A lot of San Francisco home sellers lose money. Here’s how to avoid this fate.

San Franciscans have been exposed to negative news about empty offices, layoffs and crime – facts that have undoubtedly affected home sellers’ bottom lines.

In fact, a report released in September placed the city as the location with the highest percentage of home sellers losing money in their transactions. One in eight (12.3%) San Francisco homeowners who sold their homes in May, June or July lost money during the sale, typically about $100,000, according to Redfin. This is four times the national average of 3%.

However, statistics show that nearly 80% of sellers in the Gulf region are at least profitable or profitable in their transactions. With the right price, excellent condition and perhaps some incentives, most San Francisco sellers can break even or turn a profit even in a buyers’ market, local agents said.

Whether or not a homeowner loses money during the sale usually depends on when they bought their home, said Tanya Toba, a real estate agent with Sotheby’s International Realty in San Francisco. “It depends on how many years they’ve had it and whether they’ve made improvements.”

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For example, Toba said buyers who bought in 2018 or 2019 are more likely to sell at the price they paid rather than make a profit. Buyers who were part of the frenzied market from mid-2020 to mid-2022 will likely get less for their home compared to the purchase price.

Besides purchase date and price, there are other factors that affect the current market value in San Francisco.

“Single-family homes are the most in demand, but a lot of them are back at their valuations in 2017 or 2018,” said Nina Hatvany, a real estate agent with Compass Real Estate in San Francisco. “But apartments in neighborhoods like South of Market, Nob Hill, and Rushan Hill, their value has dropped to 2014 or maybe 2016.”

Hatvany recently sold the co-op for a substantially discounted price equal to its value in 2007.

“Condos are less desirable now, especially in Oakland,” said Andrea Chubb, a real estate agent with Redfin in San Francisco. “In general, buyers don’t want to spend what they paid a few years ago, especially if the property hasn’t been 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 the low interest rate. However, there are some owners who choose to sell even in an existing buyers’ market.

“Most people don’t sell unless there’s some kind of life milestone like a job change that requires leaving the city or California,” Toba said. “Then there are reasons such as divorce or death in the family, expanding the family or wanting to downsize when the children leave home.”

Some homeowners don’t realize how much the Bay Area market has shifted.

“It’s understandably painful to work through this with people who know they’re going to lose a lot of money,” Hatvani said. “Some people decide to wait until the market improves and plan to rent out their place or leave it vacant when they leave.”

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Unfortunately, these options also face challenges.

“There’s an issue in San Francisco that there’s a rental law that means you can’t evict a tenant when you decide to sell your property,” Hatvany said. “Even after the lease has expired for a year or two, the landlord cannot force the tenants to move out. This ties the sellers’ hands, and they may be forced to sell with the tenant in place.”

San Francisco is also implementing an empty-home tax starting January 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 put or keep their property, but they need to realize that if they don’t put enough time into it, they may owe additional taxes on it,” Hatvany said.

Tips to improve your selling price in San Francisco

While no one can change market conditions, homeowners are advised to carefully consider the condition of their property and price it appropriately to get the best possible outcome.

“What sellers need to do is set up, set up, set up,” Toba said. “Staging and painting is something everyone does, so you need to hire the best designers to present your property in the best way possible.”

Toba recommends conducting a pre-sale inspection to find and fix every potential hurdle for 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 less visible like updating the electrical system or adding central air conditioning,” she said.

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Since many insurance companies have left California and premiums are high, Toba recommended mentioning any improvements such as seismic retrofitting that would make property insurance less expensive.

Accurate pricing is crucial to making sure the home doesn’t linger on the market. Pricing a little below market, such as 3% to 5% less, based on recent comparable sales, helps some sellers get better offers, Hatvani 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 $1.895 million condo that received multiple offers and sold for $2.05 million.

“Some sellers still get more than one offer and sell for a little more than the asking price because inventory is so low,” Chubb said. “You want to price your home in line with the market, but sometimes pricing a little low can generate multiple offers.”

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Chubb recently listed a property for the owners who purchased it two years ago for $950,000.

“It’s probably going to be worth about $850,000 right now, but similar apartments nearby are listed at $699,000, so that’s what we went for as well,” Chubb said. “Otherwise we won’t get any offers.”

Some other techniques can also improve your chances of selling or getting a better price for your property, Chubb said.

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“Some sellers offer 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,” Chubb said.

Another option some sellers are considering is offering a credit at closing to purchase a one- or two-year mortgage interest rate to buyers, she said.

“Some sellers offer their own financing, which can be especially helpful in a market like this when it can be difficult for buyers to get a first or second loan,” Toba said.

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