With competition comes multiple offers. With multiple offers comes a winning bid and well, the rest of the them. So what do you do when you find your dream home,  you make what you think is a strong offer to purchase and the offer gets rejected? As Aaliyah would say, you “dust yourself off and try again…try again.” (Yes, you can sulk in your Sonoma Syrah but only that evening!)

The truth is that if you know what you want, are realistic about your goals, have a great team (real estate agent and mortgage broker) and set your intention on finding the best home for you, it’ll all work out in the end.

We have seen this time and time again. If a buyer does not get their first bid accepted, they are devastated. They feel that they lost out on the perfect pad and contemplate giving up, muttering things like “This market is nuts.”  “My coworker says this is another bubble!”* “It’s not fair. Why did they like that all-cash offer over ours?”  “We wrote a heartfelt letter and included a photo of Fido?!” But then, they buck up, sprinkle some fairy dust in their cornflakes and hit the open houses. And each time, voila, the true perfect home for them emerges and this time, their offer IS accepted.

For example, we are working with buyers right now who are moving back to San Francisco from overseas. They have cash to buy and know what they want. After looking for a few weeks, they found a beautiful farmhouse in Noe Valley (though further out than they originally wanted)  and were outbid by another all-cash offer! Three weeks later and on the verge of giving up, the true dream house emerged – the ideal house and location for them. Yes, there were multiple offers – in this case we think there may have been 20+ of them! – but this time, it was meant to be and it worked out. Happy ending because it was the right home for the right home buyer.

So, have faith. Don’t worry too much about the competition. You will end up with the right home for you.

* It’s always a bubble. The difference is where are we in any given cycle. Where are we now? http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/04/15/MN7U1NVVU3.DTL

What’s a FHA Home Loan?

FHA is the Federal Housing Authority, under jurisdiction of HUD – Housing & Urban Development. What they do is provide insurance for lenders to give borrowers home loans at reduced down payment and credit score levels.

From HUD’s website:

The Federal Housing Administration, generally known as “FHA”, provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.

They don’t actually lend the money. You go to a regular bank or lender that is approved by the FHA. For example, BofA, Wells Fargo, Guarantee Mortgage, & First Capital Group are local San Francisco home loan options for FHA.

Why Get a FHA Home Loan?

The most common reason a buyer would choose a FHA loan over a conventional mortgage is the lower down payment requirement. You can buy a home with as low as 3.5% down payment vs. the typical 20% down for a conventional loan. Of course, there are great 10% & 15% down payment options from conventional lenders now available. They briefly went away during the financial crisis but are back.

In San Francisco, the real estate market has really picked up. Multiple offers are again commonplace and prices are on the rise. You may feel that the real estate will appreciate faster than your savings account and you want to buy your starter home before you are priced out of the market.

As a new client said to me yesterday, “I’m already paying sky-high San Francisco rents and feel comfortable with the payments. The mortgage payment even with the insurance isn’t going to be much different. And then, I get tax savings, home equity appreciation, and the pride of being a homeowner in this expensive city.”

The other reason you might choose a FHA home loan is because your credit is less than stellar. You still need to qualify – have a job, have some reserves, be able to afford the payments – but you can get away with more blemishes on your record and a lower FICO score.

Another bonus is that FHA allows non-occupant co-borrowers, meaning that you can buy with the help of someone (say Mom or Dad) who is not going to live in the property but in order to qualify, you need to include their income, credit, or money.

What’s the Downside?

First, you will pay FHA mortgage insurance which becomes an added closing cost and monthly payment. FHA is insuring your lender for your lack of a full 20% down payment so, of course, they expect you to pay for it! Keep in mind, that you will have mortgage insurance for any loan with less than 20% down, for example, with one of those cool 10% down loan I mentioned earlier.

Second, there is a maximum loan amount dictated by FHA. In San Francisco, you can borrow up to $729,500 for a single family home and $934,200 for a duplex. Here is a complete list of FHA loan limits for California by County. Your purchase price is the loan amount plus your down payment. As you can imagine, this eliminates a lot of our housing stock. Yet, there are many places you can buy and we have helped dozens of FHA home buyers in recent years.

