I recently bought a sfh in bay area and wanted to share my learnings. - redfin vs. traditional agent: I was going to hire redfin agent to get that sweat commission refund, but ended up going with a traditional agent who knows the area very well and came with high recommendation from friends. He has a lot of experience in real estate and was in the market for a long time so he was able to tell me things like "this house came on market last year but didn't sell because of foundation issue" when we went to an open house or "the way they built bookcase inside the wall could affect integrity of the structure". He was able to tell me what neighborhoods to avoid and which ones have school issues (too much academic pressure), etc. He ended up giving 0.5% of sales price as refund as well. If you are unable to find trustworthy and experienced traditional agent, go with redfin as traditional aren't giving you much value. Don't hire your friend as agent unless they have a ton of experience, i.e. don't become their learning experience. You are trusting them with your hard earned $ and house you have to live in for many years. - how much to offer: the listing price doesn't mean anything because sellers often list it way below "market" value to attract potential buyers. Redfin estimate is hit or miss and in my experience, lags the trend, i.e. lower than the final sales price in the current trend, but it could stabilize with rising interest rates and stock performance. I believe Redfin also uses # of views and likes in estimating cost in addition to $/sqft, recent nearby sales, etc. The house we were looking at received over 1k likes so I think it unfortunately contributed to increasing redfin estimate = good for the seller, bad for buyers. Rely on your agent because if they are good, they can assess market trend better that takes into conditions that redfin algorithm cannot capture. In my case, my accepted offer was very close to the next best offer. - escalation clause: When I bought or sold houses in WA in the past, all offers had escalation clause (e.g. my offer is $500k, but if another person is offering more, I am willing to go up to $600 at $10k increment) so I felt like i can put in reasonable offer. In CA, at least with my agent, he didn't recommend using escalation clause so theoretically, I could way over bid compare to the next best offer. And it being seller's market, seller could ask for more even if my offer is the highest by large margin. As buyer, it left bad taste in my mouth. - mortgage: if you are buying in bay area and don't have $2-3M in cash, you would have to get jumbo loan and because RSU tend to be large portion of income, have to find lender that considers your RSU as income (some local banks do) Many Zillow online lenders I talked to didn't consider RSU as income. One of them even was surprised I am getting paid so much in stocks. All mortage lenders I talked to asked how long I've been with the current employer and 2+ years is considered good, otherwise you would have to provide employee history from previous employer. 2 years w-2 were required to check if the current income is not one time spike in income Lenders look at income to monthly payment ratio in addition to your total debt. What this meant for me was, I have a house in Seattle area that had a ton of equity but my lender wouldn't give loan until I found a renter and use the rental income to improve income-to-monthly payment ratio. If you have large car payment or student loan, obviously they would hurt the ratio. Your lender may ask you to pay them off to keep the ratio low but do it only when they ask you to. Wells Fargo was reducing interest rate by 0.125% points for each 250k assets (401k, stocks, IRA, savings, etc.) you move to Wells Fargo. It does take a long time to move assets from one brokerage to another so I ended up not going this route, but if you are planning to buy a house and if Wells Fargo still has promotion, it could save non-trivial amount of interests. I ended up going with US bank because I didn't think I would be able to make the transfer before closing and they already had all my information. Make sure you talk to a few lenders to compare rates as they are NOT the same. Rely on your agent to find a few good local lenders. They typically have a couple they work with closely. Note that mortage is heavily regulated. 1 lender cannot give different rate to 2 similar borrowers, however 2 different lenders could have widely different rate to the same borrower. - earnest $: I purchased house a few times, but this is something I still struggle to remember. If your offer is accepted, you have to wire your earnest $ within a few days. In our case, it was within 1 day. I luckily had enough money (3% of purchase price my case) in my bank account so I was able to wire it, but if you keep low cash balance (to make more of your $ work for you), it may take a while for your liquidation to settle (Fidelity takes about 3 days) and another 1 day for transfer to bank account. If you need more time, work with your agent to change the earnest deadline. - Compare to WA, all houses we put in offer in bay had someone die in it recently. This is due to prop13 where property tax increase is capped. For e.g. the seller was paying something around $1500 for annual property tax because they bought it 30 years ago but I have to pay $25k. This means people can't afford to move so they literally have natural death in their house. In WA, I've never experienced this. I don't know if prop13 is good or bad yet; my WA escrow pay went up $8k last year alone but it forces rent to rise at the same time, putting more pressure for people to buy instead of rent, pushing up house price. - house hunting: I live in Seattle area and never lived in bay. I Airbnb for a month in bay to get a feel for neighborhoods and relied heavily on my real estate agent and my friends. Here is what I collected from them. This may or may not be true so feel free to comment what you think: Los Altos: there are 2 parts, one with mega mansions with true rich people and there are smaller houses ( move stuff to storage -> buy a new house -> move again) read on. If you have considerable asset in retirement account, you can use indirect rollover to get access to 100% of the amount for 60 days without penalty. This is different from 'borrowing' from your IRA which your brokerage severely limit the amount. I personally used this in the past to avoid moving twice: bought a new house that required down payment of $300k. I didn't want to sell stocks so did indirect rollover from my IRA that had $500k and used it as down payment. Once I moved my stuff to the new place, I immediately put my existing house on the market and the sales proceed went back into new IRA account before 60 days cutoff. Again, this is advanced topic and getting line of credit may be better option for you, so talk to tax experts before going this route.
