The report that the San Francisco real estate market is picking up is better news to sellers than it is to buyers. But this column is the Mystery Housebuyer, not the Mystery Houseseller, so we’re interested with how this affects the person hoping to own a prospective home.
In short, buyers can now expect to pay more – maybe much more – than they would have paid just a few months ago, and the bid submission process now is weighted against them. The country might be mired in dismal economic growth, but San Francisco has bounced back rather well from the depths of the Great Recession, and it’s getting a further boost by the influx of new tech jobs and their highly paid employees looking to
buy property.
The biggest danger of a suddenly hot market is that it can cause people to lose the rationality they had been using before they got to the point of bidding on a home. It’s one thing to look at lots of houses and see the prices rising; it’s another altogether to find out you are bidding against literally dozens of other potential buyers.
Is there any way to ensure that you submit the winning offer on a home? Unless you tell the sellers you’ll pay the listed price plus the GDP of Singapore, you can not be 100 percent certain to be the winning bidder.
We were lucky. Extreme-ly lucky, in fact. We bought our home just before the prices started escalating; while we were in escrow, comparable homes on the block were selling for at least 30 percent more than the price we paid. Had we been even a couple weeks later, the sellers might well have decided to hang on a bit longer and squeeze some more money out of the heating-up market.
In general, here are some tips that might provide guidance.
Just as you would do when bidding on a jacket on eBay, you should know what your maximum is and not exceed it. (That is how you bid on eBay, isn’t it?)
Also, because sellers are back in control, they are less likely to indulge a buyer with extensive contingencies. You might well end up bidding on a property that has many interested buyers. Local media have reported people doing away with all kinds of possible hindrances; for example, they’ll give up the inspection contingency. There might be a lot of contingencies that are OK to skip, but think carefully about not having your inspections; at the very least, mentally budget for significant post-sale expenses.
You can also help yourself (or your broker can help you) if you know a lot about the sellers and their history with this property. If the property has been on the market for a very short time and it’s already receiving hot and heavy interest from potential buyers, then be prepared for a bruising bidding war. If the property was on the market for six months, didn’t sell, then was relisted with a different broker, then the price might be easier to negotiate. Might be; that same crowd of buyers can push up prices of even relatively uninteresting properties when so many people are trying to buy homes in the relatively small city of San Francisco. (Not to be a broken record, but if the property didn’t go anywhere in its previous listing, remember that inspections are
your friend.)
And you should always check comparable sales. Again, keep in mind that a similar property down the street that sold four months ago for $150,000 less than what your seller is asking does not mean you should low-ball the seller. The market has changed, so you need to be as current as possible with your comps.
