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San Francisco
residents have been pummeled by negative news about empty offices, layoffs and crime—realities that have no doubt affected home sellers’ bottom lines.
Indeed, a report in September placed the city as the location with the highest percentage of home sellers losing money on their transactions. One in eight (12.3%) San Francisco homeowners who sold their home in May, June or July lost money on their sale, typically about $100,000, according to Redfin. That’s four times the national rate of 3%.
Still, the statistics show that nearly 80% of Bay Area sellers are at least breaking even on their transactions or making a profit. With the right price, excellent condition and perhaps some incentives, most San Francisco sellers can break even or earn a profit even in this buyers’ market, local agents said.
Whether or not a homeowner loses money on a sale usually comes down to when they bought their home, said Tania Toubba, a real estate agent with Sotheby’s International Realty in San Francisco. “It depends on the number of years they have owned it and whether they made improvements.”
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For example, Toubba said that buyers who purchased in 2018 or 2019 are more likely to sell for the price they paid rather than make a profit. Buyers who were part of the frenzied market from the middle of 2020 to the middle of 2022 are likely to receive even less for their homes than their purchase price.
Besides the purchase date and price, other factors influence current market value in San Francisco.
“Single-family homes are the most sought after, but many of them are back to their valuations in 2017 or 2018,” said Nina Hatvany, a real estate agent with Compass real estate in San Francisco. “But condos in neighborhoods like South of Market, Nob Hill and Russian Hill are down to 2014 or maybe 2016 values.”
Hatvany recently sold a co-op at a substantially reduced price equivalent to its 2007 value.
“Condos are less desirable now, especially in Oakland,” said Andrea Chopp, a real estate agent with Redfin in San Francisco. “Overall, buyers aren’t willing to spend what they paid a few years ago, especially if the property isn’t fixed up.”
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Choosing to Sell in a Buyers’ Market
High mortgage rates have pushed many buyers out of the market and discouraged homeowners from selling because they don’t want to give up their low rate. Still, there are some owners who opt to sell even in the current buyers’ market.
“Most people aren’t selling unless there’s some kind of life milestone like a job change that requires leaving the city or California,” Toubba said. “Then there are reasons such as a divorce or a death in the family, an expanding family or the desire to downsize when the kids leave home.”
Some homeowners don’t realize the extent of the shift in the Bay Area market.
“It’s understandably painful to work through this with people who are learning that they’ll lose a lot of money,” Hatvany said. “Some people decide to wait until the market gets better and they plan to rent their place or leave it vacant when they move out.”
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Unfortunately, those options also have challenges.
“An issue in San Francisco is that there’s a rent ordinance that means you can’t evict a tenant when you decide to sell your property,” Hatvany said. “Even after a one- or two-year lease ends, the owner can’t force the tenants to go month-to-month. That ties the hands of sellers, and they may be forced to sell with a tenant in place.”
San Francisco also has an Empty Homes Tax going into effective Jan. 1, 2024, which will tax owners of residential properties that are empty for more than 182 days in a calendar year.
“People with a low mortgage rate may want to stay or keep their property, but they need to be aware that if they don’t spend enough time in it, they could owe extra taxes on it,” Hatvany said.
Tips to Improve Your San Francisco Sale Price
While no one can change market conditions, homeowners are advised to carefully consider the state of their property and price it appropriately to get the best possible outcome.
“What sellers need to do is preparation, preparation, preparation,” Toubba said. “Staging and painting are something everyone will do, so you need to hire the best stagers and designers to present your property in the best possible way.”
Toubba recommends a presale inspection to find and fix every potential obstacle to buyers making an offer.
“It’s also important to brag about the improvements you’ve made in your marketing materials, especially if it’s something not visible such as upgrading the electrical system or adding central air conditioning,” she said.
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Since so many insurance companies have left California and premiums are high, Toubba recommended mentioning any improvements such as a seismic retrofit that will make a property less expensive to insure.
Careful pricing is paramount to make sure a home doesn’t linger on the market. Pricing slightly under the market, such as 3% to 5% less, based on recent comparable sales helps some sellers get better offers, Hatvany said.
“When other people are interested in a property, buyers are more willing to go up a little in price,” she said. She recently listed a condo at $1.895 million that received several offers and sold for $2.05 million.
“Some sellers are still getting more than one offer and selling for a little over the asking price because inventory is so low,” Chopp said. “You want to price your home in alignment with the market, but sometimes pricing a little low can generate multiple offers.”
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Chopp recently listed a property for owners who purchased it two years ago for $950,000.
“Its current value should probably be about $850,000, but similar nearby condos are listed for $699,000, so that’s what we went with, too,” Chopp said. “Otherwise, we wouldn’t get any showings.”
Some other techniques can also improve the chances of a sale or a better price for your property, Chopp said.
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“Some sellers are offering a higher commission to buyer’s agents, such as 3.5% instead of 3%, to generate more interest in their property and hopefully a higher price,” Chopp said.
Another option some sellers consider is offering a credit at the closing to buy down the mortgage rate for a year or two for their purchasers, she said.
“Some sellers are offering their own financing, which can be especially helpful in a market like this when it can be hard for buyers to get a first or second loan,” Toubba said.