. I can’t stress enough the importance of hiring an architect who will show you full 3D renderings at design stage. You just can’t get a great feel for what a house is actually going to look like from a few two-dimensional schematic drawings. Below are some samples from the documents provided by Build:

Model 1

View from northwest of the house. This is the “back” of the house, but it’s the side that faces west, towards the huge view.

View from the lower lawn, looking up at the house.

View from above. Only birds will see this, but it’s a good shot to envision how a rooftop deck might look atop the flat part.

A proposed floorplan. Note that the stairwell is against the view glass and is intended as a bit of a centerpiece design element. It would certainly make walking downstairs a huge pleasure.

Sample elevations from all sides.

Model 2

View from above of the second model. Not nearly as nice looking as the first model, but more open.

Floorplan of the second model. Much closer to what I’m looking for than what was presented with the first model.

Thoughts on the two models

My overall impression is fairly straightforward: I like the exterior of Model 1 better and the interior of Model 2 better. I love how the rectangular structure in Model 1 breaks up the exterior of the house so it’s not so imposing looking, but I like how Model 2 puts all the bedrooms on the upper level (crucial for resale) and puts the living and dining rooms where I imagined they’d be all along.

We’re going to meet again this coming Friday at which point, Build will present a revised comp based on my thoughts and direction. The e-mail I sent them is below:

Hi guys. Great meeting today. I’m really excited by the direction and progress. Here are my thoughts:

Overall

The overall design aesthetic is more or less exactly what I’m looking for. You guys nailed that. Shed roof, not gigantic or overbearing, mid-century modern design cues, and open. As long as we pick the right exterior materials, this thing is going to perfect from the outside. Plenty modern, but timeless as well, without any elements that would scare off another owner (if god forbid, I ever had to sell).

Plan 1 vs. Plan 2

It’s probably best to start with Plan 2 and make modifications from there, merely because the interior layout seems much closer to what we’re looking for: three bedrooms on the upper.

Detailed Impressions

- There were only a few things I liked better about Plan 1, the most important being the breaking up of the north and south *exterior* sides with the beautiful wood rectangular thingie (BWRTâ„¢). I think that even if there is no interior function to the BWRTâ„¢ (e.g. to house the stairwell), it should be part of the house as an exterior design element. Probably front and back. It could be more subtle or shaped differently if need be, but I really like how it breaks things up from the outside.

- In order to create more room on the upper level, I think the double-heightness of the great room can be substantially narrower north-to-south. In other words, if you’re looking at the 3D view of Model 2 facing east, it has “5 panes worth of double-height” (Model 1 has 4). I think it could even be 3.25 panes worth, especially if we extend the great room eastward for the TV-watching area. If we go with 3.25 panes worth, the master (or a sitting area of the master) could extend into the previously double-height space (like in my model) or that space could be used for something else entirely. Basically, the double heightness could end right around where line C is in your schematic of Model 2.

- Building on the previous point, given that TV watching (and eating while TV watching) is a very common activity for us, we should probably start optimizing for that a bit. My initial feeling is that it should be in the southeast corner of the main floor since that would place it within eyesight of the great view but also potentially shielded from the glare by a half wall. Considering how far away from the west windows it would be, you might not even need a wall. If we place the TV room/space here, I would want the TV to be on the north or south wall. The other option that just occurred to me would be to put it in the north wing where the dining room currently is. This may actually be kind of nice considering the Nana Wall and the outdoor BBQ would be very useful during football and other parties that involve watching stuff on TV. If we put the TV room/space here, I’d want the TV on the south wall (where the pantry is now). As I look at it, this might be kind of cool because if you’re sitting on the couch facing southward watching TV, you may have a nice wide open view SSW through the house.

- The dining room feels right where you have it in Model 2. If the TV room/space ends up going there instead, the dining room could either go in the southeast corner or it could go in the “north living room” area where the extra couches and chairs are in Model 2.

- The kitchen should ideally serve the dining room, the TV room/space, and the living room. This isn’t a requirement or anything, but I’ve found that during parties, a lot of people tend to congregate in or around the kitchen so it would be cool to have it somewhat centrally located. That is kind of why it felt like putting it in the north living room area might be nice. I don’t want the location of the kitchen to cause us to compromise on the rest of the space though so don’t kill other spacing concepts for the sake of “no matter what” putting the kitchen in the north living room area. If it doesn’t work there, it doesn’t work there.

- It is not necessary for the wall north of the north living room to be glass. In fact, it might even be a disadvantage considering I want the outdoor BBQ against that wall. I really don’t think the view to the north is anything special from the main floor. I’d rather concentrate on maximizing that view angle from the top floor.

- I have no strong feeling about the stairs at this point. Use your judgement where they should be.

- I assume this is just because we’re still in rudimentary modeling stage, but none of the windows look like they open or could take screens. I assume at least some of the upper level windows in the great room will open and have screens.

- I don’t think we should be afraid of mixing some flat roof with some tilted roof. Maybe the north roof becomes flat to accommodate a deck and hot tub.

- I love the “open to below” element from the upstairs. Very cool. Would like to keep this if possible.

- If we narrow the double-height portion as mentioned above, maybe the BWRTâ„¢ is what gets wider and maybe that’s our rooftop deck and hot tub area? That might be kind of dope, and it would allow the north and south roofs to continue to be sloped. If the BWRTâ„¢ gets too overbearing if it is made that wide, maybe it becomes a floating BWRTâ„¢ instead. Imagine chopping off the bottom half of it essentially and have it only cut through the house from the second level on up. Just a thought… might not be a good idea.

Building a house is an exercise in creativity and compromise. Being only six weeks into the conceptual design stage, I thought the compromise part was still pretty far away. During my meeting with Build last Friday to go over the second round of designs, however, it became clear that it was already imminent.

I already don’t want a gigantic house so I figured the compromise stage would mainly be relevant when picking fixtures, appliances, and building materials. The problem, however, is that the existing concrete foundation I’m trying to work with is already a bit too big. It’s about 1700 square feet, so a simple two-story house would weigh in at 3400 square feet. Finish out the 1300 square foot basement and you’re at a whopping 4700 square feet, not even including the garage.

