A lot of angst is caused by computer generated estimates of home values. Most buyers realize that “auto comps” are seriously flawed. Some sellers worry a great deal about the impact that one of these sites might have on their home’s chances of selling at a fair price.

What is the difficulty with these sites (such as Zillow)? Why are they unreliable?

Real estate professionals know that a great many area-related things can impact home values, such as school districts, city boundaries, zip codes, or even being on one side or another of a somewhat main road. Most often, the computer generated estimations of value do not factor these things in.

Additionally, these automated systems rely on county records, which are often incorrect. They don’t “see” remodels, they don’t “compute” deferred maintenance! They cannot factor in a view - good or bad.

To ascertain a home’s probable market value, it’s best to find recently sold homes (pendings and closed sales) that are related to the subject property as follows: within a mile, within 10-15% of the size of the home, similar lot size, similar age, similar condition, and close proximity of time (preferably within the last couple of months). Additionally, the “comps” should be in the same school district and have the same city or town name and have the same zip code.

Many things can “throw” value: odors in the home, high voltage power lines, an overcrowded or unkempt street, noisy neighbors & dogs which bark too much, having apartments too close, being adjacent to freeway walls, train tracks etc.

If you view these types of market analysis sites online and get a “value” provided, please remember that these sites are extremely limited. Please understand that the number you see could be far higher or lower than market value. It is not uncommon, in my experience, to have them off as much as 20%.

What’s the solution? If you read these online valuations, do so with a large “grain of salt”. A better approach is to contact your Realtor and ask for recent comps and if you need to know the precise valuation, ask for that. Your real estate professional can help you to get a handle on your home’s current value, whether it’s to petition for lower property taxes or to decide if you can refinance or sell.

A very common seller concern, understandably, is selling the home for too little money.  Oftentimes they want to price their Silicon Valley home so that they “have room to negotiate” and “don’t leave too much money on the table”. 

The trick is in figuring out how much room you really need to negotiate and at what point you’re dramatically hurting your chances of selling by overpricing. Where’s the tipping point?

Let’s do some mythical math - let’s say a 4 bed, 2 bath home in Los Gatos or Almaden Valley is worth approximately $1,000,000 (depending on terms like “As Is”, the loan type or all cash, free rent back, etc., the probable sales price range might go from about $975,000 to $1,025,000). 

If the home’s likely value on the market is worth about one million, many agents will suggest listing the home at about $999,000 in order to get buyers who may not search over the $1 million mark and to drum up interest, traffic, and hopefully at least one offer.

Saavy and experienced agents know that most homes sell fairly close to list price in today’s market (Almaden Valley houses are selling, on average, at 99% of list price and Los Gatos homes are selling at an average of 97% of list price), so most would not want to go beyond that percentage - whatever it is - since we also know that most homes are not selling.  Five percent over probable list price is ususually the upper limits of what may be wise positioning.   In the case of our mythical million dollar home, the highest that some agents would see as potentially viable might be $1,050,000 - but many others would not venture that high, feeling it creates a big risk of the home sitting on the market too long and ultimately selling for much less if the home is perceived as shopworn. They might place the upper limit at $1,025,000 or close to there.

Sellers, though, sometimes see the numbers but want to list their home higher - perhaps 10% higher or more over probable market value.  Why is this so often the case?

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Recently I was showing a buyer of mine a San Jose house which was vacant.  Often a home is occupied and the garage, in particular, is full of stuff so it’s hard to see the walls very well.  In this case, though, we could easily view where the walls in the garage meet the floor.  And this is what we saw:

Only a qualified, licensed Pest Control Operator can diagnose termites and pests, but this looks a lot like subterranean termite tubes to me.  When you see “mud tubes” such as this, it is time to call a good termite and pest control company for diagnosis and treatment.

Why do termite & pest companies insist that the garage be largely free of personal possessions when they inspect? It is so that they don’t miss things exactly like this. 

When buying or selling a home, understand that the inspectors arent being difficult if they won’t warrantee a garage as free of pests when they cannot view the walls or floor.  Bookshelves and personal storage can obstruct the view of things like this.  If you’re selling, be ready for the inspectors - have all your items away from the walls or even better, entirely out of the garage. If they have to call a packed garage as an “unknown further inspection”, it’s likely to cause you problems later, when there’s a time pressure.  Best to know upfront, for everyone’s sake, what the score is.

