Tips for Home Sellers
What is the function of a title company or title insurance company in real estate purchases or refinances? In Silicon Valley, and the San Francisco Bay Area and northern California generally, title companies perform two specific services:
- provide title insurance for real estate being bought or borrowed against
- provide escrow services, acting as the neutral third party which takes in the deposit money and holds it during the escrow period, disbursing all funds when escrow closes and having someone go to the county recorder’s office to record the deeds to complete the sale
Title insurance companies research the title history, find out what recorded easements may exist,reveal any encumbrances (leins, clouds on title, etc.). An escrow officer from the title company is usually the professional with a notary’s license who will sign off home buyers and sellers on the final documents, too.
There are many other services that title companies provide. Many people wonder how to hold title, and while neither your Realtor nor your escrow officer can advise you on how to do so, the title companies all have a little 1 page handout explaining the major concepts for each option on how to hold title.
If you need to sign off on the final documents out of town or even out of the country, the escrow officer and her or his support staff will work with you to coordinate it. (It can be a little tricky if overseas and outside of the U.S.).
If you are selling your house or condo and discover that an old loan that you paid off is still showing up in the preliminary title report, the escrow officer at the title insurance company will work to get it resolved and removed.
The customer service department at title companies can research the chain of title, too. Sometimes it’s quite interesting as the chain brings you back to the time of patents and land grants, with hand written deeds in a style of cursive which is somewhat foreign to us today.
There are many other things that title companies do – big and small – and most of them are “behind the scenes” that few of us ever witness directly, but without which no one would be able to close out sales with the safety net of title insurance which we value so much.
Title insurance can be a confusing concept, but I wrote about it elsewhere on this site.
In 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!
Earnest 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.
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)
Although the Silicon Valley real estate market remains hot, and generally is a strong seller’s market, not every home is selling in 2-3 weeks. Most of the time, if the property is unsold after 30 days, it’s time to reevaluate the marketing strategy. The biggest piece of the marketing effort, of course, is price. (Please also see Why didn’t my San Jose home sell? for info on other remedies to real estate not getting pending.) if the home isn’t selling, it may be time to lower the list price or asking price.
Usually, the main reason why a home doesn’t sell is that buyers think that it is overpriced. Sometimes you, the seller, can compensate by improving the condition or some other relevant factor, but often, the solution will be to adjust or lower the price.
How much should you lower it? Naturally, it depends. If you’re going to change the price, though, make it worthwhile – not a drop in the bucket. Too small of a price reduction can actually backfire.
Recently I visited an open house in which there’d been less than a 1% price reduction after 30 days on the market. That very minimal kind of repricing tells a buyer “I’m not budging”, which the buyer may read as “My price is high and I’m unreasonable; move along, this is not the house you seek”.
First, how much activity is your property getting? How many showings per week?
If you are getting at least 3-5 showings per week, but no offers, you are probably close on price. Perhaps a smaller reduction, combined with some other adjustment (restrictive hours loosened up, scary pets removed, alarm disarmed) may do the trick in getting you more traffic to create a viable offer.
If you are getting NO showings, or close to no showings, you may well be way, way high on your price or have other major issues which need to be corrected. My general advice, below, may not apply in that case as you may need something more to get the qualified traffic in through the door. The more qualified traffic you get, the better your odds are of selling. An atractive price is the bait that can attract those buyers.
Here are two old rules of thumb, which I think pretty much still work today:
- for every week it’s been on the open market, lower it $10,000 (so a reduction in 3 weeks would be $30,000 or a reduction in 5 weeks would be $50,000)
- alternatively, for every week it’s been for sale and active on the MLS, lower it 1% of the sale price (hence at 3 weeks, a 3% reduction would be appropriate and at 5 weeks a 5% reduction would be indicated)
Every situation is, of course, unique, so it’s important to look at the big picture. If buyers and agents are staying away because the home smells of pets or cigarette smoke, or if there are people constantly home during showings (you should all vacate), or if you demand that the listing agent be present for all showings, any of these things can drive away qualified traffic. But if the marketing is good, the home is clean and reasonably accessible, and all the other basics are correct, it probably is price. Sit down and talk with your Realtor to get good guidance. If those who have shown the home have provided feedback, take it to heart – whatever that input is.
If you want to sell your home, you probably know that your house and yard need to be spotless, that anything scary (like a safety hazard – let’s say, something like rats in your attic) is taken care of, and that your property feels inviting and uncluttered.
