Tips for Silicon Valley Home Buyers
Odd shaped lots in older subdivisions are sometimes recorded as having the same amount of land as the smaller, normal rectangular shaped parcels nearby. I’ve seen this many times – an area with houses on 6,000 SF lots have a few “pie shaped lots” at the end of the cul-de-sac and they are bigger, but for unknown reason are said to have the same 6000 SF lots, even if it’s understating the amount of land.
If you are selling your home, you want credit for the whole lot size. And if you’re buying one, you’ll want to be on the lookout for undervalued properties which have not marketed the true amount of land in the sale.
Plat maps, lot shapes and area
Plat maps can be a little hard to understand without some deciphering, but one thing that is clear is the length of the sides of the parcel. If you look along the edge of any lot, you’ll see a number up against it – that represents the distance in feet of that side of the property.
With simple rectangular or square lots, it’s easy for consumers to do the math and see if the lot size represented is correct. But what happens if the parcel has a more complicated shape? Today we’ll look at this – and a possible solution to double check the figures provided by the MLS, the sellers, the county, or any other source. With irregularly shaped lots, the parcel’s area is very often misrepresented in the records.
With a perfect square or rectangle, the math is easy! Have a look at parcel # 12, circled in red. It has 2 sides with 100′ and 2 sides with 70′ so you simply multiply 100 x 70 to get the lot size of 7000 SF.
If all geometry were only so simple.
Now compare 12 with the other circled parcels:
- 14 isn’t too bad – 4 sides and almost a triangle (so for estimating, fairly easy)
- 7 is a flashback to high school geometry with 5 sides and only one right angle
- 5 boasts 6 sides and is above my pay grade
Odd shaped lots and figuring the true area: software to the rescue
There are pricey real estate programs that can calculate the area of a parcel, but I haven’t had access to them for over 10 years, as most brokerages phased out their subscriptions to it. Recently, though, I was involved in a transaction in which the parcel my client was buying happened to be irregular, and it seemed to be listed as having a much smaller lot size than it really did. What to do?
As with all things, I went to Google and did a query for software that could calculate the area of a lot. And I was in luck – not only did it exist, but it is free. The name is Google Maps Area Calculator Tool and you can find it here:
This is easy to work – you go to the page, input an address, zoom into where you can see what looks like the boundary lines clearly (fences, sidewalks as guides) and click from corner to corner. You can see the little pins where I clicked. When I did it for the land in question, it looked like this:
Google then provides both the area and the perimeter measurement. A nice bonus, it’s in both meters and feet.
After that’s done, how would you know if it is correct or not?
We again turn to the plat map and add up the measurements of all the sides of the parcel. For the # 12 lot we discussed at first, that’s simple – 100 + 70 + 100 + 70 = a perimeter of 340′. If the Google mapping effort is accurate, the perimeter it produced should be the same, or at least very close. When the perimeters match up, you have pretty good validation that you are at least close.
Where you can obtain a plat map
For home owners, sellers and buyers, you may be wondering where you can get this plat map. It is part of the county records for Santa Clara County, and you can see the plat map of any property in this county here:
When selling or buying real estate in Silicon Valley, it’s important to stay on your toes and not assume that the county records are always correct. If you read this blog, you know that I have often written about the county, city and town permit files often being incomplete, and sometimes missing entirely. Homes and land are very expensive here, and the county offices may not always have accurate information, so ideally consumers keep their own, complete records, and check the facts stated about the property they are buying or selling for accuracy.
How to fix incorrect property records in Santa Clara County?
Monte Sereno Building Permit Nightmare (Live in Los Gatos blog)
In this highly competitive seller’s market, some home buyers are choosing to purchase their house, condo or townhouse non-contingent, meaning with no contingencies for inspection, loan, appraisal etc. . The “non-contingent offer” has been present in the Silicon Valley real estate scene for a few years (since 2012 or so), to the horror of those of us working in the field in 2000 and the years immediately after (it’s a very bad deja vu, given the onslaught of lawsuits that came in its wake last time). My clients sometimes make this choice, too, explaining to me that they feel it’s the only way to get the property.
