By: Revanche

On the home(buying) front: SF Bay Area eccentricities

May 15, 2017

Househunt 2017: buying in the SF Bay AreaWe’ve looked at dozens of homes online and in person. We started working on this in February. By mid-March I was pretty sure that nothing was going to come onto the market that we wanted. We didn’t even see anything worth making an offer on until about April.

Oddly, this made me feel better about the process. Probably because it gives us more time to save!

We’ve done our preliminary budgeting and number crunching, though I did it again for every house that we made an offer on.

Together, on the advice of our broker, we wrote up our list of must haves.

She advised us to write our entire list separately, and then combine them to get our top 3 picks together. We were very Gift of the Magi on this one – PiC prioritized a better microclimate for me, I prioritized a maximum distance/commute time for him. It turns out that I don’t actually want the better microclimate anymore, which is a frugal win, because I’ve gotten used to the year-round fog and appreciate that we don’t need central air! My fibro has actually adapted to the colder weather these past few years, so warmer weather is not longer good for me. Blasphemy from a sunny SoCal gal but there it is.

We’ve now submitted multiple offers and a pattern has emerged.

  1. The $$$$$ option is to pay through the nose for an essentially finished home and live with it for a decade, making no changes because we cannot afford to, no matter how gaudy or stupid their upgrades were. And my goodness some upgrades are stupid. There’s the fully remodeled kitchen that had no oven, sold for $1.1M. There’s the “fully remodeled” house that might maybe have electricity but nothing else, listed for $989,000.  There was the perfectly perfect house with a microwave smaller than a chihuahua and stairs that would kill me inside of a week, sold for $1.2M.
  2. The $$$+$$ option is to buy a fixer upper and live in a construction zone for the next five to ten years as we slowly earn the cash to pay for remodeling or do it ourselves.

Debt averse as I am, the second option was the lesser two of evils. Not by much, but still the lesser. I think.

Our process and discoveries this far:

We got a recommendation for a realtor from our friend, and we love her for her honesty, responsiveness, and willingness to go the extra mile for us. We were traveling recently and she did big video walkthroughs for us so we could view homes even while we were gone.

1. Pre-underwritten loans
Our broker connected us to lender who would approve and underwrite our loan before we even had a property identified. That’s huge so when you make an offer in this market where even fixer uppers that need A TON of work are getting 10-15 offers. It allows us to remove the loan contingency.

2. This leads me to the no-contingency buyer.
We are finding that many prospective buyers are making offers with no contingencies and that’s knocked us out of the running when we have any contingency at all, forget it if you have two contingencies!

The three common ones are the loan contingency which you need if you only have a preapproval and not a fully underwritten loan, an appraisal contingency (which protects you from being committed to the offer until you know that the appraiser is assessing the property to be worth at least as much as you offered, since they will only lend based on the appraised value), and the property condition contingency for you to take a look and be sure that the place is in the shape you expect. I might have gotten that name of the last one wrong.

3. A common thing that’s done here in the SF Bay Area that I haven’t seen elsewhere is the seller often does the property inspection, the buyer doesn’t.

On the one hand, it sucks that you’re locked into the inspection company that the seller chooses but a good broker will tell you if the company is reputable or if you should get another inspection. The upside to this is that I love getting the property inspection reports with the seller’s disclosures so I can make an offer that takes into account the condition of the whole place, not just what I think I saw, and there are fewer surprises.

4. More cash is better.
Well, duh. No, I mean strategically: I found that it was more comfortable to make offers that might be over the appraisal a touch only if we had an extra 20% in case over and above our expected down payment. It’s not great, but when every house has more than 10 offers, it’s helpful to be flexible where you can afford it.

We had intended to buy in 5-7 years, if at all, so our cash reserves are net as hearty as they would be if we’d waited. The benefit of being as diligent with our money as I am, though, is that I’m one of the few people that can be offered a personal loan by a couple friends who can afford to lend it and know that I will, without a doubt, repay them immediately on the sale of our present home. This is something I never would have looked for but they knew of the situation and offered it as a way to help us bridge any temporary gaps in funding. On the one hand, it’s a huge responsibility, but on the other, I know they never would have made the offer if they didn’t have absolute faith in my judgment and discretion and that faith is based on knowing how I’ve managed our money for the past decade. The work really does pay off. 

