What should you look for when buying a luxury home in Silicon Valley? Whether it’s a move-up purchase or a first home, there are a few tips which will be helpful for you to know going into it that will make the whole home buying experience smoother and easier.  We’ll hit on 3 areas: first geography & construction, second hyper local factors that impact market value, and finally qualities or features of the property or house itself.

It’s hard to assign an exact price tag on what constitutes an estate or luxury property, but in and near Silicon Valley, in most regions it’s the $2,000,000 and up price point (it will be less in Morgan Hill, Coyote and Gilroy – and likely more in Hillsborough).

1. Geography and Bay Area Construction: it’s different here!

The first and most important thing to understand is that real estate and housing construction vary from one region of the country (or the world) to the next.  This is true for all types of homes, actually, but perhaps more obvious in the priciest homes. Luxury real estate in Silicon Valley is a little different from similarly expensive homes in other parts of the country due to our climate, soil conditions, and natural hazards, such as earthquakes. What seems mandatory for a high end home (and might be ideal to have elsewhere) could be a problem here, so it’s helpful to literally understand the lay of the land before you get too far along the home buying path. A couple of quick examples:

• A fabulous home in Boston or anywhere in New England may be built of brick.
• Here, a brick house is seldom seen because of earthquakes – we need our houses to move and bricks are not usually too good at that!

I mention these two upfront because well intentioned friends and relatives may want to stress the importance of this or that in a property – and it may simply not apply here. (Please see article: Qualify The Advice You’ll Accept When Buying or Selling a Home in Silicon Valley)  If you are non-native to the San Francisco Bay Area, you may have assumptions about construction or architecture that may not work here. Please just be aware of that possibility.

2. Understand the importance of hyper local factors on the market value of a property

Schools can be a main driver for home values in the luxury market as all other segments.  Home buyers may not know that the town or city boundaries are usually irrelevant to school district boundaries. Here are a few examples:

• In Saratoga  there are 3 high school districts and 4 elementary school districts.  Before buying anywhere in Saratoga, then, you’ll want to know which district is which and where you’re buying.  If you want to utilize private schools, you may be delighted to find that you can buy more house for your money in one area of this lovely city than another.  Or you may want one school area over another for any number of reasons.
• In Los Gatos there are 2 high school districts and 3 elementary school districts.
• In the Almaden Valley area of San Jose, there are 3 high school districts and 3 elementary school districts

Often the lesser public school districts will have a lower lid on pricing than the very top districts or schools, so it’s important, when analyzing the pricing of an estate home, to factor in the weight of the school. (more…)

Sometimes a  friend will call or email me and say that he or she is buying or selling a house, has a Realtor but wants my advice about the real estate purchase contract nuances, analyzing comps, or any other real estate related question. Usually it’s someone out of my Silicon Valley market area, though a few times it’s been someone closer to home.

Most professionals don’t want to be asked to give professional advice when they aren’t going to be compensated – this is true for lawyers, doctors, and many others.  But it’s also true for real estate professionals, too.  The problem, though, is not really that some folks overstep the bounds of asking for a favor. Instead, it is a matter of ethics.

I cannot interfere or meddle if you or they have a Realtor.  This is part of our Realtor Code of Ethics:

Code of Ethics
The Code establishes time-honored and baseline principles that come from the collective experiences of REALTORS® since the Code of Ethics was first established in 1913. Those principles can be loosely defined as:

• Loyalty to clients;
• Fiduciary (legal) duty to clients;
• Cooperation with competitors;
• Truthfulness in statements and advertising; and non-interference in exclusive relationships that other REALTORS® have with their clients.

Non Realtor real estate licensees also have boundaries on what they can and cannot do, too.  One big area is that we are not supposed to advice outside of our areas of competency.  I feel pretty good about a lot of areas ranging from Santa Cruz to the south to Redwood Shores to the north and Fremont, Pleasanton or Livermore on the east bay plus all of Santa Clara County.  But I don’t know Sacramento real estate, Santa Barbara Real Estate or San Diego real estate, so it would be wrong for me to suddenly delve into those arenas.  Even more so if that friend or relative asking “for a favor” were working with a Realtor or other real estate licensee and my commenting would constitute interference.

