As some of you may recall, I spent the first decade or so of my career doing electrical engineering (i.e. – circuit design, PCB layout, etc.). In that world of custom electronics, every customer seems to want their widget to cost $5, be packed with features that are 100% reliable, and have the design completed in a week.
It is obviously impossible to achieve all three of those goals, so the key to a successful project was to figure out which of those ideals the customer was willing to compromise in order to get the other two. Are the most important goals to have a reliable, feature-packed device with designs delivered in a week? No problem, but it’s going to cost you (a lot). Does the device have to be cheap and delivered fast? We can do that, but we’re going to have to cut features and sacrifice some testing.
The saying we used to describe this process is one you may have heard before: “Fast, good, cheap: pick any two.” This concept is sometimes known as the project triangle. When it comes to real estate, I believe there is a corollary to the project triangle that can help you set more realistic expectations when shopping for your home: “Price, quality, location: pick any two.”
Just $250,000 on Capitol Hill. Hah, just kidding—it’s $8 million. And also in Tacoma.
Everyone would love to buy the $100,000, brand-new, 3,000 square foot home on an acre lot at the top of Queen Anne. Clearly no such home exists, nor will it ever exist. If you are actually serious about buying a home, you are going to have to set appropriate, attainable goals for your search.
Even though lending standards have become more conservative, and banks are unlikely to approve a debt-service-to-income ratio of more than 30%, it is also becoming more common for borrowers to be even more conservative than that. Maybe you can “afford” to take out a loan big enough to buy a $750,000 home, but it is important to you not to go above $400,000. Figuring out whether you are able and (more importantly) willing to compromise on price is usually pretty straight forward.
Quality can mean many things to many people. Here, I’m using it to mean things like the size of the house, the size of the land, and the finish quality of the house. Is one of your top priorities to have the perfect kitchen the day you move in? Or perhaps your family of six needs no less than 2,000 square feet to fit everyone and their stuff. Maybe quality should be one of the two priorities you pick.
Obviously location is a priority that most people don’t want to—or shouldn’t—compromise. “Drive ’til you qualify” is a trap that all too many people fell into during the bubble, and now they’re stuck commuting from Marysville to Redmond. However, if price and quality are really so important to you, maybe location should be what you give up.
Obviously decisions on price, quality, and location are not a simple yes or no choice, but a give and take. If you’re willing to give up the perfect kitchen, you can pay a little less. If you look in Ballard instead of Queen Anne, you can get a better house for the same price. You get the idea.
The price, quality, location equation is probably the way most people intuitively shop for a home already. With this semi-formal framework, you should be able to make better, more intentional decisions as you search for the home that has just the right combination of factors for your budget and lifestyle.