How to Buy a Home In The Bay Area

There's two questions that I continually get after 8 years in Real Estate. The first is always "Derek, how is the market"? If you meet a Realtor, and you ask them that, and their first response is "HOT" immediately walk away. The truth is, we as a Realtor cannot answer that with one answer. We first need to find out what your goals are, what you are looking to do, what market you are in, in addition to several other questions. There is never a "one size fits all" answer. Each market and client is different.

The second question I get commonly, is "Derek, we are thinking about buying a home. Where do we start?" Again, there is never a "one size fits all" answer. Everyone's situation is quite different. Thus, you need a unique, individual, strategic, approach. With that being said, I can outline the steps that we will take and where to start. Keep in mind there are different nuances and strategies in each of these.

"Thus, you need a unique, individual, strategic, approach."

Ah, the joys of buying a home in California. From the rolling hills of wine country, to the speed and unique architecture of San Francisco, and the Tech universe that is Silicon Valley. There’s no shortage of beauty, excitement, and uniqueness, to The Bay Area and the Golden State. But, let’s be real, the process of buying a home can also be stressful, confusing, and downright frustrating at times. But, with the right plan, Consultant/Real Estate Pro on your side, and knowledge, it will be as smooth as a Tesla driving itself on Auto Pilot. Ok, maybe not a good example; but, you get my point. It can be a daunting task but, our job is to make it very easy. So let's go.

1. Determine Your Budget

The first step in buying a home is to figure out your budget. In the Bay Area, where the median home price is just over One Million Dollars, this can be a frustrating at times. However, that doesn't mean you can't find a home under 500k or there are no deals. So, grab a bottle of wine and start crunching the numbers. Just don't drink too much wine, and accidentally add an extra zero to your budget – Zillow is NOT a good place to start. Download a mortgage calculator, such as Karl's Mortgage Calculator. Keep in mind the bottom line is just your basic approximate mortgage principle and interest. It does not include the additional fees of any potential HOA's, Mella Roos, Property taxes, insurances, etc. So the best and most accurate thing to do is speak to a Loan Officer. This may mean getting pre-approved for a mortgage, which involves filling out a bunch of paperwork and having your credit score checked. It’s not exactly a party, but it’s a necessary step in the home-buying process. Plus, it’s still more fun than going to the DMV. You DO NOT NEED 20% down to buy a home, and you can do it for less than 5%. There are ways to overcome down payment issues. But, talk to a lender to see what program may work for you.

2. Find the Right Realtor

The second step is to find the right Realtor. This is crucial because a good Realtor can save you time, money, and sanity. They are worth their weight in gold. A good one will also problem solve like a mathematician with the most complex equation known to man. But, finding a good realtor can be like finding Waldo. So, ask around for recommendations, google them, and don't be afraid to interview a few before committing. Just make sure they have a sense of humor, because after weeks of looking at countless properties you are going to need it. You want to work with someone you like, not just someone you know.

3. Determine Your Ideal Location

The third step is to determine your ideal location. Do you want to be in the East Bay, South Bay, or Valley? In San Francisco or the suburbs? In a neighborhood with trendy coffee shops or a quiet cul-de-sac? Just remember, the more desirable the location, the higher the price tag. But hey, you can always start a GoFundMe campaign to fund your dream home. Remember, if it's your first home, budget may play a huge part in what city you look at. It may not be your first, second, or even third choice. However, this is just a stepping stone to build equity and get to where you really want to put down roots.

"They are worth their weight in gold. A good one will also problem solve like a mathematician with the most complex equation known to man. But, finding a good realtor can be like finding Waldo."

4. Research the Neighborhood

Once you've determined your ideal city location, it's important to research the neighborhood. This means looking up crime rates, school ratings, and the nearest In-N-Out Burger and Starbucks. After all, you don't want to move into a neighborhood with high crime rates, low-rated schools, and no access to animal-style fries.

5. Start House Hunting

Now comes the fun part – house hunting! This is where you can really let your creativity shine. You can make a game out of it by creating a bingo card of features you're looking for (pool, fireplace, wine cellar, secret room, etc.), but keep in mind your wants vs needs. Needs is always more important. Everyone wants something. But, what is more needed for your lifestyle? Schools, distance to mass transportation, room downstairs for in-laws, open floor plan because you do a lot of entertaining? Always shop from a needs basis. Be prepared to make sacrifices on some of your wants, unless you are Jeff Bezos.

