My heart goes out to anyone who is looking to purchase a home in the Bay Area. We just closed on a house today and I’m finally ready to talk about the real estate process out here. Here are some things to know:
Understand the general process of buying a house.
- You need to put down around 20% of the full cost upfront unless you can afford to pay in cash (in which case all other buyers probably just hate you). You need to bid 10%- 20% OVER the asking price (at least), and you are going to get hammered with closing costs. Knowing these things, make a spreadsheet with all of your accounts to see how much you afford.
- You need a buyer's agent who will get 3% of the sale as payment
- Every house typically has a sellers agent that also gets 3% of the sale as payment.
Figure out where you want to live. Important factors include:
- Walkable distance to the Bart or just good general commute times to wherever you want to be. People tend to change jobs a lot in the Bay Area so don't assume you will be at your job forever.
- Schools (if that is something you want to consider at this time)
Figure out what your “absolutely have to haves“ are.
- Is it commute time?
- # of bedrooms?
- Fun fact: # of bedrooms doesn’t mean anything in real estate listings. In order to be considered a bedroom, the room has to have a closet. That's IT. Thus, houses that say “3 bedrooms” may actually have the ability to have four or more. Save $100k+ and look for houses that are listed as having one less bedroom than you would like because it might actually have the number you are looking for!
ok, let’s get started.
1. Get your buyer's real estate agent. (this may take a few tries)
- We tried a few agents but ended up with Fred Glick. Just give him your money and don't worry about it. Seriously, we can't recommend him enough! We knew that he was an expert when he showed us all of his internal online tools and set up a specific Slack channel for us on day one. He really knows the Bay Area and he isn't afraid to tell you to walk away from a bidding war when things get too crazy (it will happen). He's also just a really great guy, and there's a lot to be said about that in real estate. You want Fred on your team.
- hungryagents.com is an incredible resource that you should check out. Basically, you sign up and a bunch of agents bid to be your buyer's agent by telling you what percentage of their cut of 3% of the sale price they will give you. This equates to some real money when you are bidding around a million dollars on a place. Sometimes it works out and sometimes it doesn't.
- Don't sign any "exclusive agreement" with any buyer's agent unless you are completely sure you are going to go with them and understand the consequences. Some agents will want to make you sign a contract saying that you will only have them as your buyer's agent for a year, regardless if you want to go with someone else. Just don't sign.
2. Look for a house online!
Sometimes houses aren't listed on every real estate site. Look around at:
- Fun Fact: the agents that appear right next to the house on Redfin ARE NOT THE AGENTS FOR THE HOUSE! They are general agents that want to be your buyer's agent. DO NOT CONTACT THEM unless you want them to be your buyer's agent.
- Sign up for all of Redfin's email notifications! Do it! Their system makes it so that you almost don't even need a buyer's agent to help you find things.
3. Go to as many open houses as you physically can. I can't stress this enough.
Going to a lot of open houses was hands down the hardest part for me. You need to understand that your weekends are now all about looking at a ton of houses (at least 6/day), and you need to have your game face on to do it. Every time I would walk into a home I wore my heart on my sleeve and tried to envision myself living there with my future "mini Hovas"...which is really really hard when there are 5 other families already inside it. I absolutely hated this. I was completely out of my comfort zone in this situation. If you are lucky the open house will have snacks...and if so, just eat your feelings and take a look around. Here are some open house tips:
- I thought I knew everything about my husband. Sometimes houses look good on paper but when you walk through them it’s just not a good “vibe” for someone. This is a very real thing! Take it seriously! If you're going to have to spend a million dollars (literally) on a house you better feel ok inside it.
- There is something to the "it feels like home" aspect of a house. We looked at A TON of homes and the one we ended up getting was the one that felt the most like we were returning home. It's hard to get the "I'm home" feeling when there are a ton of other families in the open house but I promise it will hit you like a ton of bricks when it's right.
- Houses typically are on the market for 2 weeks (consider it 2-week sprints) and have open houses over two weekends. If it's on the market for longer there might be something wrong with it.
