Select Page

Online home valuation programs and why they are usually inaccurate

The online home valuation websites are in high demand for spot checking a price. They are fast, easy, and free. 
Online home valuation graphic: same House Different ValuationsEveryone wants an easy answer, but often the easy answers aren’t all that accurate.

Online home valuation confusion

Sometimes our clients present us with “THE VALUE” of property per one of these free online home valuation websites sites and in some cases, they challenge us to disprove it (Zillow says it, or some other site, so it must be right, goes the thinking).  If they want to buy a house which is listed for more than the auto-comped value, it may cause some emotional anguish.  And if they want to buy one which is listed for less, they may feel a little giddy – unless multiple offers are looming.

The same is true with home sellers.  They agonize when Zillow, Trulia or some other big name site places a worth on their property which is less than what they feel it should be.

Often the best way to respond is to show many of the online valuations and not just the one the client is focused on (often that’s either Zillow or Redfin, but some are attached so some other site’s numbers.

What might surprise a lot of people is the huge discrepancy in values given.

Sample auto comp values online

A good exercise is picking a home that you know fairly well and then seeing what the online home valuation tools say for each one. I picked a home that I know and ran the address through several websites that provide automatic pricing info. Here are the results, from low to high:

Not included in online home valuation study:
Eppraisal $2,072,000 (too high)

Included in the online home valuation study:
Chase $1,721,800
Collateral Analytics (via Realtor.com)  $1,671,000
Redfin $1,644,906
CoreLogic (via Realtor.com) $1,631,300
NAR RPR $1,617,440 (subscription only for Realtors)
Zillow $1,580,300
Quantarium (via Realtor.com) $1,566,759
Bank of America $1,504,391

(Please note: the Trulia home value estimator is the same as Zillow’s Zestimate because Zillow owns Trulia.)

From top to bottom, the amount varies by $217,409! That’s a 14% gap between top and bottom. Had we included Eppraisal, it would have been even crazier.

How can the online home valuations disagree so much?

(more…)

Buying a townhome

Buying a townhome - consider the grounds! Photo of townhomes in west San Jose - Cabernet Vineyards Circle, San Jose CA 95117 Front of home & walkwayBuying a townhome in the next year? Here are some pointers to help you get up to speed more quickly.

There are a number of things to ask about and learn to make sure that you are happy with the end result of your townhouse or townhome purchase. There’s tremendous variation in townhomes across Silicon Valley, how well the property is managed, how well the finances are managed, how happy the residents are, and so on.

I’ll put my tips into 3 categories: (1) before you go, (2) things to consider while there, and (3) research if you are serious about a particular property.

  1. Before you go – there may be things that will take the property off of your short list, such as the property condition, HOA finances or rules. There may be natural or environmental hazards that cause you to skip it. Usually these can be learned before you ever visit the property, and they can save you a lot of time.
  2. Things to note or consider while there – some tips on what to perceive while in and near the property.
  3. Deeper research if you are serious about buying a townhome or townhouse

Buying a townhome: a little pre-visit recon

Your real estate agent may help you with this – I do with my buyers and we can sometimes eliminate non-starters with a little research. Most people interested in buying a townhome or condo will check these out upfront:

  • Maps: Take a look at Google maps and see what can be learned from Google street view and the satellite image, if possible. Street view may provide info on how crowded a complex is and if there’s a parking problem if the townhomes are directly on public streets.
    • Sometimes there are undesirable buildings or structures right next to the complex you’re planning to visit which may be visible from either the satellite or street view. The negatives usually don’t make their way into the MLS photos, so look at these other views to get a more complete sense of the area. Recently I saw a power sub-station directly next to a unit my client wanted to see. We did visit it anyway, but many home buyers would have skipped it. You can often identify high voltage power lines from the maps, too.
    • The Google Satellite View will alert you to undesirable neighbors. Recently we saw a unit that backed up to something odd looking – turned out to be a gas station.
  • Odors: If you are buying a townhome in South County or in an area where farming takes place, be sure to zoom out on the map view to see if the property might be impacted by farm smells. In Gilroy, San Martin, and Morgan Hill, mushroom farms can be smelly if you are downwind. And…garlic happens. In Milpitas and North Valley, there are a number of odors, particularly as you get closer to the bay.
  • Natural and environmental hazards: you can find out upfront if the property is in a 100 year floodplain, liquefaction zone, near gas transmission lines or near a Superfund site. There are links to maps for almost every kind of hazard out there.  For example, the Cal OES My Cal Hazards Awareness site can provide info on liquefaction, flood, quake, and fire zones.
  • Disclosures: you may be able to get them upfront and skim for the local hazards, expensive repairs needed, etc. Most of the time we can provide these before you see the home. Keep in mind that no condo, townhouse, or house is perfect, and most do need thousands of dollars in repairs, replacements, and upgrades. A good rule of thumb is to budget 1% for a condominium or townhouse.

