Buying a Silicon Valley home? Understand that unless you are buying “all cash“, you will need to show your real estate purchase agreement to your lender, and your lender may want to see inspections, reports or disclosures based on what you’ve written in that paperwork.  And then the bank, credit union or lending institution may ask for repairs prior to close of escrow, even in an “As Is” sale.

This happened to my buyers a few months back.  They were buying  their first home using an FHA backed loan.  In the offer, we indicated that we would be having a few inspections (home, pest, roof, pool). Because financing with FHA backed loans is a tougher road, the lender did, indeed, require certain work to be done prior to close of escrow.  It was supposed to be an As Is sale so the buyers ended up paying for work to be done in order to close (and the seller allowed us to reduce the price somewhat).  Luckily they were all improvements that my clients intended to make anyway – but it was inconvenient and stressful to have to rush to have the work done, and of course this did cause delays.  (We did discuss not having the inspections listed in the offer, but my clients very much wanted them in it.)

For this issue, does it matter which contract you use, PRDS or CAR?

If you are planning to purchase a Los Gatos, Saratoga or San Jose area home, most likely you and your real estate agent will use either the newest PRDS contract (Peninsula Regional Data Service, employed from Los Gatos to San Francisco) or the CAR contract (California Association of Realtors form which is used throughout the state of CA).

There are many differences  between the CAR and PRDS contracts, but both of them have a place for listing at least some of the disclosures which are to be expected and whether or not the buyer intends to order a termite or pest inspection.  The CAR form also has a place for listing any other inspections the buyer intends to have done.  (Below find part of the section which lists inspections – too wide to fully reproduce here, unfortunately.)

One of the nice things about the CAR contract is that it is very clear as to who’s ordering and paying for what.  Nowhere in the paperwork, though, does it state that unless an inspection or disclosure is named, it cannot be ordered later.  So what is becoming common practice “in the field” is to simply not mention these disclosures or inspections in the offer.

Is that lender fraud? Might be – I will leave that to our attorneys to say for sure. Most of the mortgage people I talk with suggest that we simply leave things out to keep the situation uncomplicated. (I wonder if others in the bank feel the same way?)

The difficulty comes when buyers want to buy and sellers want to sell but the house, or pool, or some other element isn’t 100% perfect… If the bank sees the inspections reports and disclosures, it will of course show that the 50 year old house isn’t “like new”.  The bank doesn’t like that.  In more than a few cases, lenders essentially don’t permit an As Is sale.  In these cases, the banks, credit unions or other lending institutions start rewriting the obligations on buyers and sellers.  Maybe the buyer wants to do the repair differently after close of escrow – perhaps with alternate materials, but now is forced into paying for whatever is fast just so that escrow can close.

It’s not a simple problem, it’s complex.  Just as every house or condo is unique, so too are the issues that come with them.  If it were a simple matter that every house had to have a pest clearance, we could easily manage that.  But in fact it’s not so straightforward.  In response, agents and home buyers are leaving more and more blanks in the contract.  Personally, I’m not comfortable with it.  I present the situation to my clients, they talk with their banker or mortgage broker, and they decide what to do.  I think we could have a better solution, though. Don’t you?

Silicon Valley home buyers, sellers, and their real estate agents rely heavily on the professional advice, insights and opinions of home inspectors, whether it’s for the property generally (house, townhouse or condominium inspection) or for some other component, such as the roof, foundation, chimney, pool, heater, etc. One of the most frustrating – and sometimes maddening – experiences for everyone involved happens when these inspection reports disagree with each other.

Either extreme is bad, either “calling” something when it’s fine or missing something if it’s not.  Often resolution is accomplished by having yet another inspector come out OR by having the two who disagree meet at the property to sort it out.