- Great tip: We exhausted ourselves creeping on Redfin every day but in reality, all you have to do is check out Redfin on Fridays and plan your weekend open houses accordingly. Work smarter, not harder. Don’t be us haha
- One of the big factors when bidding on a house is that you need to know the “comps” (comparable houses) in the area. You don’t want to bid too high or too low because on one end you will have a hard time getting a loan (loan companies will only give you the amount of money the house appraises for based on comps) and on the other you'll have a hard time winning a bid. Get a feel for what is available in the area and about how much that will cost. Unfortunately, this means you should go to open houses for homes in your area that you don't even like.
- Keep looking! There are always more houses that pop up. One thing we noticed is that there are a lot of houses that look like they are fixer uppers. If this is for you then great, but know what your limits are. IKEA is only so powerful.
4. Putting an offer on a house
- How to be competitive
- Bid 15%-20% over asking price (unless you are working with an all cash offer. In that case all other buyers hate you and none of these rules probably apply to you haha). Study the hell out of your “comps” so that you know about what the house should appraise for.
- Go in with 0 contingencies if you can. Yeah, I know --- All houses will give you disclosure packets with inspections and vital information and you just really have to study the hell out of that.
- Great tip: One big thing to look out for is a compliant sewer lateral. It can be really expensive and just ask the sellers agent as soon as you can. It’s a Bay Area thing, I think.
- Be careful of homes that have great views of the bay, those that are right next to schools, and homes that have clearly been flipped. These are typically highly coveted by buyers and you will probably get blown out of the water in the bidding war. Miracles do happen, but it's good to know.
- Crazy stuff happens when you put a bid on a home and it seems like there are no rules. Did you know that asking price means absolutely nothing in the Bay Area? True story: One time we bid 20% over asking price on a home and the seller essentially said: "no thanks, we were actually hoping to get 40% over asking price". It wasn't that we were outbid by other buyers, it was literally a shakedown of the seller and the original price was a honey pot. This is not illegal but it happens and it's annoying.
- Get pre-approved for a loan.
- We got pre-approved at several places in order to have a solid looking offer. This takes so much work but is so worth it!
- Fun fact: Loan agencies don't want you to have more than 60 days rent-back by the seller after you buy it. Otherwise, it turns into a different kind of loan and you don't want to go there.
- Another fun fact: If you are a contractor (aka you aren't salary at a company) it doesn't matter how much money you are making unless you have been a contractor for at least two years. Loan agencies don't think you are stable enough to count your finances toward loan consideration.
- Write the best love letter you can.
- In the Bay Area, you typically have to write what is called a “love letter” that includes:
- Who you are.
- Why you love the house.
- Fabulous design. Here is our winning love letter:
Repeat steps 1 - 4 until you get the right agent and finally get an offer picked up. As long as you didn't sign anything with an agent don't be afraid to keep trying until you find an agent that fits what you need.
- Get all of your information together. Like, literally anything you think could be interesting about your finances. This includes crazy things like:
- All documentation on large deposits you've had into and out of your accounts in the past 6 months. (They want to know that you aren’t taking out several loans in order to make this happen. Makes sense)
- 12 months of rent stubs (if you were previously renting)
- Proof from your work that you totally work there and that they are totally a real business people work at.
- 6 months of statements from all of your accounts
- Get insurance!!
- Home insurance isn't that crazy, but if you get a good deal you can get a bulk insurance deal where you can get a bunch of plans together. This includes:
- General Home Insurance
- Auto Insurance
- Umbrella Insurance
- Earthquake Insurance
- Earthquake insurance is craaaazy expensive out here, but depending on where you are in the Bay Area you should look into it.
- Fun thing: I'm not sure if this is at every company but the company that we went with had both "Engineer" and "Scientist" discounts on their insurance. All you have to do is show your college diploma for either profession to them.
- Take measurements of the house! We like to take measurements and CAD it up so that we can game plan where everything is going to go.
- Signing day is the best day! It's when you go to the title company to sign away your life to this place.
- Fun fact: You need to make an appointment at the title company so a really rad Notary can be there to facilitate. Whoops.
- Another fun fact: When you are signing these legal docs you need to write your first, middle, and last names all together in cursive. Matt HATES cursive.. so this was an adventure.
Best of luck! I never want to do this again haha