Tuesday, May 18, 2010

Pictures of the lot

Here is a link to an album of pictures of the lot. The first 6 face roughly north (the lot ends at the start of the terraced garden in the back), the next 3 are stitched panoramas, and the next 5 face roughly south. The last image shows a bit of view of the Ballard ship canal that we hope to capture better from the third floor.

Sunday, May 16, 2010

Getting started and finding land

I have long been a fan of the modern Seattle architecture firm PB Elemental, who designed and built modern townhouses around Seattle in crazy numbers. While their work is often controversial, I simply love their buildings, and appreciate their focus on affordable modern.

So, when I noticed that PB had a facebook page, I became a "fan." As a result, I got frequent updates on buildings and designs in progress. A set of images on a new prefab design piqued my interest; I assumed a that a prefab house would be much more affordable. It turns out that is a common assumption and not really true (see here and here for some great arguments), but not realizing this I emailed the firm's co-founder, Chris Pardo.

He told me that prefab was not necessarily cheaper than traditional stick-built homes, but that there were other advantages (faster, no exposure to Seattle weather). Either way, PB was building several affordable modern homes in our price range, and he felt that our budget and criteria were very possible given the recent decline in construction costs and land values. So we scheduled a meeting, which went great. Chris, who is also a licensed realtor, offered to help us identify land or an existing house for a substantial renovation. At this point I didn't really think that our project was realistic, but I thought that it would be fun to explore, and wouldn't cost me any money if we couldn't make it happen. And the dream of living in something like the Crockett or River Bend houses below was certainly inspiring.

So, the first thing we did was get a pre-approval for a construction loan from Washington Federal, who Chris recommended. Given that we were in the depths of the economic crisis I was somewhat amazed that anyone was giving construction loans, but our originator, Anne Curran, assured us that they would IF the project appraised well.

The process seemed amazingly low-risk. We could make an offer on a property with a long financing contingency. Then, we could do the basics of a house design, get a bid from a general contractor, and get the appraisal. If it didn't work out, we could exercise our contingency and get our earnest money back. (It turns out that it is not really as straightforward and low-risk as painted by this rosy picture, as I will later describe, but luckily it worked out.)

So we decided to give it a go. Unfortunately, the first stage of finding land turned out to be not so easy. Over six months, we made offers on five properties:

1. The first was a tiny, roughly 900 sq ft house on a big, flat in Magnolia. The idea was to renovate it while Method Homes would simultaneously build a second floor in two modules in the factory; these modules would be craned on to the renovated house (and several support columns) once it was done. The concept seemed great to me; it's greener to reuse an existing structure than tear it down, and the whole process would take only 2-4 months since the work could go on simultaneously. The house seemed to have great bones, too. Unfortunately, the owners were stubborn. Even though the market was very slow at this point, their counter-offer was full price, and they cut the inspection period to 7 days. While we eventually met their price, we needed the standard inspection time of 10 days, since along with a normal inspection we needed the oil tank on the property tested for leaks and a structural engineer to examine the foundation. So, sadly we had to walk away from the deal. (The house recently went pending, seven months later and at a list price $10k less than we offered; I hope those 3 days were worth it!)

2. The second lot was in Phinney Ridge with a tear-down existing house. The views were some of the best I had ever seen. The land, which wasn't on the market, was owned by a developer facing foreclosure from a hard money lender. The developer told us for a month that he would sign our offer any day now, but it eventually became clear he wouldn't, so we gave up.

3. The third lot was also on Phinney Ridge, with nice views. It was vacant, split off of a larger lot with an existing house gutted by fire damage. Both lots were for sale, but only ours was affordable. They accepted our offer, but it turns out the owner was in a short sale situation. She originally thought the split-off lot could be sold in a normal sale, but her lender told her otherwise. It became clear the short sale would take forever, and the price was fictional until the slow-moving bank had their say. We eventually gave up.

4. The fourth house was on the north side of Queen Anne, again with great views. The house was older, so the plan was to tear it down to the foundation, and build on top of that. The property received 12 offers, mostly from flippers, so we weren't even close.

Incredibly frustrated by our inability to find land, I resorted to surfing the city's online parcel viewer, superimposed on satellite imagery, looking for vacant lots. It turns that there was exactly one other vacant lot in Phinney Ridge, our favorite neighborhood. As you can see in the image below, it was a pretty strange lot; there's a driveway right through it to another house. None the less, it was a real lot with its own address and tax parcel ID, but no house.

