Tips for Home Sellers
Things in the greater Silicon Valley real estate market are shifting right now, with downward pressure on pricing in some segments of the market. In other places or price tiers, prices are level, or possibly rising a little. It’s still pretty red hot in Santa Cruz County, but cooling generally in Santa Clara and San Mateo Counties. The Los Gatos condo market is definitely feeling the chill. What do you need to know or do if you’re selling your home in a declining market?
There are a two principles which are important to understand.
The first truth to grasp is that all real estate statistics are yesterday’s news. Homes that are closing escrow today most likely were negotiated 4 weeks ago. That was last month’s market. Looking at comparable properties that sold 2 months ago is really a reference to the market conditions of 3 months ago. What is most relevant can be the hardest data to obtain, and that is what has gone under contract yesterday or at least within the last week or so. When you cannot get the pending info, it’s helpful to piece together the sold info chronologically.
Santa Clara County in recent months – median sale price:
July 2018 $1,350,000
June 2018 $1,402,000
May 2018 $1,414,000
April 2018 $1,420,000
March 2018 $1,450,000 – PEAK
February 2018 $1,380,000
January 2018 $1,1,163,000
We don’t know what August’s numbers will be like yet, but there’s a good chance that they will be lower than July’s.
Second, it’s important to try to determine where prices are headed and to get ahead of the curve, if possible. This is easier said than done, of course, because it’s never a straight line up or down, but something with a lot of variation. (It is also true for buyers in an appreciating market – they have to jump ahead of the curve to bid high enough to get the home, not offer where the current comps are selling.)
Looking at this graphic image, it would seem as if the “big picture” is a consistent upward movement. However, there are a lot of downturns within the general upward trend. Our current “down” movement may well rise again in the new year, as many local real estate economists predict. That’s not certain, though, and many real estate market corrections begin slowly, and instead of reaching the old peaks, start reaching smaller ones, rising and falling to a different tempo. It can seem slow enough, but you cannot tell while it’s happening if it’s suddenly going to drop like a nightmarish roller coaster. During the Great Recession, we had a lot of ups and downs, but one outlandishly steep slide. I created this graph below on the MLS, and later added the red lines to make the January in each year clear, as most years, prices begin rising in February (sales in January). Please note that despite the recession, prices usually rose in early spring
As you can see, except for the steep declines in 2008, there were plenty of peaks and valleys during the 2006 to 2012 years. Even in 2008 there’s an upward blip and I think it’s fair to say that many of us thought that the market was going to start to recover at that point – or at least hoped so. After that little tick up, though, it continued its downward movement. We very much felt the dip in pricing in late 2010 through early 2011. Looking back, it may not seem so bad now, but at the time, we had thought the housing correction was over, and that decline was a nasty deja vu. And please notice the low points in each year – usually they are in January (think sales in December). Jan 2012 was lower than January 2011 or 2010, and was close to 2009.
I do not believe that anyone expects a correction of that magnitude in our lifetime again, but it would be foolish to say that anything cannot happen.
The pattern, though, can be unpredictable. Some slides are long, slow, and fairly consistent, as in the 1989 to 1992 correction. Other times, things can drop like a rock, as with the dot-com bust in 2001.
Either way, if you are selling your home in a declining market, price accordingly to mitigate damage and get ahead of the curve.
You cannot tell ahead of time if the falling rate of values will accelerate, slow down, or go flat, but you can see what has happened in the last 6 months or so and try to determine the rate of change.
So what is a seller to do – sell before it gets worse, or hang on until it gets better?
What do you believe it is that we are experiencing now? Is it a seasonal blip, or the beginning of a trend?
If you believe that the current market conditions are seasonal (that is my thinking since Silicon Valley still has so much hiring and demand), then if your home is in one of the cooling areas, selling now is a mistake, because many home buyers are concerned about over-paying. If you believe that spring 2019 will bring better prices, then I would suggest holding off on selling and focus on getting your home into TOP SHAPE so that you will fetch the highest possible price when you do sell, whether early in 2019 or at some other time.
If you believe that the market is at the initial stages of a market decline (and nationwide, the real estate market seems to be cooling), then you have to decide if you want to sell now or wait until the market hits another peak.
