Buying Tips

Tips for Silicon Valley Home Buyers

If you live in Santa Clara County, once known as The Valley of Hearts Delight, you no doubt appreciate our mild, sub-tropical climate.

Unfortunately, so do the termites.

We have two main types of termites here (and other wood-destroying pests too), drywood termites and subterranean termites.

The subterranean termites, or subs as they are called, can be identified by the mud tubes they build from the ground or floor up the side of a wall. As their name implies, they live underground, and build the tubes as they go. Pest Control operators will remove the tubes and treat the area, injecting chemicals underground at spaced intervals, to exterminate them. See my post on identifying subs here.

Drywood termites, or drywoods, may live anywhere in the the home where there’s wood to eat. If they are found only in one or two areas, a licensed pest control company may do a local treatment. The difficulty with local treatments is that drywood termites may also be lurking in places that cannot be seen, such as between the walls. For that reason, the standard recommendation is to fumigate (also called to tent or to fume) the structure.

If you live in the Santa Cruz Mountains, you may also have dampwood termites to contend with.
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Bel Estos Drive near Carlton and Rosswood in San Jose's Cambrian areaMy Cambrian area of San Jose Real Estate Report was recently published with the updated numbers from the closed sales last month for this part of San Jose (95124 and 95118 with a little of 95008 too). Please click on the link above to see much more information there.

In this district of San Jose, we have been experiencing dreadfully low inventory of homes for sale, and buyers aren’t backing off as much as usual for this time of year – I believe because there is just a whole lot of pent up demand from nearly two years of a deep seller’s market. What does that mean? Sellers, if you have a problem home, or one not updated or well maintained, this is the time to sell it – buyers have little to choose from so are purchasing properties that need more work than they would bother with in a more balanced market.

Want to learn more about Cambrian Park real estate, the Cambrian district, Cambrian neighborhoods, school districts and zip codes? Please also see this article: Cambrian Park: Good Schools, Low Crime, Close to Los Gatos and Campbell

Be sure to read to the end to see the live Altos charts too – they are near the end of the article so please keep reading into the next page!

Cambrian area sales at a glance:

Year-Over-Year

  • Median home prices increased by 17.9% year-over-year to $1,150,000 from $975,000.
  • The average home sales price rose by 18.4% year-over-year to $1,211,180 from $1,022,910.
  • Home sales rose by 5.7% year-over-year to 56 from 53.
  • Active listings fell 1.1% year-over-year to 93 from 94.
  • Sales price vs. list price ratio rose by 0.5% year-over-year to 106.3% from 105.7%.
  • The average days on market fell by 39% year-over-year to 11 from 17.

Compared To Last Month

  • Median home prices improved by 6.5% to $1,150,000 from $1,080,000.
  • The average home sales price rose by 10.8% to $1,211,180 from $1,093,360.
  • Home sales up by 100.0% to 56 from 28.
  • Active listings increased 57.6% to 93 from 59.
  • Sales price vs. list price ratio dropped by 0.6% to 106.3% from 106.9%.
  • The average days on market dropped by 44.4% to 11 from 19.

Generally speaking it is still a hot seller’s market and great time to sell a Cambrian home.

 Please see the whole Cambrian Real Estate Report for charts, stats and more.

The condo and townhouse real estate market for San Jose 95124 & 95118

As I hold my listings open in and around Silicon Valley, I am amazed at the number of people interested in buying a home who are on their own and not working with a buyer’s agent. If that describes you, do you feel that you are a little afraid of a buyer consultation with a Realtor?  Not sure what to expect, or concerned that you may be coerced or manipulated into hiring someone you don’t want to work with?   Let’s talk about how that appointment usually or often works, and how you can meet with an agent and not feel like you have no control.

What is a home buyer consultation?

Talking over a computer  -buyer consultationFirst, let’s talk about what a home buyer consultation is.  In a nutshell, the appointment has just a few purposes: (1) to help the home buyer to learn about the process, what’s involved, and to answer questions about what happens and what kind of choices there are. (2) It is a job interview for the real estate professional – is this someone you would want to hire? Even though the seller usually pays the commission, the buyer’s representative is someone you hire or not. (3) It is also a chance for the Realtor to see if you are someone that he or she can or would like to work with, too.  The interview is a two way process.

