Opinionator

Op-ed: Priced out of my own ‘million dollar’ Berkeley block

By Reichi Lee

Reichi Lee lives with her husband and two children in Berkeley. She is an Adjunct Professor and Assistant Director of the Academic Development Program at Golden Gate University School of Law.

Outbid when she set out to buy the home she coveted in Berkeley, the author has some hard-won tips for home buyers. Photo: Daniel Parks

If you live in Berkeley and didn’t think you live on a million dollar block, think again. Last month, a 3-bedroom, 2-bath house directly across the street from mine in the modest flats of Berkeley listed at $769,000, sold for 32% over asking to the highest bidder at a cool $1.014 million in cash. (In 1997, that same house, minus some improvements, sold for $225,000.)

No, I’m not talking about a house in the Indian Rock, Berkeley Hills, or Claremont neighborhoods. I’m talking about a house (albeit a lovely house, but with no dishwasher) a stone’s throw away from the Dollar Tree on San Pablo Avenue and not far from what was once disregarded as the industrial wasteland of Berkeley, now coined Westbrae.

Some residents and real estate agents still attempt to lump this area with the more desirable North Berkeley, but make no mistake, this is not the Gourmet Ghetto of Alice Waters fame. Nonetheless, that house across the street, with its neatly laid shingles and yellow daisy flowers, was my favorite house on the block.

Like many thirtysomethings during the years immediately following the millennial tech boom, my husband and I moved to Berkeley from San Francisco after quickly realizing that we could not afford to buy there. At that time, we were barely out of graduate school, making payments on our student loans, and working entry-level jobs in our profession.

Fast forward ten years, two kids, several pets, and many jobs later, we had clearly outgrown our 952 square foot “bungalow” and craved more space, but had come to love and appreciate our down-to-earth neighborhood (and incidentally, so has Whole Foods, set to open on Gilman Avenue by the end of this year).

When that house – my favorite – came on the market earlier this month, listed in a price range that we could afford, assuming we both continued to work, we decided to make a genuine attempt at buying it. At the time, it seemed like a perfectly reasonable thing to do; we weren’t even trying to move “up.”

Well, the joke was on us. Since we regularly follow the real-estate market, we were aware that the Bay Area, particularly Alameda County, had been experiencing an unprecedented surge in demand, met with very little inventory. Multiple offers were the name of the game, with many buyers bidding well over asking and listing no contingencies.

For days, we agonized and debated over what we should bid – we were no strangers to competitive bidding having purchased our current house during the previous bubble – and finally decided to go nearly 15% over asking, with a no-inspection contingency (we spent $300 on a pre-offer inspection that did not raise any major red flags), and a tight loan contingency period. We knew there would likely be some offers more attractive than ours, but hoped to get ourselves to a counter-offer situation. Less than 12 hours after we submitted our bid, it was over. Another offer accepted; no counter necessary.

Later, we discovered the staggering facts: of 20 offers, several were in the high $990,000-plus range, three were all cash offers, and the final two offers were both over $1 million dollars. Who were these people? I didn’t know whether to laugh or cry. The disappointment I felt was not the type in which my desired thing came close but slipped through my grasp. Rather, it was a sickening realization that in this market, for a house on my very own block, trying our best meant not even coming close.
If you consider yourself middle class, as defined by the Bay Area, and are looking to buy, here are some hard truths you should know before diving in:

“Worth” is a misnomer

Because you probably work hard for your money and think about how you spend, you are likely accustomed to thinking in terms of “worth.” However, in the current market, it is fruitless to gauge a house according to its worth. Traditionally, a property’s worth is determined by objective factors such as its characteristics and location. But when supply is greatly outpaced by demand, and demand is comprised of people with a lot, and I mean a lot, of money to spend, a property’s worth is simply what people are willing to pay for at a particular moment in time.

Thus, comparative prices (“comps” as they’re known in the business) produce widely varying results with no helpful patterns to glean; if looking at them makes you feel like you’re doing your homework, do it, but it won’t do much beyond that. The one caveat, as pointed out by a friend who recently purchased a home in San Francisco, after being defeated five times prior, is that comps can help you determine how high you have to go to beat out the all cash offers – more on this point below. However, a word of caution: if the bank does not appraise your property as high as your offer price, the seller may demand that you make up the difference between the appraised price and your offer price by putting down an even larger down payment.

Cash, not persistence, prevails

It is unlikely you have boatloads of cash sitting around in an investment account, but maybe your parents, relatives, in-laws, or family friends do? If so, have no shame — borrow from them.

