Silicon Valley Real Estate | 9 Tips for Today's Buyers
1. Don’t buy if you can’t stay for at least three years.
If you cannot commit to remain in one place for the next three years, then owning a home is probably not for you. Home appreciation in the Silicon Valley is currently too volatile. Although home prices are stabilizing, short sales and foreclosures are still bringing home prices down. You may end up losing money, paying transaction costs, if you need to sell in the short term.
2. Spend the money get your own representation – It will save you time and money.
Many buyers now believe if they can find a home listing on the internet the job is done so they forego professional help and deal directly with the listing agent. This can be a very expensive mistake. Now more than ever buyers need professional guidance. Today’s path to home ownership is riddled with land mines. Look for an exclusive buyer agent, ideally use an Accredited Buyers Representative (ABR), who will have your interests at heart and can help you with strategies during the bidding process. If you deal with the seller’s agent, that agent’s loyalty is first to the seller then to himself. You come in third!
3. Know your credit score.
Even now with record low lending rates bad credit will cost you more to borrow. Before you start you home search, pull a credit report on yourself. Ideally check all three major credit agencies (Experian, Equifax and TransUnion). It's not uncommon for one agency to have different information from the other two. By starting know you have a few months to fix any problems you might have.
4. Shop for homes within your budget.
The national standard is look for housing which equates to about two-and-one-half times your annual salary. Here in the Silicon Valley one may need to push the envelope to as high as four times ones salary due to local home prices. Most local leaders know to buy here so it’s important to work with a local lender versus a national lender. As aid to see what you can qualify for I suggest start with one of many financial calculators available online.
5. Before you start the house hunt, get pre-approved.
Getting pre-approved will you save yourself the grief of looking at houses you can’t afford. Being pre-approved will also put you in a better position to make a serious offer when you find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender means you will need to provide copies of your last two years tax filings, current earnings statements and bank statements. It’s a little more work up front, but it will save valuable time later.
6. Even if you don’t have 20 percent to put down, you may still qualify for a loan.
There have been several stories recently in the press about banks not lending to qualified borrowers and banks are requiring a minimum of 20 percent down on home loans. While the majority of home loans do require a minimum of 20 percent down, there are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a minimum down payment. For example, FHA loans require a minimum down payment of 3 - 1/3 percent of the purchase price. Additionally, the state of California and many local governments have funds to loan to low income households. The later borrowed funds are interest free and can be used as your down payment.
7. Schools establish home values.
Buyers are drawn to homes located with high performing school districts. In fact, many Silicon Valley home buyers are willing to pay 10 – 20 percent premiums to buy in the top local school districts: Cupertino, Mountain View/Los Altos, Palo Alto, Saratoga and Los Gatos. Homes in select areas continued to appreciate even as neighboring communities have seen home prices drop. Yes, it may cost you a little more now to buy in to the more desirable areas. When it comes time to sell you will be glad you did.
8. Do your homework before bidding.
Everyone wants a deal! At the same time no one wants to feel like they gave their away. Working with your real estate professional, do you homework to determine what similar homes in the neighborhood have sold for during the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that’s about eight to 10 percent lower than what the seller is asking. Making a bid much lower than 10 percent will not get you the home. If fact, it may just insult the seller. Residential real estate sales is completely emotional, more deals have been killed because one side feels their feelings were bruised.
9. Unless you have built homes yourself, hire a property, roof and pest inspector.
A home purchase is a big investment. Property, roof and pest inspectors are here to make sure you know as much as possible about your future home before you turn over the big money and it’s too late. Sellers are obligated by law and personal ethics to disclose what they know about their home; however, many a seller has been known to have selective amnesia about past water leaks or noisy neighbors. The only way to make sure the home is sound is to crawl in the attic and under the home and look for termite damage, water leaks or faulty wiring. Professional inspectors are often licensed contractors, have often worked in construction for years. They have studied local building codes so they know what to look for regarding the systems of a house. This added knowledge is critical to identifying if a water stain is caused by an active leak or caused by a roof leak that occurred ten years ago. An inspector’s job is point out potential problems that could require costly repairs down the road. They are not here to kill a deal or disrupt the successful sale. Inspectors will document, typically with color photos, what they see during their inspection of a home. With this added knowledge you are in a better position to go forward with your purchase of knowing your new home is great shape, possibly ask the seller to make needed repairs prior to closing the deal or simply walk away.
The list of tips could have been more than 50 suggestions based on our experience as professional REALTORS. If you have a specific question we didn’t address in our top 10 tips, please send your question. We will be happy to provide you with a prompt response.