Here are some real examples I’ve experienced first hand over the years while selling residential real estate in Santa Clara County:

1. Over-called: General property inspector called for “further inspection” of heater, roof, or chimney because he said something’s wrong.  Further inspection ordered by buyer or seller, and paid for by consumer – but the professional for that aspect of the home says it was just fine.  Is it fine or not? The home buyer or seller is out some money and one of the two reports says there’s a problem with it but the other says it’s OK.  (This happened a few times where the general inspector “called” things that experts said were in good working order.  For that reason, I had to stop recommending him to my clients and began working with another inspector who wasn’t so over-eager that he called things which were not bad.)
2. Crawl space nightmare:  many homes have crawl spaces and if yours does, it’s important to either go down there yourself or have someone else do it for you periodically to check conditions there.  My buyers were purchasing a home near Carlton Elementary in Cambrian (Los Gatos border) and the pre-sale pest or termite inspection (the only one available) was from a company with the absolute worst reputation in the valley, and that report said that there was not one thing wrong in a 50 year old house (highly unlikely!).  We ordered new inspections, both home & pest.  Both my inspectors found a lot of damage in the crawl space, amounting to about $10,000 in damage not reported by first inspector.  The seller’s inspector had claimed to go into the crawl but it was evident that either he didn’t go or he didn’t do it thoroughly.  The seller wanted his inspector’s company to do the repairs but we negotiated for a more reputable provider and got it.
3. My pre-sale chimney inspection, from a reputable inspector, said my listing’s fireplace and chimney were fine (Los Gatos border area, Alta Vista neighborhood).  We got the home sold and the buyers ordered a new chimney inspection, and that mason said it was broken.  My first inspector apologized for his error (after coming back out and looking at it again, verifying that it was, in fact, in need of fixing) and said he would do the repair at a reduced rate, but he couldn’t get to it prior to close of escrow.  We could not use him because this had to be done prior to close of escrow.  Since I had referred this man, I felt partly responsible for his error and offered to split the cost of the expensive chimney rebuilding with my clients. My sellers felt that was fair.  I never, ever hired that chimney guy again.
4. Another house, another chimney: my pre-sale general inspection cleared the chimney in this lovely Cambrian Park home.  Buyers ordered a chimney inspection to be sure and a young kid (maybe 18 years old?) came out and said the chimney was broken and needed repairing. My sellers paid for another chimney inspection, and a seasoned mason looked at it and said it was fine.  The other agent and I arranged to have our seasoned mason and the boss of the young kid come out and both inspect it with everyone present.  They did and said it was, in fact, fine.  The young kid was there and I asked him why he “called” it. He responded, “I wasn’t sure so thought it was safer to have it rebuilt”. (At a cost of about $2000 as I recall!) My sellers were out about $100 for their inspection but did not have to rebuild the chimney.

There are other inspector disagreements which can cause stress, confusion and upset too.  Sometimes it’s the best solution to something amiss.  At other times it may be the level of danger present with a problem.

“Gray areas” are also problematic: Recently I had two inspectors, both of whom I trust and respect, disagree on whether or not the crawl space was safe to go into because it was extremely muddy.  If there’s standing water in the crawl, most inspectors won’t go in because it’s dangerous (fear of electrical shock if there are any wires present – and usually, in the crawl areas there are wires).  If it’s muddy, apparently some will go in and some will not (concerns about shock and chemical hazards, per link above).  In the case of my inspection, one inspector didn’t want to go in but the second one did – which confused and upset my home buyer because he felt that if one of them could go in, both could. I phoned and explained my buyer’s upset and that inspector did return and do the crawl.  But it was with great misgivings because he wasn’t convinced it was safe.  That said, there was a LOT of damage under the home (so much so that my client canceled the sale). Had they not gone into the crawl, the results would have been disastrous for my client.

I have searched on several professional inspection websites and not been able to find an answer to this last question about muddy crawls. There’s certainly support online for being wary about them, but apparently not everyone is equally concerned so it does not appear to be a hard and fast rule or guideline.  For standing water, yes – it’s definitely a “no entry” situation. But for muddy it remains unclear, as far as I can tell.

One of the best ways to avoid having conflicts is to hire exceptionally good inspectors.  Most of the time, they will agree – they will not “over call” nor will they miss things.  Of course inspectors are human and can have a bad day, get distracted, or simply make a mistake.  If that happens, most of them will go out of their way to try to “make it right” one way or the other.  When they do, we know that they can be trusted inspecting our clients’ homes or future homes and that they will do their best to give buyers and sellers the best information available.

For further reading:

Would You Recognize Signs of Subterranean Termites If You Saw Them?

Choosing Vendors When Buying & Selling Homes in Silicon Valley

What is Cellulose Debris?

