Perhaps one of the most important concepts that Silicon Valley home buyers need to appreciate is that someday, they’re going to be Silicon Valley home sellers.

It is true that there’s no such thing as a “perfect house” anywhere in Silicon Valley. No matter what your budget, there is always a change you might want in any home. (Often buyers want about 20% more than their budget allows, in my experience. This is equally true of first time homebuyers as it is for move up or even luxury home buyers.)

So it comes down to which compromises you’re willing to make. There will always be compromises – but which ones are acceptable, and which ones aren’t?

It is extremely helpful if you can prioritize, in order, what you must have or strongly prefer to have, in your next home. Sometimes couples have some, but not all, of the same preferences, wants and needs. Where they get into trouble in homebuying is when they have different priorities. In fact, that can make it almost impossible to buy a home and have everyone happy at the end.

I would like to suggest that one of your top priorities ought to be “resale value” and “resale ability”. Some may object, “I am never going to sell this home!” but in truth, we don’t know the future. If you buy a home with a problem that makes it hard to sell generally, and you get stuck having to sell it in a bad market, it will be brutal and possibly even risky if you later are selling due to any financial hardship.
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What do you need to know if you are shopping for a home in Silicon Valley right now?

First, you need to understand that possibly more than in any other time, it’s all about location. Homes on the east side are struggling to sell while homes in the west valley are experiencing what seems to be a seller’s market.  In my 14 year career, I have not seen this before – usually it’s a case where everyone is doing well in the same price point. Not so today. If you want to live in the east valley area, that means you can get more home for your money than usual. But it may also be harder to sell later – we aren’t sure what the long term impact will be. And if you want to buy in Almaden, Los Gatos, Saratoga, Cupertino or Sunnyvale, forget anything you’ve read about it being a buyer’s market. So first of all, know your market and what the situation is. Talk to a lot of people and do research.

Secondly, understand the pros and cons of the two available purchase agreements. In our area, when you purchase a home you might use the California Association of Realtors purchase agreement.  Or, you might use the Peninsula Regional Data Service contract. 

Why does it matter which one you use?

One is an “as is” agreement. The other stipulates that at closing the home must be in a certain kind of condition (a few of them include: no leaks in the roof or other places, no cracked glass, all systems operating).

One says that all repairs must be done by a licensed contractor (as opposed to “in workman like manner”).

One form lays out penalties for defaults (which can mean delays in closing). The other doesn’t.

Some agents will just put either of these forms in front of you – but you may want to be familiar with both so that you can make an informed decision about which one to use. Or perhaps you might want to incorporate some of the concepts from one into the other (e.g., what happens if the seller isn’t out on time?).

Third, once you select your home, before writing the offer, do a lot of homework. Check out the school district scores (schools drive the long term value of the neighborhood).  Read any pre-sale inspections (better listing agents will have a termite and home inspection on a single family home) and make sure you understand what is in the reports.  Learn about any natural hazard zones (earthquake fault zones, flood plains, liquifaction areas) and whether you would be required to carry special insurance. Investigate the neighborhood by revisiting the street several times, at different times of the day and days of the week. Check on things like too many cars on the street, noise levels, grafitti too.

Remember that there are things you can change (color of paint, carpeting) and things you cannot change (neighborhood conditions, school scores, natural hazard issues).  High voltage lines will always be there, as will a freeway or train tracks – so think long and hard before deciding on purchasing a home with an adverse condition that you can’t fix.

Also, on the short list of things to do (not an exhaustive list!) when homebuying in Silicon Valley, see a lot of homes. Do not just buy the first home you see. In my experience, most buyers need to see about 20 homes, sometimes 30, before they feel ready to purchase.  Open houses are a good way to get in and out of a lot of homes quickly and easily. Take note of things like the layout, the light, noise, potential, and things you might be needing in a home.

If you are working with a good agent, he or she will educate you as you go through the homes, and will point out things that might not jump out at you if you go it alone.  So finally, I would add, “hire a good agent”. Choose someone knowledgeable, experienced, attentive, and insightful.  If you tell your agent that running or mountain biking is your hobby, that professional may suggest seeing a particular neighborhood that has an extensive network of trails nearby.  Find a good agent, tell her or him what is important to you, and then learn from your Realtor as you go through neighborhoods and homes.

For more information on home buying, please see the chapter on my website about purchasing a home. There you will find a lot of information, plus access to links and free reports:
http://www.popehandy.com/buying/index.cfm

Happy house-hunting!