Competition Hits New Highs – San Francisco Real Estate
Real Estate in the Bay
In the cutthroat world of real estate in the Bay Area, where rental prices are one of the highest in the country currently, prospective home owners are resorting to a range of tactics in order to secure the home of their dreams.
When it comes to finding the perfect home, sometimes it’s a year-long journey, and other times it’s the first house that you visit. For most, finding the right house is all about timing, money, and the big real estate gamble: contingencies. The three big contingencies are: mortgage, appraisal, and home inspection. Sometimes the perfect property pops up, and it takes everything you have not to jump on the bandwagon, sign the papers, seal the deal, and in doing so, waive contingency rights. Real estate agents cite home inspections as the largest reason for home sales falling through. With rent prices on the peninsula at an all-time high, home buyers are resorting to real estate tactics to land the home of their dreams.
Real estate agent Chris Backer, with Zephyr Real Estate, suggests two options to his clients who are willing to go the extra mile to get the house of their dreams: free rent-back, and handwritten letters. His clients are advised to write the letters by hand, instead of sending them via email, to add sincerity and personality to their file. “You never know what might tip the scale in your favor,” Backer said. What to include in the letter is left up to the buyer, but some opt to explain their reasoning for wanting the house in question, such as an excellent school district or a personal connection. In such competitive markets, it’s unwise to leave anything up to chance according to Backer. Another option for scoring the deal: free rent-back. In real estate, free rent-back is when sellers are allowed to continue to live in their homes, even after escrow had closed, for a certain allotment of time.
This allows the family to search for another home if they haven’t found one already, or to continue with a deal they have in process without attempting to find a temporary space between their old home, and their new one. Free rent-back is especially luring in the current market, with steep prices and fewer sellers than buyers. Buyers offering free rent-back to sellers in exchange for a deal may make themselves stand out.
So you’ve found the perfect house, be it a Spanish-inspired villa, or a colonial three-story with a Romeo & Juliet balcony. There are five other couples vying for your oasis and you’re desperate to land this sale: it’s been a long journey, you’ve seen a million houses, and none of them hold a candle to this one. For some, this situation results in waiving contingencies in the hopes of enticing the seller. But real estate agents warn that a no-contingency clause can hurt both buyer and seller, and that a thorough home inspection protects both parties, regardless of who pays for it. Backer suggests that homeowners looking to sell in a competitive market get three inspections done pre-sale: pest report, home inspection, and sewer lateral report. His reasoning: “When you get a property into contract with a buyer and inspections haven’t been done, as a seller you have lost the leverage and the buyer could get an inspection and find things done and ask for a price reduction.” Backer also cites a pre-sale inspection as a way for buyers to know exactly what they’re bidding on, so a price shift doesn’t happen mid-way through negotiations.
Some may lean towards an all-cash deal, or to waive their mortgage contingency. Sellers are more inclined to take on buyers who are not in need of a loan, and are able to buy outright; thus for some, an all-cash deal is their ticket to winning the house. For some who are hasty to nab the house they’ve got their eye on, offering to waive their mortgage contingency may seem like a quick get-out-of-jail free card. But waiving a mortgage contingency means that the buyer may lose their down payment if they’re unable to find a lender willing to lend them the money to cover the mortgage.
With competition running high between buyers in the bay area, stretching from the peninsula all the way across the bridge to Marin, buyers, and sellers, are looking for ways to expedite the long process of house hunting. For some, that means offering heartfelt pleas via handwritten letters. For others, that means dropping contingency offers, such as those dealing with sewer, mortgage, appraisal and house inspection. Still more, financially stable house buyers may opt for an all-cash deal and choose to nix their mortgage contingency, which waives their right to reclaim the down payment if loans don’t go through.