:: Which route would you pick? Are you a DIY expert or a DIY avoider? What remodeling or renovations would you feel comfortable tackling? 

Disease Called Debt

31 Responses to “On the home(buying) front: SF Bay Area eccentricities”

  1. Jax says:

    We planned a quick 6 week DIY remodel of our bathroom and kitchen. 6 months later we’re still remodeling. While we have saved a ton of money doing it ourselves (and it looks great!) the stress of living in constant construction (oh, our bathroom is in our living room? Oh, this week the kitchen is in the living room?) is really, really starting to get to me.

    If you go DIY route-focus on one area at a time (our number one mistake. We demoed the kitchen and then found all sorts of problems in the bathroom and couldn’t even get to the kitchen for 7-8 weeks!)

    Have a plan for self care, also. Our main source of entertainment was cooking for our friends. We’re all various shades of broke so going out to eat rarely happens, but pot lucks/dinner parties happen often. Well, not anymore and that is also eroding my sanity.

    I think I would still go the DIY route if I had it to do over again, but I would definitely chose one project at a time and triple the amount of time I thought it would take to complete.
    Jax recently posted…These Are Strange Times, My DearMy Profile

    • Revanche says:

      6 weeks turned into 6 months?? Oh good grief that’s exactly what I was afraid of and why we know we’ll have to budget for a certain amount of professional help.

      “chose one project at a time and triple the amount of time I thought it would take to complete.”

      Wise words!

    • Revanche, I sure hope you’re listening to Jax!!! We did much the same with M’hijito’s house. Ohhhhhh man! Living in a construction zone is no fun at-tall. One thing at a time, and be sure any contractors or craftsmen you hire are LICENSED AND BONDED. all caps for a reason…
      Funny about Money recently posted…Time to Batten Down the Hatches?My Profile

  2. I’m not a DIYer but Jon is, and we bought our house knowing it would need some DIY. It took 5 years to install the dishwasher (and almost 5 months of washing dishes in the bathroom to replace our kitchen sink.) There are numerous other things that haven’t been touched, and more importantly, there’s a few things that have come up since. So our experience is similar to Jax’s. If you do go the DIY route, be prepared for extra things to crop up and slow you down on your plans.
    Emily @ JohnJaneDoe recently posted…Mutual Fund Terms: Don’t Guess the Flavor EditionMy Profile

    • Revanche says:

      Our primary DIY problem is JuggerBaby! We know how hard it is just to get things done around the house that aren’t remodeling level. We can do minor things but it just isn’t possible to do the kind of renovations that other bloggers have been able to do on their own between zir and me.

  3. Joe says:

    I prefer to not do the work, but in your location, I’d probably DIY. The price is just crazy in the Bay Area. Good luck on the search.

  4. My husband and I bought a move-in ready house because we didn’t want to deal with contractors and renovation. We didn’t love everything about the house. In fact, we had a long list of things we wanted to change before moving in. But after a month of living in the new house, we got used to almost everything. The urge to fix the French door or replace the gate just wasn’t there anymore.

    The median housing price in DC is $500k, but it’s $1M in the Bay Area, so I understand the dilemma that you’re in. If you have lived through a kitchen or bathroom upgrade and felt comfortable with it, I’d say go for a fixer upper. But if you dread even a small project, you might not want to do that for years to come.
    Ms. Frugal Asian Finance recently posted…What I Got For Mother’s DayMy Profile

  5. SP says:

    There was an inspection report provided in our disclosures, but we still had our own inspection. I wonder if that has changed a bit in the past few years. Pre-inspection was something that our relator suggested to be competitive, but we ended up not pulling the ($300+) trigger on this. We ultimately put in an offer that had an inspection contingency and were successful only because the first place offer fell threw.

    I interpreted the motivation for the seller inspection to allow them to refuse to negotiate further on anything that was in there, because it was already disclosed. (haha – as if the buyer has any negotiating power anyway!) Our inspection didn’t really turn up anything new, but it was very nice to walk through the property with the inspector and get a to do list of minor things that we should do.