With no loan contingency to protect the buyers should the loan not come through (or fail to do so in time), some consumers are electing to “double app” the loan. Translation: they pursue financing with two or more lenders simultaneously (fill out two loan applications, pay for two appraisals etc.). Lenders, naturally, don’t like this because only one of them has the possibility of closing the sale or the loan, and only the one who closes the loan will get paid. In a normal market, with normal contingencies in place, I would not recommend this approach. But if there are no contingencies to protect the buyer, a second loan may provide a safety net as it increases the odds that a loan will be funded so that the home can close escrow. Continue reading
How do you choose where you’d like to live in Silicon Valley? Especially if you’re relocating here from out of the area, this can be a huge question (for more relocation-specific posts, check out my blog Move2SiliconValley.com). Most Santa Clara County home buyers have strong preferences for low crime, good schools, and pleasant looking, quiet neighborhoods.
My clients often ask me to compare for them areas which are somewhat similar, such as Los Gatos & Los Altos. Off the top of my head, I can give general answers, such as this: Compared to Los Gatos, Los Altos is a more expensive (perhaps 20 or 25% more?), has a very slightly smaller population, is a little more spread out, has slightly milder weather and is overall “quieter” in terms of the downtown night life. Los Altos is more convenient if you want to go to Palo Alto or San Francisco. Los Gatos is more convenient if you like to visit Santa Cruz, Monterey and the coast. Los Gatos is more mixed in terms of housing types (it still has many beautiful historic districts with nicely renovated Victorian homes, but also newer construction). Both are “nice looking” but Los Gatos has more varied terrain as it is nestled into the Santa Cruz Mountains. Both enjoy pleasant neighborhoods, good schools, lower than normal crime and community involvement.
That’s the kind of “ballpark” info I can tell people about various areas of the Santa Clara Valley, whether it’s comparing one part of San Jose to another (Cambrian Park vs Almaden Valley vs Willow Glen) or one city to another (Cupertino vs Saratoga). I can give general info on schools.
What I can’t do (and most agents can’t) is recite from memory school API scores, median household income, housing density, crime statistics, etc. For that we have the web! Here are some very helpful links which can assist you in your search to find the part of Santa Clara County that’s the best fit for you, your wants, needs, and budget:
Want to compare areas in and near San Jose? A great tool for some basic and broad information by zip code is Zip Lookup. Input a zip code and get an easy to read map of population information like density, age, and income. For more official documentation, census data is easily searchable online through Fact Finder – just search by county, city, town, or zipcode. A good overall source for research is Melissa Data.
Silicon Valley real estate offers few simple answers but many recurring questions. One of them is whether or not you should write a “lowball offer“. So the first question is this: what makes an offer a lowball one?
It’s entirely relative to how the market in that area (not the county, not the state, but that particular area) is selling. If houses in one area of San Jose are selling within 1% of list price and you come in 5% under, the seller may feel insulted. But if properties are routinely selling at 10% under list price and your offer is at 13% under, that’s not such a big deal. So keep an eye on that.
As a reality check, though – right now, and for the last year or so (as in this glance back to March, 2015), most homes in the Bay Area are selling OVER list price. Houses in Santa Clara County in March 2016 (San Jose, Los Gatos, Saratoga, Santa Clara, Sunnyvale, Cupertino etc.) sold, on average, at 105.3% of list price and condos at 105.5% (these numbers come from my ReReport, updated monthly at popehandy.rereport.com/). If homes are routinely coming in at or over list price, and you bid 3-5% under, and ask for a Section 1 pest clearance, or other contingencies, etc., this could be viewed as “lowball” given the current real estate market conditions in Silicon Valley.
Click through for the rest of the article.
Many Silicon Valley home sellers receive multiple offers on a set day, often 7 to 9 days after the house or condo is first on the market. What happens if they like a few offers and want to counter them? One option is to issue a Multiple Counter Offer. How does that work?
