This week The Buzz is delivering Good News and Some Bad News for Buyers and Sellers

The good news is that the SanFrancisco market has picked up significantly.  Odds are good that whatever you buy today will be worth more in just a few short months. Sellers can also look forward to selling their property for great prices.

The bad news for San Francisco real estate buyers is that we’re back to multiple offers.
After the first of the year, the market was flooded with hungry buyers. Now listings are often going into escrow significantly higher than their listing price.If you’re buying in this kind of market, you need to prepare and educate yourself.

Here are 8 steps every prospective home buyer in today’s hot San Francisco real estate market needs to take right now.  A number of these come to you courtesy of the 360 Digest, a Seattle real estate blog:

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1. Get a pre-approval letter:
A pre-approval letter is a ‘must-have’ before you can start writing and presenting offers. Sellers need to know you can close the deal and pay their price.

To get a pre-approval letter that has credibility, you need to meet with a mortgage professional who is in the business full time.  Please don’t use an online lender, your neighbor’s cousin or the guy in your building who does loans on the side.

I like my buyers to get a pre-approval from a mortgage professional who is known in the San Francisco real estate community.  Good listing agents know who the good mortgage brokers are—a pre-approval letter from one of them can give you a leg up against your competition.

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2. Be Ready and Willing to Act Quickly!
The typical marketing cycle of a new, well-priced listing is 7-14 days. This means you have limited viewing opportunities. If you miss the first Sunday open, you may not have another chance to see it before it’s sold.

If you’re serious about buying I recommend keeping your Sunday afternoons open.  New listings usually make their debut at a Sunday open house. You can also cover a lot of ground in a short period of time because everything is available to see at once.

Adopting an action-oriented mindset can be challenging for some. Individuals whose personal style involves taking plenty of time to ponder and process information will have a harder time adjusting to current market conditions. Your chances of succeeding will improve by making a conscious decision to stretch your comfort zone.

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3. Keep Some Of Your Powder Dry.
If you’ve been pre-approved for a purchase price of $900,000, you may want to look at homes listed for $825,000 to $875,000. That way, when you get into a competitive bidding situation and are vying with multiple offers that exceed the full asking (or “list”) price, you still have the ability to compete for that house.

Don’t confuse this strategy with trying to write a “low-ball” offer for less than the full value of the home.
It’s a mistake to think this strategy will give you room to raise the amount of your offer later. This is a seller’s market. Low-balling isn’t likely to work, and it could be counterproductive. You could earn a reputation as a flaky buyer, especially if you’re looking for a home in a relatively small geographic area or neighborhood where word gets around quickly.

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4. Study the Market.
In a rising market, your best “comps” aren’t properties that closed in January, but properties that are presently in escrow. Ask your Realtor to track the kinds of properties your interested in and find out all they can about the number of offers they received and what the accepted bid was (in the interests of their Sellers they’re usually not going to quote the information directly, but you can usually find out the general range of the selling price).

At Paragon, we’re talking about new listings and what they went into escrow for all the time. We swap information on what our buyers bid (if they didn’t win) and what the counteroffers were (if there were any). If we don’t know what properties are in escrow for, we’ll call the listing agent, who is generally forthright about how many offers came in and will give us a general idea of what the property went into escrow for.

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5. Look “Farther Out”
Some of my buyers who have been looking for awhile are now revising their neighborhood criteria and looking in areas that they hadn’t considered before.

Realtors working in traditional, bedroom communities call this “Drive until you qualify” meaning that the further a buyer is willing to look from their workplace the more reasonable the cost. In San Francisco, the ‘drive until you qualify’ neighborhoods would be in the Southern parts of the City—places like the Excelsior, Crocker Amazon and Ingleside. For upper-end buyers, it can mean leaving Pacific Heights to look in Ashbury Heights.

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6. Be Flexible on Your Closing Date
Some Sellers can’t wait to get out of their home. In this case, the shorter the close, the better. A good mortgage broker can make the loan go through quickly so you can go on record within 14 days of acceptance.

Other Sellers may want a few days to move out after the sale is recorded, especially if they’re buying another home.  So, if you can close early, but take possession 10-14 days later, the seller may prefer your offer. It can be done in less than 10 days, but the extra time may be especially attractive to both the seller and his or her Realtor. Why? Because if there’s a glitch on the other transaction, it allows time to solve it so the seller doesn’t lose the home he or she is purchasing. Have your Realtor should ask the Listing Agent about the timing of their Seller’s plans so you can write an offer with terms that will be viewed most favorably.

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7. Consider Pre-Sale Inspections
In a hot market, buyers may consider making their offer more attractive to the seller by waiving protections that are typically included as part of an offer. For example, buyers may decide to waive the inspection contingency or waive the loan contingency.

Waiving these protections carries a measure of risk but you can limit your exposure by using the expertise of the professionals you hire. Your mortgage broker is the person to talk to about waiving your loan contingency—a frank discussion with them about the risks of making an offer without a loan contingency should help you decide if it’s a route you want to pursue.

In order to safely waive the inspection contingency, I recommend doing a pre-sale inspection with a licensed home inspector prior to the offer date.  The objective of the inspection (which costs $300-500 depending on the type of property) is to let you know exactly what you’re getting into before you buy the home. If you learn everything you want to know before you write your offer and eliminate physical inspections as a condition of sale, you will be at a distinct advantage. Buyers who are weaker on price often win out when there are no inspection contingencies.

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8. Know the Advantages of Using a Realtor
Not every person who has a real estate license is a Realtor. There are distinct differences between a licensed real estate agent and a licensee who is a Realtor. The term “Realtor” is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of Realtors.

The most important thing that distinguishes us is our strict Code of Ethics which requires us to deal fairly and professionally with all parties in a real estate transaction. Questions about a Realtor’s professional conduct are subject to a rigorous review process. We get called to the mat when we misbehave and Realtors don’t hesitate to report each other to our local grievance committee.

The best Realtors are full-time and offer full service. When writing offers in this kind of market, their expertise is more important than ever, not only in helping you decide what to offer, but how to ‘package’ you as a buyer so that your offer will be the accepted one.

I also urge you to use someone known in the local Real Estate community. A Realtor with a sterling reputation will have an advantage when competing against out-of-town agents or discount brokers in a multiple offer situation.

Thanks again for your superb referrals. I look forward to getting them all in escrow and appreciate your keeping me in mind for your friends and associates who are looking to buy or sell.

This entry was posted on Tuesday, March 20th, 2007 at 12:00 pm and is filed under Buying Strategies. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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