How long does an initial buyer appointment take? Where does it happen?

In my experience, most of these initial appointments can run anywhere from 30 minutes to an hour or more.  The length of it is often driven by the consumer’s questions.  If it is clearly not a fit, either side can say it’s time to wrap things up and call it a day.  If the appointment goes well, it may last longer. Continue reading

Hiring a Realtor? Silicon Valley home sellers are very savvy and go at their real estate transactions carefully. However, some may be tempted to try to line all the criteria up in side by side charts and attempt to make a hiring decion that way. Please beware the temptation of focusing on what is “easily measurable” as most important. Sometimes the most easily measurable factors may not be that important at all. Much of what is truly valuable in a Realtor’s suite of services and skills cannot be easily measured in a side-by-side comparison chart.

When trying to figure out what market value or a fair price is for a property, Silicon Valley consumers will often look at recent sales nearby which they find online, extract an average price per square foot, and then decide that this is likely to be what a house or condo is worth based on those “comps”.

First factor: the unique real estate itself (how similar are the comps, really?)

Unfortunately, it’s not that simple to figure out that home’s likely sale price or the probable buyer’s value. Homes are much more nuanced than just the average price per square foot.   Unless the comparable sold property is truly comparable in every way – similar quality of updating or remodeling, similar location, similarly expensive landscaping –  and the timeframe recent, too, you’ll have to try to adjust based on varying factors. (And that’s not easy – it’s an appraiser’s area of expertise. But you may say “those comps had remodeled kitchens, so that may be worth X amount of money”. You would not ignore that big of a difference.) Look at the list of homes below – how much can you tell about remodeling, landscaping, or upgrades from a simple list? Not enough.
Comps in a Campbell community

Second factor: speed of sale, number of offers

The situation surrounding each sale is likewise quite varied.    A property that gets 4 or more offers on day 7 on the market is a different situation than 1 offer on day 43.  If you are writing a real estate contract on a home that is getting multiple offers, it’s not going to help you to compare it to a stale listing that sold with just one offer.  It’s not just comps: it can be the current competition that largely determines the final sale price of that house or condo.
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Rinconada Hills in Los Gatos HOA dues covers pools, tennis courts, ponds, walking trails, a clubhouse, RV parking, and more.

Rinconada Hills in Los Gatos – HOA dues cover pools, tennis courts, ponds, walking trails, a clubhouse, RV parking, and more.

Home Owner Association or HOA dues are monthly fees charged in some communities for shared amenities, insurance, or other services.  These may be for houses, townhouses (townhomes), or condominiums (condos).

What do the HOA dues cost?

As of this writing (Sept 2016), the lowest amount I am seeing for HOA dues in the San Jose area is approximately $275 per month and the most about $1,000 per month. Typical is $350 to $450.  If a complex offers more services or perks, expect to pay more.

Some condos, townhomes, or houses for sale with HOAs may disclose the monthly amount due. Be sure to also find out if there are other payments not included. I know of one complex in Saratoga that has very expensive insurance payments, making the actual monthly payment much higher than what might be stated in the MLS. So always ask if there are any quarterly, semi-annual, or annual fees due in addition to the monthly HOA dues.

Beware: sometimes younger complexes under-charge, either by accident or as an inducement to get you to buy.  This is not a good thing because eventually that community will find it’s short of funds and will need to have a special assessment to get back on track.

Special assessments are a nightmare for home owners.  When buying a condo, townhouse, or house in a complex with a Home Owner Association, make sure to read the very boring HOA docs carefully, and pay special attention to the reserve account. Reserves are necessary for the anticipated maintenance (such as repaving the private roads or re-plastering the pool every so often).  It’s no small matter to correctly anticipate future needs, but if it’s done wrong, you may get the unhappy news of an un-anticipated assessment.

What do HOA dues cover?

The dues may cover private roads, gates, security personnel, community pools, landscaping, exterior painting, roof repairs or re-roofing, insurance (possibly homeowner’s, blanket, or earthquake), or maybe pest control work.  Some HOAs include RV parking, ponds, trails, tennis courts, club houses and other more extravagant features. They will all drive the HOA fees up!

