So You Want to Buy a Home in San Francisco…

Now what? We are actually out “in the field” today writing offers and checking out property, but we thought it’d be nice to see what our readers can share in regards to their tips and tricks to finding, offering on, buying, and enjoying a piece of San Francisco real estate.

Later today (hopefully), we will give you our list of tips. So please come back.

Tip #1…go to Walgreens, or your favorite pharmacy, and purchase a bottle (the larger the better) of “patience”. You’ll need lots of it. If the pharmacy doesn’t have it, try the liquor store.

21 thoughts on “So You Want to Buy a Home in San Francisco…

  1. Took me from 2002 until this October. I’m in SF, Baby!!! Would pass you a bottle, but I ran out during escrow :)

  2. Patience is definitely the key to finding a place in this city. Every home we’ve written offers on has been competitive. We’ve been beaten out by other buyers 5 times and counting. You need to stick it out, have patience, and keep plugging away. We’re actually thankful the market has slowed because we’re hoping there is less competition on the homes we like. In fact, we have our eye on a cool place in the inner sunset. We’ll see how it goes.

  3. 1. Don’t settle for something you do not truly love.

    My wife and I almost fell into this trap by placing a bid on a place we were less than enthusiastic about last summer. Thankfully we lost and avoided that headache.

    2. Shop around for loans; their rates and terms are all over the place right now.

    3. Never slouch on due diligence (even when it is your 20th time). Comps are important and using them will help insure that you don’t get caught up in the moment and greatly overpay for a place. $/sqft were always the most important to me. Propertyshark is also excellent.

    4. Ignore the pitches of sellers agents, but ask the right questions of them, i.e. reports, cost estimates for repairs, roof, HOA policies and dues, parking, deaths, neighbors (condo), sq ft, what are these rodent droppings, etc.

    5. Ignore sellers agents of new construction who are competing against cheaper, older property. I always hated it when they would make remarks about how old Vics and Edwardians have good square footage, but hardly any of it is useful. I disagree.

    6. Do not let your realtor decide for you on whether a bid should be placed. I learned to hate the phrase “It doesn’t hurt” when I was too naive to know any better. Thankfully I dodged that bullet as well.

    7. Write a good letter about yourself and the property with the offer for tie-breaking situations, but never fool yourself into thinking that it will actually give you an edge over someone willing to pay even 5K more than you with no letter. It all comes down to the almightly dollar (atleast in my experience).

  4. When considering buying where there is a HOA, look at the detailed budget and their long term capital improvement plans. Do they have enough reserves? Does the budget cover everything? Read the minutes…

  5. I seriously looked for about 2 1/2 years before writing my first (and only) offer in SF. There is absolutely no substitute for hitting the pavement every Sunday between 2 and 4. Get out and see lots of places over time so that, when you see the place that excites, you’ll already know what else is ‘out there’ and whether it is priced right.

    Working with an experienced agent helped me a lot too because I was in a competitive bidding situation.

  6. Dede, et al, what are some good ways to analyze HOAs? I’m in the middle of an HOA fiasco at a building I just purchased in and wanted to do some HOA research. Thx.

  7. pwb, hard to say without understanding the type of issue you are having. Remember that an HOA’s primary responsibility is to preserve and hopefully increase property value. HOA’s are essentially non-profit organizations with what can be significant budgets. Usually, if an HOA goes south budget wise, it is because of unique circumstances or bad past decisions. It is not terribly unusual for HOAs to be involved in some litigation in their history. People simply don’t understand that when they buy a property part of an HOA that they give up certain rights to essentially be part of a private government.

    First, go you your management company’s office (hopefully you have a management company) and go through the history of the HOA. Read through the minutes and look at the history of the problem that your HOA is having so you have context. People in the HOA who have been trying to deal with the problem will appreciate the effort and you can have more productive conversations.

    Second, listen to what recommendations the management company is making to solve the problem. Good management companies have lots of experience and can best able to guide you out of a problem. It gets tricky when people vote for/against things on the basis of personality issues instead of solving problems. Unfortunately, this happens a lot, because issues related to your home are personal, and people can react irrationally.

    Third, when working on the problem, remember your board members are volunteers – so treat them with respect and you’ll get further. When I volunteered for my board and was elected, I was amazed that people treated me as if I was a building superintendent and that I worked for them. Even got a call on a Sunday morning at 8am once for somebody that needed the toilet unclogged. Told them politely to call a plumber and hung up.

    Fourth, volunteer for a committee to look at the problem and propose solutions, or even run for the board.

    Lastly, if you want to get out and sell, remember that you have to disclose / direct people to the management office to review documents. So one of the best things you can do is help the association solve the problem in a manner that is financially responsible, positively impacts property value, and creates predictability. It makes your property more valuable. is an invaluable resource.

    I had a pretty bad experience myself which taught me to be much more careful.