    We haven’t done any major renovations, nor was the home fully remodeled. The kitchen is updated and they did a fine job. Most other stuff was original, but in good enough condition that we haven’t addressed much yet. Just the ductwork / furnace and some drainage. So, I guess we are somewhere in between, but we did err on the side of move-in-ready. We will probably do the smaller bathroom late this year. Someday, we’ll replace the windows that are older.

    • Revanche says:

      It might have changed, or it might be more common to this side of the Bay. Most offers that are being considered are contingency free, and even all cash, so maybe it’s just this market right now.

      But as our agent explained it, yes, the seller’s motivation to do the inspection is to remove one possible contingency.

  6. DIY avoider! It took us something like 8 years to replace the carpet in our kids’ bathrooms with linoleum.

    If we had to buy in the bay area we’d probably get one of the falling apart places, tent it for termites, fix anything actually dangerous, and then just live in its horribleness.
    nicoleandmaggie recently posted…Giving money instead of stuff to school eventsMy Profile

    • Revanche says:

      I really tried to convince myself that living with the horrible is the best route but I don’t think I can do it. I spend 95% of my time in our home, it’s just got to be SOME level of workable.

  7. Linda says:

    Up here in North Bay, the only time I ran into houses that had inspection reports already available were ones where a previous offer had been made and then was either withdrawn or the deal fell through for some other reason. Luckily, the market is a little bit less crazy than it is in the other areas of the Bay, so making an offer with an inspection contingency usually doesn’t put you out of the running. (It doesn’t hurt to offer over asking, though, too.)

    If I wanted an inspection (and I did), I had to pay for it myself. Actually, there were multiple inspectors: general/overall, pest/termites, electrical, and roofing. The electrical one was a special add-on since the wiring in this 1940s house was original knob and tube.

    Having been through this home-buying thing before, I know a good inspector from a bad one, and I thought the general home inspectors fell into the latter category. They did a poor job in their inspection and came up with all sorts of excuses about why they couldn’t go into the crawl space to inspect anything or confirm that the house is bolted to the foundation. I told the real estate agent they were not good inspectors at all. Luckily the pest inspection guy was amazing and since he had to go into the crawl he took photos to show me the bolting. (Whew!)

    You’re going to want to change some things about any home you buy, but buying a place knowing you’ll want to do major renovations…well, that could be a lot to take on at once and I wish you luck! In my Chicago house I renovated a bathroom, kitchen, and some bedrooms, but I didn’t do any of the work myself. I also had “backups” for each of those areas: another full bath I could use during the bathroom remodel, and a “summer kitchen” in the basement where I could do cooking and cleanup.
    Linda recently posted…The progress loop trends downwardMy Profile

    • Revanche says:

      I agree with you that the general home inspectors were generally bad! For most of the reports we’ve seen, they were awfully lazy, and didn’t even bother to attempt to go into the crawl space.

      Having a back up is crucial when you have the choice, we’re keeping that in mind!

  8. We bought, renovated (with minimal DIY), then moved in. More expensive than DIY, and a very stressful in between time, but boy am I glad I don’t have to live in a construction site. Other friends have done similarly– bought fixers, took out a construction loan, then consolidated into a bigger mortgage based on new appraisal value. We didn’t take out a construction loan but instead paid everything in cash, which in hindsight was a big mistake. I got lucky since I was getting paid a lot at work, but there were times liquidity was a big issue.

    How bad are the fixers? Is the work mostly cosmetic or structural? If just cosmetic, I’d DIY changing light fixtures and paint before moving in (so much easier without furniture), then just live with everything else until it becomes convenient to remodel.

    • Revanche says:

      The ones in our price range are PRETTY AWFUL. Some are down to the studs awful. So we’re trying to pick mindfully. I ignore anything cosmetic, that stuff will all be ignored. I just need to know we can handle the structural stuff.

      • Oh wow. I would definitely not try to live through anything that requires taking down or putting up large sections of wall. Doubly so if walls need to be moved and reframed. Just the idea of the little bits of plaster dust everywhere… yikes.