Don’t assume anything when it comes to your unit coverage. Although many Home Owner Associations will cover things like exterior painting, roofing, or pest work, they don’t all. You’ll have to read the HOA docs to know what’s covered (and what’s not).

Some nice communities with HOA dues include these:

Saratoga Oaks
Almaden Winery (3 subdivisions)
Glencrest Patio Homes (in Almaden)
Rinconada Hills
Arroyo Rinconada
Los Gatos Estates
Los Gatos Woods
Bluebird Lane

The cooling Silicon Valley real estate market is less of a question and more of an acknowledged fact (we wondered about it in June, we are sure now). If so, how can you tell? We need to begin by talking about “the market”.

First, Silicon Valley doesn’t have ONE market. The real estate market in Palo Alto or Cupertino is going to be very different from the realty market in Los Gatos, or the various parts of San Jose, such as Almaden, Willow Glen, Cambrian, or Blossom Valley. Ditto that with price points. It’s a very different “market” for entry level houses than for luxury homes.

But if we’re going to speak in broad, sweeping terms about cooling trends, what do we SEE? What do we HEAR? What’s happening with offers and open houses? These are the ways we measure the real estate climate. Often we in the industry hear the anecdotal evidence long before it’s reported in the paper. If we hear one Realtor friend after the next report quiet open houses, or few or no offers, we know there’s a climate change afoot.

I will tell you that I am hearing these things, which hint to a softer market for home buyers:

  • Houses taking longer to sell in much of Silicon Valley / Santa Clara County
  • Homes selling with fewer offers than 6 or 12 months ago
  • Contingencies for loan, appraisal and inspection becoming more common
  • More price reductions being necessary for than a few months ago
  • Fewer ALL CASH offers
  • Sale price to list price coming down a little

All of these suggest a mellowing of the housing market. Do the numbers line up?

The cooling Silicon Valley real estate market: seasonal fluctuations…

Historically, we do know that the busiest time for home sales is usually February – April. Some years it’s shorter or longer. (One particularly bad year, we had exactly 3 good weeks for selling in March and nothing more.) But what do the numbers tell us?

If we view the sale price to list price ratio, we expect there to be “seasonal fluctuations”. We don’t expect a hot seller’s market in December. Therefore, what’s often most helpful is comparing the same statistics year over year. Let’s do that.  The image below provides the sale price to list price ratio for houses sold in Santa Clara County from Jan 1 2012 through Aug  24, 2016 (the day I grabbed this data). This was taken from the MLSListings.com site for agents (the private MLS).

I love this kind of presentation because it’s so easy to see both month over month and year over year statistics. Take a look at August (so far) for this year compared to the prior months in 2016.  At 101.5% that seems like a fantastic ratio (they would go nuts for this in most of the U.S.). Now compare it to the prior months this year and you can see it’s been coming down since March.  OK, now consider prior years…it’s mostly a very similar pattern. That tells us that “spring is hotter”. We already knew that, but seeing it for most of the last few years pretty much drives the point home.

But let’s compare August 2016 to August 2012- Aug 2015.  That’s a better “apples to apples” comparison. And here it’s very clear that the real estate market in Silicon Valley really IS COOLER than it was in prior years for the same month. Any doubts? Check the same info for July – yes, all hotter until you get to July 2012.  Now June – same as for July. May? Yes, again, hotter for that month in 2013, 2014, and 2015 but not 2012. In retrospect, we now know that 2012 was the year the market ratcheted up for a big, long run.

The cooling Silicon Valley real estate market: Santa Clara County sale price to list price ratio Jan 2011 to Aug 24 2016

Before anyone begins screaming that the sky is falling, let me stop and remind you that we are talking about a sale price to list price ratio for the entire county that is at more than 101%. This is not a buyer’s market – at least not as a county. There are hotter and cooler pockets, yes, for sure.

What we are experiencing is a return to normalcy, a flattening out, less appreciation. We are not seeing price drops at this time.

And you know what? We’ve been expecting it.

You cannot sustain double digit appreciation forever.

