by Alexander Clark
If you’ve never seen an Ultimate Fighting Championship match you’ll have no idea what I’m talking about, and I know it’s a stretch comparing writing an offer to stepping into the Octagon and taking on the likes of Chuck Liddell, but to some of my clients, they truly feel they are getting kicked while they are down and they just want to get a place to stop the bleeding.
Our story of 636 Steiner, a 3 bed, 1 bath, 1582 sqft. condo in Alamo Square, asking $869,000, is quite a doozy.
I’ve put this picture of the kitchen in so you all can see what kind of kitchen near $1,000,000 buys you these days, and illustrate a big problem (among others) I had advising my clients to go much higher in their offer price.
This all started a couple weeks ago when my clients said they’d found a place they want to write an offer on. (This would be the third offer they’ve written, the other two being 218 Cole, and 256 Page).
The seller decided not to do the typical pre-contractor and pest inspection in order to promote super “clean” offers, so we thought we’d get a leg up on the competition and do them prior to the offer date…the seller said no, because we weren’t the only party requesting to do this. So we waited until Monday.
Offers were due at noon, and I was continually calling the selling listing agent to find out how many were coming in, so that we could adjust our asking price and submit an offer at a price that we thought would keep us in the game. Our first offer was at $915,000, which I submitted at 12pm. I called the agent and asked how many offers he had received…the answer “four so far, but I expect 9 total.” My thought…”F*ck!, what the hell!”. Called my clients, told them the story, and said we better put our best foot forward. So at 2pm we revised our offer, told them to burn the other one, and submitted our max offer at $950,000 pleading the selling agent to keep us in the game. So we are now $81,000 over on a home that has tiny tandem parking, a trek down the stairs to the washer/dryer, really no easily accessible outdoor space, a kitchen that really has no counter space, and 8 other interested buyers. I told the agent to give it to me straight, so we don’t waste any more time. His answer, “I have three offers higher than yours, and they’re very ‘clean’.”
That’s it. Throw in the towel, clean up the blood, lick our wounds and move on. The property was in contract that evening, so I’m thinking there wasn’t too much in the way of counter offers and I wouldn’t be surprised if it sells north of $985,000, which to me, is absolutely nuts.
The score: my clients 0, the market 3. These clients need a knockout on their next offer and we’ve asked Mr Liddell for some help, so steer clear.
Happy house hunting.
–218 Cole: Damnit it happened again [theFrontSteps]
–Why’s this keep happening to me?! [theFrontSteps]
–636 Steiner [MLS]
Wow, San Francisco must be such a special place to justify those places. I don’t really get it. I mean I lived in SFO for 6 years in the late 90’s early 2000 and liked the place but give me a break, no city is worth paying $1m for a tiny third rate condo.
I saw the light and moved on to a better city in the Pacific Northwest and bought an amazing craftsman with a nice yard in a neighborhood far cooler than most in SFO.
However, I do admit to missing the stench of urine and feces on Market Street in the mornings.
Who are the people buying these places? We’ve been in this situation 3 times ourselves and I think we’re done. We go to open houses – look at the house and look at the asking price and momentarily get hopeful – the asking price and the house seem to match pretty well. Then we remind ourselves of what we know with certainty – if we like it – so do a bajillion other people just like us – and offers will be many and the selling price will be at least 100k over.
We’ve started poking around the Oakland/Berkeley MLS where we’re seeing things sell for pretty close to asking on a regular basis – and for the money we (and your clients) are willing to spend you can get a pretty nice house with a yard and a garage. It feels like giving up – but I don’t have it in me to keep getting kicked like this for the privilege of giving someone a million dollars for a house that just isn’t that great.
Why do I get the feeling that SFOSailing never lived in San Francisco?
Point of clarity: When you say “selling agent”, you mean “listing agent”. *You*, representing the buyers, were the “selling agent”.
[Editor’s note: You are correct. Have made the change, and actually meant to say “seller’s agent”, but agree that “listing agent” is much better. Thanks!]
I think your clients got lucky and personally would advise them to stay away from hot auction properties. The place looks nice and its right there near the painted ladies, but you’re a stones throw from a sketchy part of town. And certainly not putting an offer with no home inspection.
I personally would never be able to justify paying that much money for a place like that. Nothing against San Francisco, I love the city, the architecture, the neighborhoods, etc., etc., but damn these prices are unbelievable. I guess I will just have to wait for the 2.0 crash and hopefully the prices will float back down to reality.
You’re right SFOsailing…San Francisco IS a special place. But, likewise it’s not for everyone. That’s the distinction.
We all live here for our own personal reasons, ant that’s what matters. Yes, it’s expensive, but all of the world’s GREAT cities are..for example: London, Paris, New York, Sydney…
We choose to live here because its VERY livable, walkable, very Euro in my opinion. It’s diverse in many ways.
