How to Buy a Home in a Hot Seller’s Market, the Bay Area Edition

Buying a home in a hot seller’s market like the San Francisco Bay Area can be a challenge. But with the right tools, tactics and preparation, you can make it happen. Here’s are some “field-tested” tips and strategies to help you buy a house in the Bay Area seller’s market of 2021 (and beyond).

How to Buy a Home in a Bay Area Seller’s Market

Yes, we are still in a real estate seller’s market here in the San Francisco Bay Area. And it will probably extend through 2021 and into 2021. Record-low inventory conditions and strong demand from home buyers have created a “lopsided” housing market that favors sellers.

Which begs the question: How do you buy a home in a competitive seller’s market, like the Bay Area? What’s the key to success?

Here are some proven tips and strategies to help you accomplish that goal.

1. Prepare yourself ahead of time, financially and emotionally.

Buying a house in a seller’s market can be a challenge, and sometimes frustrating. But that doesn’t mean it’s impossible. It just means you have prepare for the process, financially as well as emotionally.

You have to be ready to move quickly, make a strong offer, and negotiate accordingly.

It’s not the kind of real estate market where you would take your time or “sleep on it” before making a decision. There is a common expression among real estate agents in the area: “If you have to sleep on it, you probably won’t sleep in it.”

Translation: If you hesitate on making an offer, the home will probably go to another buyer.

There’s a financial side of it as well. In order to buy a home in a seller’s market like the Bay Area, you want to have your financing lined up ahead of time. This is especially important for home buyers who plan to use a mortgage loan to finance their purchase.

In a slow real estate market, a home buyer could find a house first and then go look for a mortgage lender. But in a fast-moving seller’s market like the San Francisco Bay area, that kind of strategy typically doesn’t work. It’s best to start with the lender, getting pre-approved for a loan, and then start shopping for a home.

2. Research your chosen housing market with online tools.

It’s a good idea to work with a real estate agent when buying a home in a competitive seller’s market. You can use your agent’s knowledge of local market conditions to increase your chance for success.

But that shouldn’t prevent you from doing your own market research as well. A savvy Bay Area home buyer will conduct thorough research into the housing market where they plan to buy a house.

This kind of market research can benefit you in several ways, when it comes to buying a home in a seller’s market:

• You’ll have a better idea which neighborhoods offer the types of homes you’re seeking.
• You’ll know where inventory is lowest, and which areas might have more properties to offer.
• You’ll gain valuable insight into the price at which homes are selling in your chosen area(s).

Much of this information is available online. For instance, you can find the average or median sale price within your chosen area with a quick Google search. You can also find out how much prices have risen over the past year, which is a good indicator of how competitive the market is.

Pro tip: Do a Google News search for your chosen city followed by “real estate market.” This will reveal all of the latest news, trends and developments for that area.

Also, by using websites like Realtor.com and Zillow, you can see how many properties are on the market within your price range. This is a great way to determine which housing markets might serve your needs, and which ones might be a dead-end.

3. Use all available means to find a home.

In a previous blog post, we offered some tips on finding a home in a tight real estate market like the Bay Area.

A seller’s market usually has a very low level of inventory, relative to the demand from buyers. In fact, that’s one of the things that defines a classic real estate seller’s market. There are plenty of buyers looking for homes, but not enough properties to go around.

Due to these supply constraints, Bay Area home buyers have to exhaust all avenues to find a house that meets their needs and budget.

We talked about the importance of having a real estate agent already. An experienced agent will know how to create a shortlist of properties that meet your needs. Agents also have access to word-of-mouth and networking type listings that might not appear on the Internet. This can make it easier to find and buy a home in a seller’s market like the Bay Area.

You can use all of the major real estate listing websites to search the market for the right home at the right price. But don’t stop there. Put the word out through your extended social network. A friend or relative might know someone who is about to list their home but hasn’t yet done so. This kind of real estate “matchmaking” could give you an advantage, when buying a home in a seller’s market.

4. Be realistic with your offer and negotiating strategy.

Throughout 2020, and now halfway through 2021, the San Francisco Bay area has been a strong seller’s market. These conditions are expected to continue through the rest of 2021, and possibly into 2022. Chronically low inventory is the number-one reason for it.

It’s not impossible to buy a home in a tight seller’s market like the Bay Area. But it does require a realistic approach, when it comes to making an offer and negotiating with sellers.

When most homes go onto the market in the Bay Area, buyers begin “lining up” immediately. It’s not uncommon for a house in a desirable area to receive multiple offers within the first few days of being listed. Home buyers should understand this dynamic and negotiate accordingly.

This is another area where your real estate agent’s expertise will prove valuable. For instance, some of the hottest markets in and around the Bay Area are seeing a lot of offers above the asking price. That’s something you would need to know about as a home buyer, in order to be competitive.

To buy a house in a seller’s market, be sure to make your first offer as strong as possible. You might even have to increase the offer amount, if other buyers submit competing offers for that same house. That’s just the reality of our current real estate market.

So there you have them, some time-tested strategies for buying a home in a tight seller’s market like the San Francisco Bay area. Using these and other strategies can increase your chance for success and make the house-hunting process a little less stressful.