How to Compete in the Zany San Francisco Real Estate Market
There are 3 key components to gaining the edge here in the San Francisco Real Estate Market – Money, Risk and Timing.
1. Offer Amount
This component is pretty straight forward, but NOT the only thing that matters. In an inventory constrained market, it is highly likely that you will be competing with other buyers. There are indicators of the level of competition that I’ll keep you posted on and we’ll incorporate those factors into the overall offer strategy. With heavy competition put your best foot forward as you may not get a second chance since the seller may only counter the top offers if they counter at all! A good barometer to identify the home’ value to you is to ask yourself, “at what number would I/we be OK if someone else got it?” Now this is not an arbitrary number, I provide you with data driven offer scenarios and insights for you to make an informed decision on the offer amount. The barometer question is nuanced as it allows you take data and also the intangible factors to identify what you feel the home is worth.
2. Contingencies - How Many and How Long
First let’s start with a brief overview of what a contingency is and how a seller views them. A contingency allows buyers a contractual way to cancel the purchase contract. So, in the eyes of a seller, they see risk in each contingency. Appraisal, Finance & Inspections are the most common contingencies. In a sellers’ market, anytime you can reduce the number of days for the contingency or remove the contingency all together, it will add strength to your offer. I am not advocating waiving any contingencies, they are there for your protection. What I am here for is to explain what it takes to win in this market. Sellers in ~90% of cases have multiple offers to choose from and ~99.999% select offers with no contingencies. Back to what I mentioned above, contingencies = risk to sellers and risk is what they will avoid when selecting an offer.
There are tactics you can deploy BEFORE you submit an offer on the offer date to either remove or shorten contingencies and still mitigate your risk. Two general ways to look at risk: 1. You can manage the risk as best as possible to your satisfaction through strategic tactics; 2. You can pass on the risk and not move forward.
One tactic to mitigate risk is to complete a home inspection before the offer date. This allows you to understand the home’ condition and weight your comfort level. In most cases you won’t have to go this far as most Sellers hire a 3rd party inspector to complete an inspection report that is included in the disclosures. If this is the case you have 4 options: 1. The report satisfies your questions, no further action needed; 2. You can call the inspector and discuss questions you have; 3. Hire the inspector to walk through the property with you to explain things and provide context in real time; 4. Hire another inspector to walk property with you and provide report. The end goal of this is to be able to waive the inspection contingency when writing the offer.
Another tactic is to work with your lender long before you even find a property to get your file (application, associated documentation, employment verification, etc) to an underwriter for review and approval. The process can seem cumbersome and invasive but you come out of the process knowing that your file is rock solid and unless something catastrophic changes in your file your loan will close! This approval is called “conditional and/or credit approved” and puts you in the position to compete with cash offers! The contract we use to write offers here in San Francisco actually has a line item in the terms section that notes “non-contingent financing” as an option. After all we are here in the heart of the innovation capitol of the world, so of course our real estate sale and offer process will be aggressive to match the market and clientele.
3. How Fast You Can Close the Deal
In most cases, the faster the close the better. Bottom line, once a seller decides to sell, they want to complete the transaction, pull their money out of the investment and move on. Getting the escrow period (this starts once your offer is accepted and ends the day you get your keys) down to as few days as possible is critical. To give you context, a strong escrow time period is 17-21 days if not shorter! So, all the due diligence we do ahead of time translates to a shorter escrow period.
Not to Fear
I will guide you through the offer strategy and writing process. I am here to guide you by providing data and insights allowing you to make the best decisions for your own personal situation. I work behind the scenes with banks, mortgage brokers and inspectors to tighten up timelines and partner with you to perform due diligence to get you to the point where you can remove them all together, should you choose to.
Yes, It Does Matter Who You Know
My relationships and reputation within the broker and realtor community plays a key role. There is a lot that happens behind the scenes that can make a deal go sideways, but I am known for getting the job done! Sellers want to know the deal will get done so listing agents want to work with an agent they can trust to get the job done. And that’s me!
The homework we do together to prepare the components of your offer coupled with how I present the final offer package will get the attention of the listing agent and seller as a solid, comprehensive and strong offer that will see the finish line for both the seller and buyer.
You Need to Be Prepared for This Market!
The better prepared a buyer is to tackle the intense and at times insane San Francisco and Bay area real estate market the more seamless and effective their experience will be!
I Help with That!
Comment below and let me know what your questions or concerns are and what topics you’d like to see me address. I’m here to guide you with a proven framework for helping buyers secure a home in the competitive San Francisco and Bay Area Real Estate Market.