With the multiple counter offer process, the seller decides after one or more of the buyers accepts (or if they counter back and forth, or if one buyer improves his or her offer). No matter the exact path, the seller ultimately must pick one offer and sign off on it to ratify the sale. In other words, when a buyer agrees to the multiple counter offer terms, it’s not a done deal. The owner must sign again to accept and select that buyer. Only then is the contract ratified.
CAR and PRDS multiple counter offer paperwork
We have two sets of contarcts, addsenda, etc. in use in Silicon Valley – the PRDS and the CAR. The California Association of Realtors (CAR) set is used throughout the state. The PRDS is employed from about Los Gatos to somewhere south of San Francisco on the Peninsula. Many areas such as Almaden or Campbell may work with either.
The CAR forms library has a separate document for multiple counter offers. Near the bottom of the page, there’s a place for the seller to sign when selecting a buyer for the sale. Unless this is signed, the buyer doesn’t have the deal.
The Peninsula Regional Data Service (PRDS) form is not separate – it’s the same document used for just a single, binding counter offer. However, at the bottom, there’s a place to indicate if it is a multiple counter offer. Here’s how it looks:
Obviously, it is extremely important to notice whether you’re receiving a regular counter offer or a multiple counter offer. But either way, it’s clear that the seller must agree to choose one of the willing buyers. Just pay attention to the details!
Are the price and terms of multiple counter offers all the same?
When a seller responds with a multiple counter offer, the price and terms could be the same for all of the bidders. Most of the time, though, that’s not the case – the price and terms are not identical between one bidder and the next. There are many possible reasons for this.
- There may be an offer with great terms (
- all cash , no contingencies, or?) but a price that’s not quite right. That buyer may only get a counter based on price.
- Another potential buyer may have a strong price but not so hot terms (long contingencies, too many contingencies, less than ideal downpayment or financing). A good example might be a sky high price with 5% down and FHA backed financing and an appraisal contingency (but money available that the buyer just doesn’t want to put in the down payment). The seller may only counter out the appraisal contingency. Other times the offer may be great but the contingencies are just too long, so the seller asks for them to be shortened.
- Sometimes all the issues are relatively small, such as whether or not the washer, dryer and fridge stay, or how much to pay for a rent back.
- Some sellers approach multiple counter offers the way some high school seniors approach college applications and target a “safety” price, a probably attainable price, and a “reach” price – and put three different numbers out there.
- I have seen sellers who were annoyed by rude buyers (or their agents) give the unpleasant people a sky high counter. (The period before the offer deadline is the courtship, and buyers really need to be on their best behavior with both the seller and the listing agent.)
Anything else to know about multiple counter offers?
Two more things to know: first, some buyers, when given a multiple counter offer, won’t just say yes or no. Truly motivated and capable buyers sometimes instead just submit a better offer (redoing page 1 with a larger offer price, for instance). Don’t assume that you won’t get uprooted, even if the listing agent tells you something leading like “it’s looking good for you” (which shouldn’t happen but sometimes may). As long as the counter is in play, someone else can come in and get it.
And lastly, a good attitude and looking “rock solid” and sure can sometimes win the bid. Not every seller does this, but it’s not uncommon for a home owner to take the first multiple counter offer returned with an acceptance. The reason is that they want to sell to someone who is so sure that there’s no hesitation.
A question I’m getting a lot lately has to do with when the Silicon Valley real estate market will peak. We’ve had 4 straight years of very strong appreciaion. In east Los Gatos, houses that were selling in early 2012 for about $1,000,000 may now sell for $1,500,000. Consumers have to ask: where will it end? When do people simply refuse to pay, and move elsewhere?
I don’t have a crystal ball, but I have experienced downturns, and on average they seem to happen about every 10 years in the San Jose – Santa Clara County area. Usually the “runup” between the downturns is a ton more than the correction. Often the price rollback is about 10%, while the 10 year period between price corrections might be 30-50%.