I’m trying to keep the house under 3000 square feet so it’s a challenge finding areas to chop out. Although the basement level has a killer parlor room which opens out to the lower lawn and garden, I’ve decided to leave that entire level unfinished for now, mainly to save money (on both construction and the tax assessment). I figure we’ll just frame it, insulate it, run electrical and plumbing down there, and then think about finishing it years later. The rest of the house is so spacious that if the basement level didn’t even exist, I would barely miss it.

I inquired with Build as to whether we could move the north wall of the house in by 5-10 feet in order to create a bigger sideyard buffer between me and the neighbors and also to reduce the house’s square footage, but it turns out that might actually increase the price of construction because it requires some modification the foundation. We may be able to shove the garage 5 feet or so into the house footprint reducing a bit of square footage, but I’m not sure how much that will save.

Without being able to chop much off the footprint, the upper floor becomes the main opportunity to eliminate square footage. Vaulting the ceilings in the living room so that they are double-height chops off a good 500 square feet, and I already wanted vaulted ceilings, so that is a gimme. Build, however, recommended that I think about eliminating one of the bedrooms up there so that the upper floor contains only the master bedroom and one additional bedroom. While I don’t have any problem with this as it relates to me living in the house, this is officially the first time the subject of “resale” has entered into the decision making process. Many people feel that if you don’t have two bedrooms for kids on the same level as your master bedroom, your house is significantly less desirable to potential future buyers with small children. Although I hope I live in this house until I die, I’m not sure I can eliminate that bedroom and risk compromising resale value. Additionally, I feel like the two additional bedrooms on the top floor will be among the cheapest parts of the house. Drywall, carpeting, closets, and lights… that’s about it.

So with all of that, we may not be done cutting square footage yet… we’ll see. Onto other matters.

Chloe seems to like the entire stack of plans.

Build presented three separate designs on Friday to determine which layout felt most comfortable to me. Even though this meeting was supposed to zero in a little closer on a single design, I very much appreciate the fact that I was given three, considering how many variables are still up in the air. Schematics of the three designs are below. I’m concentrating on the main floor for now because that is where the majority of waking hours are spent. Once the main floor is nailed, the upper floor can follow from that.

4B is my favorite plan (by quite a large margin) because it accomplishes the following things:

• Opens up the living room
• Connects the media room to the living room and pushes it eastward away from the giant glass, eliminating glare
• Places the dining room in a dramatic spot, from a view perspective, without chopping up prime main floor space
• Locates main entrance such that it leads to a long straightaway which eventually exposes the grand view
• Doesn’t attempt to dominate main floor with kitchen, but centrally locates it so it can serve multiple areas

It is also interesting to note that Andrew and Kevin over at Build preferred 4C. There is nothing wrong with this, but it illustrates two important things:

1. It’s perfectly ok for your preferences to differ slightly from your architects’. If they differ tremendously, then you may have picked the wrong architect, but there is nothing wrong with putting in first place what your architect may initially put in second place.
2. If an architect picks their favorite early on and presents it without any alternatives, they may be doing you a disservice. I love that Build followed through and presented three separate designs even though they really liked one in particular early on.

So without further ado, below are the latest plans. Overall, I’m extremely happy with the progress Build has made so far and look forward to the next meeting the Friday after this one. So far, all of the meetings have been exactly two weeks apart and that seems like the right amount of time to properly iterate. I’m not in love with how the house looks from the front just yet, but it’s still a rough rendering and we’re concentrating on the interior for now.

Front of the house

Back of the house during the day from the northwest

Back of the house during the day from the southwest

Back of the house at night from the southwest

Plan 4a

Plan 4b (the tentative winner)

Plan 4c

Last Friday’s meeting was all about zeroing in on one design/floorplan and going over initial cost estimates. At this point, I’m very happy with the general floorplan and how the house looks from the back (the view side). The front of the house and the cost, however, need a bit of work. Below are the latest renderings and schematics:

Back side

Front side

Main floor

Upper floor

I think the back is looking really great. The major addition since the last renderings is the rooftop deck with the hot tub. We’re still figuring out how the roof access is going to work, but a hatch seems like the most cost-effective, least obtrusive (albeit a bit ghetto) solution.

The floorplans are also looking good, with the main floor really opening up, two flexible locations for the dining room (west edge or north edge), and an upper floor that accommodates the requisite three bedrooms. I still have a punchlist of things for Build to nudge around in the floorplans but nothing major.

The front of the house, however, is still not quite doing it for me. It just hasn’t achieved the Feng Shui that the back of the house has yet. I don’t know if it’s the angles, the paneled siding, the colors, or what, but it’s just not there yet. We’re going to experiment with some siding and color options as well as modifying the angles and lines until we achieve curb appeal nirvana.

And now for the costs.

Ohhhh the costs.

Let’s just say they are too high. It’s not Build’s fault as they are just estimating materials and labor for a house of this size and finish, but as the house is currently spec’d, it’s about $400k over my anticipated budget.

That’s a lot.

I’m not sure what we are going to do about it yet, but I’m glad we’re having this conversation at this stage rather than mid-construction. I’ve heard plenty of horror stories about architects underestimating projects only to have the homeowner vastly overextend themselves in order to finish the project. In Build’s words, they are trying to “make sure any financial surprises we run into will be positive ones”.

I like that.

We’re going to meet this Friday to discuss packages of things we can possibly save money on.

With the stock market sinking a whopping 18% last week, I have major questions in my head about what the cost of construction labor and materials will be come spring when we break ground. I have thought for the last several months that the cost of construction would decrease as the economy soured but have been told that so far, that hasn’t happened. That’s all well and good because before last week, the decline in the economy was a slow bleed, but last week was extremely damaging. It wasn’t just damaging to wall street fat cats and hedge funds. It was damaging to anyone and everyone who has any money invested in the stock or bond markets. In my opinion, it was the sort of calamity that is going to finally cause people to really watch their spending.

Everybody is always so quick to talk about how the American consumer borrows and spends above their means, but I think this episode shook a lot of people to their core. I think it canceled a lot of vacations and certainly canceled a ton of construction projects — indefinitely. When I think about how many construction projects will break ground in my neighborhood this spring, I think there is a real possibility that I’ll be the only one. Who knows.

Although the financial crisis we’re going through right now is a terrible thing, I’m hoping the cost of building a house during it will be commensurate with the reduction in wealth we’re seeing in the equity markets. If anyone has any good web sites at which to track the cost of materials, let me know. I know the cost of both lumber and copper have plummeted, but beyond that, I have no idea.

