How to Buy a Home in California's Ultra-Competitive Bay Area Market
Keep these nine things in mind to maximize your chances of success.
Opinions expressed by Entrepreneur contributors are their own.
California's Bay Area is one of the most desirable places to live in the U.S. It has a booming economy, is the epicenter of consumer technology, has great weather and a gratifying food scene, and endless outdoor and indoor activities. In short, the Bay Area leaves little to be desired in a city other than affordable real estate.
When measured by median home values, the Bay Area real-estate market is one of the most expensive in the nation. Relative to other major metro areas across the country, only New York City home prices are comparable to the Bay Area. The most common question I get asked as a realtor is, "Why is the Bay Area housing market so expensive?" And my answer comes down to supply and demand. The Bay Area has a high population density and a shortage of housing inventory, thus driving up the cost.
It's not only first-time homebuyers: Second- and even third-home purchasers are struggling to find a home in the current housing market. Many buyers are outbid with bigger down payments or all-cash offers, and add to that mix of high housing demand and low inventory.
As a realtor, I've doubled down as a grief counselor, helping my homebuyers recover from rejection and disappointment. Knowing all of this, if you are ready to jump into Bay Area housing market, here is my advice.
I tell my clients to practice patience, persistence and positivity. There will be ups and downs during the journey, but trust your real-estate agent to find you a home that best suits your needs.
When I work with clients, I like to show them estimates beforehand — what similar homes in the neighborhood sold for, how much above asking and how many days it sat on the market. When making an offer, I always ask them what the home is worth to them. Because in the end, they're the ones who need to walk away from it feeling like they made the right decision and that it's worth what they paid for.
Understanding how much you should spend on a house involves some careful planning. Planning will help you avoid making an impulsive decision during a bidding war. I suggest discussing with your partner or your support network to outline what you will do if you're up against multiple bids in advance.
3. Get prequalified
If you plan to use a mortgage loan to purchase a home in the Bay Area, I recommend getting prequalified. It provides a general estimate of how much you'll be qualified to borrow based on an evaluation of your described finances, such as credit, debit, income, etc.
4. Be prepared with financial documents
Get all your docs in a row. Once you like a house, the process moves fast. Make sure you have all your financial documents prepared and ready to submit. Also, avoid making any big changes, i.e., buying a car or changing jobs before the closing.
5. Be flexible
I like to be very transparent with my clients. Some come to me with strict requirements and get defeated when I show them home estimates. All in all, make a list of your needs versus your wants beforehand. Having that flexibility opens a pool of houses to search from.
6. Get your top three neighborhoods and cities
Be open to different neighborhoods in up-and-coming areas with fewer competitors. Some of the Bay Area cities might have more supply than others, so I recommend shifting your housing search to areas with more inventory, thus increasing the chance for success.
7. Consider a new development
While there are fewer newly constructed homes, work with your realtor to know your options. Buying a new development means no surprises and no bidding wars. You know precisely what you're paying, and the process is fully transparent and manageable. For some of my clients who are tired of bidding wars, I open the option of new development if available.
8. Consider preemptive offers
I call this a power move for the winning buyer. As a buyer, you can beat the competition by offering the sellers a too-good-to-refuse preemptive offer, meaning you can bid on a house before the seller's published date to hear all offers. A compelling offer can be all cash, no contingencies, free rent back, quick close. While this is a power move, it might not be feasible for all.
If you consider making a preemptive offer, make sure your agent stays informed throughout the process. It's important to note that some agents are willing to entertain early bids while others will decline, as they want to honor the published date to hear all offers.
9. Work with a real-estate professional
Sellers often price their homes at an asking price, knowing bidding will drive up the sale price. Working with an excellent real-estate agent can help you navigate this often painful process. Furthermore, an experienced realtor can provide you with advice unlikely to be found through online searches.
Buying a house or real estate in the Bay Area can be an emotional process. Make sure to look for a buyer's agent who will represent your best interests when negotiating a home purchase.