American Society of Home Inspectors

California Real Estate Inspection Association

Pest Control Operators of California

Buying or selling a Silicon Valley home? Be prepared for an onslought of paperwork.  There will be many questions you’ll be required to answer carefully (if selling) or to read and understand thoroughly (if buying) plus many other documents such as  inspections, reports, and boilerplate (templated or generic) disclosures.  Sometimes the language used will be technical or complicated, so you may need to do a little research as you see the questions.  Here’s a list of some of what you’ll be reading or responsible for completing or ordering, not necessarily in this order:

• the purchase agreement, any addenda & contract disclosures (appx 12 -20 pages in most cases)
• a preliminary title report and possibly CC & Rs (Covenants, Conditions and Restrictions)
• if the home is a condo, townhouse or PUD, docs pertaining to the home owner’s association (can run hundreds of pages)
• the standard disclosures common in our area which require the seller to answer questions about the home, yard and area (appx 15-25 pages)
• a natural hazard report (stating whether the home’s in an earthquake zone, flood plain etc.), environmental hazard report (whether there are leaking underground storage tanks and such), tax report (any extra bonds or assessments that will show up on your property tax bill) and other area disclosures ordered by the seller and provided by a company such as JCP, Property ID and other firms (appx 80 pages)
• inspections: usually pest and home are ordered, often also chimney, roof, possibly others such as pool or other specific components of the home (varies but often at least 40 or 50 pages, frequently more)
• for buyers: disclosures on their loan
• for sellers: the listing agreement and disclosures related to it
• at the time of signing the final papers: escrow instructions and lots of forms for transferring title – you will also see the reports seen previously too
• additionally, some real estate brokerages have a lot of their own disclosure forms too
• if the sale is a relocation, there will be a lot of relo papers to complete as well
• if it is a short sale or bank owned home, you will have extra paperwork for that also

By the time it’s all said and done, you will have reviewed several hundred pages of paperwork that are several inches high if stacked. All of this can make consumers a little bit crazy, particularly when there forms which are very nearly duplicates. (It may be a little less if it’s a trustee sale or probate, but only a little less.)

Why is there so much of it?

For the most part, the disclosures, reports and inspections are consumer protection driven.  It is extraordinarily important for home buyers to have a full and complete understanding of what they’re taking on when purchasing a home. 

Disclosures are key: Sellers must provide information on anything which would “materially impact value or desireability“, so have disclosure forms to assist with that goal. These questions are intended to help the sellers to cover areas that might not occur to them without prompting. For example,  some sellers wouldn’t think a death on the property matters, but some buyers would, so there’s a question on one of the forms about that.  (The law in CA is that a death on the property within the last 3 years must be volunteered by the seller without asking by the buyer. They don’t have to offer that information if the death happened more than 3 years ago, but if a buyer asks about it, the seller is obliged to answer truthfully.)

Many of the questions, or nuances within the questions, are the result of a lawsuit at some point.  So to omit some “wiggle room”, the question was added or modified (usually to make it broader).  When you see questions that make you wonder, it’s pretty safe to assume that somewhere along the line, someone sued someone else over that very issue. (For example, “land fill” is now called just “fill” on a question asking about its presence since there was a lawsuit involving a Willow Glen home owner’s use of medical waste products as fill in a back yard. Gross, but true.)

Sellers sometimes do not want to answer the disclosure questions carefully  or truthfully because either they don’t want to spend the time or for fear that it will put off a buyer.  They sometimes think that a problem in the past was remedied so it’s no longer necessary to mention the issue. That’s just not true – the obligation includes explaining past issues that were fixed or repaired.  The #1 cause of real estate lawsuit is non-disclosure by seller to buyer.  The best way to keep the money you make on your home sale is to be very truthful and complete in your disclosure (not under-disclosing a problem).  Plan to spend at least 2 or 3 hours responding thoughtfully to the disclosure questions and trying to recall if there’s anything else not covered in the questions which ought to be disclosed.

Buyers sometimes do not want to be bothered to carefully read and understand the paperwork they were given.  Later, they may insist that they weren’t told about this or that, but a review of the disclosures or inspections may reveal that they were told but either didn’t read it or simply didn’t remember it.  It is very hard to take in and retain everything when buying a house, particularly because there are so many papers to go through.  But the best way to avoid an unpleasant suprise later is to take your time with the purchase paperwork now.  Read it as you get it: do not ignore it and think it’ll be OK to skim it at the last minute. In some cases you may read something that will warrant further inspection, asking the seller more questions or may even make you want to run it by an attorney.  If this happens you’ll need time so it’s imperative to take the info you’re given seriously and address it soon. 

