If you are purchasing a home in a seller’s real estate market, as is the case in the San Jose area today, you may be horrified to learn that the successful bidders are those who write contracts far above list price, include few or no contingencies for loan, appraisal, and inspection, and of course take the property in “As Is” condition.
Because inventory is about half of normal, home sellers can do very few repairs and will still garner multiple offers if the home looks good, is priced attractively and marketed well. Often there’s fresh paint and new carpets, and frequently these properties are nicely staged too. The pre-sale home inspections – which you should read carefully prior to submitting your contract – for property, pest, roof, chimney etc. may reveal that work is needed, such as tenting or fumigating for drywood termites, repairs in bathrooms for dry rot, plumbing, heating or roofing at the end of their usable life.
Planning to purchase a Silicon Valley home soon? In this climate, home buyers absorb the costs to make the home move in ready in most cases. How much does that cost? As a rough estimate, set aside about 2% of the home’s value for repairs. In some cases it will be less, and others more. For instance, if you set your sights on a home with a pool but plan to remove and re-landscape it, you’ll want to budget in that cost as well.
Ideally, you will be purchasing below what you can truly afford or are qualified for. Where problems happen the most is when buyers look to the top of their range, then have to bid higher still, and finally get stuck doing repairs as well. Aim lower at the very beginning so that you are factoring in everything which will make up the true cost to purchase – count the overbids and repairs as part of your formula. If you qualify for a $1 million purchase, try to look at homes priced closer to $800,000. Often those houses are selling at 10-15% over list price (more in places like Cupertino, Palo Alto and less in areas such as Blossom Valley, Morgan Hill). If you can comfortably use this strategy, you will not be as likely to get home buyer burnout or quite so stressed with the final outcome.