Yes, a correction is probably coming. Yes, our prices are out of control due to a lot of hiring locally and fantastic interest rates combined with a terribly tight inventory.
When? When will prices come back down to earth?
My best guess – and that’s all that it is – is that it will be sometime in the next 2 years or so. Probably not this year because Apple and Google seem to be hiring like crazy (and they are not alone). Maybe it’ll be in 2017. Maybe 2018. But I think before spring 2019. That said – I could be wrong.
Should you wait to buy, then?
Nope. In my opinion, if you want to make a life for yourself here and plan to stay put 5-10 years, go for it. Interest rates are good now and may not be in 2 years. Prices are still climbing. And heck, if you can stay put for 5-10 years, even if you do buy at the beginnig of a correction (which I did in 1989), you’ll be ok if you can buy and hold. And the bonus is that in the meantime, if it’s an owner-occupied property, you get a nice tax benefit (talk to your CPA or tax professional about that.)
It remains a strong seller’s real estate market in Silicon Valley, with many properties selling with multiple offers, but there’s an undercurrent of concern that we are the near the peak of pricing. That has some buyers nervous (though most will quip that Apple and Google and others are still hiring, and the local economy is strong – so they are not too worried). For those who are a little nervous, sometimes it turns into cold feet – and it’s costing them.
What we are seeing in terms of cold feet with Silicon Valley home buying:
This undercurrent is not being widely reported but we are experiencing it in our real estate practices as a few things have been taking place.
First, a larger than usual number of transactions have been falling through. Many of these, though, are not recorded on the multiple listing service, as they take place right after an offer is accepted, so the listing agent and sellers turn to one of the other bidders and put them into contract within hours. Because they aren’t recorded, it’s impossible to track – but the stories are out there of this happening more now than a year or two ago.
In other cases, offers are written and submitted but withdrawn before they could be countered or accepted.
And in others, buyer agents say that they will be submitting an offer, but on the day of offer presentation, the home buyers back out and the offer is never submitted.
In my experience, all of these things are happening “more than normal” right now. A lot of it is not easily measurable.
Symptoms of cold feet to come
Home sellers want to feel confident when they accept a contract that it will stick, both because they don’t want the work or emotional upheaval associated with a transaction that falls through, but also because often the best price is the first price. When a home ‘resells’, most of the time it is for less than the origanlly accepted bid.
For that reason, smart listing agents are looking for the symptoms of cold feet. They’d rather not get their sellers into contract with nervous buyers who will change their mind about buying the house or condo.
Symptoms of nervousness about the property at an open house:
- Dominating the listing agent’s time with incessant and low-level questions – best to give most of your questions to your own buyer’s agent, who will help you with them. It’s good to ask about the home, the reports and so on, but you don’t want to take so much of the Realtor’s time that he or she cannot talk with others there. Think balance both in terms of the time and the nature of the questions. You want to present yourself as reasonable and easy to work with.
- We often say that the longer a buyer stays, the more likely he or she is to write an offer. This is true, up to a point. Buyers who come to an open house and stay for 2 hours, or who make 4 or 5 trips to see the house go from looking interested to appearing unsure.
Symptoms of nervousness about the property (your potentially cold feet) when your offer is submitted:
- Sending in an incomplete offer and supporting documents. If the listing agent requires proof of funds, provide it. If the disclosures are to be signed, do all of them – not just the cover sheet. Aim to be thorough, it will present you as serious. It will also show that you are not a pain to work with, that you and your Realtor can follow directions and that the listing agent won’t have to chase down the paperwork later. Go the extra mile, it helps!
- Submitting an offer package “last minute”, without the buyer’s agent giving advance notice that it’s coming. Related to this is seeing the property and reviewing everything well in advance, but only deciding a few hours before the deadline to actually write, sign, and submit the bid. The serious buyers who are rock solid are the ones who know early on that they want the property and are committed to it early on. Their buyer’s agent will let the listing agent know long before offers are due that these home buyers are going to bid on it. One agent recently told me “my buyers are madly in love with the house” many days before the offer due date. This makes a big impression on sellers and their agents.