Sellers love all-cash offers for their speedy closes because they don’t have to go through any lending or appraisal processes, thus greatly reducing the chance of a deal falling through. In 2013 in Alameda County alone, approximately 25-30% of home sales went to all-cash offers, far above the historical average of 13% across the Bay Area.

Don’t (just) blame high tech or foreign investors. Agents are also seeing cash offers from older buyers who made money off of a previous sale and regular people scraping cash together from a hodge-podge of sources, including mommy and daddy, borrowing against their retirement accounts, and obtaining a line of credit or a bridge loan on their current home. Bottom line: the cash people are here to stay and a smart buyer will have to figure out a way to compete with them.

There’s no pop in this bubble

Maybe I’m a glass half empty kind of person, but calling this market another bubble is nothing but hopeful thinking. Sure, the frenzy might cool off a bit eventually, as interest rates rise and more people who had no intentions of selling decide they too want to make a million bucks. But all you have to do is grab a salad during peak lunch hour in downtown San Francisco and you too will quickly realize that the hordes of start-up trendsters standing in line aren’t going anywhere anytime soon.

If you don’t believe me, think of all the internet services you use (Google, Twitter, Pinterest, Uber, Lyft, LinkedIn, Munchery, Stitch Fix, to name a few). Those companies all have offices in San Francisco that weren’t there during the previous bubble, with employees hungry to buy or upgrade. Of course, they will first try to buy in the city. But when that doesn’t pan out – and Rockridge can absorb only so many of them – take a wild guess where they will be headed? I’m sorry to say, but this time, unlike 2005, their qualifications are good and the money is real.

Don’t get attached

Buying a house is an inherently personal endeavor. Our home is our kingdom; it’s the place we raise our kids, grow old, and create lifelong memories. I couldn’t help myself from going there, i.e. visualizing my kids running up and down the hallways of my favorite house, my artful black and white travel photos hanging on the freshly painted walls. Save yourself the heartache. There’s no such thing as fate in real estate. A house is a house and you can live in any number of them. Focus on writing the best offer possible, not birthday parties in the fictional backyard.

For now, our family has no real choice except to stay put and wait for the market to level off. But perhaps this recent attempt at home buying was not a complete waste of time. Our little piece of property, or rather, real estate heaven, is really not that bad after all, and we are grateful for all that we have, even if it means being cozy all of the time.

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  • Roll on

    Occupy died a predictable death.

  • justiceplease

    Next you will be disparaging me for being a “victim”, subtly implying that there are no actual victims, there are no actual bad people with bad intentions doing bad things to the weak and defenseless. This is the case concerning the “tech boyz” vs. the long term residents of Berkeley who are being displaced from their HOMES. My own role was GOING BLIND. Put that in your pipe and smoke it, you troll.

  • justiceplease

    I was a humanities student. I was never in a position to buy property in Berkeley. I was saving up for it, but those savings were burned by the long period of unemployment during the financial meltdown. Then my disability happened.

  • It’s on you now

    Khan academy. Coursera. Udacity. MIT open courseware. You have a computer. You have no more excuses. Quit posting and get to work retooling for your next career.

  • justiceplease

    Sad but true. One of the things they didn’t do is set up accommodation for disabled people. For instance, it was hard for people with mobility issues to march, and there were no chairs about. A huge part of their constituency simply couldn’t make their presence known.

  • justiceplease

    I have all those bookmarked actually, though I mainly make use of codeadcaademy. Howevery, it was hard to make use of these WHILE I WAS BLIND. So you should quit posting out of your rear end and spend some time considering there could be real issues surrounding poverty that can’t miraculously be solved by online classes.
    By the way, coursera isn’t going to count on a resume.

  • AnOski

    Heaven forbid someone tries to invest in property for their retirement or whatever other purposes. You’re essentially saying that no one should be able to invest in real estate unless they’re going to live in the property or will rent it at a below-market price indefinitely, because renters’ best interest should trump property owners.’

  • AnOski

    And you’re reiterating your underpaid, “I want to live someplace where competitive prices are higher than what I can afford” perspective. Lol.

  • Shoulda but didna

    Elsewhere in this thread you declare that you are a techie. It’s all so confusing.

  • AnOski

    >I’ll confess to being anti-Texas, with the exception of Austen!

    Way to make generalizations. I’ve visited a few times and met many nice people.

    >I’m glad to see you’re not against socialism in the European sense.

    Which isn’t really socialism, but sure.

    >If you weren’t so busy putting words in *my* mouth, perhaps we are more on the same page than you think.

    Mostly not, but I appreciate the effort to find common ground.

    >All I want is for people to be able to stay where they’ve established years of community ties, with some sort of protection from sudden disasters in their life.