Frequently I’m asked if I (or another real estate licensee or agent) can help a consumer to purchase a foreclosure.  There are some nuances to this answer, but in short, it depends.

There are several stages in the foreclosure related sales in California.  Often, homes somewhere in this quagmire are listed on our Silicon Valley area MLS or multiple listing service.  If a property is listed in the MLS, then yes, we Realtors can help home buyers with a distressed sale purchase.

1. Pre-foreclosure (where payments have been missed and a Notice of Default or NOD has been filed – often, but not always, these homes are on the market and included in the MLS.  If they’re in the MLS, I can help.  Often these are short sales (but short sales are not always in pre-foreclosure – they may not have missed any payments).
2. Trustee’s sale, or actual foreclosure on the courthouse steps.  No role for a real estate agent here.  There are some big caveats and warnings! First,  often what’s owed against the home is more than it’s worth and the only way to purchase a home here is to pay off all the debts (so it may not be much of a deal!).  Second, if you buy here, you get NO inspection contingency and must pay cash for the house.  End of story – no backing out.  Worse, you cannot inspect it ahead of time!
3. Bank owned or REO.  These are usually listed on the MLS and if so, I can help you with it.  Sometimes banks hold onto them between the trustee’s sale and prior to listing them with a broker.  Often this is only for a month or two but sometimes it’s longer.  If it’s not on the MLS, it’s very very hard, or maybe impossible, to buy it.

While it’s not hard to locate homes where owners have missed some payments, it should not be assumed that these houses are either for sale or that the owners have any intention of selling them.  In my opinion, it would be harassment if consumers showed up on their doorsteps trying to purchase a house where a payment has been missed.  Most, maybe all, of the residents there would be offended.  They may be trying to get a loan modification (a friend of mine got one approved last week!) or have family & friends helping them to get back on track. If it is not listed in the MLS (which you can find at www.MLSListings.com – the public portal of our agent multiple listing service), the odds are overwhelmingly against it being available to you.

Should you sign the arbitration clause in your real estate listing or sales contract?  I can’t tell you.  Seriously. As a real estate licensee in California, I am not supposed to guide people to initial or not initial for it because that would be giving legal advice.  (Realtors and other real estate sales people are admonished not to provide, and are not qualified to give, either tax or legal advice.)

Arbitration is a choice that consumers have both when listing a home (between you and the brokerage/agent) and when selling a home (between you and the seller or buyer).  In reality, nearly all people do initial for arbitration, though, so many people do not feel that they really do have a choice. When you sell or buy your home here in Silicon Valley, there’s a very high probablilty (perhaps a certainty) that the other principals in the transaction will opt for arbitration – at least if it’s a “regular sale”.

With arbitration, if there were a big problem (not “small claims court” material), the issue would first go to non-binding mediation. That is, you’d all have to sit around the table (so to speak) and talk it through and try to find a resolution on your own. If mediation fails, then it would go before an arbitrator whom both sides would agree on. Usually they are retired superior court judges or someone with a lot of real estate law experience.  He or she would hear the case and decide. You only get one shot at it with arbitration, there’s no appeal if you’re unhappy with the decision.

With litigation you’re still supposed to do mediation first, but then if you go to trial and don’t like the decision rendered, you MAY be able to appeal it to a higher court if the system thinks you have a reasonable gripe about the decision. No guarantees, but the possibility exists.

The plus to arbitration is that it’s faster and cheaper. The plus to litigation is the right to continue to protest (appeal).
(more…)

Being an FHA home buyer in Silicon Valley is a challenge right now, especially if you want what everyone else wants: a nicely updated and remodeled home in a good area with no “issues”. (Issues meaning things like high voltage lines, busy roads, flood plains, or being too close to stores or spots not everyone wants to be near.)

The Problem with Condominiums and FHA

I need to start by explaining that things aren’t always the way they look.  We tend to think of condos as looking like apartments, with no yard, for example.  We think of townhomes as a two story or more home with neighbors on the sides but no one above or below.  And we think of houses as freestanding buildings with a yard around it.

