In the San Francisco Bay Area, people line up to view a home for sale, a contract cycle could take less than two weeks, all cash and no contingency offers are common and bidding wars are expected.
Housing in San Francisco is insanity. According to Redfin research, in July, the price of residential properties in San Francisco climbed by 15% year over year. Data from Zillow.com indicate that the San Francisco metro area saw home inventory drop by about 6.7% in the first half of 2015 compared to the same period the year before.
I’m well aware of the housing crunch, as my husband and I have been looking for a house for six months. But we discovered something surprising in how the bidding wars are unfolding.
In order to get a leg up on the competition in the million-dollar housing market, some hopeful homeowners are writing clever letters while others are making videos starring their dog and baking a batch of gluten-free muffins. Bay Area real estate agents say creativity works, but no one is going to walk away from more money.
Focus on what you have in common
After searching for seven months, Ryan Corces-Zimmerman and Charlotte Jones found their dream home in Redwood City, California. The Mediterranean-style home with colorful accent tiles and a classic terra cotta roof was everything they wanted.
“We were told from the start that a good letter was the only thing (other than the offer price) within our control that could make or break a deal,” said Corces-Zimmerman. “Our realtor stressed that a good letter is part of the offer, not just something additional to put on top.”
Corces-Zimmerman, a PhD student at Stanford University, started working on a letter once they were ready to start the bidding process. In order to have a fighting chance at winning the bid for the three-bedroom, two-and-a-half bath home, they were forced to stretch their budget to the max and offer 20% higher than the asking price—and submit a heck of a letter.
“The seller really liked that we were a young couple, my fiancé is a veterinarian, she [owner] had four cats and one dog, so we hyped up the vet thing. We were told that there were a few other offers around the same time, but she chose our letter based on the animal connection.”
They won the bid with a closing price of $880,000.
Having cash doesn’t make you special
Losing a deal to a cash buyer isn’t uncommon.
“Cash isn’t special anymore, it used to be shocking, but the reality is in the Bay Area, a lot of people have that kind of money,” said Michelle Balog a managing sales director at Climb Real Estate.
Realtors say there is a lot of cash sitting on the sidelines with tech employees cashing out stock options and foreign money, which also plays a role in the increase of cash buyers.
“At one point there was Eastern European (like Russian) money, but that dried up, and now there is a great deal of Chinese and Indian money, but that money competes with the Google’s, Facebook’s, Linkedin’s and Apple’s,” said David Barca, regional vice president for Pacific Union Real Estate in Silicon Valley.
Barca says he sees around 40% of offers in all-cash.
If love letters don’t work, muffins and puppies might
Balog has seen what she calls “love letters” written from buyers to sellers since she started in the business 15 years ago. But in the tech savvy environment, letters might not be enough anymore. In fact, her clients John and Kate Fenwick who work for Google and Liftopia, decided to set themselves apart by making a video. Well, they made the video, but their dog Cooper does the talking.
“He is a 9-month-old puppy and the center of our universe, what else do we have that’s interesting? I can juggle and Kate has good memory. We played to our strengths,” John Fenwick told Quartz.
In addition to the video, the Fenwicks provided the seller with a letter and as an added bonus, baked a batch of gluten-free muffins. They were considerably outbid and didn’t get the house, but the seller was so impressed by the video that he came back with a video response explaining that the Fenwick’s bid wasn’t high enough. They repurposed the video for another house in San Francisco and eventually won the bid for a home in May.