Tips for Buying A House in A Competitive Market
San Francisco is again in the midst of a real estate boom. Prices are continuing to rise while inventory is very low. There are many theories as to why inventory is low but if you’re in the market to buy a house it doesn’t matter. What matters is finding a home you love at the right price*. The point of this article is to give you a few strategies to use in a competitive market. They work for both — the investor and the homeowner.
What to Look for — Stale Listings (houses become stale in SF very quickly)
In San Francisco, the kiss of death to a property for sale is to overprice it and to not market it properly. Houses on the market for more than a few weeks are called ‘shopworn inventory’ or ‘stale listings’. Buyers have come to expect that the list price is less than the price that the property will actually fetch. So if the list price is too high, most buyers walk away and simply forget about the property. Successful listing agents in San Francisco employ entire teams to help them prepare a property for sale and to develop the marketing strategy. It is rare that a property is listed for sale without being staged to look like something from the pages of Architectural Digest. However, occasionally there is a listing that is either overpriced or is not marketed or presented properly. These properties often linger on the market longer than the usual 10 days from list to offer. If a property is on the market a couple weeks, it presents a potentially great opportunity for a buyer! Don’t gloss over these listings.
Go into Back-up Position (You Need to Know This!)
Offer on every property you like, don’t scared off by competition. If your offer is not the one chosen, then ask to be put in back-up position. I can’t tell you how many times I’ve seen the primary buyer back out and my buyers get the property. These days buyers get caught up in an “auction mentality” and once they win they may get buyer’s remorse. If you are in back-up position you will be offered the property.
As a back-up offer the seller accepts your terms subject to the primary offer backing out. It binds the seller but, NOT YOU! You are free to keep shopping for a home and if you are notified that the primary buyer has backed out it is at your option to become the primary. It’s a great position to be in!
Don’t Miss an Opportunity Because the Property Doesn’t Meet All of Your Needs.
Prioritize your list of needs and wants for a property according to what cannot be changed. It may seem silly, but it is an easy step and can save you a lot of grief down the line. Examples of things that cannot be changed easily: Location, houses around you, the slope of the street or lot, the size of the garden, the direction the house faces, size of the existing structure (include the unimproved areas in your space
calculation). Examples of Things you can change: Adding living space in an existing basement, attic or unimproved area of the existing structure**, remodeling a kitchen or bathrooms, painting color, changing the floor plan, adding window, skylights, sometime even adding parking.
The Take Away…
1) Go into your search with a game plan. Remember, we said the market is ‘competitive’. Do not bypass the shopworn or stale listings.
2) Go into back-up position. There’s no downside.
3) Prioritize your needs starting with the things you CANNOT change about the property.
4) Don’t get caught up in the existing finishes (flooring, paint color, etc).
5) Look for the potential in a property.
6) Be open to remodeling; you can make it your dream home.
7) And, always enlist the help of your friendly neighborhood realtor.
* The “right price” is an elusive term. What is right for YOU might not be what someone else is willing to spend. If you’re an investor, then the right price is calculated by figuring out the income and the yield expected. If you plan to live in the home, then it becomes a bit more complicated. It depends on factors like location, proximity to schools, work, transportation and how long you expect to live in the your new home.
** A house can usually be remodeled or changed to suit your needs. It is usually easy to obtain city permission to change anything inside the envelope of an existing structure. So if there is space to add a master suite within an area that is currently unimproved, or add a bathroom under a stairway, this can done