        I’ll echo others in saying renovations will often take longer than you expect. Especially stuff that ends up being dependent on other things/is harder to modularize. One of my coworkers who was even working with a contractor had a big reno that was supposed to take 2-3 months that ended up being a year+. He showered at work for weeks since none of his bathrooms worked for a while. Another coworker whose reno was supposed to take 4-6 months that is still at it four years later. You might fare better if your housing stock is newer (everything out here is at least a hundred years old) and the place you purchase is at least somewhat livable through repair work, but buying a place without walls might be a bit much to live in let alone DIY.

        • Revanche says:

          I know my limits and they don’t include living through inhaling drywall!

          Cross your fingers for me, please!

  9. I like your fixer-upper option – but I don’t want it to be so fixer-upper that you exhaust yourselves. I love it that you and PiC put each other’s concerns first on your respective #1 priority for a house. That bodes very well for whatever decision you make. And I’m so glad that you have people in your life who are ready to lend the money to you until your house sells. We had to rely on that type of loan too, as our first house didn’t sell for three years after we’d moved into this one. (We ended up renting it out for that time.) And back then, we weren’t nearly as reliable as you are now. (But we certainly did pay it off as soon as that first house sold.) Thanks for the update. All the best as you make your decisions.
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    • Revanche says:

      Agreed – we’re trying to pick the least bad fixer-upper we can find for exactly that reason. We’re incredibly lucky that my work has given our friends this faith in us, and that they have the means to make the loan. Thanks for the support!

  10. Cindy in the South says:

    I found your blog from a post on the Non consumer Advocate blog. Wow, San Francisco prices are unbelievable! All I can say is that if you plan on staying there, perhaps buying a fixer upper may be the only way to survive that housing market. As a comparison, I live in a very rural area in the deep South. My two bedroom one bath 912 sq. ft. house was built in 1950. I have a large shaded yard in a small town of about 1,000 people. We have no restaurants so I cook at home, always. I bought my house, which is sturdy but needs updating, in 2014 for $25,000. Housing prices in this area neither rose nor fell during the recession. I feel for y’all who have to contend with multiple offers in trying to obtain a permanent home for your family. Best of luck!

    • Revanche says:

      Welcome! These prices truly are. We’ve made ends meet for a long time but it just keeps getting worse.

      That’s a truly amazing price for your home, in comparison.

      Thanks for the support and commenting!

  11. Ohhh dear lord, you’re making me hyperventilate with this stuff!

    Considering that you have a painful disability, it would be wise to avoid major fix-up. No “down to the studs” nonsense, certainly not while you’re living in the place.

    Even relatively minor renovations can be hassles. Time-consuming hassles. With the exception of interior painting, I’ve always hired people to help with fix-up (tiling, electric, plumbing, landscaping)…and even with other people’s expertise and muscle applied to the job, it isn’t what you’d call an entertaining way to spend six months or so. Bear in mind that older houses are often not entirely up to code…oh lord, what a headache. Avoid if at all possible.
    Funny about Money recently posted…Time to Batten Down the Hatches?My Profile

  12. Katie C says:

    I’m still so jealous that sellers have inspections done in advance of selling their home out there! It’s not done in Tennessee, but it makes so much more sense to be able to see an inspection report BEFORE you make an offer. Seems like it would save sellers’ time too because they’d have fewer offers rescinded after the inspection.

    • Revanche says:

      The only thing is I wish we could have more diligent general inspectors – they’re kind of slipshod. But they would be even if they were our own paid inspectors.

  13. I would be all about the DIY, but I’m totally spoiled with a dad and brother who are both carpenters. I’m so glad I’m not trying to buy anywhere in the SF area.
    Mel @ brokeGIRLrich recently posted…Financially Savvy Saturdays #195My Profile

  14. Livingalmostlarge says:

    We are under contract on a house. We bid over ask and we beat out a cash and no finance contingency offer. I am guessing the cash was as a lot lower and the no contingency I saw the offer due to our escalation clause it was weak financing. We pre inspected and it was worth every penny. I will admit to paying a lot for our house and mostly for location. First floor done but the basement needs to be redone. Much smaller than we had hoped but location is unbeatable

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