Over the last week, Build successfully made the (mostly) final nudges and modifications to the floorplans, and everything is now exactly where it should be. If you enlarge the floorplans below, you will see that the media room has increased in size, a couple of sliding walls have been added, the washer/dryer have been relocated, and a few other miscellaneous issues have been resolved.

More importantly, however, the front of the house is looking much better now. During our meeting last week, we studied several different materials for the exterior of the house including corrugated metal, fiber cement, stucco, concrete, and a few different woods. Discouragingly, none of the comps that were presented made me jump out of my chair and say “that’s the one!”, but I encouraged Build to refine their rendering with more foliage and multiple camera angles and I would re-evaluate at that time. I have to say, upon leaving the office, I did have a nagging doubt in my head about whether or not the front of the house would ever end up working for me.

Not being able to think about much else, I spent my entire Friday night playing around in Photoshop, adjusting angles, colors, and a few other things. Modifying a 3D model in a 2D program is no easy task, but by the end of the night, I was able to produce a slightly modified model that already looked quite a bit better to me. I shot the model back to Build, and a few days later, they shot me an entirely new set of renderings that were much, much better than even my modded one. Thank god for modeling programs. I couldn’t imagine building a house without this sort of visual aid.

The front of the house is starting to look sharp now! See drawings below:

House front, view from straight-on

House front, view from northeast

Main floor schematic

Second floor schematic

Roof schematic

So, with everything looking great now, I need to do some serious thinking about how and where we can cut some costs associated with construction. So far, that’s proven difficult, as I’ve heard it always does. :)

… they not only show up to your Halloween party but they come dressed as your house. Kevin, Andrew, and Duff over at Build went to great lengths to produce the costume of the night and even documented the entire thing on their blog:

Photo of the night, however, goes to my friends Steph, Tim, Sooz™, and Lavina who dressed as Yearning for Zion polygamists and appeared in the photo below. Love the expressions:

There’s only so much books can teach you about the homebuilding process, but having no better leads for must-have guides, I picked up Building Your Own Home for Dummies from Amazon and read it cover to cover. I’m a slow reader and finished the whole thing in about four days, so it’s a refreshingly quick read for an all-encompassing reference guide.

The best thing about the book is that it’s applicable to people like me who are using architects and other professionals to build the house as well as those who are doing the design, general contracting, and even construction themselves. Wherever you fit in the spectrum, there’s useful and even essential information in here for you.

Everything from construction loans, to protection against liens, to steel vs. wood framing is covered. Besides the occasional oddball statement like “if you don’t currently use e-mail, take the time now to figure it out” or an explanation of Palm PDAs and Lotus Notes, the book seems plenty up-to-date. It’s also chock full of plugs for other books in the Dummies series, but hey, whatever.

If you’re going to buy this book and read it, I recommend keeping a highlighter handy to highlight any information you find particularly useful. It’s not the type of book you’d want to read cover-to-cover twice; useful, but not even mildly entertaining. In fact, I find that most jokes attempted in Dummies books make me feel slightly uncomfortable for the author.

All in all, my inner dummy appreciated the usefulness of this book, and I would recommend it as a good first read for anyone thinking about building a house.

Costs accrued during this stage:

Turns out we’re actually not going to Drill Baby Drill.

A couple of weeks ago, in the midst of wrestling with some difficult cost-cutting decisions, Build and I met with an energy consultant to discuss the viability of equipping the new house with technologies like geothermal and radiant heat. My hope was to use both, in an attempt to be as green and comfortable as possible.

I had been told by a couple of local drilling companies that I probably only needed three 300-foot holes drilled, at $5000 apiece, to generate enough load to both heat and cool the house. Although $15,000 is a lot of money, it seemed like a good investment and the right thing to do, from an environmental standpoint.

To my dismay, however, the consultant was pretty sure I needed five holes, considering how many windows I have, and that the total drilling bill would be more like $30,000. If I was under budget or close to it, maybe I would have still considered it, but since I’m still substantially above where I want to be, it made sense to say goodbye to geothermal heat, unfortunately. I get the feeling this happens to a lot of people; swearing to use as many clean technologies as possible and then shuttering many of them along the way as costs begin to spiral. I look forward to the day when the cost of building green is not significant enough to even notice. That being said, building green is not an all or nothing proposition. Just because I’m not plunking down $30,000 for a fancy geothermal system doesn’t mean the house won’t be energy-efficient in many other ways.

The next decision revolved around radiant vs. forced air HVAC. Going into this meeting, I didn’t even think forced air would be on the table, as many people have told me that radiant heat is far superior. The problem, however, with radiant is that there is no built-in cooling. There is a “comfort system” they can build these days which runs cold water through the radiant pipes but it’s not really capable of cooling the house by more than a few degrees. Given the fact that so much of the west side of the house is glass and will transfer a lot of heat from the sun, it seemed necessary to have a full-fledged air conditioning system for those (admittedly rare) sweltering Seattle summer days.

Could we try and design a house which used breezes off Puget Sound to cool the house in the summer? Sure, but if it didn’t work so well, retrofitting for air conditioning would be difficult and expensive. Given that, the project now required full ductwork for a forced air A/C system. And given that, we were now talking about two totally separate systems for HVAC: radiant pipes for heat and forced air for A/C. Expensive, and arguably overkill.

On top of these complications, the energy consultant also warned me that radiant heat is not nearly as fast as forced air at changing the temperature of a house or a zone in the house. Radiant can take 2-3 hours to do its job while forced air is more like a matter of minutes. While this usually isn’t a big deal because most people keep their house at a relatively constant temperature, my house may present a difficult challenge because of all the west-facing glass (this is becoming a theme, I am noticing): on a cold, clear winter morning, it may be 30 degrees outside and the heating system would probably be cranking. But as soon as the sun hits the west glass in the afternoon, that could warm the house up naturally quite a bit. At that point, the heating system needs to ease up a bit. And then when the sun goes down, it needs to crank back up. Radiant heat is simply not as good as forced air for quickly adjusting to these sorts of things. And on top of that, radiant heat does not work perfectly under wood floors. It’s generally best under concrete, slate, or tile.

So anyway, with all of that to consider, I made the call to move forward with a natural gas powered forced air heating and cooling system. I may do a mini radiant heating pad to warm up the master bathroom tile, but that’s it. On the downside, it’s not as forward-thinking of an HVAC system as I was hoping for, but on the upside, it should be more comfortable, and it saves me probably $40k-$50k in total.

