Buying a house that needs significant work
We are first time home buyers with 1.2 million as our max budget. We are not finding anything that meets our needs that doesn't require significant fix-up, given the heated market and the age of homes in Oakland/Berkeley.
After having looked at more than 30 houses and submitting an offer on 3 houses (and being outbid by several hundred thousand), we realized that we need an agent who can give us a ballpark rough estimate of how much it will cost to fix up a house or have a lot of contacts to contractors on hand who can call them out to give us estimate on houses that we want to offer. If a realtor who can provide rough estimates doesn't exist, perhaps we need a realtor who has connections to a lot contractors and can bring a contractor out on every house we're serious about, which could be 2 or 10, since we don't know when we'll get lucky and get our offers accepted. We won't hold the realtor to the estimate s/he gives but we can't make a decision on the offer price without knowing how much we'll need to spend to fix up the house, since have limited cash (probably 30 - 50k after closing, depending on the offer price) for construction.
House #1 (Dimond/Oakmore): Asking $800k. Our offer: $1.17. Sold: $1.3
House #2 (Glenview): Asking $850k. Our offer: $1.07. Outbid. [This house was a fixer needing new foundation, HVAC, & roof before we could move in.]
House #3 (Glenview): Asking $750k. Our offer: $1.15. Outbid.
Every time, we had a friend come out and help us estimate the work we'd need to do to make the house work for us. No house we offered was perfect. But, we feel horrible and can't have a friend just come out every other Sat. to go house shopping. We'd probably lose that friend soon.
So, we're thinking we need a realtor who used to be a contractor or who has a flip side business that knows how long and how expensive things are to make changes to the house / improve the house and what things are easy or hard to fix and who can help us have a realistic expectation and vision for a house.
Our current realtor casually recommended that we could dig under to expand the square footage on House #3. Our friend says "no way. that will be way too expensive." Your budget to work on the house is $40k after closing you can't do it within that price range after having done the required sewer lateral and pest and adding a second half bath, all of which you need right away."
Some people say we should lower our standards. But, at 1.2 million, we believe that we should not have to squeeze into a 2 bedroom / 1 bath, 1000 sq ft house when we have 2 little kids and a dog. We both commute to San Francisco. We currently rent a 1500 sq ft, 3+ bed, 2 bath house with an enclosed yard in a wonderful neighborhood. Perhaps, we should just keep renting...
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I hate to say it, but yes, you should just keep renting. Sooner or later the market will soften. We are in the same situation, looking with a slightly lower budget with the same basic parameters (and it sounds like in the same neighborhoods). There's nothing right now. We're just grinning and bearing it in our 1000sf 2/1 (and feeling grateful that we have that). We've looked into expanding our current house, and to do anything substantial like an extra bed and bath, you're looking at $250K+ these days at a minimum (and up that number if a new foundation is required or you need to dig out). If you only have $40K to work with post-closing, I would consider that to be for cosmetic upgrades/landscaping/etc. Maybe some electrical upgrades or a bathroom renovation, or a really, really bare bones kitchen renovation, but that's about it. It would be valuable for you to connect with a contractor--hopefully someone will provide some names--but don't expect too much. Good luck!
With little kids, you should focus your search on areas with good schools. Oakland schools are declining in quality, despite the Oakland community's desire and effort to improve them. Try looking in Alameda, Walnut Creek, Lafayette or Moraga instead of Oakland/Berkeley.
This is the advice that I would give to myself if I could go back in time. Seriously, only buy in an area with good schools if you have young kids. Otherwise, keep renting.
I feel your pain, we just closed on a house in Glenview which I'm sorry to say we spent more than your budget on but have really pushed ourselves and are nervous about it! Good news is that it has needed very little work but even the small bits and pieces we have done have ended up costing like 20K. So you're right to be cautious if your budget is a hard stop. However, I do feel like our real estate agent did a great job of giving us a realistic picture of how much some of the work we fantasized about in different houses we saw on the way would cost (like when we were interested in a too small house and thought about what it would mean to raise it up etc he brought us pretty swiftly back down to earth in terms of what that kind of work woudl cost and how long it would take). His name is Dan Walner at Pacific Union, in Orinda but knows the East Bay inside and out. http://www.pacificunion.com/agents/9896-Dan-Walner
Talk to Linnette Edwards. http://abioproperties.com/agents/linnette-edwards/ She can help you navigate this. We worked with her to buy and later sell our home in Oakland near Lake Merritt. She has a whole team of contractors and fixit guys and knows what she is doing. She's also going to be able to help you figure out how to give your bids the most chance of acceptance. Hang in there. We bid on 7 properties before we bought the right one. If you think of making a bid as something that is not such a big deal, you can increase your number of attempts, and the (enormous) learning you get from each one. If most homes are getting 5-10 bids, then most people are bidding 5-10 times before they get their house, right?
1. Accept the reality of the SF Bay Area real estate market. It doesn't care what you "believe you shouldn't have to" do.
2. Call my agent Karen Sanders Moss at Marvin Gardens in El Cerrito. She is an experienced real estate agent who's been in the business for 30 years and has a list of contractors on hand.
3. Look at other neighborhoods. Do you really have to live in Glenview? If so, will you send your two kids to private school for 13 years? (Glenview Elementary is under construction and students are attending school at Santa Fe in North Oakland for the next few years.) Albany and El Cerrito are great. El Cerrito has two BART stations, good schools, and you can still buy "a 1500-sq ft, 3-bed, 2-bath house with an enclosed yard in a wonderful neighborhood" with a view of the Golden Gate Bridge for under $1.2 million. Albany houses are much smaller but the schools are very good. Albany and El Cerrito also have significantly less crime than Oakland and Berkeley.
