You would have to be living in a cave if you didn’t know San Francisco’s real estate market is hot. hot. hot (actually you might consider living in your car in this recently-sold $82K parking space with these prices, but that’s for another story). I spoke with real estate agent Rob Costabile of San Francisco who has been selling into this city’s neighborhoods for past eight years, about readying for and winning in the City by the Bay’s real estate market.
We know why the last housing bubble burst of the late 2000′s, but walk us through this current real estate frenzy: What makes it different?
Rob: This real estate market has eclipsed the the first half of 2007, which is generally considered the peak of the housing market with a combination of factors: a stronger economy in San Francisco with many major tech companies moving here and creating more demand, historically low interest rates, and the consistent lack of both inventory and land. The icing on the cake is that rents keep rising so people want to dip their toes into buying because it makes more financial sense.
What can a buyer do to ready themselves for this real estate craziness?
Rob: This market is not for the timid. There are three things to do before you proceed: First, establish a relationship with a real estate agent—learn the market, get educated on today’s conditions. A lot of new home buyers attempt to do too much on their own and don’t understand the dynamics.Having an agent cuts through a lot of it. Secondly, get pre-approved with a strong local lender familiar with the San Francisco market who can deliver on aggressive time frames and terms. Thirdly, evaluate if you truly want a property and are ready to put in the work that it takes to be successful. In other words…get your head wrapped around the rules of the game in this real estate market—or get out. It sounds harsh but it’s the reality right now.
Once you’ve decided to forge ahead to battle, what kinds of trends will buyers face?
Rob: You have to be quick to see properties and also willing to stomach the 10-30% overbidding that occurs with multiple offers. To make matters worse, there will always be one or two home buyers on each sale that offers cash, which is still king and also makes it difficult to compete. Cash can also be used as leverage for counter offers, a double whammy for some home buyers who can barely afford their initial offer. Another trend is home buyers removing standard mortgage contingencies, such as a loan and appraisal. You’ll also have to be more flexible on what you are looking for and likely sacrifice that extra storage, perfect neighborhood, or stellar view you always wanted.
Sounds fierce. Is there a positive ending?
Rob: Absolutely. I have sold homes to many people in this market who were patient, diligent, and persistent. It might take a few tries to get the home of your dreams, but it can happen in San Francisco.
Editor’s Note: Check back in July for a close look at the red-hot San Francisco East Bay real estate market, what makes it different, and how to win that war.