Buyers, this is probably the biggest purchase you will ever make.  It is extremely important to take your time understanding as much as possible with the paperwork.  Sellers, you want to be done when you sell the home and not have a problem arise later due to non-disclosure or under-disclosure.  Be thorough and complete and you will be protecting yourself.

Many, many years ago, when I was a new agent, a friend of mine (who wasn’t a Realtor) suggested to me that being a listing agent takes knowledge and skill but “anyone could drive buyers around in their car”.  I was stunned that she could think that buyers’ agents do nothing more than drive from house to house and unlock doors for people. 

Lockbox and Keysafe Set

Last weekend I held a listing in Saratoga open and a young couple asked me if I could work with them in writing the offer on that home.  This happens a lot – buyers are out searching on their own, independent of any professional real estate guidance, and when they find a home they like they just “use” the agent who’s got the listing.

Apparently, the old view and the current one aren’t so different from each other.  It amounts to this: who needs a buyer’s agent?

The assumptions seem to be these:

• agents are all the same (anyone will do)
• buyer’s agents do not really “do” anything or “know” anything
• if I just working with the listing agent, he or she will make sure my offer is accepted
• maybe I’ll get it cheaper if the listing agent also works for me

 This is very misguided and generally shows a lack of understanding (and possibly discernment).  Would you buy a car without researching it on Edmunds.com or ConsumerReports.org?  I hope not. Would you just see any doctor for surgery?  Or any attorney for your legal issues?  Probably not – you’d probably do a little research, maybe ask around for referrals.  Even my kids like to check RateMyProfessor.com before deciding on a college class to take.  Many home buyers, though, are not so discerning – they will just work with whomever happens to be the listing agent on a home.  This is a mistake.

Why does it matter so much?  Because your agent’s skills can make or break  your decision-making by catching or missing important elements which are crucial to your getting the best home or best deal.  If you don’t have good info, you will have a hard time making a good decision.  A bad agent may miss “red flags” and this could cost you! 

What kind of “red flags” would a good buyer’s agent notice? All kinds!  Real estate professionals are trained to issue spot – that is, to point out any defects they might detect (see, smell, hear, or feel) and further, to explain to you what the ramifications might be and give you professional guidance.  Agents are not property inspectors, but they know enough to be able to convey to you a likely scenario if there is a red flag with the home or yard. 

Red flags can be found

• in a property (things like moldy spots, out of level floors, additions which appear to not be permitted)
• in a neighborhood (the home being close to buildings, freeways or other things which might pull down property values)
• in the purchase agreement, counter offer or addenda - clauses worked into or omitted from a contract might be easy for you to miss, but a good buyer’s agent will catch these things and explain the ramifications to you
• in the timelines – your agent can shepherd along the myriad of things which must be done on time and will notice if the other side is not performing whatever they need to do on time also

Additionally, a good, competant buyer’s agent can negotiate for you and with you.  Negotiation begins long before you ever walk into a property that you want to buy.  It begins with the way you set up your financing more than anything else.  All loans, all banks are not the same.  Same with your letter from your lender – they are not all the same!  Your buyer’s agent will help you to make sure that even before you find your dream home in Silicon Valley, you’ll  be poised for success.  Further, of course, your buyer’s agent can assist you in writing a good, clean offer that will entice the seller to want to work with you.  A badly written offer (full of errors or clauses which muddy up the offer) will often cause your contract to be passed up if there are multiple offers. 

Comprehending the disclosures and inspections is another area where your agent’s skill is paramount to you.  If he or she glosses over things like the preliminary title report, TDS, Natural Hazard Report or many other disclosures or reports or never adequately conveys the risks associated with various disclosure items, you could find yourself paying for it in the long run.

Also, of course, there’s navigating the escrow.  Sometimes finding the house and getting the offer accepted are the easy parts of home buying in Santa Clara County – the real work may just begin as the ink dries on your contract!  Unforeseen things happen and a good agent finds ways of addressing the problem, concern, issue or surprise.  In a way, it’s like surfing – we know that the waves are going to come and it’s up to us to have the skill to ride them. 

