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From Spotlight: The Mistake-Proof Guide to Home Buying

It’s an (Urban) Jungle Out There: How to Buy Smart in the City

Tips for buying in Washington, D.C., and other intense urban markets.

Kids riding their scooters on an urban sidewalk
Image: Monica Marino

The braggable joys of a primo location. The convenience of being able to walk to get your soy latte or see that indie film from the Czech Republic. The frustration of multiple bids. The cost.

Buying in the city comes with its own set of opportunities and challenges. But you'll be prepared if you know a few things.

Each Urban Market Is Unique

Ready, set, buy. Be prepared for a high-speed buying process in New York City, Oakland, Calif., Washington, D.C., and many other urban areas thanks to steep market competition. Though some smaller cities have more reasonably paced markets, the biggest, hottest real estate markets in our country move like race horses.

"The real challenge for first-time home buyers in our market is orienting them to this hyper-accelerated, competitive market," says Cameron Platt, a partner and broker with Abio Properties in Oakland, Calif.

For example, one odd practice you often find in urban real estate markets like Washington, D.C., is listing a property below market value. While that may seem counterintuitive, it goads people into putting down aggressive, and sometimes reckless, offers on a home, he says. Best to spot those before you get caught in a bidding war.

Every urban market has its own kinks along those lines. Before diving into a high stakes, lightening round of homebuying, make sure you prepare in three ways:

1. Do a deep dive into the market. A qualified real estate agent can help you understand the potential mistakes you could make, what red flags to look for (like that below-market listing), what fair market value is for homes in the area, and any oddities about the market. For example, in some hot markets, an open house may be the only opportunity to see and make an offer on a home.

2. Get your financials in order. You will be wasting your time if you don't. "You get one shot to make an attractive offer package," Platt says. That means having your mortgage financing all set with a pre-approval (not pre-qualified) letter in hand and verification of your funds. In a high-paced market, sellers won't even consider an offer without a pre-approval letter. There's no wiggle room in this.

3. Get a leg up on the competition. One technique in a fast market, says Rachel Valentino, of Valentino & Associates LLC with Keller Williams Realty in Washington, D.C., is to agree to an inspection where you:

  • Can walk away from the contract if there's a major issue, like foundation trouble.
  • Can't negotiate with the seller over any issues that arise.

This arrangement appeals to sellers because they won't be hit with thousands of dollars in repairs, and it gives you an advantage in a competitive field.

Similarly, if you're competing against all-cash offers, which don't require an appraisal, you can waive the appraisal contingency. That means no matter what price the home appraises at, you're still going to buy.

In either case, understand the risks — if the appraisal comes in $10,000 lower than the asking price, for instance, you'll have to make up the difference; the bank isn't going to give you more than the appraisal amount. And ideally, hire an agent who knows the city inside and out.


Don't Set Your Heart on Just One Neighborhood

You may love the neighborhood you're currently renting in, but urban areas have a variety of neighborhoods. If housing inventory is low or too pricey in the 'hood you've set your heart on, you'll only be in for disappointment after disappointment.

Be proactive and expand your search to other neighborhoods that may offer the same amenities, such as walkability (handy tip: Check out the website WalkScore.com to see).

"Every neighborhood has its own flavor and character," says Emily Green, a REALTOR® with Sandy Green Realty in Minneapolis. "Go to the neighborhood coffee shops. Walk around. Chat up the mail carrier. Say 'Hi' to someone walking their dog or mowing their grass and let them know you're thinking of moving onto the block."

And think about your lifestyle. "If biking around is something you want to do, you might be happier in a more residential area of the city, as opposed to a denser part," she says.

She also suggests asking friends and colleagues if they know a local you can talk with to really make sure you and the neighborhood are a match.

How Do You Really Get to Know a Neighborhood?

Whether you're exploring emerging or established neighborhoods, you want the inside track. Here are a few things to consider.

Crime. If it's a concern, check out sites like CrimeReports, where you can see what types of crime (assault, theft, etc.) have occurred near an address. But don't freak out based on what you see there. “You have to put these stats in perspective,” says Valentino. “First look at the results where you're currently living so you have some perspective. A lot of times there's a decent amount of crime in your own area that you're totally unaware of.”

And it bears repeating, “The best thing you can do to experience a neighborhood is to spend time in it. Period,” says Platt. Don't just drive through. Walk around. At different times of day.

Schools. Check out school ratings via a site like GreatSchools, which includes parent ratings. Again, keep ratings in perspective. “Some people tell me they only want a school that's rated a nine or 10. But are you going to pass up a restaurant with an eight if it's got great comments?” Valentino asks. “School ratings shouldn't be the sole score you look at. Talk to people, visit the school.”

If you don't have kids and aren't planning to (or at least any time soon), you might be inclined to ignore schools. If you and your agent are sure you're buying a starter house (or condo) at a price point where there are plenty of people to come after you and buy, then it may not matter. “In D.C., there's only a certain neighborhood where you can get a one- or two-bedroom condo for $400,000. But it doesn't have the best schools,” Valentino notes.

Empty lots and development. The great thing (or maybe it's not so great) about cities is there's always change. Your agent can help you check with the city planning department to see if there are permits pulled for development near you. Ideally, you want to find out about changes that could affect your view or noise tolerance.

Neighborhood designations. Property listings might claim a home is in a super-cool neighborhood, when, in fact, it's like a bus ride away. “Listing agents are going to do what's advantageous for their seller,” Valentino notes. So you have to be a smart buyer. That means working with an agent who knows the city inside out.

Don't Overlook the Hidden Costs of Transportation

If you have a car, factor in parking — possibly a monthly fee. Or you may have to deal with the annoyance of having to park on alternate sides of the street every other day in accordance with local ordinances. A condo or co-op might come with a parking spot, but you may have to buy it. Prices range from a few thousand in smaller cities to more than $100,000 in New York.

The good thing about living in an urban neighborhood is that you could ditch the car altogether (if you haven't already). On average, public transportation costs less than owning a car. But in some cities, that may not be the case, so do your homework to find out.

Also, consider the built-in costs of buying too close to the convenience of public transit. In Washington, D.C., for example, “You may pay up to a $150,000 premium if you're on top of a Metro," says Kymber Lovett-Menkiti, president of sales for the Menkiti Group with Keller Williams in the D.C. market. "If you're sensitive to price, consider living along a bus route in one of [a] city's emerging neighborhoods."

With a little research, planning and perseverance, it is possible to find — and buy — your dream home in the big city.


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Author photo of writer Stacey Freed
Stacey Freed

Stacey Freed writes about homes, design, remodeling, and construction for online and print national trade and consumer publications, including "Better Homes & Gardens." Previously, she was a senior editor at "Remodeling" magazine. Follow Stacey on Twitter.