Home Ownership Experience in the Bay Area - Lessons Learned

The seven years of owning two different homes in the turbulent Bay Area real-estate market have clued us into various key points as far as home ownership:

Location, Location, Location: This oft-repeated home ownership rhetoric has spared none on the quest for an abode. But there is more to this adage than choosing a residence based on school district, proximity to work places, view, and the average value of properties in the neighborhood. In a rapidly rising market, as in the early 2000 Bay Area’s bubble period, home ownership in new constructions in the suburbs provided the gold fever as opposed to well-established and comparatively more expensive neighborhoods nearer to the city. The graph below from zillow compares the home prices of two such neighborhoods – Alameda and Brentwood:
For the five years from September 2000 to September 2005, when home prices only knew the upward tick, the total appreciation of an average home in the Brentwood area recorded an astounding 125% while those in Alameda stood at a moderate but still handsome 65%. The trend took an about-turn during the 2005 to 2010 period when the bubble popped – average home price in the Brentwood area nose-dived to 50% while in Alameda took a more palatable 15% drop. As the average time of ownership of a home is around 5-6 years, it is worthwhile to mull over market conditions also than employing location as the sole criteria. Overall, for the 10-year period, the appreciation for an average home in Brentwood stood at just 8% while for Alameda it was closer to 40% - stressing location makes perfect sense when a home is purchased for the very long term.

Timing: Conventional wisdom perceives low interest rates as the prime time for home ownership. Factually, this is counter-productive and favors only the minority that intends to hold the home forever. The average homeowner can profit more by going for home ownership when the interest rates have peaked and is on the downward trend . This notion is based on the economist’s pet supply vs. demand theory. When interest rates are low, housing is more affordable which translates to higher demand, which in turn pushes home prices higher. By the same token, when the rates march higher, properties become less affordable reducing demand and home values, thereby allowing a prospective homeowner to enter at a lower price.

Buyers and Sellers Agents: While most residential real estate transactions involve both buyers and sellers agents, it is not uncommon to see listings bypassing an agent completely. The seller profits by not having to part with the agent’s commission, which is typically 5% of the money realized. The buyer’s assumption is that the costs would be lower sans an agent. The growing number of properties in the market availing of support systems (helpusell.com and other such businesses) in place of individual agents is a testimony to this perception. In our home ownership experience, going with a real-estate agent and specifically the best available wins handily, regardless of the market conditions. The only caveat is the type of agent – ideally, one should employ agents who specialize as either a buyer’s agent or a seller’s agent. In some markets, agents specializing this way are not an available option. If so, it is imperative to steer clear of the double-ending traps: when a popular agent has many listings and also many clients wanting to buy a house, it is inevitable that the agent will try to convince one of his clients into buying one of his own listings. More often than not, the parties involved are unaware of such connections, unless they specifically ask and/or read what they sign off. The downside with such deals is that the agent has a vested interest in double-ending the transaction.

The best agents in an area often have a team of support services that can alleviate the potentially stressful aspects of buying/selling a home such as renting back and relocation.It is important to be aware that there are other agents who do such real estate related transaction tasks such as appraisal, home inspection, insurance, title, etc. Their involvement is relatively transparent to both the buyer and the seller, especially if you have opted for the services of a better real-estate agent.

Related Posts:

• First Time Home Buyer - Builder Upgrades vs Upgrading on Your Own - An Analysis.
• Home Improvement - Our Experience.
• Mortgage Refinancing - Our Experience.
• Home Maintenance Schedule - A Primer with a Focus on Costs.
• Flipping Houses in the Bay Area - An Experience.
• Bay Area Home Buying - A Bubble Period Experience.
• Home Ownership Experience in the Bay Area - Lessons Learned.

Last Updated: 03/2012.

Bay Area Home Buying - A Bubble Period Experience

Ads marketing newly built homes in Alameda, CA were a mainstay in the San Francisco Chronicle in the early 1990’s. They highlighted the opportunity to own a home in a beautiful island setting just across from the City of San Francisco – and that too at an affordable price starting in the 200,000’s. Although at that time home buying was not even in our horizon, the message was appealing. Even in our dreams, we did not envision that, twelve years later, we would be engaged in a bidding war to be in possession of one such home at almost four times the price. But, that was exactly how things worked out.

