Finding the perfect house using open data

I also got lost on the site.

But this article is really good. http://patrick.net/housing/crash1.html

These are fair points. I've met Patrick in person and used to follow patrick.net a while ago (>4 years ago), but the discussion threads appear to have gone downhill a bit. But as someone else pointed out, there are some FAQs there that provide a useful counter to the conventional wisdom. Also it looks like Patrick now has a book out you can buy on Amazon.com: http://www.amazon.com/Housing-Trap-Buyers-Captured-Yourself/...

Put another way, even if there's an 0.9 probability that the advice there is wrong, buying a house is nevertheless the most significant purchase of your life for most people. It's also a very illiquid purchase, meaning it's difficult to sell and you need it to appreciate ~7% just to make back what you paid (that's because of Realtor(tm) commissions). You owe it to yourself to seek out a different opinion even if there's only a 0.1 probability it's accurate.

Edit with an addendum: My goal is not necessarily to get people to avoid Realtors(tm). This is not yet possible given the state of the market; I made some effort in that direction and was unsuccessful when I bought a single-family home on the SF peninsula. Instead, it's to get folks to realize that especially in coastal markets, they are likely not worth it, have minimal mandated training, and do not necessarily have your best interests in mind. In the long run, what I'd like to do is encourage HN readers to come up with ways to make real estate transactions more efficient. Some Realtors(tm) with deep knowledge will probably stay in the industry; most others will end up doing something more productive with their lives.

I didn't do anything this intense, but back in 2008 I took some data I gathered from city-data and mapped neighborhood ratings for San Diego. After living here for 6 years they're still pretty accurate. https://www.google.com/maps/@32.7740233,-117.1799609,12z/dat...

I'd just take an address from Craigslist and paste it in to quickly see whether I wanted to live there.

Today I live in one of the "bit dumpy and rough, but OK" neighborhoods.

>I'm considering building a house too. I get the feeling it would be financially better to start smaller, and then incrementally add to the house as we accrue the necessary capital to do it.

I don't know anything about your personal financial situation, so this advice may be completely off-base. But perhaps buy a house that's unrenovated but structurally sound and then hire a contractor to renovate it to your specifications? At least if my experience a few years ago was any indication, you'll learn a tremendous amount about permits, appliances, electrical upgrades, fixtures, moulding, doors and windows, insulation, decks, landscaping, and how to manage a complex undertaking that's likely (depending on the size of the house and the geographic area) to run into the six figures and last at least half a year.

Then, a few years later, you can hire an architect and do everything right the second time around. :)

Also if you live in the SF bay area (and I know your profile says you're in Massachusetts), be warned that all the good land is already built on or unavailable for building or vacant and extremely expensive -- as in millions of dollars for just a lot in Portola Valley, Los Altos Hills, or Woodside. There was a discounted property for sale two blocks down from me a few years ago for only $800,000 (!). But there was an active landslide on the property and the town expressed some doubt about whether the owner actually had the legal authority under the deed to subdivide in the first place...

So if you have a liquidity event, you can buy that 800 ft^2 shack in a great location in Palo Alto for $2M, tear it down, and spend another two years and $2M building a nice modern 3,500 ft^2 house (1,000 of that may have to be underground because, well, it's Palo Alto). Otherwise, well, New Hampshire is a nice place to live! :)

In the US, each state sets it's own guidelines for licensing Realtors and the general rules for how they run their business.

In New Jersey, commissions are typically 5% to 6%, depending on the level of service the agent representing the seller performs. My wife charges 6%, and spends a lot of her own money on cleaning the house, moving extraneous furnishings out to de-clutter the house, moving her own furnishings in to stage (decorate) the house, and providing boxes and other packing materials to help the seller move out.

There are no-frills agents in NJ as well; at least there used to be. They were paid a salary by their broker, and the broker charged a very low commission, 1%-2%. These agents provided NO services that weren't absolutely necessary to the transaction. I don't think these agents are around anymore.

About that commission: in NJ there are generally always two agents, one for the seller and one for the buyer, and they split the commission. Sometimes, one of my wife's buyers would make an offer on a house of one of her sellers. Generally she would reduce the commission to 4% in that case; she's still doing more work than she would representing just one side of the transaction, but less than she'd have to do when there is another agent involved. (There are strict rules regarding this situation to avoid conflicts of interest, btw.)

About that $1m transaction: yes, the overall commission is $60k. The two agents split that, so they get $30k. Except they don't; their brokerages take almost a third, so they get about $22k. That's gross income; federal, state, and employment taxes take another third... down to about $14500 now. That's the net income for 3-5 months work, and it has to cover the out-of-pocket business expenses for the items I described earlier to properly market the home.

Your friend couldn't do what he did in NJ. Getting a license in NJ isn't difficult if you're reasonably intelligent, but that's not enough to do business as an agent. You need to "hang your license" with a brokerage, which means signing a deal that will generally require you to pay monthly office fees and a chunk of your commissions, with varying rules about how to handle commissions on your own sales and purchases. (Typically waived for your primary home, and not waived on investment properties.) There's also the second agent involved in most transactions; they're going to get their commission even if you don't take one, so at most you're going to save 2.5%-3%.