When searching for a home in the Bay Area, it helps to have a top buyer’s agent on your side so you can win the home you love.
We’ve compiled a summary of the key steps in the search process, all of which can be enhanced with the expert guidance of a top agent.
a. The most basic criteria are location, size, and price.
Examples: neighborhoods, zip codes, cities, counties, square feet, number of bedrooms, number of bathrooms, asking price.
Note: certain areas may have tendencies to advertise listing prices that are below the expected sale price in order to attract extra buyer attention, so you're going to want to search for homes based on the expected sale price, not based on the list price.
b. Use the filters on real estate search engines to spark further ideas; also, if it's criteria that's built into a search engine, that will make it easier to find properties that match that criteria.
c. We believe strongly in using data to make an informed decision, so don’t be afraid to add detailed criteria (for instance, our Sherlock reports can you tell if there has been a recent bathroom remodel, or allow you to see if the home is abnormally large or small for the neighborhood, which can impact resale value).
d. Use a buyer’s agent to help brainstorm additional criteria or eliminate ones that might be impossible in reality in the Bay Area.
a. Use the provided filters to generate potential properties that are listed for sale.
b. Look at all the photos and information provided online so you don’t waste time visiting properties that you can eliminate virtually.
c. Save a list of desired properties and note how long they have been on the market; attractive homes can end up in contract very quickly, so be prepared to jump on homes as soon as they come on the market.
d. Have your buyer’s agent send you homes based on your criteria; they may have access to off-market properties that aren’t listed in other places or be able to confirm which properties are about to go into contract and might be a waste of time.
a. You or your buyer’s agent can contact the listing agent or seller to schedule a tour.
b. Ask questions, take notes, and capture photos during your visit that will allow you to compare it to your list of needs and wants.
c. Consider visiting multiple times at different times of day to get a better sense of noise levels, light, traffic, parking, and safety.
d. Use your buyer’s agent to schedule tours when possible, as sellers and other listing agents will view you as a more serious, credible potential buyer if you are working with a buyer’s agent.
a. Use the information you collected to rank the properties using a 1-10 scale against your list of wants and needs.
b. In the Bay Area, you may also have access to inspection reports and disclosures at this point to help confirm the condition of the property.
c. If a property is lacking in certain criteria, consider how easy or costly it is to make the necessary improvement.
d. The buyer’s agent can help you obtain and interpret all of the standard due diligence reports. The Bay Area and most of California are unique compared to the rest of the US in that close to 100% of homes listed for sale will already have inspection reports paid for by the seller and disclosed to potential bidders.
a. Determine a cut-off on overall rankings (i.e., 7 out of 10? 10 out of 10?) where you can actually picture yourself living in the home, or even loving it!
b. Compare the home to comparable home sales and comparable listings to estimate the fair market value of the home.
c. The buyer’s agent can help you pick the right comparables based on their deeper experience and knowledge of the area, and provide their highly informed opinion of value.
a. Do your homework on what price the seller is truly expecting - it may differ from the list price!
b. Compare your fair market value estimate to the price it will likely take to win the home.
c. Eliminate any homes from consideration where the seller’s expectation is ridiculously high compared to your estimate of fair value.
d. The buyer’s agent can help get useful information about the seller’s expectation directly from the listing agent and get other information that will be useful for shaping your offer such as the number of other bidders and the timeline for choosing a winner.
a. At this point you have a home you love and that you believe your offer price would make the seller happy.
b. Keep in mind the market can get very competitive and other people might be willing to pay the same or higher price for the home, so look for ways to stand out besides price, and be prepared for a rejected offer and a continuation of your search process.
i. Speed of offer (make an offer before the official offer date, if there is one)
ii. Speed and certainty of closing (can you pay all cash or do you have a special lending relationship that can provide quick funds?)
iii. Other considerations (a unique, personal, or emotional connection with the home or the seller; additional flexibility on the closing date if the seller needs to stay in the home longer while they arrange their move, etc.)
iv. Your buyer’s agent can recommend the best ways to help your offer stand out from the pack
c. Congrats on your accepted offer! You will move into the escrow process and proceed towards closing.
I. Real estate offer process and checklist
II. Due diligence
III. Escrow process
IV. When is a good time to buy
- Your closing costs will include items such as local taxes, escrow fees, title insurance policies, recording fees, HOA fees, homeowners insurance, and mortgage fees. These can be determined from sources such as comparable transactions, online tax records, and your lender.
- To assess ongoing ownership costs, you will need to compute the monthly mortgage payment to your lender, taxes which are typically paid biannually, insurance which is typically paid annually, and expected repair and maintenance costs (examples could include identifying upfront older items that may need to be replaced in the next few years, such as appliances, water heater, roof, landscaping or pool maintenance, etc).
- Bay Area and most California residential transactions are unique compared to the rest of the US, in that the seller pays for and provides what is expected to be a complete set of inspection reports as part of the disclosure package that potential buyers can review prior to placing an offer. The goal is for the buyer and seller to be able to enter escrow without any remaining due diligence contingencies.