- If the buyer’s agent needs to call every few days to see how things are looking, it usually hints that the buyers are not too sure or that they will only write an offer if there’s limited competition. The truly sure buyers plunge ahead despite competing bids or the lack of them.
Want to buy a home? Try not to come across as skiddish to the listing agent! Your cold feet may cost you the home, even if your offer’s got the highest price. Home sellers and their agents want to feel confident that you will close on the sale if your offer is accepted. Present yourself as serious, capable, reliable, and easy to work with and your odds of success will be increased. At the end of the day, it is always “price and terms”, but never underestimate the influence that your behavior and your real estate agent’s behavior play into the overall package, because shaky buyers may not close the sale, but home buyers who are rock solid and madly in love with the house will.
Lastly, in an appreciating market, as we have right now, it should be noted that often the next house or townhouse or condo will be more costly or in worse shape than the one you could not decide to get serious about. Stay nervous too long, and you could ultimately really impact how much home you can buy at all. Worse yet, take too long and you may price yourself out of the market entirely.
Often the Silicon Valley real estate market takes a bit of a nosedive in December and January, only to make a comeback after the SuperBowl. Just now I ran the stats for the city of San Jose, which is big enough, at about 1 million people, to provide a good sense of the market generally.
Below please find a simple chart reflecting houses sold with the days on market and sale price to list price ratio. You can see, clearly, that the SP to LP ratio dips noticeably in December & January, and also that the days on market rise.
Even so, how bad was it? The average DOM was 38 (break-neck speed in any other part of the country) and the average SP to LP ratio fell to “only” 102%.
That was it – that was the “break” that buyers get in winter. Things are reversing course, as often they do in February, March, and April, and multiple offers with big overbids are again the major story in San Jose and throughout the Silicon Valley region. Just this last week I heard of a home in this valley that got 45 offers.
Home buyers, want to purchase this year? Your best bet is to be financially well equiped with 25% down or more if you are buying in any of the hotter areas. This is a nearly impossible market for FHA home buyers or for those with less than 20% down.
Home owners, want to sell this year? You can maximize your return by doing smart fixes and thorough inspections to make buyers feel confident about purchasing your property. That confidence can change the game and bring 10 offers where there might have been 5, and with the larger numbers of bidders usually there come also much larger sale prices.
Call me or email me if you would like to discuss working together and getting your best deal in the current Santa Clara County realty market.
Homes for sale in San Jose
$450,000 : 197 Coy DR 3, SAN JOSE2 beds, 1 bath
$2,625,000 : 1150 Norval WAY, SAN JOSE6 beds, 5 baths
$450,000 : 3128 Loma Verde 116, SAN JOSE1 bed, 1 bath
$899,000 : 531 Autumn Meadow DR, SAN JOSE3 beds, 4 baths
$589,950 : 2607 Gimelli PL 116, SAN JOSE2 beds, 2 baths
See all Real estate in the city of San Jose.
(all data current as of 9/19/2018)
Listing information deemed reliable but not guaranteed. Read full disclaimer.
Buyers who are getting slammed out of the Silicon Valley real estate market due to low inventory and multiple offers are extremely frustrated. In many cases, they write offer after offer, and each time not only are their bids rejected, but they never even get a counter offer.
You should not depend on getting a 2nd chance, of course. Just because you write a contract on a San Jose area home does not mean that the seller needs to give you a counter offer. Some agents and sellers don’t respond at all – not nice, but if you get dozens of offers, sometimes that does happen. Sometimes they just take the best offer and run. Othertimes they only counter the best offer and forget the rest.
The question arises all the time: why isn’t my 20% down offer just as good as the 50% down or the All Cash offer? Isn’t 20% down good enough? Or for that matter, why wouldn’t a 3.5% FHA backed loan be suitable?
