2005 home-buying battle

OK, enough from me about battling for homes. Check out this article from well respected Inman News.

I've just noticed another up-tick in Buyer demand, and heard of a home getting 40 offers. Based on reports, my guess is that home sold for 45% over asking. So the battle rages on, and until you're on the home-owners side of the fence, you're at a disadvantage.

Call or email me if you want to stop making multiple failed offers and finally be the winning bidder so you can profit from what is expected to be continued appreciation so long as Demand far out-strips Supply. Read the above article for more on that too.


San Francisco Real Estate Bubble?

It seems 50% think there is a real estate bubble, and 50% don't. So who is right? First off, my background includes a dot-com stint, and I lived through that bursting bubble. I've been in Real Estate roughly two years and I was oringally on the side that believed our Real Estate market might burst thanks to my dot-com experience. My reasons for believing there might be a bubble was largely based on the number of buyers getting low down payment interest-only loans. If in 5 years, when many of those loans become variable, interest rates are significantly higher, those home owners may be in deep trouble if the market is flat or down. Rising interest rates also reduce home affordability and could therefore slow or stop appreciation.

So why have I changed my mind? Because of the laws of Supply & Demand.

There is enormous demand, aka Buyers. And there is very little supply, aka Sellers or homes for sale. And many of those buyers have an amazing amount of money. Parents and Grandparents are helping out younger buyers, others are getting inheritance money, Google just created a bunch of millionaires, many of whom are buying in San Francisco, and weathy people around the world love San Francisco. And that demand simply will not abate. Why? Well think about how many people you know who make good money, have money saved up, and still rent. Every one of them is hoping there's a bubble and should the market drop they will jump in and push the market right back up.

Think about it. Demand is and will far outstrip supply in San Francisco for as far into the future as I can see. And those sitting on the side line are losing money every day they wait. They're losing their rent money, they're losing the profits from price appreciation of any home they would have bought, and they're losing the tax write offs that home ownership provides. The only way this market will drop is if all the wealthy people in this town (and those planning to move here) pick up and leave. An earthquake could cause this to happen temporarily, but just as in 1989, that won't last long. The Marina, one of the hardest hit areas in the '89 quake, is one of the most expensive neighborhoods in the city.

If you'd like to find out how much you can afford, drop me a line and I'll send you some lenders you can contact.


Winning the Bidding War

You've made 10 offers and lost every one. You refuse to give up like so many others, but you refuse to pay too much too. So how do you get a home? Well, first off, if you want to buy a home without competing against other home buyers, move to Indiana. Don't try to buy in San Francisco.

You think I'm wrong? Maybe a fixer-upper can be had for below market without competition? Think again, 20 other buyers think the same thing about the same property, and they end up driving the price up. How about that place that's sat on the market for two months? Well, probably the Seller refuses to take anything under a certain amount, and that amount is $100,000 over what even the craziest buyers are willing to offer.

OK, maybe you believe me, but you still want a home. So how do you do it?

Here are a few strategies for the savvy Buyer:
1. Pre-emptive offers:
In hot Seller's markets, nearly every home for sale has an "offer deadline". This is designed to take full advantage of the competitive market and create an all out bidding war. Your strategy should be to get out there, and look at homes that you think you'll like within the first day or two of them coming on the market. And you make an immediate offer ignoring the offer deadline. Some agents and sellers will refuse your offer (keep in mind only the Seller has the right to refuse an offer, whereas the agent is legally bound to present it unless the Seller has given him written permission not to present offers). Let's say the agent does present it. How and when will a Seller accept a pre-emptive offer, and not wait another 10 days for the offer deadline and the bidding war they're confident will produce multiple over-asking price offers? You guessed it, your offer must be over-asking. OH NO you say, why bid over-asking? Isn't the point of a pre-emptive offer to save me money? Yes and No. You may save money because a bidding war may produce even higher bids, but if the Seller KNOWS he/she is going to get a higher bid, why on earth would they accept your pre-emptive offer. So your offer must be for about the amount the Seller wants or thinks they can get in a bidding war.

2. Building Trust with the Seller and Listing Agent:
Bad, but true story. You submit an offer at the deadline and you're the highest of any offer by $10,000 and the Seller chooses to accept the offer just below yours. WHAT? But I was the highest offer! Well, if they don't know you, and they don't know your agent, and your offer is sloppy, and is full of contingencies, then you very well may get passed over without a second thought. How do you build trust? You visit every Open House they have and introduce yourself each time. Your agent does the same thing. You or your agent call frequently with intelligent questions continuing to show a sincere interest in being the winning bidder. Your offer is presented in person, it's in a crisp, professional looking format, and includes the provisions the Listing Agent told you were most important to the Seller when you called him/her on one of your intelligent-question phone calls. They know you, they trust you, they know you are going to follow through and complete the purchase come hell or high water.

3. Making a Competitive Offer:
The Asking price is $599,000 or $699,000 or $799,000 or some other $x99 or $x95 or $x65 or whatever. FORGET about the asking price. In only rare instances is the Asking price what the Seller and Listing Agent want and expect - and that's almost always in New Construction buildings. You must look at recent sales of similar homes and what they sold for to determine what a "reasonable buyer" will pay for the home you want. That price is your minimum bid, and if you really want the property, you MUST go slightly higher. And if you really, really, really want the property, you MUST go more than slightly higher. You really need a Buyer's Agent to have luck buying something in San Francisco, and this in one of the areas where they earn their keep. A good CMA (comparative market analysis) is essential if you want to know what it will take to even have a chance at being the winning bidder, without going ridiculously over asking.

The above three are just the highlights. 3 ways to avoiding house hunting for months while you continue to throw away rent money and lose tax deductions. Not getting prefessional, competent, help from a top quality Buyer's Aent will cost you time and money. And get this, Buyer's Agents work for you for free. Drop me a line if you want to know more about Buyer Agent services, or more tips and strategies for getting your offers accepted.


House Hunting in San Francisco

Every couple of Sunday's you visit a couple of Open Houses, get hounded by a few of the Agents hosting them, and go back home thinking "someday". Maybe you're a www.Craigslist.org fanatic and don't realize you're only seeing 5% or less of the homes on the market. Or maybe you still rely on black&white and browse the Chronicle's Open House pages - there you're probably seeing 20%. In other words, not only are you not very serious about your home search, what little you do gets you no where. AND OH, those hounding agents! They are just SOOO annoying. Who needs an agent anyway?

When asked how long you've been looking, you say "oh, on and off for about 18 years now", frustrated that you didn't buy that over priced $400,000 miniature 2-bedroom on Russian Hill 5 years ago. What a shame because you saw it last week on "sale" for "only" $799,000.

Maybe you're an advanced searcher, and have found an MLS site like
www.SF-MLS-Search.com. Here you get 95% of all homes. Even more convenient is www.Automated-Homefinder.com where homes that fit your entered criteria get emailed to you the day they hit the market. You've got the pulse of the market, well at least of the listings. But you're still just a searcher, and not a buyer. You almost put an offer in on that amazing one-bedroom a few weeks back. But the agent scared the hell out of you with all the "TIC" talk. What in the world was that about?

Ahh well, this bubble will burst someday, and me and my 98 friends all making $100,000+ who still rent will finally have an opportunity to buy. Oh wait, that's another $10 million that will just re-prop up the market. Dang, will I ever be able to buy?