So how do you get the best deal when buying a home in Oakland Piedmont or Berkeley CA? Here is what I think. You just need to do one or more of the following things:
#1 Buy a home that is not attractive to other prospective buyers. #2 Be willing to put up with a difficult transaction. #3 Be in a financial position to buy a home that will not qualify for a loan. #4 Negotiate, negotiate, negotiate.
First off I think you need to decide if you are buying a “home” or purchasing an “investment.” They are not the same thing. In addition to providing you shelter from the elements, a “home” is something you buy because it adds to your quality of life. There is always an investment aspect to any purchase but when you buy a “home” you need to factor in use and enjoyment. When buying a property purely as an investment, pride of ownership should take a second seat to cash flow, cost of ownership and gross rent multiplier GRM.
#1 Buying a home that has some flaws translates into fewer prospective buyers wanting it. Is the property it a fixer? Perhaps. Does it have a weird floor plan? Possibly. Are the finishes dated? Most likely. All of these things will lessen demand. But if you have the skills or resources to fix those flaws you can save a ton of money. I don’t however advocate buying a home with “fatal flaws.” Examples of “fatal flaws” are things such as buying next to the highway, buying into a bad neighborhood or buying a home with tons of stairs.
#2 Deals where there is a tenant or a short sale require lots of patience and flexibility. Two things that are in short supply for many of today’s home buyers. Tenant occupied properties typically don’t show very well and just getting a showing appointments can be difficult. Short sales require a two step process. First get the Seller/Occupant to accept your offer, then get their lender to accept your offer. In order for that to happen the Seller will need to qualify for a short sale and the bank will need to agree to take less money than the sellers mortgage balance. Some 60% of short sale transactions never close escrow. Buyers know this and many choose not to participate in transactions with such success rates.
#3 Being able to pay cash for a property that doesn’t qualify for a mortgage is one of the best ways to get a killer deal. All cash offers or family financing are just a couple of ways to go. I’ve seen homes for sale in Piedmont CA that sell for 25% below the market because no loans are available for them. These homes will always need lots of work but if you have the stomach for it you can squeeze every bit of purchasing value out of today’s real estate market.
#4 Good negotiations are very important. Sellers are losing money and will push the sale price hard. Negotiations are taking longer and requiring more counter offers. Buyers are justifiably concerned about buying into a declining market so getting a fair price today may not be a good price tomorrow. Be patient and be willing to counter offer. Start low but be realistic. Fight the problem and not the people. It is not personal. Keep focused on the hurdle (the price) and with all eyes focused on clearing that hurdle you will be successful in getting the price you want.