    If people do not live fiscally responsible lives, saving up for such events (or retirement) — instead spending all of their money to live comfortably in a place beyond their means — I see no reason for this to be the case.

    >We give people help when a tornado or a hurricane strikes. Why can’t we have that same kind of mercy when disaster strikes just one person?

    I don’t think that disaster aid beyond simply keeping people healthy and alive in the short term should be a thing. If people want to live in tornado alley, they already pay a fraction of what I would in SF for a home. There are numerous reasons for this, but one of them is that the understanding is there that the house will probably not still be standing in 50 years. If they bought insurance, that’s one thing. If not, then why can’t they afford another house? Median salaries do fluctuate across the country, but not by an order of magnitude, as housing prices do.

  • AnOski

    Right. It doesn’t make any sense. Which is why I’m saying you’re naive for complaining about those very conflicting ideas.

    >So many people are out of work, employers in San Francisco are posting jobs with very low pay.

    Very misleading.

    http://en.wikipedia.org/wiki/List_of_highest-income_places_in_the_United_States

    San Francisco is one of the wealthier cities/regions in the country. Yes, low-paying jobs are being posted. So are high-paying jobs.

    >Meanwhile landlords in San Francisco are raising rent, and the newly minted millionaire tech boyz are snapping them up while heaping insults on the whining poor people they displaced.

    So people can afford to pay for more expensive housing are taking it? I don’t get it. If you wanted this so badly, why didn’t you go to school for a job that would make that kind of money: law, medicine, etc.? Seems like you made your choice and are now unhappy with it.

  • AnOski

    >Define “disproportionate personal gain”.

    Oh, the “we’re all socialists, but I’m in charge of so-and-so and deserve more money than you” thing that seems to happen in every instance of actual socialism (China, Cuba, USSR, PRNK, etc.).

    E.g. “The government should subsidize my ‘right’ to live in S.F. despite the fact that anyone choosing to live anywhere else in the country would require less money to do so.”

    It’s not the government’s job to pay for your expensive personal choices, sorry.

    >What about malrecognition of talent and potential to contribute?

    Wow. “I’m so talented that the government should give me money. I have the unrecognized potential to contribute somehow to society. Especially to S.F. society because I want to live there and wouldn’t contribute (as much) anywhere where I could actually afford to live.”

    Are you serious?

    >I go to an employment program with disabled people every day. These people get repelled from good jobs all the time simply because the gatekeeper hiring managers can’t see past a stutter or some unpleasing visual aspect.

    In many cases, the employers would be legally obliged to pay for additional costs such as higher-cost health insurance, etc., if hiring such a person. While that kind of thing does suck, our new public healthcare system has significantly improved the plight of such people.

    To say nothing of the fact that this rings of your earlier statement, in which you insinuated that no high-paying jobs were being offered in S.F. despite the fact that it’s one of the highest-paying regions in the country.

    >But they have skills that should be worth good money in truly free market.

    This makes no sense. If they had such skills, they would be hired. You might as well take on racism, sexism, ageism and other topics while you’re at it. And disabled people make up an extreme minority compared to the workforce at large, so bringing this into the discussion is…reaching.

    >The world will never be fair, but the level of unfairness now is so tremendous that something needs to be rectified.

    Rectified? And I suppose you’re the one qualified to judge whose ‘talent’ warrants monetary compensation from the government? Lol. Your suggestions would make our current economy less of a free market than it already is. More inequality. More arbitrary decisions that wantonly help and adversely affect peoples’ lives.

  • AnOski

    >Have you seen this article about how housing the homeless saves money, because it reduces pressure on the ER and other services?

    Coming across as naive again, comparing estimated costs for housing (still healthcare) and all of the other services that sheltered homeless people would require (job placement, etc.) to criminal overbilling:

    http://www.learnvest.com/2013/06/adventures-in-outrageous-e-r-hospital-charges/

    You’re comparing a short-sighted estimate to numbers chosen essentially at random. While I appreciate the attempt of the post to make its point, there are some obvious flaws:

    “More than 60 percent of the chronically homeless have drug or alcohol addictions. Thirty percent suffer from severe mental illness. Kanis says many of these people have such serious medical problems, it costs taxpayers more to leave them on the street.”

    Putting such people in apartments does not mitigate their healthcare costs. They will still be addicted to drugs; they will still be mentally ill. And now you’ll have to pay for both the apartments/housing, maintenance, and the homeless folks’ expenses, unless you’re hedging your bets on drug addicts getting clean when they don’t have any housing expenses. Mandatory drug tests? If they relapse, kick them out?

