Purchasing real estate in the Bay Area and Silicon Valley is unlike anywhere else in the country. It’s competitive, especially at the lower price points, and there’s simply not enough available inventory for all the buyers, especially close to where people work. We took at a look at some of the tips that real estate agents and homebuyers offer from their experience in this dynamic housing market.
A recent article in SFGate chronicled the struggle that a couple with a growing family underwent when trying to buy a home in a good school district in the Bay Area. They made four offers on houses and didn’t get them. Finally, with the help of a real estate agent, they found an unlisted home in a good school district, which they successfully bought.
“The three months when we were looking was the most stressful time of our life,” said Jason Baker. “It was more stressful than the wedding, more stressful than the first month at home with a newborn.”
According to Baker, listing prices for homes are “marketing prices” designed by agents to get a lot of people interested in a home so there’s a bidding war.
When it comes to making an offer price, at Intempus, we counsel buyers on the general market trends according to current data for the area where they’re looking. For example, in our recent post that covered April Bay Area real estate data, we wrote about how homebuyers are paying over the list price in San Francisco, San Mateo, and Santa Clara counties.
The list buying price to list price ratio for single-family-homes and condos in April ranged from 101.4 to 106.8 percent. So, buyers are paying over the list price, but it’s currently not by crazy amounts as some might assume. Still, each home is unique, as is each homebuyer’s desire for a particular home. But it’s true in the Bay Area that you need to be prepared to bid over the list price if you want a chance to get the home.
Consider more than the standard 10 or 20 percent down.
Ultimately, when it comes to buying real estate, money talks. All-cash offers are not uncommon in the Bay Area. However, the highest offer will usually win. Even so, consider whether you have more money to put down than the standard 10 or 20 percent down payment. All of these things can help to increase your odds of being an attractive buyer to the seller.
Another tip the Baker family recommended is to get fully underwritten by your lender, not just pre-approved, when you’re ready to buy. According to Baker, “Many houses go on/off the market in a matter of days, so you’ll want a letter ready to go in your offer packet with the bank that says, ‘Yes, we are prepared to loan them the money.'”
Be flexible but be cautious.
Another lesson that the Baker Family shared was to forget about contingencies. “We lost a bid on a house that had no inspection report in its disclosures packet, very rare for the Bay Area,” Baker said. “The seller was not willing to accept any offers with an inspection contingency, and there was water in the basement.”
This is another reflection of the competitive Bay Area housing market. Many homebuyers are willing to assume more risk because they believe in the upside of the market. If a home or condo has some issues, they’re willing to foot the cost. However, if you don’t feel right about a certain home, we counsel people to go with their gut in those situations. Another opportunity will come along to buy a home that you do feel right about.
Think outside the box.
A tip that we recommend for our clients at Intempus is to think outside the box. There is definitely a herd mentality when it comes to real estate. So, to set yourself apart from the competition by considering alternative approaches. In the Baker’s case, they found a home that was off-market. Foreclosures can also offer opportunities and less competition. And of course, there is always the fixer upper. Many homebuyers either don’t want to deal with a remodel or lack the capacity to envision what a home can become with some upgrades. If you can, you have any advantage.
In addition, some buyers may be looking at a particular size house because they absolutely need three bedrooms. Even if you need three bedrooms as well, you may find the perfect two bedroom that can be remodeled.
Another idea is to look at properties that are larger than you need and convert part of the property into an in-law unit that you can rent out. Just as the Bay Area home buying market is competitive, so is the rental market. And many jurisdictions are now encouraging homeowners to add accessory dwelling units, or ADUs or in-laws, to help alleviate the area’s housing shortage.
Be open to different locations.
All of us have preconceived ideas about towns and neighborhoods in the Bay Area and Silicon Valley. But until you really spend time in an area, you don’t truly know it. While it takes time and energy to drive around and look at different neighborhoods, buying a home or condo is a long-term decision, which makes the driving around before you buy seem like a trivial amount of time by comparison.
You may have priorities, such as commute time to work and a good school district, which will narrow your search somewhat. But there are hundreds of neighborhoods in the greater Bay Area that have a lot to offer and will meet your needs. Up and coming neighborhoods can offer some of the best upside opportunities as well as being personally rewarding. You’ll be playing a part in making a decent place to live an even better place to live while helping to create a vibrant community.
Work with the Bay Area’s Real Estate and Property Management Experts