I’ve been getting a few phone calls and emails from potential buyers looking to get into the San Francisco market, and their general mood is that of despair…mostly because of my latest posts about how hot the market (particularly Cole Valley) is right now. I’ll just come right out and apologize for giving the impression that we are back to the days of boom. We are not.
As is the case with our weather here in San Francisco on any given day, there are pockets of sunshine, and clouds of rain. While nicely presented (staged) homes, in great locations, marketed at competitive prices (whether $400,000 or $4,000,000) are practically flying off the shelf with all cash/zero contingency offers, there are certainly countless numbers of not so lucky homes and sellers that either missed the mark with pricing, timing, or presentation, and those homes are getting stale, dropping prices, and selling for much less than asking…if they sell at all. Depending on when the seller purchased it, often many homes are selling for much less than what the seller paid! So it’s definitely not all roses all across the board.
With that said, what can you do to increase your chances of buying a piece of San Francisco real estate. The most important thing for you to do as a buyer is get pre-approved with a good, reputable, local lender or mortgage broker (I can recommend a few). Getting pre-approved doesn’t cost you a dime. Don’t even look at homes until you know without a shadow of a doubt what you can afford. That includes browsing online on Trulia or Zillow.
Once you have taken the pre-approval step, there are tools available to get you searching for the most accurate, up to the minute listings both on MLS, and “off market“.
Once you have an idea of what it is you can both afford, and what it is you desire, you should absolutely get in touch with a licensed real estate professional to help you find and secure your property. You can certainly try to go it alone, but when it comes time to write an offer, 99% of the listing agents out there are going to prefer to work with someone that is represented by a Realtor, rather than someone that thinks they can do it alone. Put two identical offers on the table. One from a buyer that has an agent who knows the game, and the other from a buyer wanting to represent themselves to “save” some money and nine out of 10 agents will go with the Realtor represented buyer all day long. If you want to go discount, go Redfin. At least you’ll have an agent representing you.
Once you’ve selected your agent (It’s like dating, so don’t just go “top producer” or “market specialist”…find someone you can spend hours hanging out with. Someone that might share similar interests.), work with them using all of the tools available to both of you, and be in touch frequently. Understand the market fluctuates day to day. Know that while some properties will receive multiple offers, some won’t, and gauging at what price a home will sell in such a market is often difficult and not as easy as 1+1=2. Running and analyzing comparable sales is only half of the story (our market now is much more robust than only a few short months ago in what should have been a busy October). Be ready to act quickly, and be flexible with regards to what times you are available to tour homes. See any, and as many homes as you can that might be a match.
When you find the home you like…don’t hesitate. It could be gone the next day. Make an offer, consider shortening any and all contingencies, and be prepared to go back and forth on price and terms. Don’t take it personally! Every buyer wants a good deal, and every seller wants top dollar. It will get heated.
If you don’t get the property, don’t dwell on it. There will be more opportunity…I promise. Move on. If you do get the property…well that’s another blog post altogether.
Don’t get discouraged by my stories of multiple offers, cash buyers, and an ultra-competitive market. As much as those stories are happening, there are also many more stories of Stalefish homes finally being sold after many, many months on the market. There are foreclosures (good luck with those), short sales, and many off market opportunities. You just gotta know where to look, have patience, money, and determination. Your property is out there. Don’t give up based on a few blog posts about a hot, hot market. And definitely don’t give up before you start.
–Four buyers in four days, and 121 Beulah. How did it end. [theFrontSteps]
–Factoring weather when buying a home in San Francisco is anything but simple. [theFrontSteps]
–Search MLS
–Search Not on MLS
Wow. Spoken like a true Used House Salesperson.
The SF market still has several years of declines ahead of it… the only way anyone will be able to avoid being stuck with an under-water mortgage, locked in until the market rebounds in 10 to 20 years or they go bankrupt from the inability to move where the jobs are, is to (as you patronizingly put it) give up before they start.
As for the idea that people should pay 6% of the price to someone who’s livelihood depends on jacking up those prices as much as they can — please. There’s a reason I call them “Used House Salespeople”.
Good luck folks!
Thank you John Halbig.
Alex,
I do believe the economy has roared back, largely due to all these Bay Area IPOs, however, I’m still SHOCKED it costs 5% to sell a house in SF! It’s been so long since the top of the market, don’t you think if the commission rate dropped to 2% there would be way more transactions?
Paying $120,000 in commissions to sell a $2 mil house is obscene.
In this “hot” market, do you recommend underpricing the home to get in buyers, or pricing where you would honestly sell?
Thanks,
Sam
Sam,
Five percent is the going rate (sometimes I still get six). It’s the cost of doing business, and we earn it. Every…single…penny.
No, I don’t think there would be more transactions with lower commissions.
If your home is in a good area, and likely to have multiple buyers interested, I recommend pricing slightly below where you think it should trade. Then you need to accept the risk that you may not get over asking, and live with it. Otherwise, price exactly where you want to sell and hope for the best.
Interesting post and comments. Sam, I don’t know what you do as a profession, but have you voluntarily taking a 60% pay cut for the same amount of work? Although from your perspective, paying $120K to sell a $2M property may seem ‘obscene’, how much do you think is the net pay for the listing agent, provided that a cooperating broker represents the buyer (particularly as high-end listings have a much higher cost of marketing)?
As in most things in life, you get what you pay for.