I used city online records to look up the owners and googled them; it turned out they built and owned the house up on the hill that the driveway serves. After some hesitation I decided to email him; amazingly, he replied that he was was interested in selling to the right people (since we would be neighbors), and he invited us to meet him at the lot.

The sellers were very nice, but the lot was certainly unusual. Though it was a standard-sized lot, the driveway easement meant that the house footprint would be restricted to the area east of the driveway (north is up in the image above). This restriction meant we would have a three-story house, rather than two, and the yard would be quite small. On the other hand, the lot had a lot of privacy, since there was quite a distance from other houses on three sides (typical Seattle houses are just 10 feet apart). There was also the possibility of views from the third floor, and from a potential rooftop deck which could serve as the primary outdoor space rather than the tiny yard. The area was quiet, low in traffic, and close to the zoo and Woodland Park. Finally, the price was low. PB Elemental visited the lot, and they thought it had great potential. I think they were also excited by the challenge of designing on such a constrained, oddball, sloping lot.

So, we made the owners an offer at the full price they suggested; we thought the number was fair, and it turned to be the cheapest property sale in Phinney Ridge for the last several years. This made our tight budget much more feasible (though, it turns out, the roughly 20% slope of the lot would also add quite a bit to construction costs).

They accepted our offer! However, it was going to be a fairly complicated transaction. First, our negotiated financing contingency period was fairly short. Second, there were a number of easements, and we needed to create three more documents: a joint use and maintenance agreement for the driveway, an easement to access parts of the driveway on their land, and an easement allowing our building to cantilever over the driveway (more on that later). So, we had to get a lawyer involved. Finally, the front of the lot had a steep slope area that fell under city "environmentally critical area" (ECA) regulations. This meant the city had to approve that we could even build on the lot; we didn't want to get caught buying an unbuildable lot, or one that required expensive civil engineering.

I won't go into all the details, but with the help of the cooperative sellers, our architects, our attorney Charles Horner, and our permitting consultant Ard Consulting, we got the agreements and the ECA exemption from the city done before our contingency expired. It was quite a time sink, though, and there were some dicey moments!

Why build?

I have long had a love of modern design and architecture, and thankfully my wife shares those tastes. So, after several years of an unsuccessful search for a modern house that fit our criteria, in August 2009 we started exploring the possibility of creating one ourselves. That exploration brings us to today, May 2010, and it's actually happening: we own a piece of land, and have contracts with a builder and architect as well as a construction loan. This blog will chronicle the progress of permitting, design, and construction, but I will start with several posts on the efforts required to bring us to this point.

First of all, why build? Everyone knows housing inventories are incredibly high. None the less, we had a simple set of criteria that we just couldn't satisfy:

  • A single-family house with roughly 2000-2500 sq ft. We currently own a townhouse, and it is a great home for a couple, but it doesn't accommodate children very well. Likewise, a huge house doesn't seem like a great use of resources.

  • Modern. To me, modern can include a full range from mid-century modern to 80's modern to today's modern architecture; we were open, as long as the house had open spaces, clean lines, and minimalist finishes.

  • Within the region of a good elementary school. (I used the overly simple metric of a school in the top 100 out of the 1008 in Washington state on SchoolDigger).

  • Within a couple miles of the Fremont area of Seattle, where I work, since I want to avoid commuting by car. This limited us to Ballard, Phinney Ridge, Magnolia, Wallingford, and Queen Anne. (Fremont, where we live now, doesn't have a school that makes the cut.) These are well-established and desirable neighborhoods, i.e., expensive.

  • On budget. I won't give specific numbers, but our price range is substantially south of the 7-figure mark. High for most of the world, but not unusual in Seattle.

After several years of watching Redfin listings, I found that a house meeting the above criteria didn't exist. The world of modern houses seemed to have a big gap; there were plenty of modern townhouses, and plenty of huge modern houses that were well north of one million, but almost nothing in-between. What did exist was usually in a neighborhood like the Central District, whose schools and distance were not acceptable. This gap is a product of the economics of development. Land in Seattle is expensive, so building an economical house doesn't leave much margin; building four economical houses, or an expensive mega-mansion, makes the land a much smaller percentage of the overall project.

I simply assumed that building a custom modern home was outrageously expensive. So, for a while I hoped to buy a mid-century-modern house that was outdated, and renovate it to my tastes. However, most people don't seem to think their interior is outdated, so the pricing never left much room for a renovation budget.

That left us in a conundrum. In the next post I'll describe the beginnings of the solution.