4. Don't put all your cash into the house purchase. You have already budgeted for some renovation but home ownership is a constant outflow of money. As you know, the houses around here are old and there is always some little issue to fix. Good luck.
I am not a realtor but I have a suggestion for you that might help. When my (now ex) husband and I were shopping for housing after our son was born we learned that we could afford more house in better condition if we bought a multi unit (duplex or triplex) because the rent offset the cost of the mortgage making it much more affordable. The trade off here is that you must become a landlord with all of the responsibility that entails, but I could not believe how much of a difference it made for us. We created an excel sheet to estimate the costs of principal, interest, taxes, insurance and maintenance and then offset that with the current or estimated rental income from the 1 or 2 additional units. When we bid on homes, we did not exceed what the excel told us we could afford. When I walk my dog around our neighborhood, I occasionally see duplexes for sale that seem like good deals, even in this market. We ended up buying a duplex in Oakland. I live there now and I have had wonderful tenants over the years. Just something to consider.
When we thought for a minute that we might buy a house around here, we lucked into a fantastic realtor who sounds like he might be just what you're looking for - not only was he a friendly guy, low pressure, very easy to work with and listened well to our needs, but he also offered an amazing service -- he used to be a contractor, and was very familiar with the relative costs and importance of various home improvement projects. We would walk through houses together, and while we were getting a feel for the place, he would be carefully checking things we never even thought of and had no expertise in - foundation quality, retrofitting needs, potential problems with the roof...his advice was like gold. And when we saw a house that wasn't quite right, he was able to give us estimates of what it would take to make the needed change. We didn't end up going all the way through the process (the market turned out to be way too crazy for us), but if/when we decide to try again, he will definitely be our guy. Brian Santilena with Pacific Union, http://www.pacificunion.com/agents/9807-Brian-Santilena. We highly recommend him!
We were in a pretty similar situation and are closing on our new house today. It took 4 offers, but the last one made it. Our agent was great and is connected to many contractors and I also feel like she gave us very grounded advice on renovations. She also helped us get contractors out pre-bid to make estimates when we felt like we needed that.
Romney O'Connell romney [at] berkhills.com
Hanna Kerns of Red Oak Realty walked through the basement of the duplex she showed us and pointed out every hazard and flaw that needed correcting or we might want to hang, and roughly estimated the costs, including a new foundation. She is sharp, an experienced landlord and renovator of her own properties, and will be able to provide the insight you seek. hanna [at] redoakrealty.com
Yep, it's a tough market, and it sucks to get so little for so much. I agree it would be helpful to have a realtor with this kind of experience, so I would highly recommend the team of Stephen Bloom and Robin Donovan, who are realtors with Marvin Gardens but also develop property and flip houses on their own. They have lots of experience with remodeling, they're super down to earth and friendly, and very familiar with Oakland, including the neighborhoods you've offered in. I think they're exactly what you're looking for. Here's their website: http://www.bloomhomes.com/
Good luck!
Maybe look into El Cerrito or San Leandro. You can definitely get a 3/2 for less than $1M, at the moment, but maybe not for long.
A few years ago, I was looking in Berkeley and Oakland and was similarly disappointed. Finally I turned my attention to the El Cerrito Hills, and I bought a really lovely 3 BR, 2 BA house in the hills out past the Mira Vista golf course. It is 1250 sq feet, with a big patio in the backyard, a double garage, I purchased it for $585,000 in 2014; it is now valued at $815,000 or so (on Zillow and the like). The bus to SF leaves basically outside my door, and BART is just down the hill (a tough walk up, but a quick car ride away). It is quiet, lovely, and safe, and I did not have to have a speck of work done on the house. My realtors were Sheri Madden and Lesly Flynn of Marvin Garden (Sheri had to hand off to Lesly when I selected the house, because she was also the seller's agent). Both of them were great; Sheri was the one who looked at houses with us, and she had a good idea of what repairs would cost and what was likely to be problematic. Several houses has been on sale in our neighborhood recently; you should check the recent sales and see how they have gone. Maybe this would be a good alternative for you. We are very happy here.
Yes, keep renting! I own a home and bought at the last peak. Having a lot of debt sucks. Not having the money to fix up your house isn't great either. We owned a reasonable small house but moved up to a 3 bedroom because we needed space for our second child. Now we're trying to figure out how to pay for college and will need to borrow to do that. Save your money for college (or private school, another issue in Oakland) retirement etc Disclaimer-I'm no expert on all this but really think if you have a good rental situation you should wait until things calm down again.
Have you considered Alameda? We just bought a 3/2 that doesn't need significant work for less than what you have offered. Just thinking that it might be worth taking a look at surrounding cities...
My thought is that it's not necessarily in your realtor's best interest to offer you factual information about what renovations might cost. After all, that could dissuade you from the sale, right? And he/she wants that sale to go through! Once the sale is said and done, and they've collected their $30-40k commission, they don't really care how much it costs you to get your already-expensive house up to your standards of liveability. I'm sorry I don't have any advice or recommendations for you, but am offering just a gentle reminder that real estate agents make big bucks off you buying an expensive house and they'd rather your cash go to the cost of the house than the cost of a contractor.