Third, the property you buy must be FHA-approved. This is easy if you plan to buy a single family home and a bit more challenging for a condo. All single family homes should qualify unless they are really intense fixer-uppers. (Though FHA does have a fix-up loan product.) With condos, it’s a bit trickier. It’s the building’s HOA – Home Owner Association – that must qualify, meaning it’s the building rather than the individual unit. Many newer construction buildings through San Francisco neighborhoods like Mission Dolores, South Beach, South of Market, and more are FHA-approved as are some smaller buildings.

Which Condos are FHA-Approved?

For a quick and dirty peek at currently FHA approved San Francisco condos, check out HUD’s website. But keep in mind, that this list is not all-inclusive. If you align yourself with a FHA savvy lender and Realtor, we can help walk you through the process and your best options.

Happy house hunting!

-DL

Pondering more on the value of a real estate agent over at daniellelazier.com, I can summarize the main value of today’s Realtor by saying that we take all of the information, much of which is either overwhelming, inaccurate, misleading or all of the above, and put it into context. We break it down, organize it and make it transparent. We help you clarify what you want and help you make good decisions. We translate, decipher and save you time. Or at least we should be doing that if we want to remain relevant in today’s real estate world of online-everything.

Much of real estate can be automated or outsourced through technology but the role of the Realtor as the “in the trenches, on the street advisor” cannot. I should clarify that I am speaking specifically about the type of Realtor who is a consultant or advisor rather than the typical salesperson of days past.

Do your research. Know your stuff. Don’t trust blindly but do align yourself with an experienced real estate professional who will help you sort through the crap so you can make an easy, informed decision about when to sell your home or what home to buy. Maybe that’s why this For Sale By Owner sign was on clearance at the Office Depot San Francisco?

Sadly, they haven’t posted the episode online…just yet…and I flaked about the blog post prior to the air date but hopefully, you can catch us in syndication. It was such a blast to film and my clients, Karine and Sheila, have such a lovely story.

Danielle Lazier, Karine, Sheila, Tanya Dzhibrailova

Plus, they increased their budget $150,000 during the episode! You know, the folks in the Midwest think we are absolutely nuts with our home prices but like they say on KFOG, we are quite proud of our “San Francisco values” & happy to spread them world-wide.

For the last couple of years, if you wanted to buy a million dollar home in San Francisco, you needed to come up with 20% down payment plus to get a home loan for the purchase. Actually, anyone wanting a loan amount above the current super-conforming limit of $729k needed to have a full down payment. Not anymore. It is again possible to purchase a luxury San Francisco home with 10% down payment. Okay, okay, maybe a million dollar home in San Francisco is not exactly a castle but it can be a gorgeous, spacious home or condo in a nice neighborhood like Bernal Heights, Noe Valley, Inner Sunset…

You can buy a home that costs up to $1,088,000 with 10% down payment. Right now, the historically low interest rates are very attractive – about 4.875% for a 5/1 ARM (5-Year Fixed Rate Loan). We’re told that this is a very selective loan program only offered by a handful of local San Francisco mortgage companies. We got the scoop from Team Z @ Guarantee Mortgage (Nastasha Lovas, Dean Rizzi, Stephen Barber, CJ Kerls, Pete Elting, Sergei Andruha, Phillip Cannon, and Jane Glendinning).

If you are buying a luxury home or condo in San Francisco (plus/minus $1,000,000), you may want to check this out because the difference between putting $200,000 and $100,000 into your down payment is substantial. For those of you with high income and great credit, it could be a good fit to maximize your tax savings and minimize your risk. (Keep more money in your reserve account or towards retirement savings, etc.) Okay, I am NOT a CPA so please consult with your tax advisor.

Other resources:

• Search the entire San Francisco MLS.
• Get Market Tracker for SF real estate market stats and neighborhood information.
• Have a question or need some help buying or selling a home in San Francisco?

A colleague of mine at Zephyr Real Estate recently polled the community to ascertain approximately how many deals sell with “ALL CASH”. ALL CASH means that the home buyer buys the single family home, condo, loft, building, or what have you, without a loan…i.e. they pay ALL CASH.

In San Francisco with all of our dot-coms, start-ups, IPOs, LPOs, and so forth, there is a lot of cash in the real estate market. But just how much?

