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?
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A couple of days ago, I showed a home for sale along the Los Gatos border with Cambrian Park (area of San Jose) to a buyer couple.  It’s tenant occupied, was pretty much a mess  (and on top of being in disarray was dark – curains drawn, no lights on etc.) and the person who lived there walked us through the property, telling us things about the owners and the situation that really didn’t make my buyers want to purchase the home at all.  Between the condition of the property and the info-packed narrative, my clients could not wait to leave.   No sale!

If you own income property (or rental property) in Silicon Valley and want to sell it, you may be aware that a 1031 tax deferred exchange is something to consider.  What you may not remember to do is to strategize about what to do with your tenants.  How do you get them to be cooperative, responsive to showing requests and neat? And preferably, to be absent or at least quiet and out of the way when the home is shown?

When residential real estate is for sale, the occupants’ lives are turned upside down.  It’s no small amount of inconvenience and risk to them with the traffic in and out, the calls at all hours, the loss of privacy and on top of everything else, the risk of personal propertybeing stolen.  If you are a homeowner, you are motivated because you will get cash out of the deal at close of escrow.  If you are a renter and the home you’re renting or leasing suddenly goes on the market, there’s not really a “silver lining” built into the scenario most of the time.  That can set the stage for trouble and even financial loss.
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A very common seller concern, understandably, is selling the home for too little money.  Oftentimes they want to price their Silicon Valley home so that they “have room to negotiate” and “don’t leave too much money on the table”. 

The trick is in figuring out how much room you really need to negotiate and at what point you’re dramatically hurting your chances of selling by overpricing. Where’s the tipping point?

Let’s do some mythical math – let’s say a 4 bed, 2 bath home in Los Gatos or Almaden Valley is worth approximately $1,000,000 (depending on terms like “As Is”, the loan type or all cash, free rent back, etc., the probable sales price range might go from about $975,000 to $1,025,000). 

If the home’s likely value on the market is worth about one million, many agents will suggest listing the home at about $999,000 in order to get buyers who may not search over the $1 million mark and to drum up interest, traffic, and hopefully at least one offer.

Saavy and experienced agents know that most homes sell fairly close to list price in today’s market (Almaden Valley houses are selling, on average, at 99% of list price and Los Gatos homes are selling at an average of 97% of list price), so most would not want to go beyond that percentage – whatever it is – since we also know that most homes are not selling.  Five percent over probable list price is ususually the upper limits of what may be wise positioning.   In the case of our mythical million dollar home, the highest that some agents would see as potentially viable might be $1,050,000 – but many others would not venture that high, feeling it creates a big risk of the home sitting on the market too long and ultimately selling for much less if the home is perceived as shopworn. They might place the upper limit at $1,025,000 or close to there.

Sellers, though, sometimes see the numbers but want to list their home higher – perhaps 10% higher or more over probable market value.  Why is this so often the case?

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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.  There are a number of things which must be done for that to happen, 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 condo and potentially unknown risks.  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.

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Yesterday some clients of mine asked me about seniors selling their home and purchasing another residence while keeping the older, lower property tax rate. I did a little digging and thought I’d share what I found.

There are actually two propositions involved.  Prop 60 applies to moves within Santa Clara County, and Prop 90 relates to moves between counties which are participating in this benefit to seniors (only these few, as of the date of this posting: Alameda, Los Angeles, Orange, San Diego, San Mateo, Santa Clara, Ventura).

Some of the basics:

• Homeowners 55 and older at the time of sale of the original property.
• Homeowner must be on record both for the home that’s sold and the replacement property.
• The replacement residence must be equal to or lesser in value than the original residence.
• There are special rules for multi-family (duplex, triplex, fourplex) properties and for mobile homes.

In the most typical scenario, a senior homeowner would sell a house (or townhome or condo) and “downsize” to another, less expensive, smaller house or condo.  If the homeowner had been in the first property for a very long time, then the low tax rate would be hard to give up, but Props 60 and 90 enable that homeowner to go to another, less expensive home and carry the old tax rate along – one time, and either in the home county or in one of the participating counties. 