Just because a real estate professional has a listing or or is holding a home open doesn’t mean you should hire him or her.  The newest agents tend to hold homes open.  Some agents get their first listings not because of experience or skill, but because the owner is a relative or old friend.  You can and should hire carefully.  Check the Department of Real Esate’s website to see how long the licensee has had that license.  You might also consider finding one with extensive buyer representation experience or an Accredited Buyer’s Representative (ABR – I’m one).

Buying a house, townhouse or condominium will be the most expensive purchase you are likely to make for a very long time.  Your agent is your partner, teacher, coach, navigator, paper handler, translator, mentor.  Above all, your agent is to be your fiduciary – to take care of you and your money and your position as if it were his or her own.  That is your agent’s highest duty.  Not ever agent selling homes in the San Jose area is equally adept at all of these important elements, so find, select and hire the very best.

How much extra money will it take, beyond the downpayment, to purchase a home in San Jose or Santa Clara County? The answer varies, depending on what, where, and how you buy. Today I’ll offer some general information on home buyer’s closing costs in Silicon Valley.

Just need a rule of thumb on the costs? A generalization, a really rough estimate is two percent of the purchase price, but your actual figure could be substantially more or less. If your loan is a “zero point” product and if you do not need to pay for inspections, your costs should be between .5% and 1% of your purchase price. If you buy a home that needs a lot of inspections and specialized ones to boot (structural engineering report), your costs will be higher.

What makes residential real estate closing costs vary so much?

• The City of San Jose charges a transfer tax which is normally split 50/50 between buyer and seller. The cost is $1.165 per thousand each for buyer and seller (so for a $600,000 purchase price, $990 each)
• Short sales and bank owned properties usually do not have pre-sale inspections available, so you will need to pay for all inspections (this is often a good idea anyway, but at least if the seller has some inspections available you can know whether you’re seriously interested in the property before spending hundreds of dollars on those reports)
• Condominiums and Townhomes will have HOA (Home Owner Association) transfer fees that you’ll have to pay when buying (they also charge the seller hundreds to provide you with a complete packet of documents on the minutes, budget, articles of incorporation, bylaws, newsletters etc.). Often this is about $300.
• Some neighborhoods may have extra bonds and assessments that residents have voted in, and these raise your property tax bill.
• Loan fees can range from a few hundred dollars to several thousand, depending on the mortgage program you choose. Points paid at close of escrow may be a worthwhile strategy for you – discuss it with your lender and your tax professional!
• Are you buying a home “As Is”? If so, expect repairs to be needed even if the home “looks great”. It is not untypical for a house to require about 2% of the home value in upgrades and fixes, so if buying “as is”, factor that in, especially if there are no pre-sale inspections!

What do inspections cost?

Roof inspections run between about $80 to $120 for most houses, but larger homes or those with special conditions may cost more.

Chimney inspections usually cost close to $100 too. Naturally the charge will be higher for more than one fireplace or chimney per home.

Property or house inspections are less expensive when the home is smaller, newer, and there’s no crawl space (usually). A tiny condo might be a couple or three hundred dollars. A large house of 5,000 square feet to 10,000 SF will be far more expensive, perhaps over a thousand dollars. Typical house? About $450.

Pest inspections likewise are less expensive on smaller, younger properties and more expensive on larger, older ones. Typical fee is appx $250.

Many or perhaps most inspection companies have two prices, with a good discount is usually offered if you pay the day that the inspection is performed. Either way, if you order the inspection, you are obligated to pay, even if you later decide to not complete the purchase of the home.

For most buyers of single family houses, budget in about a thousand dollars for inspections. You may need to do other inspections too, though, if something is uncovered in the home inspection. For instance, you may need a heating specialist to look at the furnace, an electrician to estimate repairing safety issues, or other specialists. If you need a foundating or soils expert, it will be very costly. If you are in a remote area of San Jose, you may need well water tested, a septic tank tested, or other atypical inspections and you’ll need to budget in more for these.

What are other typical closing costs for home buyers?

Your loan fees you’ll need to obtain from your lender. The appraisal fee is usually paid upfront and the cost is based on the size of the home, normally a few hundred dollars ($300 to $500 is the typical range, but again it varies).