If you must sell now, and you have softening prices in your area and pricing tier, then you must be realistic that you are going to be selling your home in a declining market. It may not be declining next year, but it has been declining since March for most of Santa Clara County, and buyers have been paying attention to that fact.
- In a declining market, there’s more supply of housing than interested buyers
- If there are 2 or 3 or more homes for every capable home buyer, your property needs to be the best value to make the sale
- Most of the time, being the best value translates to offering the lowest price from among your property’s competition
- Sometimes, being the best value can mean offering the best terms, such as owner carried financing, offering to re-roof, do pest repairs, etc.
- To attract agent attention, consider offering an attractive buyer’s commission rate (better than what everyone else is offering, data that is easy for your Realtor to get from the MLS)
Many areas are still seeing overbids, but they aren’t as high as they used to be (the average sale price to list price ratio was 105.6% for Santa Clara County in July 2018. Back at the peak, and now, sellers who want their homes to get the most attention under-price it a little to get multiple offers and overbids.
Even in a seller’s market, I do encourage my sellers to price their home to be the best value – a strategy that normally results in the best results. Additionally, do the repairs that might scare buyers off. Keep in mind that they are afraid that as soon as they buy, their new home will be worth less, so they do not want to have to put money into the home to fix things such as electrical work, roof leaks, etc. Make sure you hire a great Realtor who will help to get your home into top showing shape, and will market it widely on the internet with professional photos, and market it well in person with quality fliers. Newspaper ads and post cards seldom bring buyers to your door, but a well placed Facebook ad may. Make sure you see the MLS printout and have any errors corrected. A second set of eyes on all of the marketing is a good idea – in a cooling market more than ever.
Home seller temptation # 1: overconfidence on the market
Because folks read about the dozens of offers on some homes, by extension, it’s easy to believe that every home sells, for top dollar, with no effort or planning on the part of the seller. This is a huge mistake. Perhaps we should even call it a myth since it may be commonly believed.
In today’s wildly hot market, there are still some homes that DO NOT SELL.
What are the odds that your home won’t sell?
I just pulled some numbers from the MLS today, July 23, 2018. You may find them surprising!
- In Santa Clara County, there are currently 1274 single family homes on the market
- 490 of them have been on the market at least 30 days – 38% are not moving quickly & likely need a price reduction, if it hasn’t already been done
- 211 of the 1274 have been for sale for at least 60 days – 17% have had 2 months worth of open houses, keeping the home spotless, etc.
- 107 of the 1274 have a “days on market” of 90 days or more – 8% have serious market rejection
- These are not all luxury homes!
- 9 are listed at under $1 million
- 13 are offered between $1 million and $1,499,999 (“normal” houses in our area)
- 9 are on the market between $1.5 mil and $1,999,999
- 14 are listed at $2 million to $2,499,999 (these are still not luxury homes in most cases)
- 11 are priced between $2.5 mil and $2,999,999
- That’s 56 homes of 107 that are under $3 million. The balance are “high end homes”, which usually are more challenging to sell
The best homes, those which are well priced, well marketed, and are easily shown, sell within 2-3 weeks. After that, home buyers view them as stale listings and assume something terrible is wrong with them. After three weeks, unless the home gets a deep price reduction, it’s unlikely to get multiple offers.
This first temptation is the greatest one, and it often leads to mistakes in areas #2 and #3, listed below. Continue reading
Sellers should leave during showings of their homes – that is the common wisdom in the real estate industry. Most Silicon Valley Realtors will advise their seller clients to go out for a walk, do errands, or otherwise be fully out of sight when buyers and their agents visit the home. Home owners may object that “it is an inconvenience. And what if the buyers or their Realtors have questions? ”
Recently, some friends told me of an extreme situation in which the home owner was in the driveway, grilling prospective open house visitors to see if they were serious buyers or just having a fun look – and told them that unless they were willing to buy that day, they should turn around and leave. They did. (I felt sorry for both them and for their Realtor, who watched them leave and wondered what happened.)
Once, when my family and I were house-hunting, we had the home owner follow us all through the house, staying all of 3 feet away at any given time. When we walked into the back yard, he followed us, grabbed a lawn chair and sat in it – staring at us.
My children referred to that episode as the one with the creepy man who followed us. Needless to say, we did not buy that house with the overbearing seller and the creepy vibe.
