My path to multiple home ownership and my learnings

I am feeling nostalgic after listing the first home I had bought in the SFO Bay Area. A co-worker asked me some questions about my listing, and based on the conversation, I thought I could share these experiences and learnings for a first time home buyer in the Bay Area.

This is my first and quick blog post at bigger-pockets, so please forgive if it is raw, unstructured, not comprehensive etc.

Suggestions for starting a home purchase search:

• Find a good realtor to represent you in buying the home. 
• Identify a good mortgage agent who will help you with the mortgage and pre-approvals.

Tips and tricks:

• Commission discounts and rebates:
  • Some agents and companies (Redfin) provide cash back to buyers if they represent you for buying the home. So, that could be something to ask for when looking for agents.
  • In a hot market, your realtor’s negotiation skills and network is very important to land you the home that 10+ other people want. So, find a good balance between someone who offers more or any cash bask vs someone who is an expert negotiator.
    
  • I am working with a top-notch realtor with no commission discounts for listing my home for his expertise. I feel that the higher offer he will find for me will outweigh any commission discounts by other realtors.
  • I have also worked with Redfin for my home purchases, and was fortunate to find a stellar agent with the perfect balance of network, negotiation skills, assistants for availability, and cash back!
• An important factor in selecting a buyer-agent is whether the realtor has a team to help with multiple visits to the home during the buying process. One person realtors may be too busy with other clients to take you to homes you like multiple times on your schedule. Ideally, the main realtor would be available when you need them for consultation, and for the next 10 re-visits to the home, they have a team who can assist you at your schedule.
• It is OK to interview multiple agents to find someone who you feel listens to you and will help you find your dream home.
• The first home does not need to be a dream home! We bought what was good for our needs then, and kept buying other homes as needs changed! With $15K cash in 2010, I could never have owned my current 6 bed 5 bath home if I had kept waiting for the dream home. I bought a new construction townhome instead with 2 bedrooms, which was more than enough for us as a couple and occasional visits from parents and family.
• Similarly, the first mortgage does not need to be the best deal ever. We bought our first home with 3.5% down-payment but a higher interest rate. It was very easy to refinance it a few years later when the home had appreciated and we had 20% equity in the house.
• Most homes in the Bay Area are ancient, built 60 to 70 years ago. There could be too many unexpected issues that could come up with such homes.
• So...
• One way to address issues with old homes (other than having deep pockets) is to get a home owner's warranty (Any plumbing/electrical/appliance issue fixed for $75 per incident).
• Another way is to look for new construction or newer homes. And for these transactions, a cash-back realtor would be great!

• We started with a new construction home as the first home, and then bought older homes when we knew how to deal with issues and had a good cash buffer.
• When looking for new homes, list your agent with the builder before you visit to get cash rebates from your agent. If you visit directly, the agent (and you) will lose the commission/rebate and the builder will get to keep it. We missed on to this in our first home purchase.
• Builders won’t give you any kind of discount when you say you don’t have an agent, but will pay your agent their commission if you list the agent in your initial visit.
• Townhome/Condo vs Single family homes
• Newer homes will tend to be townhomes or condos (common walls with other homes). Such homes have HOA associated with them. If the price looks low, remember that there’s going to be an additional fixed monthly payment for life with townhomes.
• Single family homes (a single home on your personal lot/land) typically have no HOA or minimal HOAs in some cases. It is hard to find new SFHs in the Bay Area, so for the advantage of not having HOA, you then get a 70 year old home. There could be some homes in great shape, so if you feel you have found one, go for it!

Staging and cosmetic updates:

Homes are typically staged for selling. And sellers do some cosmetic updates to their homes before listing. So, if possible, try to look past the fancy furniture and shiny coat of paint on the house, and see how functional it is and whether there could be potential problems.

Pricing:

If you are moving from lower cost of living areas, be prepared for a sticker shock and try to get over it as soon as you can :) 

It took us a few months to get over it. We thought there's a housing market crash in 2009 so we would get outrageous deals.

We walked away from negotiations when the builder would not reduce the price of the house by $5000. 10 minutes into our drive, we realized that $5K on a $500K home is very insignificant with the mortgage payment, so we called the builder back. And, in the midst of the worst housing crisis, that home was gone in those 10 minutes that we hesitated! We had to wait for 6 months for the next set of homes to become available, and that home was priced $10,000 more than the previous set of homes! So, the home we loved in early 2009, finally became available to us in 2010 due to the 10 minute hesitation. And it still turned out to be a great deal!

Be prepared to pay way above listing price for teaser list priced homes these days (mostly applicable for realtor-listed homes, new constructions generally have a fixed price). In most instances, the appraisal will match your offer which is above listing price, so rely on your gut feel and realtor's advice for your offer amount. Don't go by the list price.