    Think about it.

    >You keep putting words in my mouth about how I’m advocating particular salaries and whatnot. All I’m saying is human beings should have a right to getting their basic needs met, including housing.

    But you brought that up in the context of your having the “right” to live in S.F. because you want to. Even if the government did implement such a costly plan, prices would simply increase in response. You simply can’t have ‘runaway buying power’ — prices inflate accordingly.

    >Society needs to work out how they pay for that when no work is available.

    Why? If you take up a job that has only enough demand that you work for 20% of the year, the government should not pay you for the rest of the year. You should find something else to do in the downtime. A part-time job should not pay as well as a full-time job, sorry. People who work more/in more highly skilled jobs should be paid more.

    >And I also believe that when someone has built community and institutional ties in a particular place they should have some priority in being able to stay in that place. That place has become their HOME.

    It has an importance to the person, not anyone else. The country gets no benefit from people living in the same place for extended periods of time. You might as well say that the government should ensure that people shouldn’t get fired from their jobs if people like them — without taking any practical considerations into account. Just because they like their job and getting fired is generally undesirable.

    While you may get attached to particular places, many people do not. Take, for example, someone who decides to follow through with higher education. You went to a school in the Bay Area. What if you had chosen to go to graduate school? You would almost certainly be going to a school in a different city, if not a different state or country. The government should not reward or compensate you for staying put. It doesn’t make any sense. I understand that you, in your current situation, desire this, but it is a perspective that makes no sense whatsoever. If you wanted to make more money, or to find a successful job elsewhere, you almost certainly could.

    Paying you tax money to stay put doesn’t make *any* sense.

    >Economists should endow the idea of a HOME with some meaning and factor that in.

    Lol. What’s it worth when you’re renting the place? Oh, that’s right: nothing.

    >Right now they are just saying any rich guy who desires something can grab it, and anyone who loses their job can be thrown out of their home and into chaos.

    Rich guy? Someone able to pay a fair price for the place. Just because you, an apparently qualified college graduate, choose to stay put in a place where you can’t find a job, doesn’t mean that the government should provide for you. Fair.

    When I looked around Berkeley and settled on a place a few blocks from campus, the location cost more, and that made sense. I didn’t expect the government to cover part of the expenses. Some places cost more to live in, and that’s generally because they’re more desirable for some reason(s). It doesn’t make any sense for the government to pay people who choose to not take the work they can find to live in such places. It simply does not make sense.

  • AnOski

    >I’m not working right now because I’m disabled. Period.

    Oh. You’re incapable of working. Why? The physically disabled are at little to no disadvantage in today’s market. Learn a programming language.

    >But I am going to an employment program so I can stay “work ready” and pivot back into the work place as soon as I can.

    Work ready? Please. I thought you were in graphic design. Join Deviantart or any other such site and have fun with it. Put together a portfolio. Sheesh.

    >I see what my fellow disabled and unemployed friends face every day as they struggle to find/maintain their housing and find/maintain jobs.

    I don’t mean this as an insult, but it sounds as though you’ve settled into a very unproductive mindset re. finding a job.

    >52k would be a dream job for every one of us, but that’s the income you would need to pay market rate rent in Berkeley these days.

    And have what? $30,000 a year in expenses? Look at competitive rents. What are you trying to do, rent an entire house? Seems a tad ambitious for someone without a job.

    >Didn’t Mark Twain say there are Lies, Damned Lies, and Statistics?

    Ah, yes. The good ole’ anti-intellectual American spirit.

    http://www.thedailybeast.com/articles/2014/03/09/richard-hofstadter-and-america-s-new-wave-of-anti-intellectualism.html

    While statistics can be skewed, I think it’s fairly clear what’s going on here. And it isn’t ‘injustice.’

  • AnOski

    >The issue of gentrification is that people might be living where they wish on 32k a year, but then property values inflate under them, and they are forced to move out of the area

    That happens in some places, and not others. Depends on desirability over time. In SF, prices have been increasing; it is a desirable place.

    >that is THEIR HOME and THEIR COMMUNITY because it has become “desirable” and they can’t afford it.

    …Says the person choosing to not work, yet who has hours for answering comments in meaningless forums.

    >For whatever reason, the 52k job is not available to them.

    In your case, it seems to be choice, but, yes, some people can’t afford to live in some places. That’s nothing new. Those Malibu beach houses I drove by on PCH run in the millions. What if I wanted to live in one of them? Should the government subsidize that, too?

    You put a premium on where you’ve been. Why not any other preference? Your perspective can’t be justified unless you argue for all-out socialism, at least with regards to housing. It makes no sense.