  8. Second the opinion on HOA. My personal preference is to avoid new condos with high HOA fees, because you wind up basically paying for two mortgages, and your second mortgage (HOA fee) is not tax deductible, and does not increase your equity in the home. Many such new buildings have high HOA fees because they have pools, club houses, etc., which are nice ‘status’ symbols but one needs to think just how often one will use such nice amenities for it to be worth the HOA fees which will have to be paid monthly

    Also, there are generally no caps on how much the HOA fees will increase year over year, unlike the variable rate mortgages. This makes budgeting for even the worst case scenario rather difficult.

    Many people say condos are great starter homes. For the above reasons I am not sure.

    The other key thing I learned about real estate in SF is the need to understand the ‘growth potential’ of the property you are interested in — basically, understanding how many ways you can increase the value of your property

    There are basically three main vehicles in SF to increase the value of a property:

    1. Time based appreciation

    — i.e. hold on to it for many years to enjoy the organic growth of home appreciation

    2. Home improvement

    — i.e. buy something at a discount because it needs a new bath and kitchen, or buy a building that has a large basement which you can add an additional legal in-law or whatever to increase the square footage of the home. Adding these improvements often increase the value of the building (at a profit)

    3. Conversion of use

    — i.e. buy something that can be converted into a TIC, or from a TIC to a condo, etc. By going through the hassle of ‘use’ conversion you can generally increase the value of the building.

    I like buildings that have potentials in all three categories, because these potentials generally offer a cushion of safety in case the market goes south (like what it’s doing now), because you can take the time to remodel the kitchen and bathroom, or converting the building for a different use to increase the building’s worth, while you wait out the market. And if you absolutely have to sell at an inopportune time (relocation due to jobs, etc.) hopefully the profit from improvements or conversions will help you break even.

    Now, for a brand spanking new condo that has everything new and nothing needs to be done, it only offers one growth potential — time based appreciation. Unfortunately when the market goes south, time based appreciation alone is unlikely to help the homeowner break even if they have to bail.

  9. great comments anon8mizer! Regarding the increasing budgets, you are absolutely correct, they can sky rocket and but it is important to understand the rules regarding these increases. Look at the governing documents and understand the following:

    1) under what scenario can the board increase the dues without a vote of membership and what that percentage increase is.

    2) look at the vote history on budgets in the building. Is there a vote history of increasing for added services or simply for staying in the black. How close is the vote.

    3) Look at how special assessments (which are handled outside the annual budget process) handled and apportioned. You may find that you pay dues per square foot on a budget basis but a flat equal share on special assessments. This can work for or against you based on your unit size.

    Regarding amenities, like pools, concierge, etc. these are generally more affordable in larger developments with 100+ units because the cost can be spread over many owners. If you have “rich” amenities in a small building, you are going to pay for it in HOA dues. Small buildings tend to not have these types of services. Mid size buildings though are tough (25-50 units?) because they can be reaching for those “rich” amenities and your HOAs will be expensive because they are spread on a smaller unit base. Lastly, the design of your common area may significantly impact your HOA budget. You may need security personnel simply to patrol the building exterior to make sure you don’t have homeless people sleeping in your doorway for instance. Loved it when I was in Germany and got a call from my wife that she had to step over the homeless person to leave – in Russian Hill!

    On the HOA dues side – they count as an expense and are deductible if it is an investment property and you are renting it… And if you are looking at investment property, look at what the minimum lease duration is for tenants. I prefer 12 months. Shorter tends to get you bad tenants but also means there will be more turnover in the building. Reduced turnover generally positively influences property value. Also look at if there are limits on the number of rental units in the building. If there are unlimited rental units and the minimum lease is less than six months. Run – unless you are renting it as a vacation property specifically. Your governing documents will tell you this.

    To add to anon8mizer’s 3 areas I would also look at:

    4. Gentrifying neighborhood. Some neighborhoods appreciate faster than the SF average rate.

    5. Dearth of competing housing. SOMA will have lots of competing housing for a long time, for instance. Other neighborhoods, not so much. If your in a neighborhood where people want to be but there are few options, buyers/renters will pay more.

  10. quality of empty lot. some lots are worth gold just by their location. Some are not so great. Make sure you do your reseach on soil, earthquake soil and foundations (upgrading foundations in the marina costs many times more than upgrading foundations laurel hts). Check the few adjacents lots (length of ownership and/or age and/or recents permits applications).

    all those might have an impact on remodeling/planing review or plain maitenance on your own house.

    at open house, dont rush out so fast. MANY neighbors are usualy around, and they are a way to check on the block. Stuff like parking, night noise or just how happy they are on that block.

    in very dense area (like manhattan or paris), my best tip is to look around for the closest hotel, and take a room for one night (or 4 nights if you want). If you cant stand night noise, traffic, if you dont feel safe after sunset… it’s unlikely it’ll improve when you buy around the corner.

  11. Anon8mizer, or you can whine and create blogs saying prices are too high, and life is not fair :)

    Seldom do people who do something about their situation whine.