Cash is better because there’s less risk
Twenty percent down is “good enough” if there are no other offers. If it’s multiple offers, though, it’s probably not sufficient for most sellers provided that the all cash offers are written with realistic pricing. Right now, 25% of all sales in Santa Clara County are all cash, and sellers would far rather deal with an offer that includes no finance or appraisal contingencies. For sellers, the fewer contingencies the better and no contingencies is ideal. Particularly now, when we are seeing a very sudden and dramatic upswing in pricing, appraisal contingencies can kill an offer’s chances of success. With all cash, there is no appraisal at all – it’s a slam dunk on that front. Continue reading
If you are house hunting in the Cambrian area of San Jose, you are probably aware that home prices and the real estate climate generally differ based on a number of things, but the most important factor of all is the schools. While it is helpful to view the Cambrian real estate market as a whole, it’s more accurate to look at a smaller segment of that realty market and study it by school district.
One data point we use to analyse the market is the absorption rate, or months of inventory. The question is this: if no new inventory came on the market, how long would it take for the current supply of houses for sale take to sell, if sales continue at the same rate? For this we look at the currently available list of homes for sale (some people including pending with contingency in place, but nearly all of these do close, so I omit them) and also those of the same criteria which have sold and closed escrow in the last 30 days. The same study could be done on a weekly basis rather than monthly, but with such small numbers of inventory, that would likely not be so reliable. I ran these numbers from MLSListings.com this morning?
Cambrian as a whole has 1.07 months of inventory – that’s pretty good if you are a seller, and a bit scary if you are a buyer. A closer look, though, and you see quite a huge difference between either the Cambrian or Union School District, which both have a very brisk .83 months of inventory, versus the homes in the San Jose Unified School District area, which are moving at 3 months of inventory – a great market for most of the U.S., but sluggish compared to the other areas.
For a home owner wanting to sell in the SJ Unfied section of Cambrian, this is critically important information to understand so that you don’t overestimate the enthusiasm for your house. It is going to be more important for you to price aggressively, stage well, market thoroughly than in the other areas, which may be more self-selling due to the very high quality of the public schools.
For a home buyer wanting to purchase in any of these areas, knowledge is power! You might be able to get away with contingencies in your offers in the San Jose Unified neighborhoods as you may be the only offer in some cases, but that may not get you into your next home in the more competitive areas where many people are just trying to get their children into excellent schools and you’ve got multiple offers and overbids in that superheated market. (We Realtors do not love seeing our buyers get into contract with few or no contingencies, by the way. We prefer where there’s a little more balance. This imbalanced situation is a classic case of supply and demand: too much demand, not much supply.)
Finally, it should be noted that schools are a major driver all of Silicon Valley. I have similar studies, using high school districts, for Saratoga (on this site) and Los Gatos (on the Live in Los Gatos blog), if you’d like to check those out also. Because those areas have a really big spread in pricing, the absorption rates have been considered by price point too.
Check out what’s happening in the Cambrian market in the map below.
$1,049,000 : 1878 Rosswood DR, SAN JOSE3 beds, 2 baths
$1,150,000 : 3272 Vistamont DR, SAN JOSE3 beds, 2 baths
$1,695,000 : 5063 Brewster AVE, SAN JOSE4 beds, 3 baths
$1,099,000 : 4857 Pepperwood WAY, SAN JOSE3 beds, 2 baths
$949,000 : 1118 Dinkel CT, SAN JOSE3 beds, 3 baths
$1,829,000 : 15390 Woodard RD, SAN JOSE4 beds, 3 baths
$1,399,000 : 5343 Lenora AVE, SAN JOSE4 beds, 2 baths
$1,120,000 : 3182 Kirk RD, SAN JOSE4 beds, 1 bath
$1,399,000 : 5254 Rimwood DR, SAN JOSE3 beds, 2 baths
$799,888 : 2785 S Bascom AVE 7, SAN JOSE2 beds, 2 baths
See all Real estate in the Cambrian community.
(all data current as of 9/19/2018)
Listing information deemed reliable but not guaranteed. Read full disclaimer.