We've heard a lot about real estate "buyer fatigue" over the past couple of years.…
You’re prepared to buy a home in the San Francisco Bay Area. You’ve got your financing lined up. You’ve chosen a real estate agent to assist in your search. And you just found a house that meets your needs and falls within your budget.
The question is: How much is the home really worth? How do you know if a home in the Bay Area is reasonably priced, or overpriced? Should you try to negotiate it down, or pay what the seller is asking?
There are several ways to gain insight into the true market value of a house in the Bay Area. Looking at recent sales within the local housing market is a good place to start. But let’s consider all of the different research methods.
Researching Bay Area Sales Trends Online
Localized market research will give you a better sense of what homes are selling for, within the Bay Area real estate market where you plan to buy. It can also help you determine how much a particular property might be worth, and how much to offer.
So, how do you find out what a Bay Area house is worth online?
To get started, you can visit the major property listing websites like Realtor.com, Zillow or Trulia. These types of websites offer listing and sales data for different real estate markets. You could use any or all of them to look at recent home sales, and to find out what a particular house might be worth in the Bay Area.
So let’s say you’re looking at a 3-bedroom, single-story home with at least 1,500 square feet. That’s your target house. Now you want to go online and find out what that home might be worth in the current market. You can visit any of the websites mentioned above and look for recent sales prices for the area, with an eye out for similar properties — 3 bedrooms, single story, 1,500 feet or more.
This is what real estate agents often refer to as “comps,” or comparable sales. We’ll cover this concept in more detail below.
But be aware: Depending on the type of real estate market you are in, there could be a big difference between the average list price and the average sale price in the area. For instance, houses might be selling for 10% to 15% above the list price, on average. We saw a lot of this during 2021, when the Bay Area real estate market became overheated and highly competitive.
So when researching this online, you’re better off focusing on the actual selling prices of homes. That kind of data will help you shape your offer.
Using ‘Comps’ to Determine What a Home Is Worth
We touched on comparable sales, or “comps,” in the previous section. This is arguably the best way to figure out what a particular home in the Bay Area might be worth, given current market conditions.
The goal is to find out what similar homes have sold for recently, in the same geographical area (and within the same neighborhood or subdivision, if possible). These are your comparable properties or “comps.” The more similar the properties, the better the comp. The more recent data, the better the comp. You get the idea.
If the house you’re considering is different in some way from the comps, you might have to adjust up or down with the price. For example, if it’s similar to most of the comps but has an extra bedroom, you might need to adjust upward from the average of those comparable properties. The idea is to add or subtract value based on the features and condition of the property in question, when compared to the comps.
All of this will be easier when you start working with a real estate agent — especially if you choose an experienced agent who knows the market. Real estate agents are trained in this sort of “comparative market analysis.” But you can do some of it yourself, by reviewing sales on the big property listing websites.
Having the Home Appraised
Another way to find out how much a Bay Area home is worth is to have it appraised. But that’s not always an option for home buyers, at least not during the offer and negotiating stage.
This strategy is more commonly used by homeowners who are trying to price their home for the market, and by mortgage lenders who are trying to protect their investment by determining the market value.
Even so, home buyers should understand what an appraisal is and how it works.
In California, real estate appraisers must meet certain educational and work-experience requirements, set forth by the state’s Bureau of Real Estate Appraisers. The appraiser’s primary role is to determine the current market value of a home, based on its overall condition and recent sales prices for similar properties. (There are those comps again.)
If you’re buying a home in the Bay Area, and you plan to use a mortgage loan, your lender will likely have the property appraised before allowing you to close the deal. They do this to make sure the home is worth the amount they are lending to you.
Disclaimer: This article covers the basics of real estate market research, price determination, and related concepts. It’s intended for a general audience and does not take the place of professional real estate guidance. We encourage home buyers to work with an experienced agent, especially when buying a first home.