- The buyer’s agent writes offers for a living, while you as a buyer may only write a few in your entire lifetime! They are best positioned to interpret the process guidelines for their client.
- While publicly available online search portals may provide close to enough information to get a general sense of value, the buyer’s agent will have access to special software and databases to efficiently organize this data on behalf of their client.
- It is unusual in the Bay Area to have more than 30 days between signing a purchase agreement and closing on the purchase, and sellers will expect that you have a loan pre-approval from a reputable lender that can underwrite and fund the loan in that timeframe; the pre-approval certifies that you will be able to hit the ground running once the purchase agreement is signed. The seller has to recognize that the sale going through is contingent on your obtaining this financing, and the pre-approval letter mitigates the risk for the seller in taking the home off the market during the escrow period.
- Decide whether you want to put your best and final, best foot forward offer as your first offer, or if you want to leave some room to try to get a better deal, or in case the seller is determined to counter.
- Free up enough cash in your bank account for the earnest money deposit, which will be expected to move forward with the escrow process.
Given the large sums of money involved, once the purchase agreement is signed, a neutral third party, typically the title company, is enlisted to carry out the steps and paperwork needed leading up to and including the transfer and recording of the deed. The below summarizes the key steps in a typical 30 day closing timeline from the buyer’s perspective.
· Provide earnest money deposit to the escrow company
· Send the executed purchase agreement to the lender to kick off loan underwriting and compile any other documents requested by the lender
· Follow up with lender to schedule the appraisal
· Schedule and complete any remaining due diligence inspections
- If inspections turn up issues, negotiate with seller regarding needed repairs
- If there is an inspection contingency, the buyer will need to sign off on it before it being removed
· Obtain preliminary title report and confirm you will receive free and clear title; the lender will require a title insurance policy be issued at closing
· Obtain the final loan documents for the lender and remove the financing contingency
· Obtain homeowners insurance
· Complete a final walkthrough to confirm the condition of the home
· Review the estimated closing costs worksheet provided by the escrow company
· Buyer and lender fund the remaining amounts to the escrow company as per the worksheet
· Deed is recorded and funds are disbursed
· Obtain keys and move in
In the Bay Area, sellers typically pay for and provide new pre-sale inspections reports. As a buyer, you will need these reports to be current, comprehensive, and conducted by well known and highly respected local inspectors. If these criteria are met, make sure you understand the reports completely before waiving any inspection contingencies in your offer. You can request a call directly with the inspector or a walk-through. Your lender will also want to make sure that these reports are adequate before they give you a loan, which is additional incentive for you to be completely familiar with the results to avoid being surprised by questions raised by your lender. Once you have waived or removed the inspection contingency either in your original offer or during the escrow period, you can’t rely on or expect the seller to make any further repairs if you missed something or want to reconsider something that was already disclosed to you.
- Sellers and their agents are required by law to disclose any know material information regarding the condition and circumstances of the property. These take the form of documents such as the real estate transfer disclosure statement, natural hazards disclosure, and lead-based paint, among others. Certain types of sellers, such as probates and foreclosures, are exempt from this.
- Structural pest control inspection: This inspection is performed by a licensed specialist who must follows the criteria established by the State Board of Pest Inspection. They will look for signs of insect and fungus damage, including termites, dry rot, earth to wood contact, water intrusion, and beetle infestation.
- Contractor inspections: This should be performed by a local bonded specialist who is a member of one of the major home inspector associations, not just a regular contractor. A general contractor’s inspection will check the condition of the structure, the foundation, electrical, plumbing, the roof and every other potential problem area. They will create a detailed report outlining their findings, their seriousness, and clear remediation steps.
- Other inspections: Separate or more in-depth inspections of the structure, roof, permits review, sewer line connection, environmental hazards, underground storage tanks, fireplaces, chimneys, electrical & plumbing.
In a typical year in the Bay Area, home inventory plateaus from May to October. In other words, measuring from inventory levels in a typical December, one month later in January, inventory is 19% higher, and during the May - October period, it is >2x December levels, and by the next December, it has leveled off to 7% year-over-year growth.
Home prices follow a different trajectory than inventory during a typical year. They fall in January, reflecting prices agreed to during the prior weaker winter months; then they rise and peak 9.6% higher by May, followed by trading in a range of 5.1% - 9.6% the remainder of the year. This means that if you miss the low prices from January and February, you are better off waiting until September or December when home prices typically dip from peak levels.
However, we have also seen that inventories are at their lowest in December, which means fewer choices and less chance of finding your ideal home. September might be the best month to purchase a home in the Bay Area, as it combines peak inventory levels with reduced prices.
The logic behind why September exhibits this behavior likely results from school preferences; more buyers want to move and have certainty around the end of the current school year and well in advance of the next school year; if you are willing to move closer to the beginning of the school year, you will face less competition and have more leverage as a buyer versus the seller.
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