That’s really how things look.  But how these different types of homes are owned may be another thing altogether.  For FHA home buyer purposes, this makes a huge difference.

Some townhouses and even some houses are not owned the way they look, but are held in condo ownership.   A good example of this is The Villas of Almaden, a beautiful &  gated community at Meridian and Coleman in San Jose’s Almaden Valley. Structurally, many of the buildings are houses – but they ar “condo ownership” and are stored under the condo label in our local MLS. What makes these buildings be condos? Practically speaking, in addition to their own space for their particular unit, the owners also own a percentage of everything else, such as the pool, grassy areas, tennis courts, private roads, etc. They also have a share of the liabilities of the condo community, too. 

If you are an FHA buyer and you want a San Jose area condo (or any home which is held in condo type ownership), you have to make sure the complex is FHA approved. We had the option of getting individual units spot checked until February 1st, but that has now been eliminated. Getting an entire complex approved takes time, perhaps 60 days, and money – and most buyers don’t want or cannot take on that kind of financial liability (and most sellers don’t want it either). Here is the link for the HUD site which will list for you the condo communities which are FHA approved.   So it is important to know if the townhouse you’re looking at is owned like a townhouse or owned like a condominium.  It can be painfully disappointing to think that a home can be bought with FHA backed financing, only to later discover that it can’t due to the type of ownership and lack of approval of the asociation.

(more…)

Recently I have been involved with multiple offer situations, both on the listing (seller) side and on the buyer side. All of the multiple offer bidding events have involved first time homebuyers and in every case, at least one or some of the offers were presented with FHA backed financing.

Sometimes agents rush when they write up the purchase contract, and the offer is not well done; we call that “sloppy” and it’s not helpful to your position as a would-be homebuyer.  As a buyer, you won’t know which box needs to be checked or which blank filled in, but there are big areas that you can double check to make sure that your offer is “clean”, which will present you in a more favorable light and increase the odds that your offer will be the one the seller and the listing agent will want to work with.

1. If your offer is an FHA offer, make sure that the box on page 1 says so (there are boxes for FHA and VA offers on page one of the California Association of Realtors contract)
2. Make sure that the numbers all add up – the initial deposit, the increase of deposit (if any), the loan amount and balance of cash downpayment should all be listed and should add up to the correct number for your total purchase price.
3. The “loan terms” are supposed to be specified too. What’s the interest rate? Are there any points being paid – and if so, by whom? Blanks in that area are a problem because you have a finance contingency which relies upon everyone knowing those terms. Be specific.
4. It is doubly important – no, triply important – that your offer comes with a soid pre-approval letter.
5. Make sure that you give your agent a check, or a photocopy of the check you’ll use if your offer is accepted.

Once the offer is drafted, your agent should go through it with you so that you understand all the clauses and terms.  Ask your agent to double check everything; it’s better to take a lilttle longer and make sure it’s right than to get it off fast but sloppy.

Recently I’ve seen a few FHA offers from agents who’d rushed and many or all of the items listed above were off. In one case, the agent didn’t even include the loan amount.  In two offers recently, the real estate licensee hadn’t checked the FHA box when the contract was dependent upon it going through as FHA.

(more…)

Are you interested in, or thinking of, buying a home in Los Gatos? If so, there’s a Los Gatos homebuyer “start kit” page full of information targeted directly at the needs of Los Gatos homebuyers. Whether you want to browse houses, condos, or neighborhoods, you’ll find tools to help you begin your homebuying journey there. It is a launch pad for loads of information, including:

• Los Gatos homes for sale – view by map
• Los Gatos homes for sale – broken down by price point
• Los Gatos real estate market reports
• Los Gatos home sales prices by map
• Information on Los Gatos neighborhoods, subdivisions and areas
• Information on Los Gatos schools
• Photos of Los Gatos
• Information on Los Gatos history, architecture, parks, and more

Please stop by and bookmark this site. It’s a very helpful “starting point” for buying a home in Los Gatos.