10 Strategies to Get the Best Deal
Buying a House in Silicon Valley
Silicon Valley is sellers' market. Many homes receive several offers which lead to bidding wars.
Nevertheless, there are ten occasions where it is possible to get a house at a discount, as shown below;
rest assured that if any of these become available, you’ll hear it from me.
1. You can often get a “Fixer-Upper” cheaper than other homes, even after accounting for renovation costs.
Home improvement and restoration is something that most busy buyers in Silicon Valley would like to avoid. That’s why they pay a premium for “turn-key” homes-homes they can move in right away. This allows buyers who don’t mind investing time and a little money on minor renovation work, to claim a reward. Let me stress that we are talking about minor maintenance work; the best deals are homes with small problems of cosmetic nature that don’t need extensive work.
Renovation of the best “fixer-uppers” includes quick and affordable work such as cleaning, painting, carpeting, and landscaping. I can offer advice on the types of repairs that will fully return your investment and direct you towards these houses. Keep clear of homes with major flaws on their fundamental elements, e.g., a cracked foundation or a bad floor plan. Spending over $100,000 for a new foundation is unlikely to increase your house’s resale value by the same amount. Conversely, investing $10,000 on exterior and interior paint, landscaping, and new carpeting could easily increase your new home’s value by three times your initial investment.
If major renovation is among your options, there are situations that add quite some value to your house, such as building a second bathroom in a home with
3 bedrooms and only one bath. However, keep in mind that all projects that include significant changes ultimately take more resources, in the form of time and money, than originally budgeted. This is why I always advise in favor of homes that only need minor work to reap maximum benefits.
2. The best time to purchase a house in Silicon Valley is during either the Winter Holidays or the Summer Doldrums.
Seasonal trends definitely influence demand and supply in the housing market. The best time periods for buyers are: (1) early November to late December, and (2) the Summer Doldrums (the end of July through August).
In the winter, most buyers leave their purchasing aspirations aside and concentrate on vacations and the upcoming holiday season. This puts committed buyers, who don’t give up looking, in a position where homes receive fewer offers while active sellers are more receptive to reasonable offers. Beginning January, buyers’ numbers start increasing again, with the competition firing up from February to June, favored by the great weather conditions and the circumstance of parents wanting to be done with their new home way ahead of the coming school season.
After that, during July through August, buyers are once again in a favorable position because a large number of buyers and sellers are gone for their summer vacations. This leaves more available houses and less active buyers. Finally, the period that includes September and October shifts in favor of sellers, right before the winter holidays come again.
Although you wouldn’t be letting the time of the year to dictate when you can buy a house, being aware of these trends can offer great assistance.
In the winter, most buyers leave their purchasing aspirations aside and concentrate on vacations and the upcoming holiday season. This puts committed buyers, who don’t give up looking, in a position where homes receive fewer offers while active sellers are more receptive to reasonable offers. Beginning January, buyers’ numbers start increasing again, with the competition firing up from February to June, favored by the great weather conditions and the circumstance of parents wanting to be done with their new home way ahead of the coming school season.
After that, during July through August, buyers are once again in a favorable position because a large number of buyers and sellers are gone for their summer vacations. This leaves more available houses and less active buyers. Finally, the period that includes September and October shifts in favor of sellers, right before the winter holidays come again.
Although you wouldn’t be letting the time of the year to dictate when you can buy a house, being aware of these trends can offer great assistance.
3. Foreclosures only work as opportunities in real estate
elsewhere in the country.
For a variety of reasons, foreclosures are fairly uncommon in the Bay Area.
First, the majority of local homeowners have considerable capital invested in their homes, which allows them to make a profit from selling them and avoid foreclosure, contrary to other areas whose real estate markets are either on the decline or already dormant.
Second, due to the abundance of real estate buyers in the Bay Area, the limited number of foreclosures that do take place are profitable, meaning that they are sold at their true market value at best, or significantly higher at worst.
Although I keep an eye on foreclosures for clients, their rarity makes them a weak alternative for the Bay Area; however, discussing them is still useful for other parts of the country. Excluding a few foreclosures available in San Jose, there are generally none in Los Altos, Palo Alto, Mountain View or Menlo Park.
4. Listings With Inflated Initial Prices Can Turn Out
To Be Excellent Deals Later On.
When a house first goes on sale, it draws the most attention. If its price is overly inflated and nobody buys it in the first month, it can remain unsold for a prolonged period, with future price cuts going unnoticed. When homes like these have remained unsold for months, sellers are hugely motivated and, at the same time, agents have stopped all advertising efforts. It is precisely when such houses can be purchased at bargain prices. This is especially the case for vacant homes, which cost money to their owners on a monthly basis without offering anything in return.
For instance, a property in downtown Menlo Park had an initial list price of $1,499,000 when its real value was around $1,400,000. Since it failed to ignite the desired interest during the first few months, the seller aggressively lowered its price by $100,000 at a time, but the listing was already obsolete. Eventually, the house was sold for $1,200,000, because the owner needed the money desperately.
I will discover these houses for you and even arrange to show you a currently overpriced property that remains unsold so that we can keep an eye on it for the immediate future.
5. You can Profit from a Poor or Out of Area Listing Agent.
The listing agent’s effectiveness can have a significant influence on the selling price of the property. For instance, a capable local agent will have made sure that the house is ready to be sold by having it landscaped, painted and prepared so that it appears in its best condition to every interested buyer. Also, aggressive advertising and pricing just short of the current market value are great strategies for attracting several offers, while also achieving a premium final selling price.
