How common are “all cash” transactions for Silicon Valley real estate right now?  Throughout Santa Clara County, they were 20% of all sales among houses, duet homes, condominiums and townhouses (class 1 and class 2, does not include mobile homes, 2-4plex or apartment buildings or raw land).

Some areas and some types of sales are more frequently all cash than others.  Here are a few quick stats for the last month (last 30 days from today – numbers from MLSListings, crunched by me – disclaimer on good intentions but no guarantee):

• Santa Clara County: 20% all cash
• San Jose (entire city): 24% all cash
• San Jose short sales: 33% all cash
• San Jose bank owned or REO sales: 37% all cash
• Short sales & REOs were 48% of all sales in San Jose in the last month
• Of SJ homes listed at $300,000 or less: 48% all cash
• Los Gatos & Monte Sereno: zero sales all cash
• Saratoga: 29% all cash
• Almaden Valley area of San Jose: 14% all cash

Some of these sales will have no financing and the new owners will occupy the home.  Particularly in lower priced homes, though, these are investor buyers who will be renting out the property.  This is often the case with the lower price distressed properties in particular.  In higher priced homes, some new owners will put financing on the property after close of escrow.

With the crazy new demands that keep coming at us from banks and new requirements being imposed on appraisers, now more than ever, cash is king.  That doesn’t mean that the cash buyer will get a deep discount, but there will be a slight one in most cases and certainly preferential treatment that will create a great advantage in multiple offer situations.

Learn more about buying and selling Silicon Valley real estate with cash offers:

Cash offers: what do you need to know if buying “all cash”?

Q & A: Making an Offer

What’s My Silicon Valley Home Worth? Estimating the Probable Buyer’s Value  (financing impacts market value)

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). (more…)

Silicon Valley real estate offers few simple answers but many recurring questions. One of them is whether or not you should write a “lowball offer“. So the first question is this: what makes an offer a lowball one?

It’s entirely relative to how the market in that area (not the county, not the state, but that particular area) is selling.  If houses in one area of San Jose are selling within 1% of list price and you come in 5% under, the seller may feel insulted.  But if properties are routinely selling at 10% under list price and your offer is at 13% under, that’s not such a big deal. So keep an eye on that.

Most of all, you need to run the comps and pinpoint the pricing.  Sometimes the list price is LOWER than market value and in that case, the seller is probably expecting overbids. In other cases, the seller may be way high just to “test the market“.  At other times, the Santa Clara County area home is priced exactly at what the market can bear.  So you and your agent must absolutely crunch the numbers to establish the probable buyer’s value or probable market value for that particular piece of San Jose area real estate.

If you do submit a lowfall offer realize that the risk is that the seller will be insulted and then won’t be amenable to negotiation.  What I see most often is that a low initial offer results in a very high counter offer.  (E.G., house is listed for $1 million, offer comes in at $800,000 and seller counters to $995,000.) Throwing a lowball offer out on a home you REALLY want is probably not a very wise idea as the net result will probably not be favorable to your own interests.

Good negotiation is to be expected but if done poorly or overly aggressively, it can really backfire! So crunch the numbers, be sensitive to the local situation, and put a good foot forward.

If you are purchasing your Silicon Valley home “all cash”, you will be in a stronger negotiating position.  Most of the time, you will get a slight discount on the price and the escrow period should be smoother as there will be fewer hurdles with no financing contingency.  Sellers always welcome cash offers, especially now.

What do you need to know if writing an all-cash real estate offer?

First, make sure you really do have your funds available or “liquid”.  Sometimes buyers think that because they have stock worth a certain amount of money, funds in an overseas bank account or equity in another property they will have access to that cash almost immediately.  It often doesn’t work that way.

Large sums of money coming from out of the United States may have to sit in a bank account for some time, possibly 30 days.  Domestic wire transfers usually have little or no hold time. Is your money overseas? You may want to consider moving it well in advance of the close of escrow. Speak with your escrow officer and Realtor about the details. (more…)

Silicon Valley home buyers sit on pins & needles once they have written their contract to purchase property.  They wait and wonder and may have trouble sleeping while they expect a response. This is normal, of course. It’s hard to wait.

What happens after the Silicon Valley real estate contract is signed?

Sometimes, offers are presented in person by your buyer’s agent directly to the listing agent and sellers and there may be a nearly immediate response, or at least something soon after – within a few hours.  More often, though, now offers are presented by email to the listing agent, who in turn gets it to the seller either at a personal meeting or also by email.  Most of the time there is a counter offer, but sometimes there was enough communication ahead of time between the agents that in fact an offer is written in an acceptable fashion and is simply accepted by the sellers without any counter (or there were multiple offers and one was good enough to accept without a counter).

Some real estate trainers insist that every offer should get a counter offer – sellers should never simply accept the contract presented by the buyers

Some real estate trainers (who are teaching Silicon Valley real estate agents what to do) insist that every offer should always be countered so that buyers do not later worry that they overpaid. “Make them work for it” so they don’t have buyer’s remorse is the theory.  The bigger the fear of “buyer’s remorse”, the more likely that the agent will further negotiate the offer – at least a little. (more…)

Do you really want to buy a Silicon Valley home, or do you just want to write offers to see what will happen?  Some folks, who appear to resemble serious home buyers, write offers that are riddled with reasons why the seller should reject their offer, or at the very least write a very tough, high counter offer in response.

What kinds of things in a purchase contract make a bad impression on home sellers in the San Jose area?  Here’s  a list of things buyers (or their agents) have done I’ve seen recently which turned the tone negative when it didn’t have to be:

• On the good faith deposit check, don’t write the name of the title company.
• On the memo section of the check, write something vague or possibly nasty, such as “deposit for budget property”.
• On the contract, don’t write the seller’s name anywhere. Instead, write “Owner of Record”. Sounds like a bank owns it, but no matter what, it indicates that you don’t care who owns it.
• On the contract, omit the listing agent’s info in the agency confirmation and offer signature pages.
• Make a low offer, and if you are countered up in price, counter back to your original price.
• If the seller indicates that your offer is being reviewed favorably and that the seller is probably going to take it, ask the listing agent “is there any room still to negotiate?” and promptly cancel and submit a new offer which is 10% lower.
• Write offers on more than one property at once – even though you can only purchase one.  (That’s called “acting in bad faith”, even if it is a short sale.)
• Ask the seller to pay for everything, even items which are normally paid for by the buyer.
• If the MLS says that something is omitted or excluded from the sale, don’t mention it in your contract.
• If the MLS provides information on disclosures, inspections and reports, don’t bother looking at them before you write and submit your offer.

I’ve seen all of these just in the last couple of months.  Buyers and their Realtors need to remember that buying and selling houses, condos and homes in Santa Clara County (and everywhere else) is emotional as well as a business decision.  Being rude, inattentive, uncaring and generally not following instructions is not a good negotiation strategy!

The offer is the courting period.  If you are not polite and professional then, what will you be like in escrow?  Your offer is your first impression. If you want to buy real estate, make it a strongly good impression!

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

Don’t count on it.

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

My usuall advice to buyers is this: if you don’t think that the home is worth within 5% of list price, then keep looking until you find a home that is.  Most of the time, sellers aren’t prepared to come down more than a few percent. 
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