Tips for Home Sellers
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:
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.
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.
Do you need to sell today, in a cooling market? Many people know that in Silicon Valley, often the best time to sell your home is anywhere from January to May – and after that, the sales begin to slow and sometimes prices fall. This year, that seems to be happening, and more. We are now in early August and it’s definitely a shifting market.
How are you going to sell your home in a cooling real estate market?
Sometimes you have to sell when you don’t really want to. Maybe it’s a divorce, a job transfer, death of a spouse, loss of a job, or maybe even something good – the type of home you’ve been waiting years to buy is now available. But you have to sell first, before you can buy. For better or worse, you need to sell now, when the market is cooling. What to do?
Understand the pattern. Jump the line.
Information is power. Learn the market stats and figure out the trajectory. If homes are losing value at the rate of 1% a month and your house isn’t selling, you may need to JUMP the line to get ahead of the curve. Translation: let’s say it looks like prices are going down .25% per week for a house like yours. If you “hold out” and don’t reduce your price to sell, the gap between what you think your home is worth and what capable buyers will think it is worth may widen. But instead, if you cut your price 1.5%, you may be able to be the first home sold. Wait a few more weeks, and it could be much worse. The quick way of saying it is to “cut your losses”. In a declining market, the longer it takes to sell, the more you lose. It’s that simple.
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.