But if all you have focused on is the urine and crap on market street, while you lived here. well. then…..ah…..you missed out.
and by the way..I’ve never heard anyone call The City “SFO”..isnt that what we call our airport?
Don’t get me wrong, San Francisco is a great city. It’s not the best city in the world but it is nice. I loved living in The Marina. I loved hiking from Muir Woods to Stinson Beach and back, I loved the restaurants, proximity to Sonom/ Mendocino, and god forgive me, even the fog rolling in. At some point though, you need to put down real roots. Good luck to you if you are happy to rent till retirement or can afford to pay $1M for the overpriced condo and are happy with that.
If you can’t and move to the east bay or further east, you may as well live in Peoria. At that point, there are far better city choices you can make. I live in Seattle about 2 miles from downtown and within 2 blocks of a happening street with restaurants, bars, boutiques and coffee shops and 1 block from a great park. I got this and a great house for less than the price of the crappy condo above. Life is good… you decide what you want and live with the consequences.
[Editor’s note: Well said. Could you pass some fresh salmon our way, we’re getting gouged on it here.]
Pretty nice place, but I am VERY wary of the parts just south of here. Sketchy place, and I would never want to walk around alone at night down there. But, this place would have probably sold for $1.4-$1.5 million in District 7, so in essence, you are paying 30% less. I’m not thrilled about 1 bathroom, or tandem valet parking though.
This is the key. As soon as you find a place you like, you will find yourself competing against other people who also like. PRetty soon, you notice the place gets bid up to a new record high and u get melancholy. You give up for several months, then you realize you are getting older, you don’t want to put your life on hold and just burning money enriching your landlord in rent, and you try again, and again, and again until you finally go crazy, and say what the heck, i’ll bid 50K more than even the highest guy cuz i’m sick of looking and life is too short. They everything revalues upwards again, and the process repeast with inflation.
Then you wake up 3 years from now and laugh at how fortunate you were to pay the price you did, with your payments getting inflated away. Life is good :)
I think it would be great if most renters could go buy places in Vallejo, Antioch and the outer areas, so we can have a less congested city.
spending 8 months worth of sundays looking at open houses, i can empathize with your clients. it’s hard to find a place you love, location you love, and price tag you can live with!
i was one of the people who fell into the trap of aesthetics when looking at a place. i mean, who wouldn’t? well, my significant other didn’t luckily. after getting discouraged and even finding ourselves going to open houses in the east bay, we decided to revise our plan and look at properties that weren’t as aesthetically pleasing to the eye but that we could have a vision for making into something we loved. young couples like us in sf, seem to steer clear of these types of properties so it worked out for us.
moral of the story: you don’t have to pay 1M (or even close) to live in a nice house in a nice location in sf . you just have to be willing to do a little bit of work to get your house in that pristine condition that everyone loves. and at the end of the day when you decide to move on from that home you will find yourself making more than a shiny penny!
oh, and to sfosailing – i always wondered why seattle was so beautiful yet so much cheaper than sfo/bay area. well, i moved there for a while and found out and came running back to the bay area. the weather, the people, the lack of culture..and the list goes on..
what a dump..
Isn’t that kinda in the ghetto?
It is not in the ghetto, just at the very edge of the ghetto, which makes taking a nice walk around your neighborhood cumbersome.
“They everything revalues upwards again, and the process repeast with inflation.”
Sure, overpay for a dump ‘near’ the ghetto. You’ll feel great about it later…
It gets very tiring to hear this can’t-lose-on-real-estate-investing kind of crap. This mentality is reckless.
[Editor’s note: Oh you can lose. When I get the chance I’m going to post about my incredible loss currently going on with one of my investments in Arizona…bleeding sooooo bad on that one. But I’m going to cut my losses and move on. You can’t win them all, but you can’t win if you don’t play.]
It may be ‘reckless’, but why fight it? Creating wealth is a fantastic thing.
A better strategy is to look at over priced properties, which may appear to be out of your clients’ budget at the first glance. Keep in mind, 25% of the properties on MLS have reduced prices, so at least 25% of the properties on the market have been over priced at some point.
People are still not used to the idea of “offer below asking”, so if a property is overpriced, most likely it doesn’t get any offers.
It works much better if you can get someone to submit a 25% below asking first to prepare the seller, then submit a 15% below asking one week after. If the seller refuses, walk away. Check again in 30 days, and submit another offer 15% below asking.
Nice one, John. I agree with your tactics. I bought my home three years ago in this same way. In fact, I also submitted my below-asking offer on a holiday weekend when nobody else was out looking. The house was truly a turd but needed only cosmetic work. I’ll take that any day over the type of place in this post above (i.e. $1m with an Ikea kitchen atop white, Home Depot tiles…)
Boomtime, please spare me the late night infomercial talk. “Creating wealth is a fantastic thing.” Seriously? I like investing and real estate and money. But the can’t-lose-no-matter-how-stupid-you-are-attitude (so long as you throw money at everything and lever yourself to the gills) is very tiresome.