Assuming that a home owner would not do anything so egregious, could they remain at home? We return to the topic to answer this question:
Why should sellers leave during buyer tours?
The main reason why sellers should leave during showings has to do with how the prospective home buyer feels about the place. For cautious home buyers especially, the seller’s presence is off-putting.
Home buyers are more comfortable when several conditions are met:
- the property needs to be neither too hot nor too cold (or they will leave fast!)
- it needs to be clean and welcoming and to not smell bad (that doesn’t mean using lots of air fresheners)
- it should be uncluttered and depersonalized
- home buyers need to have “space” to hang out and envision living there, and that requires time.
Willow Glen is one of the most charming areas of San Jose, consisting of many older homes which feature lovely, classic architecture. Most Silicon Valley home buyers treasure the Willow Glen charm and ambiance, but many are seeking newer homes. A fabulous option is “The Willows“.
KB Homes built “The Willows” in 1999 to 2000. It is tucked away at the southernmost tip of Willow Glen, off of Foxworthy Avenue & close to Almaden Expressway, but only about 2.5 to 3 miles from all the action on Lincoln Avenue.
The tree-lined streets are built in something of a loop shape with Rubino Circle being the main access or loop road. Situated on the inner part of the loop are homes with smaller lots that are a little more affordable. The outer part of the circle is built with slightly larger homes on larger lots (but none of the lots are “big”). Sidewalks with soft curbs at the corners accompany the streets and make for a pedestrian-friendly, bike, wheelchair or stroller friendly area. Visit in the early evenings and you will see children and adults walking, strolling, taking dogs for a walk etc. – always a good sign! Because the neighborhood is a bit like an oversized cul-de-sac (no through traffic), it is very quiet in terms of traffic. The area has large street lights, too, making for a safe feeling community.
Close to the Los Gatos border sits one of the more affordable Cambrian neighborhoods in San Jose and the west valley generally. It enjoys lovely views of the hills, great public schools with high API scores, a neighborhood private school to boot, and convenient access to freeways and stores. There’s no sign, marker or gateway to the area, so many of its residents are probably unaware that the official name to it is Cambrian Gardens.
This neighborhood provides an incredible “bang for the buck” for home buyers wanting excellent schools and not wanting to pay luxury home pricing. In many ways, it’s a “sleeper” – meaning that many people don’t know it’s there, but it’s a good deal!
Convenient to Good Samaritan Hospital, Carlton Elementary School and freeway access to highways 17 and 85, the beautiful “King Street” neighborhood in San Jose’s Cambrian Park district seems to be close to everything. But a drive through the tree-lined streets with tidy homes seems like a relaxing step into the welcoming neighborhoods of yesteryear rather than the hustle and bustle of today’s Silicon Valley.
As with the nearby Alta Vista neighborhood, homes here show a pride of ownership not found everywhere. Holidays include beautiful displays of lights that invite neighbors out to tour after dark. Many home owners wrap the trunk of the trees between the sidewalk and street with blankets of white lights, making for a stunning look down the road.
The “King Streets” enjoy an uncommon appeal that makes homes here perennially desirable to home buyers. The popularity of the area is due partly to the convenience factor (easy to get to a great elementary school with high API scores, easy to get to the freeways, Los Gatos and Good Sam) and the beauty or neighborhood charm factor. It is a winning combination for this west valley community! Many who wish to live in Los Gatos choose this part of San Jose because it’s on the border, so it is not uncommon for the King Streets to be a first home and the move up one is in Los Gatos.
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.
If you’ve been trying to sell your home in Los Gatos, Saratoga, Almaden Valley, Cambrian, or anywhere in the greater San Jose area but haven’t received an offer yet, don’t despair! With our mild winters, you really can sell real estate any time of year. And inventory is extremely tight right now, increasing your odds of success.
In late November and December a lot of folks DO pull their property off the market, and the result is a, even further tightening of inventory across Silicon Valley from the months immediately prior. The ratio between listed and sale pending homes improves dramatically. (The “absorption rate” tends to get better with fewer houses, condos and townhouses listed on the MLS.)
But you’re thinking: it’s a hassle. It’s the holidays. Is this any time to sell Silicon Valley real estate?
And you’re right about that. So do it differently.
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: