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How Much Hub Home Can You Afford, Part I

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Welcome back to Curbed University! We guarantee it to be the most non-boring expert advice you have ever gotten about buying and renting a home in the Hub (not a guarantee). Additional questions as well as topic suggestions welcomed through the ever-trusty tipline. First lesson: Figuring out what you can afford.

Deciding to Buy: Questions to Ask Yourself
Congratulations! You have joined a centuries-long tradition of deciding to buy residential property in the Boston area. Or have you? There are certain questions you should probably ask yourself before you set out on making what will be the biggest financial—and, probably, emotional—investment of your life. Let’s ask those questions, shall we?

How Long Are You Staying Here?
With its many universities, colleges, think tanks and tech start-ups, Greater Boston (as we’ll call everything within the boundary formed by Route 128) is one of the more transient major metro areas of the United States. People come, people stay for a while (they usually rent), and then they go. Will you go?
The National Association of Realtors suggests ideally that you only buy a house or an apartment if you plan on living there for at least seven years. Anything less and you risk losing considerable money on your investment, plus enduring the headache of a quick turnaround sale, which, depending on certain variables, can send the wrong signals to potential buyers. Better to buy a home you’re going to really live in, then play the real estate market (exception: you're really wealthy, or it's someone else's money you're playing with).

What Can You Afford?
O.K., so you are staying in Greater Boston for a while. That’s great! It’s time to do the cold, hard math of buying in what remains, even after the Great Recession, one of the most expensive housing markets in the U.S. There are various theories as to to why the region is so damned expensive, but they all basically revolve around low supply and steady demand. So be prepared to pay relatively big upfront: In general, you will need at least 10 percent of a house or a condo’s asking price as a down payment. In some areas of Greater Boston, it’s more like 20 percent; and some—particularly in Boston’s downtown neighborhoods—it’s even more.
This is a difficult calculation to ease your way around, so you should be honest with yourself. If you want that $700,000 one-bedroom in the South End, and you don’t have—or can’t get—$70,000 to $140,000 as down payment, you should probably move your search a little westward, to, say, a $300,000 in Medford.

How Much Time Are You Willing to Put Into Your Search?
Greater Boston homes, whether condos or houses, stay on the sales market for fewer than 100 days on average, though some sell much faster and some linger for several months. This should be a good rule of thumb on your own part (the 100 days, not the several months part). You should be willing to invest several weeks to a few months in combing listings, meeting with brokers, answering the two above questions, and lining up loans (more on that later). You rush this thing, you may make a mistake. Besides, once you do find that perfect home, it will take at least a few weeks to close the deal.
And, another thing: Don't be discouraged if you're perfect home goes poof! when you thought a deal was near. Greater Boston's housing inventory is notoriously low, meaning there is a low supply of quality available condos and houses. It's Thunderdome out there! Here are some tips for quickly sealing the deal once you've found the perfect place.

Finally, Do You Want Help With This?
By which we mean, you need to look inside your personal skill set and decide if you’ve got the smarts—and the time—to do this house-hunting, deal-closing on your own. Don’t feel badly, but you probably don’t. There can be a lot of rigmarole surrounding contracts, both for the property and for the loans involved; these can take time and demand certain acquired knowledge.
That’s where real estate brokers come in. They get paid a commission, usually based on the closing price and usually paid by the seller (remember that point!), that should run in the low single-digits (4 to 6 percent in Greater Boston). And they split it—the buyer’s agent gets X and the seller’s agent gets Y. Keep in mind: these calculations are often made off the closing price, not the listing price. Keep in mind, part II: the listing (or seller's agent) is acting on behalf of the seller (or developer/ownership group in cases of new development, not on the buyer's behalf; doesn't make them bad people, just makes them focused on their clients).
Is working with a broker worth it? Well, it depends on the broker. Some brokers pour their hearts and souls into hunting on behalf of clients; they make it a 16-hour-a-day job, plus weekends. Some brokers (and we would like to think they are in the majority) do not. The fact of the matter is that real estate brokers work on commission as independent contractors, meaning they only make money when they close deals. That can mean, then, that the ones who do not pour their time and effort into the job may try to hustle you toward a closing when you’re not sure you care for the property, so that they can move on to the next prospective deal. It's a volume business.
You want a broker who listens to your criteria and concerns, and who does not have their eye only on the commission check.
· Why the Hub Housing Market Could Get Worse, Much Worse [Curbed Boston]
· $340K in Medford: a House Like Mike Bloomberg Grew Up In [Curbed Boston]
· The Fastest Sales in the Hub [Curbed Boston]
· Boston's Real Estate Cliff [Curbed Boston]
· No Surrender: Four Tips for Winning Multiple-Offer Situations [Curbed Boston]