Hey I appreciate this post, thanks for this. Would love to see something similar for the LA area from someone on blind too
Some good advice but also some misinformation. The wells Fargo relationship discount is not trivial, especially if you go over 1m and it takes tens if minutes to compete a transfer that can save you .5% on your interest rate...
He can always refinance with wells
Just clarifying that .5% is not trivial, especially on a multimillion property
Which are did you end up buying in and how much did you pay?
So which city did you buy ? How much were closing costs
Sunnyvale
Oh, you bought it in Sunnyvale. That's kinda risky. Price there is 20% above 2019 peak. Palo Alto price is still the same as 2019 peak. Mountain View and Burlingame is around 10% higher than 2019 peak. Hope you get a good size with that price in Sunnyvale.
It's strange that your agent and friends suggested you check Los Altos, Cupertino, San Carlos but not Palo Alto. The order of my favorite city would be: Palo Alto, Los Altos, Burlingame, Mountain View. I would put San Carlos only if you want a view. And Cupertino if you like proximity to Asian food.
They didn’t suggest particular city but this is what we concluded based on bits and pieces they shared in conversations. Palo alto and los altos definitely great place but since i want to keep my house in seattle, i didn’t want too much of my asset all in real estate.
Did you do the IRA stuff with Wells Fargo? I thought their underwriter checks if you have the down money for at least 2 months.
I ended up not doing it. They said they consider $ that won’t be used for down payment.
I also used Wells Fargo relationship discount. Maybe I was just lucky, I got all the brokerage transfer within 4 days.
1. TC, YOE, role, level? 2. How much was the house? 3. Why buy in Bay if already have house in Seattle? 4. Mortage rate?
Sunnyvale is an amazing place. Congratulation. Which part of sunnyvale did you buy? I also got my home in sunnyvale 94087. Amazing neighborhood. You did the right thing buying in South Bay. Places like San Ramon have gone up much more than South bay like sunnyvale. Homes are only up 20-30% here compared to 70% in places like San Ramon. Once hybrid starts you will see significant appreciation in your property
What’s Amazing about Sunnyvale ? Except location
In real estate location is everything. Amazing Weather, nice parks like Ortega and Serra park, great schools that feed in to Cupertino school district, great commute to lots of big tech companies, lots of food options, a new downtown with lots of newer shopping that is still being added on to, close to SJC and SFO, convenient Caltrain.
RSUs should NOT be considered income. They will hopefully continue to increase your net worth, but they cannot be considered reliable. Many banks will consider RSUs as income if you have the right kind of documentation. They want to see how much is being granted every year. They will not consider appreciation. Anyhow, I strongly recommend ignoring RSUs when you do your qualifications. You can sell your RSUs for the downpayment. Keep in mind that the tax bill can be large.
RSUs are definitely income. Else banks would not take the risk to lend to you. They automatically discount a % of the rsu value to account for market fluctuations and dips. They won’t qualify you for 100% of rsu value. No tech income remains flat. Tech TC has almost tripled in last 10 years. Even if it just doubles in next 10 you are locking in your home in today’s dollars. It is generally smart to buy the max and best house you can afford now than to deal with selling a starter home and later paying even more crazy amounts for your upgrade. Transaction costs eat up a lot of your gains. Plus your property tax gets reset and you end up paying more in the long term
People buy homes to feel secure. Overstretching is counterproductive if homeownership becomes a source of stress. Instead of moving up or fixing up, one can also buy additional properties for rental or second homes.
Thanks for the pointers, congrats!