In the Bay Area, the already competitive real estate market is about to get even more fierce. Some of the biggest tech companies in the country are planning to go public this year – starting with Lyft ’s IPO in March and with Airbnb, Uber, Slack and Pinterest expected to follow soon. These public debuts will flood the region with hundreds of billions of dollars and creating thousands of new millionaires almost overnight.
If we’ve learned anything from past IPOs, it’s that newly affluent employees will soon look to buy homes near work, and this surge will drive up housing prices. By analyzing 725 IPOs by California companies between 1993 and 2017, a study found that after the filing date, average home prices within a 10-mile radius of each company’s headquarters rose by 1% more than others in the same county. After companies went public, prices rose another 0.8%.
But even armed with this knowledge, we’ve still never seen an influx quite like this before. The Bay Area housing market is changing rapidly, and sellers preparing for the approaching IPOs need to adapt to remain competitive. Millennial buyers are smart, discerning and looking for more than just a place to live. They value experiences, and they want a home that reflects their lifestyle, personality and priorities.
I was born and raised in the Bay Area, and my wife (and business partner) and I have worked with high-tech Silicon Valley companies, seeing the dramatic evolution of the Silicon Valley workspace in only the last decade. I now use that insider knowledge to advise our company’s clients on best practices in a fast-paced housing market. Here are some of my top tips for buyers and sellers who want to ride the upcoming IPO wave.
Strategies For Sellers
Some sellers are waiting to put their houses on the market in order to take advantage of the IPO rush. If this is your situation, use this time wisely to update your home to meet buyers’ needs.
• Think Like Your Buyers
What you love about your home is not necessarily what prospective buyers are looking for. Twenty years ago, a beautiful dining room may have been a major selling point. But now, millennial buyers don’t get much use out of formal dining rooms and family rooms.
Many tech employees work remotely at least part-time to alleviate their commute, so they want open, uncluttered and flexible spaces that inspire creative work and can easily shift into areas for leisure and entertaining. Those who do have long commutes every day seek a relaxing retreat when they walk in the door. A recent client of ours who works in Mountain View sought a home in the Tri-Valley area, not only because of its award winning schools, but because they wanted to be able to afford a larger home that they could happily return to after work. Take these desires into account as you are updating and staging your home, choosing paint colors, furniture and lighting that create the right ambiance.
• Leverage Technology
Technology doesn’t replace human interaction, but the latest tools can help you understand and target the right buyers. By utilizing technology, you can also expand your listing’s reach, placing your home in front of a larger audience no matter where they live.
To say that your buyers are tech-savvy is an understatement. They live and breathe new technology, and they are turning to the latest tools to assist them in their search. Look for opportunities to create an immersive real estate experience for millennial buyers. List your home through traditional channels, like websites and online media, but also explore other tools, such as apps and virtual reality tours to give them a comprehensive and sensory experience.
Strategies For Buyers
Standing out as a buyer in a saturated market is both an art and a science. Be prepared to work hard to get the house you want at a price you are comfortable with.
• Handle The Basics
It’s important to have all your papers in order before you decide to make an offer on a home. Know what you can afford and what you are willing to spend. Get pre-approval, secure proof of funds and present yourself as an organized professional ready to do business. If you do work with an agent, find one who will do the work upfront, finding the right homes to preview and negotiating on your behalf.
• Use Comparative Market Analysis
In a fluctuating real estate market, determining how to price your offer is one of the most challenging parts of buying a home. Too low and you don’t stand a chance of acceptance; too high and you pay more money than necessary. Don’t rely on gut instinct or guesswork to calculate your offer. Instead, conduct a thorough data analysis of the current market so you can make a confident, well-researched offer.
With our clients, we use software to give buyers a clear, detailed reason why they should offer a certain price. For example, if a buyer is interested in a home in Oakland right next to a BART station, we’ll evaluate other houses of a similar size, age and aesthetic that have sold in the same neighborhood before landing on an offer. In some cases, we’ve encouraged buyers to go 30% or more over the asking price because the data was indisputable, getting their offers accepted over multiple others.
• Market Yourself
Organized paperwork and correct pricing are essential, but sometimes you’re up against a sea of other buyers with nearly the exact same qualifications. When this happens, tell your story to try to connect with the sellers on a personal level. People have a deep emotional attachment to their houses. If they’ve raised their children and celebrated countless milestones in their home, they don’t want to sell it to just anyone.
We advise our clients to write the owners a sincere letter, explaining why they fell in love with the house and why they will care for it and appreciate it more than anyone else. We share a tried and true template with our clients that guides them to tell their story and establish a relationship with the sellers, and it has often helped them win offers against other attractive buyers.
As the Bay Area prepares for this next phase of real estate competition, it’s essential for you – whether you’re a buyer or a seller – to know your worth and successfully market your strengths.