6. Make an Offer

Once you’ve found the perfect home, FOR YOU, it's time to make an offer. You can review disclosures before or after making the offer. Hopefully you have a chance to review them before making the offer, but sometimes there's no time. Thus, you can make an offer contingent on those disclosures. Disclosures are like the properties back story and DNA. Reading disclosures and making an offer is where having a good Realtor comes in handy. They can help you craft an offer that is competitive and reflects the value of you as a buyer. A good Realtor will also advise you on how to win, negotiate on your behalf, protect you, and explain the risks/rewards of submitting such offer, with a plethora of other duties. When making an offer, keep in mind, the Bay Area Market is picking up again. A lot of properties are getting 10's of offers, and selling for way over asking. That means you have to not only be budget conscious so you won't become house broke. It also means shopping with space for a strong offer. If your max budget is 800k, do not look at homes that are listed at 800k. Leave space to negotiate. If it is a hot property, you may need 100-150k to play with to secure a home at no more than your max budget. That means looking at homes priced in the 700k range. Again, talk with your trusted Realtor to be strategic about this, as there are also still deals to be had.

7. Get a Home Inspection

If your offer is accepted, it's time to get inspections. We recommend three initial ones. Home, Pest, and Roof. After that, you can do more specialized ones. Such as, Pool, Electrical, Plumbing, Air, etc. This is important, because it can reveal any potential issues with the home. Such as a leaky roof or a faulty foundation. Keep in mind, an Inspector's job is to find problems. NO HOME IS WITHOUT ISSUES. Not even that one completed 10 mins ago. Your Realtor and Inspector can go over what problems are serious, what is common, and not so serious. Your Realtor will then come up with a game plan on what the negotiation points should be.

"A good Realtor will also advise you on how to win, negotiate on your behalf, protect you, and explain the risks/rewards of submitting such offer, with a plethora of other duties."

8. Appraisal- If client Receives Financing

The appraisal has a few nuances that your Realtor can go over. However, keep in mind, this the valuation the bank will see for your property. They will only loan money based off the valuation amount. Thus, if there is a gap from the purchase price, it will have to be covered. Or renegotiated. An appraisal is just an opinion. If the appraisal makes absolutely zero sense, I would recommend requesting a new one.

9. Get final documentation in order

This is the Home stretch. (Pun Intended). There are list of things that needs to be finalized. Also, a list of things you as a Buyer should not do in the escrow process. If you do any of these things, it could mean a failure to get the loan and failure to get your home. Ask me what these are, and I will be sure to get you that list. Signing documents, and acknowledging items in a timely manner is instrumental for closing on time. Make sure you stay on track here.

10. Close!

Assuming everything checks out, you negotiated, you inspected, did your due diligence, and over came any problems that came up, it is now time for signing, final walk thru, and closing. Once the Closing Disclosure is out and acknowledged you have 3 days for consideration, in which time you will most likely sign the hard copies to title, fund the rest of the money, do a final walk thru. Then we wait for title to record with the county. Once this happens, the home becomes yours, OFFICIALLY!! You can now start planning your house warming.

This is just an outline on buying a home. There are so many factors and considerations that come into play during this process. There is also a lot of mis-information and guidance out there. By all means talk to people that maybe have gone through the process recently. But, always default to the professionals. Just because someone bought a home 25 years ago, doesn't mean they know what applies to you, or how to do it. Remember, EVERYONE'S SITUATION IS DIFFERENT. Talk to people that are trusted, knowledgeable, and respected. Make sure those people stay within their lanes. Don't ask a Realtor about lending and financial programs. The Realtors should also not be answering these questions. Unless they are a licensed Loan Officer or Mortgage Broker in addition to holding their Real Estate License. Don't ask the Lender about home values and market activity. Don't ask inspectors about negotiating the problems they find, off the purchase price.

For all things holy, please stop listening to TIK TOK GURUS and IG INFLUENCERS. Very few know what they are talking about. Also remember the common theme of this article, Everyone's situation is different. Not only is their "advice" not right for everyone but, it also doesn't work in every market. Or, it is just completely wrong. Please be careful!

I hope this clarifies a lot of questions. Please do not hesitate to reach out to me. Should you, or someone you know have questions. Or, you want to strategize your specific needs to buy a home.