You have to be at least somewhat aware of what’s going on in the broader economy, right? “Boomtime” was the last ten years. Today we’re pretty lucky to be getting back to “normaltime” and we better hope we’re not headed to “fall-off-a-cliff-time”.
My advice to my clients is always the same — If you have interest in a property at a specific price, let’s make an offer. We can’t control what other people can do – but we put together very professional, clean offers that will close escrow and we try to keep emotions out of the decision making process. If someone wants to spend 10%+ over the asking price — so be it — can’t stop them from doing that so we can’t get too upset about it. I’ve been fortunate to work with incredible clients who are patiently aggressive. Tell your clients to keep their heads up Alex- I’ve always found that things generally happen for a reason and the right place is out there for them.
Greg, I agree with you.
I bid on seven properties before I “won” back in 2004 and it was far more chaotic back then. (Slightly cheaper property, but definitely more chaotic due to the looser lending environment.)
This market takes lots of patience. Bidding over asking is not inherently wrong but overpaying due to emotion or greed is not wise.
This is a great thread.
Alex, you’re clients got off easy. The allure of 1500sf at below a $1M is sure a nice bonus but not worth the ‘price’ IMO.
[Editor’s note: I would have to agree, which is why I advised 950 as the max.]
I agree that your clients were lucky they didn’t get the place. Prices are falling, not rising. Patience will be rewarded.
Mark, prices are falling, except where prices are rises.
So, yeah, this thread was about our offer. And thanks to all so willing to converse on the matter. It’s both reassuring and compelling to read the discourse.
As far as we’re concerned, we simply shrug and move on. We know we can’t control the market, but we have total control over our budget. So when it climbs out of our reach, it’s really no problem to let those more flush stake their claim. We’ve been pretty picky thus far in tendering our offers, and note that this City is full of similar shoppers w/discriminating eyes. Crap properties sit until the price is right. Good ones go and go fast. I’d like to think we’ve got the vision to discern a cosmetic fixer from a tear down, but frankly we’re not seeing many of those out there either. Supply and demand is a powerful force, and right now (heck, this whole year), there’s simply a lack of decent inventory (discounting all the new construction, of course).
Back to mill…
Thankfully you are working with a first class Realtor who cares more about helping you find a great place to call home and one which will be a sound investment as opposed to working with someone who is going to pressure you into buying or pushing your budget beyond your comfort range.
Keep your chin up and enjoy the city — soon enough you’ll have a mortgage and all the fun stress that comes with being a homeowner!
Hi ‘The Client’ – Thanks for your thoughts. There’s always something around the corner, so don’t give up. Can you share your first hand thoughts on what you think prices have done this year, and where you think prices are going? Also, do you think there are also alot of buyers similar to you who are losing out etc? What do you think is driving the strength?
Dave, I call it the way I see it. It is an incredible Boomtime now, and I can’t wait to get my bonus this year. I have never exprienced such a tight labor market, and salaries and bonus are reaching new record highs. Imagine a 23 yr old 1 yr out of school clearing $115,000 in total comp? Now, imagine the legions of more exprienced people in my industry, and what they are getting paid? It is not uncommon for a 28 year old to get paid $300,000 and a 32 year old to get paid $500,000+. This is the prime demographic of homebuyers in SF. Add a spouse, and you get another $50,000 AT LEAST + income.
1330 Chestnut St. anyone? In contract after one Sunday open house for $1.495 million purchased last yr for $1.025 mil with a 200K remodel.
2255 Steiner St., a 2/2 asking $1.498 mil at under 1,500sqft with no view. Impressive! I bet it gets into contract by another $500,000/yr couplbe.
2249 Washington St., a 2/2 in contract for $1.525 mil. Who’s buying this?
2745 Laguna st., a 3/2 in contract for over $1.55 mil, purchased for $$1.20 mil a couple yrs ago? Who’s buying this?
3042 Jackson, a 2/2 in contract for $1.595 mil, who’s buying this?
2865 Jackson, a 3/2, 1700sqft place with $775/month HOAs… who’s buying this?
2138 Beach st, a 3/2 in contract for $1.799+ mil. Nice location, lower unit. Who’s buying this?
The list goes on, and on and on. I’ve never seen so much strength in th $1.3 and higher condo market. Personally, I would look to buy a SFH over a condo in this price range, but maybe these buyers just want simplicity?
The key is LOCATION and distinction of the property. Think about the best properties sitting a top a pyramid. The base, which is demand, gets wider and wider due to rising incomes, inflation, population =demand, as the supply remains fixed. Think of fine art appreciating over time. Same thing, and that’s why I’m amazed people are plunking down $1,000sqft+ for new properties in SOMA where there is an endless supply, and NEW becomes NOT NEW in 5 years. People start screaming the market is falling when a SOMA condo gets reduced. I’m just giddy b/c prices there imo should be no more than $600/sqft, yet people are paying $800-1,600sqft.
Finally, I have met an incredible amount of people in SF who have help from Mom & Dad. Even kids in their lat 20’s and older are getting help from Bank of Mom & Dad. Heck, on my block there are two 26 yr old kids living at home with Grandma! One underestimates the wealth in SF.
Have a great weekend all. And Alex, if we can revisit all these properties in several weeks, that’d be great!
BOOMtime
Boomtime sounds like someone who just bought at the peak of the market and trying to justify the purchase.
Greg – Check out 2420 Larkin St. Purchased for $1.7 mil in mid 2005. Sold for around $4mil this month. ZING! 1 mil in, 1 mil out.
John, I’m so glad I bought in the ‘peak’ of 1998, 2002, 2003, and 2005. And I’m so glad i’m buying again at the peak in 2007. Donno how old you are, or how your finances are, but i’m doing just fine thank you. I just feel so sorry for so many people who had the means to buy in 1997,98,99,00,01,02,03,04,05,06,07 and who’ve watch asset prices run away from them. Look at [some other real estate bloggers]. [One is] an ex-investment banker who could have bought over the past 10 years. He’s 38 now and developed a blog to help cope. All is good, but I wouldn’t want to be him.
[Editor’s note: We’re trying not to point fingers, so we edited the name. Keep that in mind for the future.]
So… sounds like Boomtime spells “quality of life”: G R E E D.
I’m so impressed with someone age 23 just out of school making $115 k.
And I’m more impressed with the “kids” on Boomtimes block who live at home in their mid-20s with granny..Wow..these are the future leaders of our country.
Yea, right..
Duggo, you shouldn’t be impressed, just stating the way it is.
There are so many people who have hand outs from mom and dad or grandma. There are 30 yr olds, yes 30 yr olds who still get help from Mom & Dad to buy in SF, and kids who live at home with grandma with no shame. This is the competition for buyers out there.. not a normal $300k/yr couples but 300k/yr + help from mom & dad.
The 23 yr old kids making $115,000 will go on to make $300,000 by the time they are 30, pretty much guaranteed.
Quality of life is all about, and if renters can pay my mortgage and then some, and if my assets continue to rise while my debt gets inflated away, i’m all for it! :)
Take a look at 2255 Washington St. for $1.498 mil. Open house was crazy today. Square footage? Not even 1,200sqft with no view. Bt this sells for asking within 3 weeks. Lower unit condo too.
Boomtime,
We thought for all of your trouble you went through listing those properties above, we’d post your comment on the front page as it’s own post for any of those that would like to discuss it with more people than are just following this thread, which should remain about 636 Steiner, if possible. Thanks.
for The client – just a word of encouragement.
We bought the ~330th property we visited (open houses over 7 months – nearly all of them seriously targeted) – and we visited 20 more properties while waiting to close – just in case we wouldnt close (very strange sellers).
I would do it all over again. We set a foot in our house and at the second – we KNEW it was the right one. And yes, it needed some serious cosmetic – something very easy to do compared to adding a 1000sqft extention (needed in many houses we visited). We got it – and we were the ONLY offer – something totaly unexpected considering the war that went on about a very similar close-by property the same week. WHO KNOWS????
Anyway. Dont give up. Alex is a great agent – knows the city very well and I believe he’s appreciated and respected by most good agents in the city – your wild card if needed.
I’m “Mark” in the thread above who posted that “your clients were lucky they didn’t get the place. Prices are falling, not rising. Patience will be rewarded.”
Per Property Shark, 636 Steiner closed for $975k on 8/20/2007. Per Zillow, the Zestimate for 636 Steiner as of today (8/25/09) is $825k.
I’m thinking that your clients really did dodge a bullet here, and I’m curious: Were they ultimately “successful” in completing a transaction in 2007 or did they continue to be lucky though 2007 and be outbid?
Mark,
They were ultimately successful in getting a home, and are happy living where they are. However, they are not happy about the reduction in the value.
Zillow Zestimates aren’t worth anything.
“However, they are not happy about the reduction in the value.” if you don’t sell, you have lost nothing.
And if they had waited… anything could have had happened – from being denied a mortgage, to caving to the pressure and buying something they wouldn’t like/appreciate, not forgetting being outbid 23 more times on dropping asking prices – but closing prices not falling as much.
And some newly built houses burn to the ground.
Sometimes it’s not about the almighty power winninfg … but it’s about being content with what one has – and being successful at avoiding disaster.