  12. Resort — those who create whiner blogs are not dumb either. They may be doing very well with the advertising fees and sponsorships from the eyeballs when they turn around and tell advertisers the surveyed demographics that are visiting the blogs. It’s the people who do not own any equity in the whiner blogs, and just use the blogs to whine, that are receiving the least benefits, IMHO. To each their own, I say.

  13. “whiner blogs.” Pretty funny. As if those who already own real estate are some type of financial geniuses who have scored a windfall due purely to their investment acumen and business savvy. Nice try. Most of you who think real estate is a great investment bought pre-bubble and had no idea prices would take such a huge leap from ’02 to ’06. Pat yourselves on the back all you want, most of you were simply in the right place at the right time, and have benefitted greatly from little effort/intelligence on your part.

    It’s basically like saying, “Hey, here it is January of 2000. I just bought Cisco stock and I’m a genius!” Didn’t look so smart from about 2002 onwards. You know what they say: easy come, easy go.

  14. Balanced Viewpoint – I’m envious too of those who bought pre-2000, but those who bought in 2006 are up about 5-10% in one year. No need to be jealous.

  15. DGee – sorry, but I think you forgot a minus sign in that last sentence. I don’t think anybody that bought in 2006 could sell today and even break even. Most of the properties that are featured here “so many offers over asking” and “gazillions higher than last sale” have been held for a few years or were remodeled, etc.

    Please find me a comp of someone selling unimproved property for 10% more in ’07 than in ’06 and I might believe you.

  16. Oh. And if you haven’t walked through the entire place, and it really isn’t a mess per se, rather merely not to your personal aesthetic, please don’t start telling the agent who happens to be hosting the open house all the things you dislike about the property. It’s fair game if you have a thorough look. But if you don’t they will invariably wonder what the hell your problem is, and whether or not you have a life. Also, please don’t make snide comments about how “funny” the concept of staging is. Because we’ve heard it all a gazillion times and frankly you will have been flatly wrong to criticize staging as a concept. If you are elderly, please do not wonder aloud where the elevator is if you wouldn’t buy the place even if it had one. Last, if you are an agent, please don’t tell us that you were hoping we’d be serving food. (Because we were hoping you were going to bring a buyer.)

  17. that’s a great post kenny. reminds me of one of my favorite quotes. the only problem with the public is the people.


  18. Many who criticize staging haven’t received any benefits from it (or probably have never sold a house they owned).

    When I was doing my 1031 exchange, I had only 30 days to sell my original investment property, and purchase the new investment property because I made an offer on the new property with a 30 day closing (trying to make the offer as clean as possible). The heat was on for me to sell the original one and close the new one in 30 days.

    I had thought the market was so hot my original property would go just like that. But after 2 weekend showings and insulting low ball offers I started to panic, and began process to go into a reverse 1031 exchange to buy more time (it would cost me $10K for service if it did happen)

    My listing agent convinced me to stage, and it went above asking in a week. I got to close the sale of the original 2 days before I closed the purchase of the new one, and no reverse.

    When you show a house w/o furniture, etc., most people have trouble visualizing how the house can be arranged, and utilized. More importantly, when you show a house empty, people have a tough time establishing an emotional connection with that empty shell. What staging does is to help the buyer visualize themselves living in the space, and establish an emotional attachment to that ‘vision’ of them living there. It often is the difference between the buyer being ‘indifferent’ to the house, and them being ‘excited’ about the house. It just gets them so much closer to seeing themselves living there.

    From the seller’s perspective, staging speeded up my sale, and increased the offer amount.

    Now, from the buyer’s perspective, those who are cynical enough to criticize staging will probably never be the intended audience who will establish an ’emotional’ connection with the house, because they probably are buying the house based on cold spreadsheets and numbers. But there are still few who buy based on numbers and emotions, and are probably the right audience for staging.

  19. well said. not staging a place in this market is like going out to pick up chicks without showering or shaving in a week, no job, no car, no home. good luck!

  20. RE staging. While selling our house, I found that staging is not as much about furnitures as the fact to make the property homey. Painting all white is NOT staging. But many stagers will help you pick wall colors that enhance the house. A good stager will have an eye for light, curtains, floors, odd spaces. A good stager will open every door and closet.

    I’m still not convinced about staging – but the stager who did our condo did fantastic, with great color picks for the walls, great choices of light fixtures etc. (yes, it was a bit more than “renting furniture” but when you remove yours, why not recolor instead of a simple touch up of your color that was matching your furniture?)

    Also, for the seller, not visiting his/her own property empty and soulless for countless days makes the sale more emotionally acceptable.

    Still not convinced, but very happy with the staging we payd when we sold. (and even happier than the property we bought was not staged. Had it been staged and with good photos online.. we must likely would have been overbid by countless offers ;-) ) (oh yes.. worse than the “no picture available” is the “picture of unclean, unstaged, clutered space” on the listing)

  21. Staging is key because many people don’t understand how to make space work. They often don’t have the ability to understand scale or anything like that. But when they can say, my couch is like that one, my table is a little bigger, whatever, they start putting themselves in the space and that is key. James’ comment above is dead on from a deal perspective in a down market.

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