2004 favored only the seller but as we were scoping homes after selling our first home for a handy profit in that very market, we did not know any better to be worried. Our plan was to go for a smaller home so that we will have a cash buffer in place from the sale of our first home. Having wised up on the school system, we focused on getting a home in Bay Farm Island, for the top two elementary schools in Alameda at the time were both in that island. Bay Farm Island has around 4000 or so homes with the vast majority built in the late 1980’s and early 1990’s. It is a beautiful island community in a serene setting complete with golf courses and artificial lakes - a true treasure as far as Bay Area home buying locations are concerned.


Single-family homes in Bay Farm were upwards of $600K while a limited number of older homes, condos and town-homes started a little lower. A view of either the artificial lakes or the bay commands a premium of at least $75K - that kind of premium is typical in the Bay Farm home buying scene. A1450 sq ft 2-bedroom single-level home listed for around $600K in the Cantamar subdivision (Ratto Road) pleased us both very much. Before we could get around to placing an offer, the house was gone for over $625K. Still upbeat, we checked out a couple of smaller condominiums and town-homes that were going for the high 400’s and low 500’s and realized those were not what we wanted.


The first house we gave an offer for was for a single-level home in the Pelican Bay sub-division (Justin Circle). We offered the asking price but the house went at just above asking with only two bids – there were no counter offers which in itself was suspicious but following up further on it was meaningless. We also looked at a few other homes briefly and in more than one instance we could sense the agent being bent on guiding us away from the property listed - one on Kevington Road and another on Orr Road. In another instance, the agent was forthcoming on mentioning an untoward incident (murder apparently) at the location - Killybegs. Both the Kevington and Orr properties sold at or near asking price in a matter of a week. By then, patience had worn thin and from the next week onwards we too participated in earnest in the bidding wars that were going on all around – we put in an offer at $10K over asking for a beautifully remodeled home in Avington Road and $20K over asking for a home on Miranda Court – the former sold for around $40K above while the latter went for around $55K above the listed price. The Avington house, listed by a lesser-known agent, had only two offers while the one on Miranda Court listed by the best selling agent in the area (Ringo Liu) entertained twelve. This kind of hectic wheeling-and-dealing was the order of the day during this bubble period in the Bay Area home buying scene.


By the third week, we were truly disillusioned and sought advice on where we erred. The consistent feedback was that ours was an “outside” agent – apparently, there exists certain camaraderie between the local agents that implicitly results in most of the business getting done locally. Our suspicions were further confirmed when we came to know that for both the Justin Circle and the Kevington Road homes, the same agent double-ended the deal. We have to admit that it did cross our minds as to whether to continue with our agent – on the one hand he is truly a nice guy and a family friend – but on the other, Bay Farm is unique and it would be hard for a novice agent to get a break. Our luck turned in the fourth week as we spotted a rundown house on Sheffield Road being listed by an outside agent from Oakland. This time, the listing agent was a family friend of the sellers but because she was also an “outside” agent, the property slipped under the radar of the local agents. The house got sold in a couple of weeks, but this time we were the lucky buyers – there were two offers, both at the asking price, but we prevailed as our down payment was slightly ahead. We spent around 100K over the next six years ultimately transforming the house to almost new condition. The best part about that house was the neighbors.

Almost six years later (early 2010), we chose Ringo Liu to be our seller’s agent when it was our turn to sell the house. We were in a time crunch and selling our home was the need of the hour as the crash of the housing bubble was being felt in our area as well – both short sales and foreclosure listings were mushrooming. Adding fuel to the cause was that ours was the third house on Sheffield to be listed as open. Ringo Liu proved he was indeed top brass as he managed to sell our house at asking price within a week in a buyer’s market. More than anything, we were impressed at how hands-on his entire team was. Overall, we exited with an 8% loss including closing costs and commissions, but that was understandable, considering prices had fallen 10-15% from the peak and that houses in general were staying in the market much longer.

Related Posts:

• First Time Home Buyer - Builder Upgrades vs Upgrading on Your Own - An Analysis.
• Home Improvement - Our Experience.
• Mortgage Refinancing - Our Experience.
• Home Maintenance Schedule - A Primer with a Focus on Costs.
• Flipping Houses in the Bay Area - An Experience.
• Bay Area Home Buying - A Bubble Period Experience.
• Home Ownership Experience in the Bay Area - Lessons Learned.

Last Updated: 03/2012.