What you may not know is how very important it is for you to be GONE. Home buyers want to see your property with their agent. When you’re not there, they can talk about how they’d like to live in it, changes they want to make, or even things they really dislike about your home. They won’t feel free to do any of that if you are there – and especially if you are crowding them by insisting on showing them through.
Home buyers usually hate it when home sellers are present for showings, lead the buyers through the house and tell them all the details that they might not notice.
There are some exceptions. If it’s a 2nd or 3rd time back, maybe it would be helpful to have the sellers fill the buyers in on the area and the home. But certainly not the first time through – then, it can feel territorial. Home buyers feel like they are intruding, even if home sellers feel like they are trying to be welcoming.
So home sellers: just don’t do it. If there’s an appointment to sell your Los Gatos or San Jose area home, please be gone. The buyer’s agent can use the lockbox to get in at the time of the appointment.
This actually happened to me in 1999. My family and I were wanting to move up from Cambrian to Los Gatos. We had outgrown our 1249 SF Cambrian Gardens house and wanted to get more elbow room closer to the hills. We were especially looking at the areas around Alta Vista School and the Belwood and Belgatos area.
One day all four of us went to view a home. Not only was the home owner there, but he insisted on showing us through the house. When we went outside, we wanted to try to figure out if we could move the garage and enlarge the smallish family room. He followed us, pulled out a lawn chair, aimed it at us and sat down. My kids noted in their best “quiet voice” that it was creepy. They were right.
We left, and I let the listing agent know what had happened – not the showing feedback he’d wanted to hear! We didn’t want to go back – it was a complete turnoff. That year, thee was plenty of inventory, and we bought a nice house from nice sellers about 1 block away.
Home sellers – don’t be a creep. Be gone during showings, especially the first showing. “Giving buyers a tour” usually will hurt your odds of selling, it will hurt your sale price, and may even keep you from selling your home at all.
When a home seller remains in the home after the close of escrow, it’s as a tenant or renter – even for a brief period of a few days. With the shifting role from home owner to new renter, the rules of engagement may not be clear, and expectations may not line up with the addendum for the rent back. So let’s do a set of what happens during the tenancy period after the sale is done.
Seller rent back True or False questions – which of these statements is true or false for the period when the seller is a tenant?
- When escrow closes, the buyers get keys to the home
- The seller must be undisturbed by the buyer until moving out
- The buyer can do repairs, including fumigation, during the rent back
- Prospective tenants may view the property during the rent back
- Contractors may enter the property during the rent back
- The new owners must give 72 hours notice before entry
- To enter the home, new owners must use an official CAR or PRDS “Notice of Entry” form
- The new owners may only enter the property if their Realtor is present or if the listing agent is present
- If the seller overstays the agreed upon rent back time, there’s a penalty fee that will be charged
- If there’s a rent back, buyers may do a walk through both before close of escrow and also at the end of the rent back period.
Some of these are challenging not just for buyers and sellers, but for real estate agents too. The reason for the confusion has to do with the number of forms involved. There are 3 different rent back addenda which may be employed in Silicon Valley: 2 options from the California Association of Realtors (CAR) and 1 from the Peninsula Regional Data Service (PRDS).
- PRDS form RSOAS – Seller Occupancy After Sale Addendum (1 page form)
- CAR form SIP – Seller in Possession Addendum (1 page form, intended for less than 30 days)
- CAR form RLAS – Residential Lease After Sale (5 page form, for more than 30 days rental to seller)
Some Realtors only use either CAR or PRDS forms, but I have found that depending on whom you represent, it may be worthwhile to tell the client about the differences between them as they are not exactly the same for all of these questions.
Now let’s go back to our questions and see what the contract & addenda have to say about each one. Continue reading
There are clever, but ultimately unsubstantial, things that real estate consumers might experience in the process of buying or selling a home – or just researching Silicon Valley real estate on the web. Here are a few of the doozies that some people fall for, in no particular order:
(1) Quoting the contract paragraph by number is meant to impress you with the agent’s grasp of the contract, which must be thorough if the thing is memorized like chapter and verse. You might hear something like this: “as it says in paragraph 14 of the purchase agreement”. Perhaps better is not so much the paragraph number, but the nuance, how it matters and perhaps how the alternative contract or paperwork reads on the same subject. I like this better: “The PRDS contract says that any repairs must be done by a licensed contractor. The CAR contract says that anyone may do repairs, even the home owner, as long as it is done in ‘workmanlike fashion’ with comparable quality materials.”