The reality of the cooling Silicon Valley real estate market has implications for home buyers and home sellers:

Buyers, GET OFF THE FENCE. Interest rates are good. Buying conditions are reasonable again. Yes, inventory is low, but if you know what you want, you should be able to find it in 2-3 months tops. If you can’t, then you are not being realistic with what you think you can buy for your budget.

Sellers, it’s time to be more aggressive on pricing and adjust your expectations. Yes, your neighbor got 15 offers in February, but it’s not February any more. If you get 1-3 offers, that means you did a great job of staging, pricing, and getting your home marketed. Position your home to sell, and then get it done.

Where will we be in 6 or 9 months? I don’t know. It could be better or worse after the election. My advise is to get on with your life and not try to time it too carefully, because things can happen which none of us could anticipate. If you want or need to buy or sell, make it happen.There will always be political things going on, world events taking place. There is never a perfect time to buy or sell – but there is the time you want to do it. Go ahead.

And please let me know how I can help.

Mary Pope-handy
408 204-7673

Realtor Logo in BlueIn Silicon Valley, most of the licensed real estate professionals belong to local, state, and a national trade group.  There’s a name for members of these associations, in which dues paying members promise to abide by a code of ethics.  Do you know that the name is?  You’ll hear various things, even out of members: Realtor, Realitor, Realator, Relator, Reeltur.  Which is it? The answer is the first one, REALTOR.  It’s two syllables, pronounced Real-tor. (There is no a, e, i, o, or u between the REAL and the TOR parts.)

Also, please note that being a member of the National Association of Realtors (NAR), the California Association of Realtors (CAR) and the Silicon Valley Association of Realtors (SILVAR) is not the same as being licensed. The states issue licenses for real estate sales people, brokers, and other professionals. Realtors are first licensed by the state and then voluntarily join the trade group for the industry. In California, it’s now the Bureau of Real Estate which issues the salesperson or broker licnese. (Please see the related article at the bottom of this post for more on that.)

Looking for a Silicon Valley Realtor? A Los Gatos Realtor? A San Jose Realtor? Please call or email me, Mary Pope-Handy, to chat about your real estate needs, buying and selling a home here in the South Bay area. And please, don’t call me or anyone else Realitor, Realator, Relator, or Reeltur!

Please also see
What’s the Difference between a Realtor and a Real Estate Agent or Licensee?

Earnest Money logoEarnest money refers to a home buyer’s deposit on a home that he or she is in contract to purchase.  It’s often called an earnest money deposit, initial deposit, or good faith deposit in Silicon Valley.  The terms are all interchangeable.

How much is the earnest money?

In the San Jose & Los Gatos areas, and Santa Clara County generally, the earnest money is usually 3% of the purchase price of the home.  It is placed in an escrow account, which is usually at a title company (in northern California that’s how it is handled – in Southern California, often there is a separate escrow company).

Ordinarily, funds are due within 3 business days of acceptance of the contract, but that can be changed (it’s one of the few places where the CAR and PRDS contracts reference business days rather than calendar days). Some listing agents will counter back that funds need to be in title the next day after the offer is ratified. Some buyers may request more than 3 days if their funds are coming from abroad.  With competitive, multiple offer situations, buyers should anticipate needing to get the money to title fast and have it ready to go before the offer is presented so that they aren’t at a disadvantage.

Is a cashier’s check required for the good faith deposit?

The initial deposit does not have to be a cashier’s check, however, some listing agents and sellers may request that in a counter offer.  That’s most likely to happen in a very competitive multiple offer frenzy, and unlikely to happen if it’s just one or two bids.

Increasingly, the funds today are wired to title, but in some cases, buyers may instead write a check. For the earnest money deposit, it may be a personal check. (At the end of escrow, it must be either a cashier’s check or a wire to bring the balance of the down payment to title. Both of these are referred to as “good funds”.)  It is important for home buyers to draft the check  correctly (not made out to just “title company”, for instance), and to understand that this isn’t a check that just sits in a drawer.  The check for the initial deposit is cashed by the escrow company as soon as they get it.  Real estate brokerages tend to prefer that Realtors don’t touch the buyer’s funds, so many are encouraging that consumers wire in funds rather than hand a check to a real estate agent.

