I’ve been looking for a house for 3 months now in the San Francisco Bay Area and I’d like to share my learnings. If you been there, done that, you can skip this, otherwise, feel free to continue reading. 1. Your agent is not your best friend. They want to establish trust so they can sell you a house, that's it. Don't trust your agent too much, do your comparative market analysis. I'll explain in #2. So the higher the house price, the more money your agent makes, and that's their incentive. I worked with several agents, and they all wanted me to buy a house up to my max budget. 2. Comparative market analysis: is a tool that real estate agents use to estimate the value of a specific property by evaluating similar ones that have recently sold in the same area. Guess what? They make mistakes! I corrected their analysis several times for more than one agent. You can analyze by looking up sold properties on Zillow and Redfin. it's not rocket science. 3. Teaser price: that's the deceptive asking price in the listing. They underprice the property to drive more foot traffic during open houses as a marketing strategy, so buyers think there's a lot of competition on these houses, and you end up paying more. Additionally, these houses will appear in more search results and attract more buyers. To get a more accurate price, check Redfin, which provides the most precise estimate for property prices. Keep in mind that the sale price might go higher than the Redfin estimated price. Too much money in the market! 4. The offer deadline is usually a few days to a week after the open house. Obviously, this is a seller's market, so they can do that, and it's also a sales strategy to drive the price and competition higher. So don't rush and panic. Only place an offer if you're comfortable and have thoroughly read the disclosures and inspection report. 5. Developers are ramping up building, and interest rates are going up, so expect the hot market to cool down late 2022 to 2023. I've been hearing from agents that the market has already started cooling down. Add the stock market volatility, the federal reserve changing their policy, and the potential war in Europe to the mix, and you have a possible recession, if not worse. Check this Bloomberg interview with Jeremy Grantham on how the market now is in a super bubble: https://www.youtube.com/watch?v=JlEGU2ypr1Q 6. Don't rush to buy a home and don't feel the FOMO. You will get your house when the right time comes. Save and invest wisely. In the meantime enjoy your life! TC: 350K #housing #houseprice #bubble #recession #sanfrancisco #housing #mortgage
Great summary! What’s your process to analyze a fair price for a home?
I don’t think the house prices are fair by any means. I’ve seen houses appreciate close to 100% in 2-3 years. Take this house for example: https://www.zillow.com/homedetails/9874-Macela-Dr-Elk-Grove-CA-95757/89161818_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare Sold in 2019 for $590K and will go on the market soon, the agent tells me they’re expecting to sell it for $1.1M. But to do the market analysis, you search on Zillow/Redfin for sold houses in the past 3-6 months with similar specifications to the house you’re planning to buy. And compile a list of the houses and calculate the average price/sqft and that would be the market value. Keep in mind that you need to factor in lot size, year built, condition of the house and the inspection report. Make sure to to read the entire discourse packet. One miss can cost you a lot of money. For example foundation work is very expensive. I’ve consulted with contractors and I was shocked that some foundation work would cost $100K
Where are you seeing cooling down ? Houses are going 300k minimum above list in Tri valley . I agree though recession is eminent but will it crash housing market in the bay ? If it does , people will just buy another home .
Agreed on each point except don’t see market cooling down. House listed in 1.5M, built in 1956, Redfin estimates 1.75M. Agent estimates 2M. Koi sense hai is baat ki ! https://www.redfin.com/CA/Fremont/41247-Norman-Ct-94539/home/1105133?600390594=copy_variant&231528114=control&utm_source=ios_share&utm_medium=share&utm_nooverride=1&utm_content=link&utm_campaign=share_sheet
Certain neighborhoods are hot, so if you’re planning to buy, you’ll be paying $250K above the estimated market value. If you’re comfortable with that, go for it. But if we hit a recession, then property values go down back to earth.
This advice has been relevant for the last decades. If someone listened to this advice in the last 20 years, they would have regretted it.
What’s wrong with that advice?
This is great advice.
Redfin joke zillow disaster
No need to complicate things so much. Just buy a home if you need it and plan to live long term. Even if you over pay 5% it will just be noise in 10 years. If you don’t intend to hold the property long term then continue renting
This will definitely help & make this craziness go away. https://abag.ca.gov/our-work/housing/rhna-regional-housing-needs-allocation
Housing demand will always be there as the population is increasing so better buy now .It will appreciate 5x in future
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Definitely reign in your FOMO. Don't stretch the loan by more than 4x your income. Leave room for market volatility ( read TC volatility). Don't become house poor and miss out on life / experiences. Buying a house at a high price = huge property tax bill year after year.
+1 thanks for the addition!
Guess what if you buy the house which is very much within your comfort zone, you will be looking to upgrade it within next 5 years.