By Paul Hagey
Home Truths, a quarterly report on the state of the Berkeley real estate market, is brought to you by Red Oak Realty.
Alameda renters Alex and Debbie Allen,* 32 and 30 respectively, had scraped and saved for five years and were now ready to buy their first home, preferably in Oakland. They started their hunt last year.
They were looking for a single-family home in a walkable neighborhood. Hoping for a 3-bedroom, 2-bath home, their budget hovered in the $600,000s, with financing.
The Allens quickly learned that wouldn’t take them far. The median East Bay home price reached an all-time high in the second quarter: $832,000, according to MLS data analyzed by Red Oak Realty. (The previous second quarter high was in 2015.)
So, the Allens shifted their focus to the Oakland/San Leandro area, where they felt they could find a home in their price range.
After a few fits and starts, they finally found their home: a charming two-bedroom, one-bath in San Leandro’s Broadmoor District, just south of the Oakland border.
They paid $657,000, approximately 24% over the $529,000 list price.
In many ways, the Allens’ buying experience echoes what’s happening with buyers all over the East Bay: they want walkable neighborhoods, they experience sticker shock, they have to be flexible and in it for the long haul to win.
That’s because inventory is low and available homes go quickly. East Bay homes sold for an average of just 20 days after listing in the second quarter, lower than any quarter in the last decade, MLS data show.
Cancellations by sellers are also up in the second quarter from a year ago in every price range but those under $500,000, suggesting that sellers aren’t fetching the prices they hope for, and are pulling their homes when they see tepid buyer response.
A dive into several buyers’ experience gives East Bay sellers a better idea of what to expect in this hot, unpredictable market.
Walkability and sticker shock
The Allens were looking for three things:
- A walkable, friendly neighborhood, with amenities relatively nearby
- At least a two-bedroom single-family home
- A cute home ready for move-in that didn’t require any remodeling
The Allens placed their first bid on a home in Oakland’s Sheffield Village neighborhood earlier this year and had what Alex called a “holy sh$%” moment, one many recent and current East Bay buyers must no doubt recognize.
They had the highest offer, but lost to an all-cash offer, $35,000 below theirs. (All cash enables quicker closings and removes the possibility of a deal falling through because of a lending snafu.)
Surprised by their first offer experience, they also decided to go with a different agent who would be a better fit and more pro-active, Alex said. They chose Red Oak Realty’s Russell Hill.
They also realized that competitive offers need to come in at least $100,000 over asking price. Stats back up that lesson. East Bay homes sold for an average of 16.1% over asking price in the second quarter, higher than any quarter in the last decade, MLS data show.
In addition, the couple waived all contingencies for the rest of the three offers they made, knowing that’s what it would take to win a home in this hot market.
There are three common offer contingencies:
- Loan contingency — meaning that an offer is contingent on the buyer’s ability to secure a loan for the offer amount.
- Appraisal contingency — meaning that the home must appraise at the offer price. If the appraisal falls below offer price and this contingency is waived, the buyer can be on the hook to make up the difference in cash.
- Inspection contingency — meaning that the buyer takes the home as-is, without the ability to back out or change conditions upon inspections while in escrow.
Red Oak Realty agent Catherine Stern said many of her buyers also waive all contingencies on the offers they make.
To make such high-risk offers, buyers must be confident that they have a well-informed, focused agent, she said.
Sometimes it pays to take a break
Red Oak Realty agents Negar Souza and Feri Niroomand had a buyer-couple recently from San Francisco who, after eight months of hunting, experienced heartache after heartache after losing out on homes they wanted.
It was emotionally draining for them, Souza said.
They were looking for a home in the $1.1 million range in Oakland and parts of Berkeley, but had a narrow set of requirements, some of which are common for San Francisco buyers. They wanted:
- A home ready for move-in, no fixing up needed
- A yard
- At least 1,100 square feet
- A home within one mile of a BART station
They lost out twice to all-cash offers. One in February stung particularly hard. It was a sweet 3/1 in Oakland on Dover Street. They wanted to give up.
Souza convinced them to keep their head in the game and suggested taking a break — disconnecting from email alerts notifying them of new homes hitting the market that fit their preferences and communication with Souza.
They unplugged for a few weeks. Then Souza got back in touch.
Soon after, they found a great house on a huge lot on Oregon Street in Berkeley walking distance from Ashby BART (pictured, top). Everything was updated in the home, it had a great veggie garden, and extra space for a third bedroom or office. They placed an offer, won the home and closed in April.
The Oregon Street home was a better fit for her clients, Souza said. “They’re where they’re supposed to be.”
That seems to be one of the truisms for successful homebuying in the East Bay: keep your head down, your heart lifted and continue plugging away until you find your home.
As for Debbie Allen, she admits her buying conclusion is cheesy, but offers it regardless: “If it’s meant to be, it will happen.”
*Note: Alex and Debbie Allen are pseudonyms, given to support the privacy of the buyers interviewed for this story.
Home Truths is written and sponsored by Red Oak Realty, one of the largest independent real estate brokers in the East Bay, serving the community since 1976. Read more in this series. If you are interested in learning more about the local real estate market, or are considering buying or selling a home, contact Red Oak at email@example.com, tel: 510-250 8780.