Our friend and excellent escrow officer, Charles Richards, of Chicago Title Company had this to report:

Using March 2011 as a sample : 13-14% of San Francisco home sales were all cash and additional 20-25% were 50% down or more

This means that last month, 13-14% of home buyers in San Francisco bought their property with all cash (no loan) and 20-25% of SF home buyers had a down payment of 50% of more.

Got cash? Er, it seems, we do!

Per the Wall Street Journal, the 5 signs that say ‘buy’ a home are jobs, recent sales activity, construction, mortgage availability, and anecdotal evidence.

1. Jobs – Forget the national reports. Are local companies hiring? Are start-ups going public? Is the mood generally positive or negative about the San Francisco job market?
2. Recent Sales Activity - Check local neighborhood-specific real estate data, using the Zephyr Real Estate website where you can check stats by MLS sub-district. Be careful to avoid analysis by zip code or tax record as they information will be too broad and not up-to-date. When we have our initial home buyer strategy session, we look at the CMA (Comparative Market Analysis) for the specific neighborhood of interest to the home buyer. Lately, I’ve noticed more recent sales than active listings.
3. Construction - This is tough in San Francisco because frankly, there isn’t much land left and yet, is construction happening? Are new condos selling? What’s the local scoop?
4. Mortgage availability – How easy or difficult is it to get a home loan? In San Francisco, it’s important to pay attention to the jumbo home loan market which, according to our Lender partners, seems to be loosening up albeit slowly.
5. Anecdotal evidence - This is the one time I recommend you actually listen to the talk at the water cooler! What’s the general vibe? Are your friends and coworkers feeling good about the economy? In San Francisco, our world kind of revolves around technology, right? My friends in tech are feeling positive, how ’bout yours?

Trulia published a very helpful blog post about the process of buying your first home. I devote a lot of blog-time to first time home buyers in San Francisco because helping you is a particular passion of mine. My impression is that the more information and insight you get up-front, the more you understand what to expect and when, the more enjoyable and successful your home purchase will be.

Here are the highlights but please read the entire post on The Suprising Insider Secrets for the 5 Stages of Buying Your First Home.

The 5 Stages of Buying a Home per Trulia Advice that, of course, we agree with! (Note my personal emphasis in parenthesis. Kind of rhyme intended.)

Stage One: Deciding Whether It’s The Right Time to Buy.
Insider Secret: (Whether you are in Bernal Heights, Noe Valley, or Pacific Heights,) the market is the least important factor you should consider when deciding whether and when to buy a home.

Stage Two: Getting Pre-Approved (at the beginning of your house hunt).
Insider Secret: Working with a mortgage broker referred by your real estate broker or agent may save you money.

Stage Three: House Hunting
Insider Secret: “Distressed” doesn’t always equal “discounted” – in some cases, a “regular” sale can be a deeper deal. (And to this that the majority of so-called short sales will never close escrow. We work in the distressed home market & have negotiated plenty of short sales, foreclosures and bank-owned REO properties. We can spot the situations with the best and worst chance of working out for the buyer.)

Stage Four: Negotiations
Insider Secret: Your family and friends can cause you to lose your dream home.

Stage Five: Escrow, Inspections and Underwriting
Insider Secret: It’s critical that you attend your home inspections. (And have them! With very few exceptions, we recommend that a buyer have their own professional home inspection.)

More posts related to San Francisco first time home buyer tips & advice:

• 10 Things to Remember When Buying a Home
• The Process of Buying a Home in San Francisco, Specifically
• 2011 Home Buying Resolutions
• Loan Preapproval Process – What documentation is needed for a home loan application
• How Many Homes Should I See Before Making an Offer?
• Loan Preapproval Before Open Houses
• A Brief History of the 30 Year Fixed Rate Mortgage

Last night, I had dinner with a couple of friends at Local Mission Eatery. One of my friends works for a super popular local San Francisco start-up.

He casually mentioned to me that he’s been hearing from friends and coworkers that the local techie community expects home values to increase in San Francisco and Silicon Valley in the near future because some of our most successful local start-ups have either just had or are about to have their initial public offering (IPO), making many of the employees capable of buying a home here in the Bay Area. (This is not to mention that Google is hiring.)

His friend was telling him that the word on the street is that if possible, you should try to buy a home before this happens.

I know, I know, this sounds like Realtor BS. But really, this is what he told me and hey, who am I to argue with the SF technorati?