As you can probably deduce from the title, there are several unrelated things to cover in this post. Some more important than others.

First things first: I had NVL Laboratories check the house for asbestos and lead paint last week, and as expected, there’s a significant amount of both (mainly under floor tiles and on the exterior of the house). None of it is airborne, so that’s good, but it presents a bit of a challenge when taking the house down. You’re supposed to have a professional abatement team come in and dispose of the stuff in a special way.

That brings us to the subject of demolition. Build hooked me up with a great local non-profit organization called Re-Store that is actually going to “deconstruct” most of the existing house piece by piece and sell the re-sellable elements as “vintage” building materials. Not only will this option save me a significant amount of money in demolition costs but it will save 52 tons of material from going to a landfill. This is really the best type of building decision: the kind that is environmentally friendly and saves you money. As if that wasn’t good enough, I can also write off the market value of the donated materials — $8500 — and get a nice tax refund out of it. It’s a win-win-win.

With regard to the timing of deconstruction/demolition, there is an opportunity to do it as early as December but my feeling is that it should occur as close to construction time as possible (spring). I just don’t like the idea of tearing down a house before the plans for the new one are even approved yet. I also don’t want my across the street neighbors to get too used to their newly sweeping water view. I think they may actually end up with a significantly better view than they have right now by the time I’m done, but their best view is clearly when my house is just a hole in the ground.

So that brings us to the economy. I could probably do a whole post on this, but the long and short of it is as follows: the market and the economy in general have gone from bad in early 2008 to worse in mid 2008 to near catastrophic in October. I’m invested about as conservatively as you can get (mostly cash and muni bonds, very little equity exposure), but even with that conservative allocation, October and now November are really making me fear for the future of the economy. I remember clearly the 1987 crash and the dot-com bubble bursting, but in neither case did I think another Great Depression was possible. When you start to worry about whether your bank deposits are safe, how many millions of people are going to lose their jobs in 2008/2009, and how our government is going to deal with all of it, you reflexively move into “batten down the hatches” mode a bit.

My feeling as of now is that if things stay where they are at or get better, there shouldn’t be any change in my plans, but if the economy dives further off the cliff or I don’t think things have sufficiently stabilized by the spring, I may re-examine my construction schedule. I’ve prepared Build for this possibility, and they of course understand, being plenty in-tune with the markets and the economy themselves. It’s still game-on for now though. Permits are being applied for, documents are being submitted, and the project marches forward. Let’s hope Barry O. has the calming influence on the country and the economy that we think he can and let’s hope the market stops trading “like a lunatic on ecstasy”, as my favorite CNBC guy Steve Liesman likes to say.

Costs accrued during this stage:

The first interior renderings from Build are in and they look great. I’m really loving how the aluminum framed windows look on west wall of the living room. I’m a bit concerned that all of the interior wood will be overwhelming, but I won’t have a good feel for what it will actually look like until I see multiple angles.

Anyway, here are the two best-looking renderings:

How much do you think it costs to keep a hot tub heated at 102 degrees year-round, non-stop, with the built-in electric heating system that come with today’s models? Formulate your answer and then scroll to the bottom of the picture for the answer.

According to a newly hot-tub-owning co-worker of mine and his wife, about $14 a month. That is much, much cheaper than I would have expected, and apparently it’s a lot cheaper than it was with the less efficient models of yesteryear. My guess was about $50 a month, and I assumed one was supposed to keep it cold until an hour or two before one wanted to use it. $14 a month for an ever-ready tub seems incredibly efficient. I think it has something to do with how well the cover insulates the tub when it’s not in use.

A few days ago, Build submitted the official architectural plans to the City of Seattle for approval. There are still some details outstanding like the placement of an extra door, some railing specifics related to the upper stairs, and of course all of the interior details, but apparently unless the outstanding items are significant from a structural or safety standpoint, it’s ok to change them later. We ending up using Swénson Say Faget as our structural engineering consultants and their fee was $2915 (Kevin at Build also has a structural engineering background so it was good to know there were two sets of eyes at work). The non-refundable cost to apply for the demolition and construction permits ended up being $5460.75 and was based on the estimated construction cost of the house. In other words, the more expensive the house, the more the permits are. I’ve been advised that the permitting process takes about six weeks, but since no one in their right mind is building now, it could be quicker.

After initially inspecting the property (at a cost to me of $116.25), the City also required me to submit a full, written geotech report with my application. You may remember that I already paid $350 for a “verbal” geotech report before I bought the property, but I guess when you ask them to write something official up, it’s much more expensive. I used Icicle Creek Engineers this time and the charge was $2700.

Other matters

I don’t have a whole lot of new renderings to display, but here’s one of a proposed ceiling treatment for the living room:

I’m not sure how I feel about it yet, but it — or something like it — will be necessary in order to dampen the echo caused by the vaulted ceilings. The idea is to put something visually nice on the ceiling and pad the area above it with a sound-dampening material.

Also, I’m getting to the point where I need to start thinking about sinks, lighting, appliances, and other interior details. Does anyone have any recommendations as to where the best places to shop online for that stuff is? I’m interested in sites which showcase hardware, lighting, and appliance design as well as retailers where you can actually buy the stuff.

Costs accrued during this stage:

While the house plans are in for approval, I’ve been checking out appliances — both online and in-person — looking for the right dishwasher, fridge, washer, dryer, and oven/range.

The quality gap between appliance websites is simply astounding to me. It’s 2009… you’d think everyone would know how to do a “help me select my appliance” feature by now. The worst I found was ironically the company whose brand I had already decided on: Bosch. Bosch makes TWENTY models of dishwashers and the process of distinguishing between all of them is maddening. None of the features are explained in a convenient manner, none of the sub-brands are clearly differentiated, and worst of all their “product comparison tool” only lets you select three models at a time. To compare each model against every other would require 1140 different combination trials. Go ahead, try it… it’s embarrassingly bad.

On the other side of the spectrum is Samsung. Ironic as well, since their cell phone interfaces are so second rate. Where Bosch fails in leading me towards a happy, confident purchase, Samsung excels. Samsung’s washer selector lets me pick features one by one and removes models that don’t fit the criteria on the fly. It also has some nice Flash demos demonstrating some of the features that might need explaining. By the time I was done checking off features, I was down to one model. That is how it’s done, BOSCH!