The title company will charge a notary fee ($10 per signature on notarized documents), a fee for printing your loan papers (if they come by email, which is normal now, often about $300), a fee for the lender’s policy of title insurance (based on the purchase price of your home, often more than a thousand dollars), and possibly other misc fees to cover their paperwork.

Most lenders are looking for 20% down, and you will need to also have money set aside for closing costs (about 2% for many buyers) and finally also “reserves”. The bank wants to know that you have money “just in case”. Each lender will have a different guideline but some are looking for as much as six months of reserves.

That said, FHA loans are available up to $729,950 this year and they only require 3.5% down, so definitely talk to your lender if you are not in the 20% down category! The interest rates on FHA loans are very competitive. Purchases using these programs have more red tape and are more work all around, but it’s a great opportunity to get into a home when there’s not a lot of downpayment money to go around.

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.

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.  Buyers will pay more IF they feel that your home is a better value.

There are a number of things which need to be done for that to occur, 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 condominium and potentially unknown risks. (Buyers are thinking “risk, risk, risk” and “beware of hidden costs”!) 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.

On a business level,  buyers want to feel that there will not be surprise costs (“hidden risk” or “hidden costs”) which will only be discovered later, either after they’re in escrow and have paid for an appraisal and inspections, or worse, after they’ve moved in.   It is not so hard to alleviate this buyer fear: simply provide pre-sale inspections so that the potential home buyer understands the true condition of the home.

If your home’s new owner can review the inspections, and even your disclosures, prior to writing an offer you’ll get a stronger contract to start with and will be far less likely to receive further negotiation attempts in escrow (which are usually the result of a surprise when a buyer has inspections).  Remember, once you’re in contract to sell the home, any negotiation from that point on will be in the buyer’s favor – the sales price never goes up in the middle of escrow!  So prevent surprises, remove the risk, and you’ll both get a stronger offer to begin with and likely prevent renegotiation later.

Inspections can cost up to a thousand dollars in most situations (condos will be less than large luxury homes of course) but having pre-sale inspections probably boosts the sales price a percent or two at least, so it’s money well spent, in my experience.  What inspections should you get? I’ve written about it elsewhere, but in most cases you’ll want a pest report at a minimum and probably a home inspection too.  In some cases you’ll want a chimney, roof,  pool, or other component inspected as well.

Once you’ve had the inspections done, you may be surprised to learn that there are some issues with the property. This is normal in homes that are not new, of course, but buyers have a few major areas that they worry about more than others: foundation, roof, electrical, plumming, termites and other pests.   The list of potential issues is long, but many are minor and they won’t be a big selling hurdle.  Depending on what comes out of the inspection reports, you may selectively fix items you choose (and, I would suggest, that your real estate agent advises). 

It is imperative is to do this before the home’s on the market, before a buyer is writing an offer.  This way, you can take your time, get multiple bids, and perhaps do the work in a less costly fashion than if you’re in escrow and under pressure with some contractual restrictions and you have the advantage of presenting less risk to an interested buyer since the home’s condition is no longer a mystery.  Often, if you inspect and pick key repairs and do them prior to marketing the home, you will be able to sell As Is once you do try to sell the property.

So to summarize the “business” angle, it’s important to learn the true condition of the home via professional inspections, possibly select key areas to address prior to selling the property and then making the inspections and repairs known to potential buyers upfront.

What about the “emotional” side of the equation?

This is just as important, because buyers have to like your property if they want to live in it (not true with investment buyers, of course – in that case the numbers just have to make sense).  It’s almost like dating: there has to be a spark of attraction to get the buyer to commit.   Creating that spark is what staging is all about.  We want to make your townhome, condo or house appeal to the broadest range of potential buyers possible.  It is time to make your home about them, about your audience, rather than about you.

Staging is the topic of a boatload of books and I won’t pretend to do it justice in this one small post, but I will touch on it because staging is key to your maximizing your home’s market value.  I do not mean storing your furniture and renting new (however if your property is vacant, it may be a good idea to bring some furniture in).  I’m talking about “lipstick and rouge”, not reconstructive surgery.