A similar twist may be quoting statistics that aren’t real. “There are 2.3 months of inventory in Campbell right now” may be a made up number. Realtors know that sounding precise makes them sound credible. But is it true? Check it out. (As for me, I am not a walking statistics machine. I have to look it up, or crunch it, to tell an answer. Yesterday a total stranger texted me and asked what the cheapest townhouse or condo in Mountain View is right now. I am not the MLS! I don’t know off the top of my head – and I’m not going to fake it.)
(2) Focusing on less relevant marketing approaches to selling your home may be a way for the potential listing agent to appear better, to seem to “do more”. The most important is price, because a grossly overpriced house will not sell for top dollar even if the print and web marketing are over the top wonderful. The second most important is photos, because they are your first open house – albeit virtual. If the photos are poor, or if every major area or room isn’t shown, whatever is not represented is deemed as bad. Photos of a cluttered, mismatched home will cause buyers to skip your property. That said, some agents will say that they will advertise your home in China, so you should list with them. Well, Chinese buyers are real, but they either come over to buy or they have close family and friends here who will help them buy. And whoever is here can see the listing on the regular channels. Similarly, things like drone photography do not usually improve either the odds of a home selling or the price for which it will sell in most cases. For a luxury property with a lot of land, ok, yes, of course a drone video or photo series would be great. But some agents push the drone angle only because it differentiates them – they’ll provide what other agents don’t want to provide. (Because it doesn’t make sense for most tract homes.) Beware marketing gimmicks.
(3) Combined experience – if you have a team with 4 agents and they each have 2 years’ experience, you might hear this: “we have 8 years combined experience”. Nonsense. You have 4 people with 2 years each.
Alternatively, there may be things which sound like trickery but aren’t. One friend of mine, on the east coast, bemoaned that every time he wanted to buy a house, the listing agent told him that another offer was coming in. “Do they teach you to say that at real estate school?” he complained. No, they don’t teach us to say that. In fact, if it’s not true that another offer is coming in, we may not say so if we are Realtors – it’s against the Realtor Code of Ethics to lie. (Not all real estate agents are Realtors. The state issues the real estate license, but membership in the National Association of Realtors is voluntary.)
Another thing which make some sellers skeptical feeling is the need for staging. “Why should I fill my empty rental house with someone else’s stuff? Buyers can see that it’s a kitchen!” But let me tell you, there are statistics proving that staged homes do sell for more. A good Realtor wants your home to sell for top dollar, wants you to become a raving, lifelong fan, and hopes like crazy you’ll be so happy that you’ll refer your best family and friends to that same Realtor.
As a Silicon Valley home buyer or seller, the best thing you can do for yourself is to hire a great Realltor. Don’t do it because they use slick “closing techniques”, but because they are experienced, knowledgable, capable, honest, and not afraid of hard work. Right now 20% of all real estate licensees have less than 2 years’ experience selling homes in the US. (Source for that statistic: CNBC article.) It doesn’t cost more to hire a great Realtor, so please do your due dilligence and don’t fall for stupid tricks. Go for substance.
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)
An old apricot orchard used to line Blossom Hill Road between Union and Leigh Avenues until the 1990s. The former owners, Ralph and Sophie Heintz, lived there in their farmhouse until their deaths, at which time the property was willed to the University of California at Berkeley for eye research.
Sophie and Ralph were interesting people. He ran a small train on their property and was an inventor. She was a ham radio operator.
In 1998, the Heintz land (and house etc.) was sold to Summerhill Homes and a portion developed as housing. That Los Gatos neighborhood is now called Heritage Grove A strip of trees was planted along Blossom Hill Road, reminiscent of the history of the area. A large section of land was made a permanent open space, now known as the Heintz Open Space Preserve. This open space connects directly with Belgatos Park, which also connects with the Santa Rosa Open Space Preserve. So the network of trails is quite extensive. (Link to Town of Los Gatos page with pdf files of these three trail maps. Link to Google Maps map of Blossom Hill Trails, drawn by Jim Handy.)
The Heintz’s big, old farmhouse has been renovated and is being lived in. Ralph Heintz’s old workshop, the Ramohs Laboratory, is preserved with signs explaining the history of the place nearby. Continue reading
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.