I haven’t made any final decisions yet, but here’s what I’m leaning towards (if you have experience with any of these brands or others, please let me know in the comments):

Dishwasher: Bosch

Despite the awful website, Bosch seems to have a great reputation with regard to dishwashers. Multiple people, including Build, have recommended them personally to me so I am loath to go against that sort of word-of-mouth claqueury. It’s the one appliance that a lot of people seem to agree on: Bosch makes the best dishwashers. That said, thanks to their website, I have no idea which model to choose. My only requirements are integrated cabinet face and the adjustable upper rack option. Depending on the model, it should cost anywhere from $800 to $1600.

Refrigerator: GE Profile

There are tons of good refrigerators out there, but so far I’ve only found one that has the top two features I’m looking for: French doors with the freezer on the bottom and an external water/ice dispenser. French doors seem to be in these days, but external water/ice dispensers are harder and harder to find. Many models just do the water-only dispenser on the inside now apparently. Boooooooooo. External seems a lot more convenient.

The GE PFSS6PKXSS seems to fit the bill perfectly and has dope LED lights on the inside as well, which is just awesome. It’s $2699 retail, but since I work at msnbc.com, my GE employee discount should knock a good portion off of that. Not bad considering some of the other fridges I looked at were twice that amount.

Washer/Dryer: Samsung

I didn’t even know Samsung made washers or dryers. They do and they are awesome, according to Consumer Reports and other sources. Among the more novel features is something called “SilverCare” which embeds microscopic silver particles in your clothing to keep the stank away. Watch this video for the entertaining details of how Consumer Reports performed the test.

The kicker, however, is something called VRT. It’s a technology that Samsung pioneered which dramatically reduces the vibration of and noise of the washer and dryer during spin cycles. According to everyone who has tried it, it’s a no-brainer if your washer/dryer is not on a concrete floor. Since we’re putting ours upstairs right next to the master bedroom, this seems like a slam dunk.

The other set that looked awesome is the Electrolux. Honestly, they look even better than the Samsungs but I couldn’t find a single review online and Consumer Reports hasn’t tested them yet. They are priced similarly as the Samsung set (about $1500 per piece), so at that price, I feel much better buying something that’s been thoroughly tested and reviewed.

Oven/Range: Probably GE Monogram or Wolf

This is the appliance I’m least sure about right now. I do know I’ll be getting a dual-fuel 36-inch wide unit, but no one model has stood out yet. The Wolfs are nice, but $8500 for a range seems ridiculous, considering how often I failover to the microwave. Currently, I’m leaning towards the 36 inch GE Monogram Dual Fuel Oven/Range with 4 burners and a griddle. It’s more like $5500 and hopefully the discount will knock a substantial amount off of that as well.

So that’s where I’m at on appliances so far. If anyone has any advice or positive/negative reviews for certain brands or models, please let me know in the comments. Thanks!

It took a well-placed comment from The JimRay™ in my last post, but induction cooking is beginning to look very interesting to me.

Check out this illustrative image from GE showing ice cubes sitting calmly on one side of an induction burner and a half-pot of boiling water on the other:

You don’t know how many times I’ve wanted to set ice cubes randomly on a burner.

Anyway, induction cooking is more than just an impressive technology for party tricks. It heats pots faster than even gas and expends less energy doing so… all via the power of magnetic force. The chief downside appears to be that you need to use iron or steel cookware, which isn’t a big deal to me since I only own a few pots and all are magnetic. The other downside is that I haven’t found a model which includes any sort of built-in griddle, which kind of sucks.

For more information on induction cooking, check out GE’s Induction Cooking site. It looks like you can get models ranging from about $1000 to several thousand, depending on what you’re looking for.

Anyone have any experience with induction cooking? Is it all it’s cracked up to be?

It’s been about two months since plans were submitted to the City of Seattle and we’re finally nearing approval. The Department of Planning and Development has really been scrutinizing the hell out of everything, probably because the amount of applications flowing through right now are minimal. The fine folks at Build have dutifully made all of the “clarifications” and modifications the city has requested and we’re entering the home stretch.

As part of the extra scrutiny, we had to do a little more geotech reporting at a cost of $350 and structural engineering at a cost of $2,642.50.

More troubling, however, is a contract the city wants me to sign not only absolving them of any liability related to damage that may occur to my property (because it is near an “environmentally sensitive” zone) but actually indemnifying them against claims made by others for issuing me a permit.

Initially, even the first clause scared me but I’ve been advised that they are still culpable for negligence. So for instance, if they run a sewer line such that it dumps 10,000 gallons of water right onto my property causing the entire cliff to collapse, I can still seek damages. We may need to clarify language around this though.

The second clause is more concerning though. It essentially says that even if a neighbor sues the city for issuing me a permit, I must pay to defend the city and also pay any judgements or penalties against the city, if there are any. That seems extremely onerous to me, especially since I have no control over what sorts of crazies might want to sue the city. At least when I indemnified the family who sold me the house, it was for a very specific situation that I knew had a 99.9% chance of not mattering… not to mention, I quickly nullified my liability by having the only potential litigious party sign a litigation waiver.

Because of this latest issue, I’ve decided to seek the advice of a real estate attorney, recommended to me by a friend. It’s probably a good time to get to know a good real estate attorney anyway, since there will be plenty of contracts to execute moving forward. Hopefully, I’ll have an update on the situation soon.

Costs accrued during this stage:

While waiting patiently for the construction permits to get issued, I’ve been thinking really hard about the ramifications of using natural stained wood on heavily exposed areas of my house. It’s been a concern of mine from the very beginning, but only after seeing in person what happens to Brazilian Ipe after a year in the sun and rain have I started to really question whether or not I want so much exposed wood on the outside of my house. Ipe is such a dense wood that you aren’t even supposed to stain it, but in order to keep it from silvering, you pretty much need to oil it down every year. Considering that part of this wood will be inside and part will be outside, I’m just not convinced I can maintain anything close to a uniform, “newish” appearance no matter what I do (and I don’t want to oil or stain a good portion of the house every year).

This concern seems to fly in the face of a lot of modern architecture lately, especially in the Pacific Northwest. Take a look at some really nice wood-heavy modern designs from the last few years:

Build LLC

PB Elemental

Scott West

SkB Architects

Unknown

While all of these houses look spectacular, I just can’t help but wonder what they will look like in 5 or 10 years, especially in a climate like Seattle that gets quite a wide range of weather. From what I can tell, it’s the sun more than the water which makes wood fade or go silver, so maybe in that sense, Seattle isn’t so bad.

Because of my concerns, I’ve been exploring alternatives including the following:

1. Using another wood like mahogany or cedar, which may be easier to stain when it starts to fade
2. Painting the wood from the get-go, or at least being ready to paint it if and when its appearance goes downhill
3. Using a synthetic wood paneling system which should hold up indefinitely to the elements
4. Using a plastic-aluminum cladding system and tucking a bit of wood accenting in sheltered areas of it

If anyone has any experience that could be helpful, I’d love to hear it. Once again, here is the mostly-final design we’re talking about:

Over the past several months, I’ve built up a pretty decent list of home-design related RSS feeds. If you’re interested in keeping up on the latest home design trends, appliance technology, and related issues, add the below feeds to your Google Reader subscriptions. The best way I’ve found to clip things I like is to use Tumblr. I basically just set up a Tumblr blog at http://tumblelog.ahousebythepark.com where everything is saved, and there, my architects can keep tabs on things I’m looking at.

• 360 Winnett Ave.
• Appliancist
• Contemporist
• Hill House
• Home Design Find
• DesignCrave
• Freshome
• Kitchen Sync
• Modern Residential Design
• Momoy
• The Cool Hunter - Architecture
• The Cool Hunter - House
• Trendir

Anybody have any other great feeds to add to the list?

During the few months my house has been waiting for permits (which I should finally get this coming week! woohoo!), I’ve been exploring different refinancing options to take advantage of how low 30-year fixed mortgage rates are right now. The process has been anything but straightforward and it’s starting to get a bit infuriating.

I am currently holding a 5/1 ARM at 5.75% and a home equity line of credit indexed to prime-minus-0.25% with a floor of 4.22%. Since prime is currently 3.25%, the line is currently floored. The ARM is for the maximum amount allowed short of a jumbo.

The process began for me back in mid-February when I happened to notice Countrywide advertising 30-year fixed jumbos at 6%. I hadn’t seen jumbos below 7% since the sub-prime crisis began, so I got the ball rolling. Everything seemed great for the first few weeks and my appraisal came in at exactly what I paid for the house, so I thought I was home free. Then the trouble began. Countrywide underwriting began asking for all sorts of additional documents, which I ended up providing eventually because they said that was all they needed to close. Then, a whole two months into the process, they wanted me to go to my HR department and provide written compensation guarantees using language my HR department was not comfortable with (and neither was I, to be frank).

All this for someone who has perfect credit, a comfortable salary, plenty of equity in his property, and the ability to pay off the entire house tomorrow if necessary. At this point, I felt something strange was afoot at Countrywide underwriting, so I called up my current lender, Wells Fargo, to see what their best deal was.

My previous agent at Wells told me they didn’t have any great jumbos available, but that they could refinance my first mortgage into a 30-year fixed at 4.875% and keep my HELOC as is. Not bad at all. I spent the evening creating a spreadsheet comparing cash flows between the split option and the jumbo option and sent it to my Wells agent in advance of our meeting the next day.

To my surprise, my agent tried to forward my email and spreadsheet to a friend in his office with a snarky note attached to it. To his surprise, he accidentally hit “reply” instead of “forward” and it came to me. I called him immediately to cancel our meeting and our financial relationship.

Always remember the golden rule of e-mail: If you aren’t comfortable with the entire world seeing an e-mail you’re writing, then don’t write it. Or at least don’t be a jackass and send it directly to the person you’d least like to see it.

Anyway, I had nothing against Wells Fargo as an institution, so I called another agent in Seattle and got the ball rolling on the split option refi. Everything was hunky dory until the appraisal came through underneath what I paid for the house. I would understand this if I bought at the peak or if I didn’t get the place off-market for under even the tax assessed value, but something didn’t smell right. I looked at the appraisal and the person got some material things wrong, including square footage and using comps that weren’t even in my neighborhood!

So now it appears I have to dispute the appraisal.

Here’s what makes no sense at all to me though: Since the jumbo limit in my area has gone down about $60k, I am willingly paying $60k to decrease the size of this loan down to the new limit. Therefore, I am owing my bank less money. Therefore, even if the property was appraised at one dollar, the bank would be better off carrying my new loan than my old one, from a risk standpoint! There shouldn’t even be a loan approval process at all in this case!

What makes me even more mad is that I met one of my neighbors yesterday who was in the same situation with ING, and he said he spent literally 5 minutes on the phone with ING and did a “mortgage modification” into a 30-year fixed with no paperwork, no escrow, no appraisal, etc. Why I can’t do something like this with Wells, I have no idea.

Permits are coming this week, so having this issue outstanding for three months now is starting to really make me nervous.

Almost 5 months after applying for building and demolition permits, the City of Seattle finally granted me my documents last week. With barely any permit applications going through the City these days, one would think things would have gone quicker, but in reality, I feel like the lack of permit flow caused more city scrutiny in the end. The main issue that dragged things out was something I wrote about a little while ago: indemnification.

In short, since part of my property is in an “environmentally sensitive area” (i.e. near a cliff) the City insisted that I sign a covenant running with the land that did many things I felt were overreaching and unnecessary. I understand why the City’s standard procedure is to ask for this (and most people accept it as is) but it contained two particular things that my attorney, Patrick Moran, was thankfully able to negotiate out:

• A clause stating that if anyone sued the City for anything relating to the issuance of my permits, I had to indemnify them and pay for all legal fees, judgements, etc.
• A clause stating that this covenant ran with the land and if I ever sold the property, the new owners would also be burdened by it.

The first clause was reduced such that the indemnification only covers actual damages caused by construction. This means that if a neighbor decides to sue the City because they don’t like the look of my house, I’m not on the hook to defend anybody or pay anything. The second clause was modified such that the indemnification ends if and when the property is sold. This is key in preserving value, as I would flinch if I was buying a property which transferred such indemnification to me.

A lot more language was clarified as well, and I feel like the $1049.50 I owe my attorney in fees has been well worth it.

During these final stages of preparing for construction, I’ve also completed a few more tasks and spent a little more money:

• We had the asbestos abated for $2,335.64 by Partners Construction, Inc.
• Some additional structural engineering work from Swenson Say Faget was completed for $2,192.29.
• Some additional geotech work was required by the City and performed by Icicle Creek Engineers for $600.
• The additional City of Seattle fee to complete the permitting process was $3,450.75 (bringing the total permit fee to $8,911.50).
• Printing fees of $172.91 for some additional drawing sets.

So with that, we’re almost all set to build. I’m still waiting for my refinance to close, but after that it’s all systems go. Unfortunately, the place that is going to deconstruct and recycle most of the existing house is a little booked up right now so we may be looking at July.

It’s also interesting to note that the official amount of investment it took to get to the point of breaking ground has been exactly $78,543.85.

Costs accrued during this stage:

I finally closed my refinancing a few days ago and am happy to have that long chapter behind me. The process started way back in February and because of some ridiculousness by Countrywide and then several more hoops to jump through at Wells Fargo, it didn’t end until now.

At least I ended up with a 4.875% rate, which I couldn’t be happier about, especially considering rates have risen substantially since I locked.

I remain aghast, however, with how much waste and financial nickel-and-diming there is in the mortgage industry. All I did was change the rate of my existing mortgage with the same bank and pay the principal down a bit. That should have been achievable with a simple phone call, but instead took months of back-and-forth, credit checks, paperwork, and all the other trimmings of a full mortgage application. Not only does Wells Fargo get to keep my business but they also make money on all the fees, including escrow which shouldn’t even be necessary since it’s the same bank my existing mortgage was with. Now I know why Wells Fargo owns their own escrow company. I think it sucks that banks can do “mortgage modifications” for people in a few minutes over the phone but refinancings take forever and require full paperwork.

Anyway, the final hurdle is now cleared. Deconstruction is scheduled for early July.

As design stage neared completion, it was time to turn my attention toward the construction stage of the project. My architects at Build LLC specialize in what is called “Design/Build”, which is exactly as it sounds: designing the house and then building the house. Design/Build proponents will tell you this is the most efficient and cost-effective way to build a new house because it centers all responsibility in one place and eliminates many arguments, inefficiencies, and other overhead associated with using a separate traditional architect and general contractor. Both traditional architects and general contractors, however, will tell you that this back-and-forth between architects and contractors is what gets you the best quality house possible. Their argument is that the architect keeps the G.C. honest and the G.C. keeps the architect honest… all on your behalf. For instance, if an architect specifies a certain material and the G.C. tries to sub in something inferior, the architect will point it out and make sure it is remedied. Conversely, if an architect specs a material that is 5x as expensive as something just as good, the G.C. will alert you to this and ask if you’d like to use the more cost-effective stuff.

Both arguments make sense to me and I’m sure there is merit to each. Addtionally, I can see either situation working out very well or very poorly. A great Design/Build firm will provide a great all-around experience without the need for checks and balances whereas a crappy one will deliver you a poorly designed poorly constructed house. Conversely, a good architect/G.C. combo will give you a great finished product with minimal friction, but if either the architect or G.C. is a weak link, the entire project can turn out poorly.

One thing that doesn’t seem debatable, however, is price. The Design/Build process would seem to produce a less expensive experience in most cases, but as my attorney pointed out to me, it also involves more risk. The reason for this is that in a typical Design/Build arrangement, you never sign a G.C. contract at all. Instead, you sign what is called a C.M. (construction management) contract. This type of contract essentially just specifies the fee you’ll be paying your construction manager and the fact that they will be “advising” you throughout the process. Now… “advising” includes a lot of the things a G.C. would do like coordinating subcontractors, getting bids, supervising the site, etc but the two key things it doesn’t provide are blanket liability for the project or cost guarantees.

Liability

In a G.C. contract, if something bad happens during construction, the G.C. is ultimately responsible for it. If it’s a problem caused by a subcontractor (more common than not), the G.C. will attempt to assign blame and remediation to that subcontractor, but in the event it cannot be assigned for some reason, the G.C. assumes it. This is a valuable service, in my opinion. It’s nice to know that no matter what happens on site, you’ll never even have to hear about it.

In a C.M. contract, the construction manager will also attempt to assign blame and remediation to subcontractors when appropriate, but if that fails, it’s on you, the client. One of the reasons it’s cheaper to use a C.M. than a G.C. is that the liability insurance isn’t there, but the downside is more risk for you so you need to get cool with that if you’re going the C.M. route.

Cost Guarantees

There are three ways a G.C. can bid your project: Fixed bid, cost plus, and cost plus with gmax. Fixed bid is just as it sounds: a G.C. tells you he or she will build your house for X dollars and that is exactly the amount you pay. If it’s tougher to build than expected, the G.C.’s margins suffer and if it’s easier, their margins increase. A cost plus contract basically says you will pay whatever the house ends up costing to build, in time and materials, plus a fixed fee to your G.C. (either a flat fee or a percentage of the cost of construction). A cost plus with gmax is the same as a cost plus except the G.C. gives you a maximum amount you will be on the hook for no matter what happens.

While the certainty of a fixed bid contract seems nice, I have two problems with it. Firstly, since the G.C. needs to make sure the project is profitable for them, they are highly incented to pad the number, almost guaranteeing you are paying more than you should, unless things go terribly wrong… at which point they eat it and aren’t going to be happy anyway. Secondly, change orders inevitably come up and I imagine this can cause arguments between clients and G.C.s as to whether or not the fixed bid should be affected by the change.

The cost plus method seems the riskiest but also has the potential to save you a lot of money if things go well. The cost plus with gmax improves this option by at least giving you a ceiling you know you’ll never go over. Although again, fighting over changes can surely result in disputes here.

My situation

Anyway, my attorney advised me to look into going the G.C. route because he feels more comfortable with the liability protection they provide. Although I had planned on using Build for both designing and building, I agreed with my attorney’s concerns and met with a couple of reputable G.C.s in Seattle to see what they could do for me.

It is important to note that I did not talk to any one-man shops or otherwise unestablished firms. I’m sure I could have gotten plenty of low-ball, unrealistic bids if I did. Instead, I picked one G.C. based on what I knew about their reputation and another G.C. based on some great work I had seen from them. My experience speaking with each firm was different.

When I called the first firm and inquired about them building my house, I ended up spending an hour or so on the phone with one of the principals and we got along great. He was a very knowledgeable guy and explained to me in great detail the benefits of going the G.C. route and what his firm offered. By the end of the phone call, I told him I’d love an estimate at which point he asked me to send the plans over. I emailed the plans over a day or so later and his response surprised me a little. He essentially said that the plans were “so complete” that it would actually make the project harder to estimate. I guess Build does such a thorough job spec’ing everything out that it requires more of a G.C.’s time to examine than if it were just a sketch. Given this, he asked me if a quick ballpark bid would suffice for now and if the fit felt right, they would do a deep dive. Absolutely I said, not wanting to waste anyone’s time. Two full weeks later, I got a bid from them and it was shocking. They submitted a “low end” (best case) number and a “high end” (worst case) number.

The low-end number was 86% higher for the total project cost than Build’s! And the high-end number was 155% higher!

I’m not just saying their fee was higher. The entire project, if contracted through them, would cost between 86% and 155% more. I’m not sure any amount of liability protection is worth that. It’s simply an obscene amount of money. So what accounted for all of the extra costs? A lot of stuff, including a higher fee and a bucket called “General Conditions” that essentially includes a construction management fee on top of the standard G.C. fee. This G.C. pitches their “fee” as being 12%, but it’s really a bullshit number. If you add in the fee they charge for their project manager and superintendent, it’s more like 20%. This is fairly standard practice, so I’m not implying any dishonesty here. I’m just saying, when you’re pricing a project, you need to really dig into the numbers and find out what you’re paying for. As a point of comparison, Build’s proposed C.M. fee would be a flat charge and it would amount to approximately 11% of the cost of construction, pre-tax, pre-contingency.

With this sort of cost differential, there is no way I could ever justify using this G.C. With no hard feelings of course, I sent an email to the principal informing them how much higher their bid was and that as a result, I could not justify a relationship with them. That’s when things started to get a little weird. The principal asked me to keep their bid confidential, and I told him that I planned on talking about the bid on my blog but that of course I wasn’t planning on mentioning his firm’s name because I’m not trying to make anyone look bad. I thought that would be the end of the discussion but he then felt the need to clarify that he wasn’t afraid of looking bad but rather that he doesn’t want his competitors learning about the way his firm bids and that “ethically” he would never ask for information on his competitors either.

What?

I asked him what could possibly be unethical about inquiring about your competitors and why was he so concerned with obscuring his business practices? I told him that one of the things that attracted me to Build in the first place was their transparency, honesty, and desire to remove the mystery from the profession. He told me his was decidedly unimpressed with that and wished me good luck on my project. Very strange… and very much NOT a good fit for me, obviously.

The second G.C. firm I met with was a smaller shop (about 40 people) whose work had impressed me and seemed to build a lot of great modern homes in the Seattle area. The firm is Dyna Contracting and I’m mentioning their name because they’re just as open about their practices as Build and they said they didn’t mind being mentioned even though I didn’t end up moving forward with them. In other words, they are my type of guys.

My initial meeting with Dyna went great and when I walked out — without even seeing an estimate yet — I knew this was a firm I would be happy to work with. They are into modern architecture, their overhead is smaller than some of the bigger firms, and they strike me as the type of people that are more interested in working on cool projects and providing value than capturing every potential dollar that could hit the top line. They also seem like great “value engineers”, meaning they are vigilant about looking for cost savings wherever possible in order to reduce your projects costs and thus make you a happier client.

While the first G.C. firm took two full weeks to get me a rough estimate that went into no detail, Dyna produced a detailed breakdown of every single cost anticipated in the project, right down to the door hardware and cabinet pulls. There were pages and pages of details about everything, including an entire section on “qualifications” spelling out things like “existing downspout locations assumed to be adequate”. Like the first G.C., they commented on the completeness of Build’s drawings and even said they were among the most complete they’d ever seen. Go Andrew!

What Dyna produced exceeded my expectations as far as completeness goes, and it took them only a few days to turn around. Amazing.

At the end of the day, however, it’s the bottom line that matters most, and I had to stack Dyna’s numbers up against Build’s. Dyna came in a very respectable and reasonable 16% higher, while of course being much lower than the other G.C. Most of the additional cost was in a higher fee and once again a higher “General Conditions” bucket that included a separate project management fee. Again, this appears typical in the industry so it’s not a big deal, but you just have to add it to the equation.

The decision

At the end of the day, my decision came down to whether or not liability protection was worth an extra 16% to me. Since neither Build’s nor Dyna’s estimates were fixed cost, I risked going over on either number, but I assigned a high honesty score to each, so I assumed an equal chance of overage with either route. This point should not be underestimated. An estimate is just an estimate and if you don’t trust the estimator, the estimate isn’t worth much. Through my many months of working with Build, they’ve done nothing but increase my trust in them and when I called their references to ask how well they stay on budget, they got glowing reviews. Although I hadn’t had any experience working with Dyna yet, they just felt very honest to me (and I tested them a bit) and I’m sure if I called their past clients, that hunch would be validated as well.

In the end, my decision was to stick with Build, mainly because they have given me no reason not to. I realize not hiring a traditional G.C. is a bit of a leap of faith, but the past several months have given me the faith I need to take that leap, and hopefully save some moey in the process. I am convinced that the Design/Build process Build goes through indeed saves money and produces great results. I accept that if my project goes off the rails in a way their projects never have in the past, I am a bit more exposed than I would be under a normal G.C. relationship, but at the same time, I’ve heard of plenty traditional architect/G.C. relationships that get out of hand as well.

In the end, you need to trust the people who have given you reason to trust them, and Build has given me that in spades over the last year. That said, if you’re looking for a great G.C. in the Seattle area, I would start your quest with Dyna… and of course if you’re looking for a Design/Build firm to design, build, or remodel something, you know how I feel about Build.

Endnotes

1. Wow, 2400 words. That was a long post.
2. We may end up using Dyna as a vendor for some major elements of the project, including plumbing, electrical, and other things.
3. Big ups to both G.C. firms for not low-balling and not responding to my declining of their services by lowering their own bids to unrealistic levels.
4. My sample size of G.C.s was very small. I do not mean this as any sort of referendum on G.C.s as a whole, although as mentioned above, I do believe that the Design/Build process — although requiring more risk — generally results in lower costs in the end. We’ll see if this proves true. This is just the sort of thing this blog is for!