Recently I read an article on Realty Times about the tax credit for non-first time homebuyers. Did you know that it may be used for “move down” buyers as well as “move up” buyers?

There are some caveats - the home cannot cost more than $800,000 and a couple cannot earn more than $255,000 per year.  Owners must have been in the home for five consecutive years of the last eight.  This may be the ideal help for Silicon Valley seniors wanting to downsize.

To read the article on Realty Times, click here.

If you’re out to buy a Silicon Valley home this year, you may be tempted to look at real estate priced far above your ability to pay and hope that you can write a low offer that the seller will accept.

Don’t count on it.

Lowball offers are contracts written substantially below the list price (and often well below market price).  How low is too low? It really depends on the micro-market of the home you’re interested in (the neighborhood, price range, school district, etc.).  In most of Silicon Valley, houses, condos and townhouses sell within 5% of list price most of the time. The average list price to sales price ratio is usually closer to 1 - 3% of list price. 

My usuall advice to buyers is this: if you don’t think that the home is worth within 5% of list price, then keep looking until you find a home that is.  Most of the time, sellers aren’t prepared to come down more than a few percent. 
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In some parts of Santa Clara County, a very significant percentage of homes for sale and homes under contract (pending sale) are “short sale” listings.  This is particularly true in entry level areas like San Jose’s Alum Rock area, the Blossom Valley district, the Santa Teresa area, etc.  These homes can be hard to sell and even harder to close - but why? They are usually well priced so should just fly off the market, but often that isn’t the case.

The trouble with short sales is that there are a lot of people involved, so there are a lot more places for things to go wrong. Unfortunately, they often do go wrong. I believe the national average is that about 20% of short sales that sell (go pending) actually close.   Think of it like hurdles:

• The first hurdle is getting a buyer to write an offer (despite the significant risk that the sale will never close)
• The second hurdle is getting the seller to accept the offer (and the seller’s agent to agree that it is viable)
• The third hurdle is in having the lender or lenders approve the purchase agreement - it is MUCH easier if there’s only one lender, very difficult if there are two lenders and extraordinarily hard if there are three lenders. Sometimes lenders would rather foreclose than work with a short sale, especially if there’s more than one loan.
• The fourth hurdle is the seller approving the lender’s terms, which may or may not be easy to swallow (some lenders require that a seller promise to pay back some of the money over time or upfront).  Sellers reserve the right to refuse the terms.
• The fifth hurdle is the agents (and possibly buyers) approving any concessions the bank requests. Sometimes the bank will require a commission cut. Agents may or may not be willing to accept what the bank requests. (Imagine having your income suddently cut by 1/3 or 1/2. You might say no too.) Buyers may be informed that the bank requires them to pay more costs too.
• The last hurdle is keeping the buyers in escrow during the prolonged period between when the seller accepts the offer and when the seller accepts the bank’s terms.  Sometimes unscrupulous buyers will write offers on several short sales and then wait to see which one is accepted first - and bail on the others. This causes a great deal of harm to the seller, who may have been nudged closer to foreclosure.  On the other hand, though, with only a 20% chance of success, buyers wonder why they shouldn’t take this approach just to hedge their bets.

I’ve seen all of the above happen in my Silicon Valley real estate practice: buyers writing offers on multiple homes, sellers refusing bank approvals, lenders foreclosing when a great offer was on the table, agents refusing commission cuts. 
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Sometimes when I meet prospective clients who are thinking of selling their home, I hear immediately, “we only want to sell As Is”.  In the next breath, they tell me, “and we want top dollar for our house”.  Those two are often mutually exclusive desires - that is, getting one usually means you won’t get the other.  But not always, and I’ll show you how to increase the odds of doing both.

To get top dollar, a Silicon Valley home for sale must appear to be the best value for the money and attract the most qualified buyers who step forward with a strong offer.  There are a number of things which must be done for that to happen, but one of the most important has to do with the condition and appearance of the property. Confident buyers write stronger offers than buyers who are concerned about the house or condo and potentially unknown risks.  Home buying is both a business decision as well as an emotional decision.  To get top dollar, your home has to make sense and appeal to buyers on both levels, and we’ll discuss both in this post.

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