    >I’m not advocating for everyone to be able to get 52k/yr jobs. I’m advocating for people to be able to stay in areas where they have friends and community ties and institutional relationships that have developed over a long period of time.

    To paraphrase: you’re arguing that people should be able to remain in their house/apartment regardless of whether or not they can afford it over time. Or area? I don’t understand the difference. You’re saying that rent should be prorated for given districts given how long a person has been living within one? It makes no sense whatsoever.

    >Real peoples lives are being ruined by the voracious theory of DESIRE UBER ALLES.

    You’re the one insinuating that you need $52,000 per year to live happily, yet claim to be unable to work. You’re literally demanding $50,000 a year to do nothing.

    And you have the gall to say it’s your right. Puh-leaze.

  • AnOski

    >The Harvard professor is for you, not me. I already know that poverty is an incredible time suck of appointments, forms, bureaucracy, and crazy contradictions that never get resolved.

    The bureaucracy of disability is, but that’s how you get $30,000 a year to do nothing, so a little paperwork seems reasonable. Poverty? You’re not below the poverty line if you’re on disability. You don’t know about it.

    >Right now I am facing a ridiculous disincentive to work. My health is improving. But I need SSI to pay back the State for General Assistance which is just a lone. I can’t work because that would prove an able to work, and thus I wouldn’t get SSI to pay back GA.

    Riiiight. You can’t work because if you worked, they’d stop paying you to do nothing. Great logic.

    >This situation is being caused by the VA-like backlog in SSI applications: mine has been in process for over 2 years. There is no node in the system I can bring this problem to.

    Doesn’t sound like a VA problem to me. Sounds like you just don’t want to give up the work-free money.

    >I do understand what you’re saying about the politicians. I’ve been watching Tom Bates punt on low income housing, and it infuriates me. First he sold all the public housing units in Berkeley to private corps. According to Wikipedia: “Bates has also strongly opposed the building of affordable, low-income housing in Berkeley, calling then Mayor Newport’s attempts to accept federal grants and build low-income housing as “really stupid.” A few years ago Berkeley got a 10 million dollar grant for low income housing, and Bates has kept that money in a COMMITTEE to “study the problem” for YEARS.

    Sure, but that completely ignores my previously stated points. Simply housing the homeless won’t do anything for most of them. When 60% of the long-term homeless are addicted to hard drugs, putting a roof over their heads is only a small part of the puzzle.

    Since you have your own preferences mixed up in this, I’d point out that unless you’re saying that you would be happy living in low-income housing, this wouldn’t solve the personal issues you’re complaining about. You also suggested that $30,000 per year isn’t enough for you to live on, and that you would require on the order of ~$52,000 per year to live comfortably.

    As such, I don’t see how/why you’re mentioning low-income housing. It seems that you’ve already ruled that out as a possibility for yourself. It’s beneath you.

    >For goodness sake, what is it going to take for people to realize that this guy has certain (probably racist) ideas about “the poor”, and is making every secret move he can to push them out?

    Now someone who doesn’t advocate for the poor is racist? Reaching a bit, there.

    >I’d like to get in his face as a former Ph.D. candidate from U.C. Berkeley, a winner of multiple fellowships, a high school woman’s state chess champion, a holder of an outstanding customer service medal from a company a formally worked for…

    http://en.wikipedia.org/wiki/Argument_from_authority

    >and I could regale him with a portfolio of my work as well.

    You said graphic design, right? You want some guy to look at your pictures…why?

    >If you can’t work for a long time, you end up in poverty: that’s all there is to it.

    Can’t, don’t, choose not to. I don’t really have any sympathy for such people nowadays unless they have significant mental issues. I learned a few code languages in my free time and could probably wing an entry level job with a little practice. It’s not like being immobile stops someone from working nowadays. I have a few friends who literally started their own retail businesses on the side; they liked certain products, knew a little about them, and realized that they could fill a little niche.

    >Let Tom Bates lose everything he has and try to cope for a while in the existing system and see how well he gets along.

    If he chooses not to work for a number of years, claiming to be “unable to work?” Dunno.

  • AnOski

    Riiight. Complete economic reform, rent subsidies based upon duration of residence in a given area, and raising disability and unemployment to $50,000 per year.

    This could only come from a willfully unemployed person who wants to live where they can’t afford it without doing a scrap of work. Figures.

  • neighbor

    I added about 800 sq feet in 2008 cost 300K

  • EastBayer

    it’s not that everyone else is “chicken” it’s that when the economy is busted, no one has money. But don’t let that get in the way of patting yourself on the back.