I have known seniors to sell a house in Los Gatos, Saratoga or San Jose and move to The Villages or to gated senior communities out of the area but closer to their grown kids and make use of these two propositions.

For more information and to get all the details, please click on the links above.

Silicon Valley home values are dropping, but it may not be as bad as you think. If you only read the headlines, you might think that the value of homes across the south bay has dropped 41% in the last year.  For example, Friday’s print edition of the San Jose Mercury news screams in its headline, “Median Home Price Dives 41%”. ( The online edition had a milder headline, Santa Clara County median home price plunges, sales rise.)

Have home prices really dropped 41% from a year ago?  No. (But it is critically important to know how much values are dropping, especially if you put your home on the market.)  The median home price is the number at which half of all sales were higher and half lower than that number.   For instance, if you had three homes sell, one at $300,000, one at $500,000 and one at $501,000, the “median home price” would be $500,000.   If you had five sell at $100,000 and three sell at $2,000,000, the median would be $100,000. You can see the problem.

What the median home price does explain is market heat, or where the market is most active.  Often, the median price tracks home values – but not always. And this is one of those times.

So how much value has been lost? It will vary from area to area, sometimes even block by block.  Loss in value will be tied to when either you bought the home or when your area was at its peak.  For many parts of San Jose and Silicon Valley, that peak was about 2 years ago, late 2006 to early 2007.

The best way to know what home values are doing is to study the comps, or the comparable home sales. It is easiest to do this in a tract neighborhood (we have no shortage of those in Santa Clara County).

For example, in the South San Jose zip code area of 95138, I took a sample tract home floorplan of 1355 square feet and charted it back over the last ten  years.    Here’s what the average price per SF was for that floorplan per year:

2009   $321.03  just one so far – $435,000
2008   $362.45   av sales price $483,870
2007   $470.55  av sales price $637,595
2006   $492.15  av sales price  $666,863
2005   $453.26  av sales price  $614,167
2004   $407.06  av sales price $551,566
2003   $332.39  av sales price  $450,388
2002   $334.46  av sales price $453,193
2001   $304.80  av sales price  $413,004
2000  $318.25  av sales price  $431,288
1999   $225.09  av sales price $304,996
1998   $205.35  av sales price  $278,249
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Visiting Silicon Valley and San Jose area open homes is a great way to get to know neighborhoods, architectural styles and the market overall. I encourage people thinking of buying or selling to visit the opens nearby to get a pulse on the market and what’s “out there”.  Normally it’s low pressure*.

*In terms of “pressure” at open houses, most Realtors and other realty professionals will let you go through the home at your own pace. Some will require a sign-in (often claiming that the seller requests this, but most often it is so that the agent can follow up with you later).  Once in awhile, though, you may bump into a “quantum” tour situation. With these, the agents are somewhat oppressive and require not only a log in by you but also insist that you only go through the home personally accompanied by one of their sales associates. The reason, of course, is “lead generation & conversion”. They want to increase the chances of getting clients out of the open home. The spin is personal attention.

Of course, the other extreme you may see is not high pressure, but nearly asleep. Some agents (maybe one in 20?) will not get up from the couch or table to even shake your hand and welcome you to the home. Hopefully you don’t run into this much!

A few open house tips, in terms of what to be aware of:

• feel the floor as you walk through the condo or house: is it level?
• smell the various rooms – are there candles or other scents intended to mask odors?
• note the light and time of day, as well as the direction the home and windows face and ask your self if the home gets adequate light for your taste
• is the layout good?
• is there enough storage?
• if there are problems with the home, can they be fixed?
• what needs updating or remodeling, or will need it soon?

The best homes will have presale inspections and disclosures completed which you can view prior to writing an offer.  It can be very helpful to familiarize yourself with the various reports, inspections, and disclosures so that you understand the range of normal. Older homes will not be defect free, and sellers will not make them perfect either – so get a feel for what to expect by perusing some of these if the binders are available during your open house. (Do understand that the agent is likely going to read it as a “buying signal” so explain that you just want to understand how the paperwork looks.)

For more tips on what to include when viewing Santa Clara County homes for sale, please see:
Viewing An Open Houseop  on my main website.