Phishing and wire fraud is a concern, so when sending funds in electronically it is extremely important to phone the title company and verify the specific instructions.

Does the earnest money count as part of the entire down payment?

Yes, if the buyer is putting 20% down on some real estate, the initial deposit is likely to be 3% and the balance of the down payment will be 17%.  The balance of funds will need to be in escrow a couple of days before closing.  Many lenders will not fund the loan on the property until and unless the buyer’s money is in escrow first.

Can the buyers get the initial deposit back if they change their minds about buying the home?

This is not a “one size fits all” question.  If the buyers have contingencies, it may be possible to back out of the transaction and have the full deposit returned.  If the buyer has written an offer with no contingencies, that may be an uphill battle, and time to consult with a real estate attorney, as Realtors are not qualified nor allowed to provide tax or legal advice.

 

Related Reading:
What is escrow? (on popehandy.com blog)
What do international home buyers need to know about financing a real estate purchase in the United States? (on Move2SiliconValley.com – relocation site)

 

Meeting with home buyers to review disclosures and purchase offer documentsWords can be so revealing.

Recently at an open house, a home buyer said that he and his wife don’t have a buyer’s agent. Later, though, he volunteered that recently they’d written an offer on a property and had “used an agent“.

What does that tell you?

Most Silicon Valley real estate professionals would like to have established professional working relationships with home buyers and sellers.  They want clients, not customers. Realtors put in a lot of time reviewing disclosures, pulling comps, analyzing the realty market, looking for red flags at the property and in the paperwork. The real estate salespeople or brokers want to go “all in” to help their home buying clients to buy their next home with the best price and terms possible.

But do home buyers want the same thing that their Realtors do? I’d say usually yes – but not always. Often you can tell how committed a home buyer is by the way he or she speaks, but sometimes only in the way that person behaves. For those of us working in the industry, it’s very important to understand the client’s motivation and loyalty; spend too much time with buyers who aren’t committed to working with you and you will be in the hole financially.

List of words that characterize the agent and home buyer relationship, such as client or customer

Probably 15% or so of San Jose area home buyers really don’t want a relationship with a Realtor.  They’d rather go it alone.  At another open house, someone said to me that she didn’t like “feeling obligated” to anyone, and found that if she did anything with any real estate agent, that person was expecting her ultimate business.

Yes, that is how it works.  We only get paid if a sale closes.

In many areas of the United States, it is very common for Realtors to engage with home buyers using a Buyer Broker Contract (buyer broker agreement).  Here, it’s not so common. We prefer to work on a handshake, we prefer to work for our clients with the faith that they will reciprocate our hard work with their loyalty. Silicon Valley Realtors want to guide and assist you all the way through from before, during, and after the sale.  They do want to know that you will work exclusively with them – and not just “use” them. If that’s the working, professional relationship you have with your Realtor, it will give you benefits for years to come as that buyer’s agent can be an ongoing source of advice and guidance.

Related Reading

How Does the Real Estate Agency Relationship Work in Silicon Valley?

Silicon Valley Home Buyers: Should You Use a Buyer Broker Agreement?

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Mary Pope-Handy
Realtor
ABR, CIPS, CRS, SRES
Sereno Group Real Estate
214 Los Gatos-Saratoga Rd
Los Gatos, CA 95030
408 204-7673
Mary (at) PopeHandy.com
License# 01153805


Selling homes in
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Santa Clara County,
San Mateo County, and
Santa Cruz County.
:
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Saratoga, Campbell,
Almaden Valley,
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2016: Personal Income's list of top 25 real estate blogs.


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2009: Sellsius list of top
12 women real estate bloggers


Mary Pope-Handy's Live in Los Gatos blog won the 2007 Project Blogger contest, sponsored by Inman News and Active Rain

2007: Mary Pope-Handy and Frances Flynn Thorsen win the Project Blogger Contest for Mary's Live in Los Gatos blog. The contest was sponsored by
Active Rain and Inman News.


Non blog award


Best real estate agent in Silicon Valley from the San Jose Mercury News poll of readers in 2011
"Best real estate agent
in Silicon Valley"

2011 readers' poll,
San Jose Mercury News

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