The best return on your dollar for pre-sale preparation, after inspections, are cosmetic rather than structural changes. It’s nearly impossible to say what one item would “return” by itself, but as a package, you may see a 3 to 1 return on investment for minor changes.  Depending on your real estate, these could include:

• freshening up the front landscaping, including putting color near the front door (annuals, possibly in pots)
• cleaning the home, inside and out, including fixtures, windows, etc.
• removing odors (pets, cooking, insense, smoking)
• fresh paint, inside and out (as needed – often is needed!)
• new floor coverings (usually needed)
• declutter your home, including the inside of closets, cabinets, storage areas (consider renting a storage pod if needed)
• depersonalize (remove your unique “stamp” on the home so that buyers can envision themselves moving in)

I have gone through a two day staging course and do help my clients with all of the above, but can also recommend people who are professional stagers who will not only advise, but also assist, you in organizing all of the above.

What about big ticket items, like remodeling the kitchen? Usually those won’t pay you back the full cost of the improvement, but “touching up” the kitchen will.  For instance, let’s say you have a 30 or 40 year old kitchen.  Should you tear it out and remodel it to sell? No, but you’d probably get your money back by updating it a little so that it feels new: put in new appliances, a new countertop, and paint the cabinets (example only! this is not advice for homes I haven’t seen!)

It is very important to make your home attractive in the front so that buyers want to come into the home, and it’s just as key to make the inside feel spacious and clean.  If a home is structurally solid but filthy, most buyers will be very concerned about what they cannot see and any offers you get will be lower than the property’s potential.

In summary, to get top dollar when you sell your home and to increase the odds that you can sell it As Is, you need to do a fair amount of work upfront, before a buyer ever crosses the threshold or a for sale sign graces your front yard.  Get the home inspected professionally, take care of some key issues and then prepare your home aesthetically so that buyers want to come in, linger, and eventually write a great offer on your property.

How much should all of this cost? Typically, preparing a home to sell for its maximum worth on the market will cost about 1-2% of the home’s value (rule of thumb), including inspections, repairs, and staging.  For cash-strapped sellers, some of these can be billed to escrow but there will be a price for it. Inspections are usually billed at two rates: upfront payments will provide a substantial discount.  There are real estate affiliates which install carpet or other floorcoverings and will bill to escrow, or at a minimum wait 60 days to be paid, but as with the inspectors, these vendors will usually charge less if you can pay them upfront.

As mentioned above, it’s hard to say what any one component done by itself will net you in terms of return.  If you improve the interior of the home but don’t make the front yard attractive and welcoming, you may not get the traffic to bring you the desired return.  Or if you make cosmetic changes but don’t do inspections, the buyers will have concerns that your 40 year old house is full of issues with the electrical, plumming, or roof. So it’s not possible to say, “if I spend $1000 on carpeting I’ll get $3000 back in the sales price” because that’s looking at each element individually – it has to be a package deal to work.  It’s important to address both sides of the equation as to how buyers will feel about financial risk and attractiveness.  If done correctly, the right pre-sale work can bring you two to three or more times back the cost in a boosted sales price plus fewer renegotiations once you are in contract. With my clients, I will not ask them to have work done unless they’ll get back more than they put into it.  In one case in Santa Clara, I had the sellers spend $7000 in pre-sale inspections and work, and our return on investment was about $21,000 more in sales price (this was on a $500,000 home, so the “investment” was almost 1.5% and the return was about a 4% higher sales price). So they were very happy!

For more information on this topic, please see my book, “Get The Best Deal When Selling Your Home In Silicon Valley“, which is available at many local libraries, bookstores, on Amazon or from me should you interview me to possibly represent you in the sale of your home (my book is my gift to potential clients).

About the author of this post: I am Mary Pope-Handy, a Silicon Valley Realtor (second generation), working full time and successfully selling Santa Clara County real estate since 1993. Specializing in west valley homes (Almaden Valley, Cambrian Park, Los Gatos, Monte Sereno, Saratoga, Campbell and nearby), but work all of the southern San Francisco Bay Area.  I have an extensive educational background & experience  and am the holder of numerous realty awards and designations.  Additionally, I’m a featured speaker at real estate events and am well known in the realty community.  To learn more, please see my profile online.

To learn more about selling your home for top dollar, please continue reading more about what it takes on my popehandy.com website “Sale Success” article.