Lessons From My Real Estate Transactions

Over a 7-year period I bought or sold a home 6 times in the San Francisco Bay Area and refinanced 4 times (I hope that it doesn’t happen again in a very long time). While cleaning up some documents this morning, I had the chance to reflect on each of those transactions. There were some valuable insights I took away from each transaction beyond the popular “Location, location, location” advice. I thought that maybe somebody reading this could benefit from some of these observations.

These are five lessons I’ve learned in the past several years:

Have multiple financing options lined up

• When I bought my first home I was only pre-qualified with a single lender. It’s not clear to me that I got the best interest rate possible and it’s painful to look back at the fees I paid.
• When I bought my home in San Francisco, I was pre-qualified with 2 different lenders and even completed bank appraisals with both of them. Even though I had to pay extra money to do appraisals with both banks, it was well worth it at the end. I was able to negotiate one of them to credit me back more fees and beat the other bank by 0.125% (which is a fairly large different for a large transaction).
• This is especially important in market situations where you may have to wave your Finance Contingencies.

Every offer should tell a consistent “story”

• I’ve been surprised to lean that your “Offer” is significantly more than just the paper offer that you submit; the entirety of your interactions is valuable. While buyers shouldn’t give too much information to a seller, you should put together a compelling and consistent story. In fact, we ended up accepting a slightly lower offer because we had more confidence that the buyer was invested in getting the deal done instead of taking the higher offer that came in on the last day without a trail of solid interactions.
• Starting with your first interaction with a seller’s agent, give him/her something memorable to take back to the sellers. For example if you identify yourself as the “Single Mom who works at Oracle looking for a large enough home”, more likely than not they will track you as “Single Mom from Oracle” throughout the process.

Criteria in selecting Real Estate agents

Fortunately I’ve had very good experiences with all of the Real Estate agents I’ve worked with — Burt Tsuei (Burlingame + Surrounding Areas), Bob Vernon (San Francisco), and Alex Wang (Palo Alto + Surrounding Areas). I would say the 2 most important aspects that I would look for are: “Will this agent interact with me the way I want him/her to” and “Can I trust this agent to be candid and honest with his/her advice”?

• I’m a very chatty type of seller/buyer — I constantly text with my agents throughout the day. Bob was especially great in being responsive at all times. After our deals together, I really felt we’ve become friends and still keep in close contact today.
• If you find an agent who will consistently give you honest opinions (assuming you find him credible), you’ve found yourself a great agent. With Burt, he unfailingly gave me negative feedback about properties I was considering. In most situations it was definitely not in his best interest to dissuade me… but he consistently did so anyways. He never took the easy way out, encouraging a lower offer when he felt that it made sense.

Importance of Deal and Market Momentum

• I’ve been shocked by the importance of Deal momentum. As a buyer, it’s easy to get swept up in the momentum of the counter-offer process and “improve” to a number that’s actually uncomfortable. Conversely I see homes listed for outrageous numbers that don’t attract enough initial interest. The downward momentum is so strong that the homes sell for $100,000’s less than what they should have sold for if they had some upward momentum. Nobody wants to catch a falling knife.
• Make sure you properly understand the momentum in the Market. As prices are rising, work with your agents to set your initial offer to something competitive so that you get a counter. In a down-market and the property is sitting, make sure your agent keeps the communication lines open when buyer’s expectations become more reasonable.

For Sale by Owner (FSBO) is fairly easy but could be difficult to price without multiple offers

• When I sold my Mountain View home, I chose to do a “For Sale by Owner”. I found it to be a fairly simple process and extremely cost-effective. I hired the Law Offices of Peter N. Brewer and they did the whole transaction for $5,000. They took care of all the paperwork and I recall them arranging most of the inspections and appraisals.
• The most difficult part of the transaction was settling on a price. In a market that was moving quickly, I had a hard time pricing the property and so did the buyer. Especially if you’re not going to list the home on the MLS, you do not receive enough traffic and offers to take advantage of the liquidity of the market. Believe me, it’s very hard to do even with all of the comps in front of you. Strong market momentum makes the comps less useful week by week.

Originally published at https://www.michaelchou.net on October 9, 2016.