Last week, a minor miracle occurred in our household when I walked into the bedroom and noticed that my husband had actually closed his closet doors! With more than 28 years of marriage under our belts, that may be a first. I get that such an event is NOT earth shattering to most of you, or even newsworthy, but to me, it was the culmination of a dream, although admittedly, I may need to dream bigger. Still, it gives me hope that the toilet seat may one day yet, find its way to a closed position.
In the world of real estate, a "minor miracle" happens when Buyers get into contract on the first house on which they bid. Spoiler alert: that almost NEVER happens.
Because, like everything in life, there's a learning curve to buying a house and in many cases, it's a slow steady hike to a successful purchase, as opposed to a 100-yard dash.
First, Buyers have to become comfortable with the disclosures each property presents. In the Bay Area, that's typically 150+ pages of reports, seller questionnaires, booklets, prelims, topographical surveys, sewer laterals, assorted inspections and all manner of discoveries that pertain to the house. In short, it's a LOT to absorb, even though much of the package is boiler-plated material. So it's not surprising that first-time Home Buyers are nervous about the "findings" our older housing stock presents and often discount their offer to absorb these implied expenses. (I understand your reticence, but there are NO discounts for these underlying issues in today's current marketplace.)
Second, first-time Home Buyers need to understand the complicated financing that goes along with purchasing a home, including good-faith deposits, down payments, interest rates, the cost of money over time, transfer taxes, property taxes, escrow and title insurance, loan origination fees, and other closing costs that are not typically rolled into a purchase loan. (The banks require you to have substantial skin in the game, as they should). In other words, first-time Home Buyers need to quickly come up to speed on what it really costs to carry a home beyond the monthly mortgage.
Third, because the market is ridiculously competitive, Buyers are essentially forced to give up every safety net the purchase contract has built in, meaning you'll need to waive inspection, loan, and appraisal contingencies IF you are truly serious about acquiring the house. Last month, I sold a small property in Montclair and not one of the seven offers it received had a single contingency connected to it; a reality that's probably going to come to an ugly head one day, but for now, it is what it is. Frankly, it's no wonder Buyers have a hard time with this one; lack of due diligence is a real risk and you should carefully weigh the pros and cons.
Fourth, Buyers want to believe that their personal story is enough to persuade the Sellers to take a lesser offer. It isn't. Your compelling love letter and photograph of your adorable family (don't forget the dog) may tip the scales when price and terms are essentially equal, but it won't matter at ALL if the offer in front of yours is $100,000 - $200,000 higher, as is often the case. In a multiple-offer scenario, successful Buyers must win DEFINITIVELY(!!!) - not by a nose. Anything short of that will put you in a multiple-counter scenario and that rarely works in your favor.
Fifth, Buyers wonder if the market is poised to correct and so they often hesitate, offering less. Truthfully, no one knows the answer to the question: "Are we in a bubble?" including those of us who work in the industry, and have watched the market peak, and fall, and peak again . . .
Historically, a correction IS overdue, meaning we could possibly be at the top of the marketplace, but then again, with very little growth in the housing stock, fewer available units year-upon-year, and practically no churn - thanks to the unintended consequences of incredibly favorable tax propositions that lock the elderly into their homes for life - housing prices could continue to climb.
Moreover, the Bay Area attracts well-educated, highly-skilled and well-heeled individuals who flock here for the lifestyle and the weather and that in turn, puts pressure on housing prices, which is great if you're a Seller and not so great if you're a Buyer. (I'm sorry to be the bearer of bad news.)
But here's the thing . . . having bought and sold a half-dozen homes in our 28 years of marriage, I can tell you that I believe it's impossible to time the marketplace, so let that doubt go. As long as you keep your house for more than a few years, real estate should be a sound investment. On the other hand, if you are counting on a return on a short-term hold, that's going to require good luck and a rising marketplace, and I'm not sure I'd gamble my hard-earned cash on a hope and a prayer.
Listen, I'd love to get you the first house on which you bid and that's always the goal, but ultimately, only you can decide what you are comfortable spending, how much you can afford, what contingencies you are willing to give up, and how aggressive you can be. Suffice it to say, that most Buyers are a whole lot more comfortable the third, fourth and fifth time around than they are the first . . . which means that they often increase their offer price with each succeeding attempt, until they are at long last, at the top of the heap. Perhaps it helps to know that your experience is nearly universal.
In the end, we all do the best we can, including my patient, but closet-challenged husband, who puts up with my incessant need for closed closet doors, made beds, and neatly folded clothes that actually make it from the basket into the dresser drawers. (Is that too much to ask?) Sigh . . . can you say OCD?
It's a wonder he "hangs" in there with me at all. (See how I did that? It's a closet pun.)
How can I help you?
Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.