On the other hand, an agent who’s not that effective or comes from another area is a grand opportunity to acquire a house at a bargain price. Agents from San Jose, San Francisco, or East Bay may have trouble marketing a home effectively and may not be familiar with a process involved in putting the home on “broker tour” for other realtors to have a view of it.
The underexposure, often combined with weak advertising, will result in fewer offers for the house and, consequently, at a lower price.
Moreover, a bad agent will probably fail to use a stager to bring the property in market-ready condition. Staging is the process of completely redoing a house’s interior and removing the clutter and the seller’s furniture, while bringing in classy showroom furniture in an optimal arrangement. By conducting noticeable, low-price improvements such as getting rid of the seller’s clutter and doing simple landscaping and repainting, you can achieve great upgrades in the house’s appeal and final price. In a study conducted recently in the Bay Area, it was shown that staging increased the final sales price by 5 percent on average, while also selling in half the time. This means that a cluttered house with terrible appeal has a good chance to be bought at a bargain price.
6. A Property that is Not Easy to Show Will Have a Lower Price.
Vacant properties are easier to show since agents can bring their clients in at any time it suits them. On the contrary, some houses are still inhabited by their sellers, or maybe even tenants, who typically want to be informed in advance before arranging an appointment. Agents tend to show their clients the houses that are readily available and sometimes avoid entering the process of finding the right timing that suits all interested parties before setting up an appointment. Therefore, houses that are not easy to show will have fewer offers and, as a result, sell at lower prices.
7. Customizing the Offer to Sellers’ Needs.
Since Silicon Valley is sellers' market, making an offer that meets the seller’s needs places it in a favorable spot over the competition. For example, I recently managed to get my client’s offer accepted, even though it was $25,000 lower than a competing offer. My discussions with the seller’s agent revealed that the owners were looking for a rent back option, until they manage to purchase their new bigger house (rent back is when the house is sold but the former owners continue to reside in it for a predefined period, while paying a predetermined rent to the new owners). Since my clients were renting month-to-month, they agreed on a long rent back period, because they knew from the start that their bid had small chances of being the highest one. So, when I presented our offer, I stressed the rent back option, elevating this aspect as priceless, since at that time of limited house availability and high demand, the sellers had low chances of finding a house that suited both their budgets and needs in such short notice. So, they would either have to pay a large premium in order to get a house that met their criteria or be forced to move into an apartment until they found the right house. Being trapped between two less-than-favorable outcomes, our offer satisfied their need of providing them with the extra time to find a house just as they wanted it. Ultimately, the sellers picked our offer and turned down multiple other higher bids, had the luxury of being picky with their own purchase and, finally, they got their new home at a bargain price. All parties won.
To be a good negotiator is often more than just arguing over the price. It is also about discovering a way in which the buyer can offer the seller something that costs nothing to the buyer, but is priceless to the seller. If the market is buyer-oriented, offers should still be customized to satisfy the seller’s needs, but negotiations can also include the price in a more aggressive manner.
8. The Buyers’ Interest is Divided Among Several Similar Properties.
There are occasions where, by coincidence, many properties that resemble each other go on sale simultaneously. A Mountain View condo building had several two-bedroom condos but only a handful of three-bedroom condos, making the latter much more sought after and constantly overpriced. The three-bedroom condos in that building would generally go on sale approximately every six months. Coincidentally, four such condos became available in a 2-week interval, which led interested buyers getting the first 3 units, allowing my clients to grab the final condo at a bargain price because there was no competition left.
Holidays can also affect the number of available homes. Many holiday weeks go without a single broker tour, e.g., Thanksgiving or Labor Day. This means that several properties become available just before or immediately after these holidays. A couple of my clients recently managed to buy a house for $45,000 less than what their neighbor paid for a similar house a month earlier, because that particular week a wave of new listings came up and the interest for that area was divided.
9. Looking for Motivated Sellers.
When it's sellers' market, seller motivation doesn’t usually have a significant effect on the sales price because the abundance of offers drives the price upwards.
On the other hand, after the market settles down, buyers will once again have the chance to benefit from sellers that desperately want to sell. There are several reasons why sellers may be pressured to sell fast. For instance, there are those who have already bought a new home and have two mortgages to pay or others that need to move to a different place because they got transferred from work or switched careers. To these sellers, it’s crucial to sell the home as fast as possible.
10. Cancelled Transactions.
Sometimes, a buyer will cancel a transaction for some reason after the house gets into contract. In general, this happens when the buyer has second thoughts or his/her financing plans fail to materialize. Nevertheless, when a house is pulled off the market and then returns, it has lost momentum, whereas both buyers and agents start wondering what is wrong with the house. Therefore, houses that come back to the market generally have a lower price compared to the first time.
There is always the possibility that the original buyer canceled the transaction due to a fault of the property itself, e.g., information uncovered during inspections. In this case, you should avoid this house. Whenever we examine the case of a house where a canceled transaction took place, I make sure to investigate it thoroughly and exclude any property flaws that caused the previous buyer to reconsider.
CONTACT US
MI YOUNG LEE
Real Estate Broker | Attorney
Stanford B.A. | UCLA Law J.D.
(650) 468 - 0607
KELLER WILLIAMS
505 Hamilton Ave. Suite 100
Palo Alto, CA 94301
