I’ve been a real estate for 5 years and this past July my husband and I had the opportunity to buy a home for ourselves. We had been renting for the past 10 years partly because of neighborhood issues and partly because of the recession. After years of saving and some serious luck we were finally in the position to purchase in the Bay Area – Oakland specifically. In the last five years, Krista and I have have helped over 100 families purchase or sell a home but being on client side of the transaction gave me some invaluable insights.
First a little bit about our experience and strategy. Like everyone else in the Bay Area, we had to get our financing figured out first. We got pre-approved with our lender and once we knew how much we could spend we were on the hunt. Our strategy at first was to go after houses on the open market like anyone else — we had a list of things we were looking for like bedroom count, indoor/outdoor living, neighborhoods we were willing to live in and a price limit. Being an agent, I thought this would be easy. Afterall I am already out touring houses for my clients and I have a successful track record of getting my clients into contract. Boy was I naive.
We quickly found that there were a lot of houses that would work for us and we started putting in offers. Just as I would advise my clients to do, we would offer 20-30% above the listed price, because that is where it would likely sell. We would painstakingly figure out if this was a house we could live in, what were the pros and cons and ultimately what each house was ‘worth’ to us, meaning what price we were willing to pay. Time and time again we got out-bid, 11 times to be exact. Clearly being an agent didn’t mean squat. We figured out very quickly that if we liked something that usually meant that a lot of other people liked it too. Moreover, most of those people were willing to outspend us. It was during this intense period of making offers (12 in total over a 3 month period) that I really began to understand and fully appreciate the stress that buyers go through when making a purchase.
We ultimately had to change our strategy – we were getting outbid over and over again. Several times the experience was so gut wrenching that I (the Realtor) was ready to throw in the towel. Heart broken and a little disillusioned, my husband and I both realized we needed to start thinking creatively (something that I am very good at helping my clients with). So we started to look for houses that had been sitting on the market longer than 14 days or ones that had fallen out of contract for some reason. The house we ended up getting was listed way above what we were willing to pay but the listing agent had it priced too high so it had been sitting for 40 days. The seller’s had to sell and even though we came in way below where they were listed, they had an incentive to sell to us (mainly, the fact that I didn’t take a commission to make the purchase and we were the only offer that had come in). As a result, our offer was accepted. Relief! We are in a neighborhood that we wanted to be in, the house is the size we were looking for, and even though it’s not perfect we still feel like we got a “deal” given how much we could spend. So like all other buyers we had to give some stuff up (there is no indoor/outdoor space) but we feel super lucky to actually have pulled off purchasing a home in Oakland.
So what did I learn? Some unsolicited advice for buyers:
1. Figure out what’s important to you in a home. For me it was sq footage, flow, location, etc AND I wasn’t going to be pay $1.2mil for a 1000 sq feet. For my husband it was not paying 50% more than the list price, outdoor space, and location.
2. Figure out how much you are comfortable paying and get comfortable thinking about how much a particular house is “worth” to you. Of course look at comps to get a sense of fair market value. In a market as hot as the Eastbay’s, it turns out there is always someone who has more money than you and who wants the house more than you so it’s important to know what price you are willing to walk away for each particular property.
4. Be patient – the right house WILL come along. Stick to your principles and work with your agent to change strategies if you need to. Be willing to move fast and make a decision quickly.
5. Getting into contract is the hard part, once you are in contract and going through the transaction (usually 20-30 days), things really get quite a bit easier. Of course it is stressful if you are getting a loan but be sure to stay abreast of where the loan making parties are in their process. It made me feel better to know when the appraisal had come in, when it was the underwriters, etc. Actually closing and buying the house is pretty anti-climatic. There are no balloons or fireworks. You get an email from your title rep (or your agent most of the time) saying you are on record- that’s it. We obviously didn’t have an agent show up with wine and keys but still I was surprised at how anti-climatic the close was.
Some unsolicited advice for agents (myself included):
1. Prep buyers for the the emotional nature of the process and help them clarify what is really important to them and what they are willing to nudge on.
2. Provide a more emotional support when an offer doesn’t get accepted. Stay positive and keep encouraging your buyers to make smart offers that are based on their principals (financial and otherwise).
3. Be creative and quick – stay on top of the market for those houses that go unnoticed or fall through the cracks for some reason.
3. Explain the purchasing process really clearly so buyers know what to expect, especially once the transaction is with the lender. Make sure they know where they are in the process and what is coming next.
4. Be the fireworks and balloons at the end of the transaction – this is a huge feat your buyers have accomplished – they should be celebrated.
On the first night in our house, we had ramen from a local ramen shop on the floor of our new kitchen and even though we still haven’t fully moved in – there are boxes everywhere- we couldn’t be happier.