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How to Buy Your First Home in San Francisco

buying first home san francisco
Considering a move to San Francisco? Never bought before? See what experts say are the best ways to prepare for this competitive market.

Preparing to buy a home can be an intimidating prospect, especially in an extremely competitive market like San Francisco. With a median sales price of $1.18M, hitting close to $1000 per square foot, prospective buyers have to be aware of all real estate nooks and crannies, both in terms of neighborhoods that best suit their needs, as well as market differences – the best first piece of advice? Find a great agent.

Find a Hyperlocal and Hyperaware Agent

“San Francisco is a different beast,” says Greg McDaniel, realtor in the Bay Area. “The MLS is wacky; some deals are done without ever hitting the market, etc. You really need a hyperlocal agent – someone with their finger on the pulse of what’s taking place in the market in the next couple months.”

Finding a great agent is a multi-tiered step as the research for your guide determines how well the home-buying experience will go. Here is a list of questions to ask real estate agents.

“The other thing I always recommend is that they need to get on some sort of listing feed like Trulia or get a direct MLS feed from their real estate agent so that they can get in tune with what’s on the market,” Alexander Clark, San Francisco agent adds. “The agent can also be aware of what you want and can give you the right expectations beyond the listings with their resources and network of brokers. But Trulia is an excellent source of listings as they get into the market.”

Assuming you’ve found a realtor that fits your needs and an idea of the kind of home you’re looking for, their first question to you should be, “have you been pre-approved?”

Pre-Approval and Buying Power

Your agent should know what you can afford and how to infiltrate the market, but you have to do a bit of research as well. Get a pre-approval letter from an established lender showing your capabilities as a buyer.

“Explore options that can help you increase your affordable price range,” Ed Craine, a San Francisco real estate financing expert, shares. “Line up gift funds from family, sell things, address credit issues, etc. Just pay off as much debt as you can.”

Clark also makes this a top priority for a buyer. “You need to know what you can and can’t afford: based on an online mortgage calculator you can afford a million-dollar home, but that may be more or less in reality due to interest rates or simply what a lender can offer you.”

Refining your search down to your financial capabilities will keep you sane as you enter this competitive market. Assuming you find the home of your dreams, or even one that will keep you happy for the next few years, you’ll know whether or not you can put an offer and feel confident in your decision to move forward or move on.

Making an Offer

After an agent has narrowed down your list of needs and wants in your new home, and understood your buying power, s/he can start showing you homes and preparing you for the aggressive market of San Francisco.

“In the Bay Area, the first offer may not be the best offer,” McDaniel describes how the market differs. “If there’s a deadline of offers the seller has dictated, let’s say 5PM on Monday, then your agent should call at 4:30PM that day and determine how many offers the seller’s agent has and try to squeeze out any additional information so that your offer is the best, and also within your means.”

McDaniel shares that often times a buyer is overly excited about prospective home or neighborhood, and simply offers the listing price. In the past, that may have worked, but with more information, an agent can determine how far off listing price you may want to go.

“If there are no offers, you put all of your eggs in one basket, when you may have been able to offer a little less. If there are five offers, as it usually is here in the Bay Area, you will want to go above listing and discuss with your agent how high you’re willing to go,” McDaniel explains.

Also, make sure to remember that the price of a home and the cost are two different numbers. The cost refers to maintenance, property taxes, HOA dues, and unforeseeable events that could increase your overall spending significantly.

Choosing the Appropriate Purchase Loan

There are many types of loan options but a good agent will work directly with your lender, depending on the type of loan that is best for you.

“Most first-time buyers don’t expect to be in their first home for very many years. At this stage, most expect to expand their immediate family and to be moving to a new home after five or seven years. The typical adjustable rate loan that is fixed for the first five or seven years is perfect for them,” suggests Nina Hatvany, agent with Pacific Union International. Knowing this information when choosing your financing can help you get approved for more money, which may help your offer.

The San Francisco Market

Although prices have skyrocketed over the last few years and have leveled off at an all-time high for both buyers and renters, experts are seeing a price correction hit this year in San Francisco.

Specifically, “charming older condominiums and single family homes will continue to be in very short supply,” Hatvany states frankly, making the San Francisco market unique against the bay area real estate backdrop.

In comparison to other competitive markets, San Francisco will continue to stand out as a “wacky” city, where a lot of research and preparation is needed to ensure success, but once in, you may just want to stay there forever.