Tips for Silicon Valley Home Buyers
One of the most powerful tools in real estate is the truth. It can be surprisingly unpopular, though, as some home sellers and home buyers may not want to hear it or to tell the whole truth as required by law (and that may apply to their real estate agents as well).
Listing agents and sellers
Real estate agents sometimes accidentally miss the mark with pricing, and may tell a home seller a price that is too high, which of course usually causes the home not to sell – in fact, the main reason why a home won’t sell is having a price that’s too high.
Sometimes, though, the seller does not want to hear the agent’s honest assessment of value. Some sellers insist on a high price and may even challenge his or her agent to back it no matter what. I once had a seller tell me “I want to hear your enthusiasm for my price”. I could not do it in good conscience, and allowed that client to cancel the listing. I wasn’t going to lie and just say what that home owner wanted to hear.
Other times, agents may be afraid to tell the home seller the hard truth about the property condition, such as the need to paint over garish colors or replace tired, worn carpeting. It’s harder to tell the truth if sellers either bite your head off or cry when you are truthful with them. Buying and selling is stressful, and emotions can rise to the surface easily. If getting top dollar is important, it’s imperative that sellers welcome the truth, not fight it or pressure their agent to tell them what they want to hear.
Here are some of the hard truths for home sellers to understand:
A plat map comes with your preliminary title report (provided by your title company with maps from the Santa Clara County tax assessor’s office when you purchase or sell a home in California), tucked away at the back and somewhat mysterious with lots of numbers in small print. It holds quite a bit of helpful information if you know what it is you’re seeing. Today we’ll view a sample of one of these – breaking down the plat map shown as a small thumbnail image on the right to more readable parts so that you can learn how to “read” or understand a plat map.
Quick overview of what’s on a plat map
There’s a wealth of information on the plat map. Take a look and see what you can pick out on your own first.
Writing an offer on a home for sale takes time in Silicon Valley because here we front load a lot of the work, while in other areas, more is done in escrow or once the buyer is in contract.
Buyers and sellers do more in advance here
For instance, here it’s normal for buyers to have a pre-approval from a lender (not just a pre-qualification). In some areas of California, or other parts of the U.S., home buyers only apply for the loan after they are in contract.
On the seller’s side, it’s normal for the property owners to order and pay for inspections up front in the South Bay. These often include a home inspection, a roof inspection, and a termite or pest inspection (but there can be others).
Additionally, sellers provide completed disclosures upfront, including HOA documents, if that applies.
Since there are hundreds of pages in the disclosure packet provided, the sellers expect the buyers to read, accept, and sign off on them when submitting a purchase contract. In other, more rural parts of California, the seller might have nothing ready to review first, and the buyer would be expected to pay for all inspections after they are in contract. Things move much more slowly in those areas as compared to here.
In this article, I’ll go over what’s involved in writing an offer in the San Jose area and how much time buyers should allow. It is more complicated than it may appear, precisely because of the front loading I touched on above.
What is involved with writing an offer?
Deciding to submit an offer involves many elements, each of which require some time (not always done in this order): Continue reading
In many parts of the U.S., a buyer broker agreement is normally used between home buyers and their real estate agents, much like a listing agreement is used between sellers and theirs. It’s not so common in Silicon Valley, though. Often home buyers are a little spooked at the prospect of signing a contract for buyer representation & compensation.
My Realtor colleague and blogosphere friend, Elizabeth Weintraub, has a great article on this topic on About.com, Buyer’s Broker Agreements & Buyer’s Broker Contracts, in which she explains the various types of buyer contracts and agreements which are commonly found around the country. The one which is used the most, if one is used at all, is the “exclusive representation” (which again is similar to a listing agreement, which is also usually an “exclusive representation agreement”).
Why use a buyer broker agreement?
Why would anyone want to use a buyer contract? Whether you’re the consumer or the agent, the answer is pretty much the same: to have options. In my real estate practice, I do not request nor require a buyer contract as long as my buyer client is willing to purchase something from the selection available on the multiple listing service (MLS). If that isn’t enough, though, then we chat about the buyer’s options.
The probable buyer’s value for a home is very similar to market value, as a home is only worth what a buyer will pay. If the seller wants more, it won’t sell.
Sometimes it can be tricky to estimate what a home might sell for. I usually talk with my seller clients about trying to find the probable buyer’s value. The seller may have a range of prices that he or she anticipates and would accept. So too with the buyer, whose range will likely be lower than the seller’s. The key is finding where the buyer and seller price ranges overlap. If it’s unlikely that their ranges overlap at all, we’ll have a listing that is difficult or impossible to sell.
Let’s take a hypothetical case of a home worth about a million dollars (see image above). The seller would love for the property to sell close to $1,040,000. The buyer would like to purchase it for $960,000. The agent’s competitive market analysis indicates that similar homes have sold or are selling at around a million dollars, give or take a percent or two. If the buyer and seller can come to a meeting of the minds, and there’s no undue pressure on either one of them, we have (hopefully) a sale and we have market value.
But as we know, sometimes homes sell for much more than they would seem to be worth, and other times much less.
What causes property values to go above or below what would seem to be the probable value? Undue pressure can certainly cause values to rise (desperate buyer who just has to get into a house, even if overpaying or desperate seller who has got to unload a property, even if selling too low).
One of the best ways to get a pulse on the Cambrian Park real estate market is to see what’s selling fast. Sometimes a few low sales will make the market look more sluggish than it is. For the Cambrian housing market, though, most single family homes are selling quickly, with multiple offers, and overbids right now. But not all. So let’s separate them out by time and see how it looks.
Fast sales are stronger sales: under 14 days is best for Cambrian Park realty sales
Just now (as of Jan 7th) I pulled the single family home sales for Cambrian (mls area 14) for the last 30 days (mostly Dec but some Jan) and saw a huge difference between the homes that sell fast and those that do not. The turning point seems to be 14 days on the market between overbids and underbids. Out of 41 properties sold in the last 30 days, 24 sold in 14 days or less, and only one in that group sold below list with 4 selling at list price and most selling over asking. Of the 17 remaining, which sold between 17 and 134 days, only 3 sold above list price, none at list price, and 14 sold below asking.
Of the 41 houses sold in these 30 days, 24 of them or about 59% sold in 14 days or less, with the average days on market (DOM) a lighting speed 7 days. For these fast selling homes the average list price $1,248,282 and average sale price $1,296,840 (averaging an overbid of $48,557 or approximately 103.9% of list price). Within the time frame of 14 days or less, only one of the 24 listings sold below asking price.
It’s a January that feels like March, if a dry one. The weather is clear, mild, and temps are sixty to seventy degrees, the skies are blue and trees are beginning to blossom – a great environment for house hunting. Is it too early in the season to begin your search for the right home in Silicon Valley?
Each prospective home owner’s situation is different, but for many people, January is a great time to jump in with house hunting, before the Super Bowl, Valentine’s Day or some other point a little later in the calendar year.
Weather, Inventory, Interest Rates and Silicon Valley house hunting
First, to note the obvious: there is no weather related reason to wait. (Sellers: pay attention!)
Second, let’s discuss selection. Inventory is horribly low (see the inventory data table in my 2020 predictions article). Most people expect the number of available listings to be higher in Spring. Seasoned Realtors know that while this often happens, it doesn’t always, so we cannot count on it. (Check the Santa Clara County monthly real estate statistics here.)
How bad is it? I’m on the MLS right now. For single family homes (houses and duet homes) in Santa Clara County, there are 411 for sale right this moment which are not sale pending or under contract. This is for the whole county, where there are 1.8 million people residing.