In person visit – when you visit the townhome

Again, your Realtor should help you to see what’s amiss or what’s a big plus as you go through the grounds and the home. No home is ever perfect (not even new construction), but it’s imperative that buying a townhome you have as full knowledge as possible about it upfront.

Once in awhile, a buyer will not get the value of this input. The majority of buyers, though, appreciate it if their buyer’s agent makes sure they see things upfront, while there together. (more…)

Silicon Valley liquefaction zones

Silicon Valley Liquefaction Zones shown in greenish color on this mapThe Silicon Valley liquefaction zones cover much of the Bay Area and Santa Clara County, but the risks are often not well understood or investigated. We know that this is earthquake country and tremblers are to be expected. But what difference does it make where you live or work – won’t the whole valley be shaking equally?

Well, we’re Realtors, not geologists or geotechnical engineers, but we can share some resources that may help answer these questions and provide avenues for further research on this topic.

What is liquefaction?

Liquefaction refers to the ground becoming liquified, or fluid. It takes 3 ingredients to liquefy land: loose sediment, water, and strong shaking. This loose, saturated soils when shaken to a certain point no longer behave like a solid and can slide, open, and swallow anything above it.

In 2010 and 2011, New Zealand experienced this and it made worldwide news. The Science Learning Hub website states that “During the Canterbury earthquakes of September 2010 and February 2011, liquefaction caused silt and fine sand to boil up and bury streets and gardens and caused buildings and vehicles to sink.”

But I never heard about that happening during the 1906 quake, or the 1989 quake – that means it’s not a risk here, right? Wrong. The USGS Liquefaction and Sea Level Rise explains that a relatively dry rainy season in 1906 lowered the liquefaction risk, and the 1989 quake happened near the end of the dry season when groundwater levels were at their low point. There was liquefaction from both of these events, but it could’ve been much worse.

Silty, sandy soil will respond very differently to bedrock and clay in the case of extreme shaking. So no, the valley won’t all be shaking equally in the case of a large tremor. Liquefaction hazard zones will likely get the worst of it. That’s why this designation matters so much.

What is a liquefaction zone?

After the Loma Prieta earthquake in 1989, the Department of Conservation, California Geological Survey created maps to make residents aware of areas in which there are increased risks from earthquake shaking due to landslides or liquefaction and to make sure that construction in those zones have extra investigational requirements to build safely. The liquefaction zones are noted by the state to be more susceptible to dangerous liquefaction in the event of an earthquake. You can learn more about these and related issues at the California Department of Conservation’s website. (more…)

Signing with a mobile notary

Should you sign with a mobile notary - image of people, paperwork, penWhen it’s time for your final document signing prior to the close of escrow or refinance, is signing with a mobile notary better, or should you do it at the title company? These aren’t papers that you can DocuSign – they must be done in person.

What is a mobile notary?

A notary, or notary public, is someone who can check your identification and verify that you are who you say you are. A mobile notary public, usually called a mobile notary, is someone who travels. They come to you.

Quick summary

  • You often have a choice about signing with a mobile notary,  or signing at the title company.
  • Be aware that in most cases you will pay a little more in closing costs if you elect to sign remotely.
  • Some lenders and title companies may nudge you to using an out of office signing and may have built that fee into their closing cost estimates for you, but it is optional, not mandatory!
  • Even if you sign at the office, you may not get the escrow officer but still have a notary and still have an extra charge. Or just a higher fee than at other title companies for this service. Different title companies have different fees and policies.
  • Best bet is to call the title company and ask if the fee will be less if you sign at their office.

During most of Covid, home buyers and sellers did not have a choice about where to do what we call a signoff: title companies did not allow signings in their office for most of the pandemic. Instead, buyers, sellers, and refinancing home owners would meet with a notary, often outdoors, to sign documents prior to the close of escrow or completion of the refi.

Also for most of the last 2.5 years, Realtors were not allowed at the signoff. That is no longer the case, either, though.

Fewer restrictions, title company office signing is now permitted

Now that things are opening up, consumers have the ability to sign at the title company in nearly all cases. A mobile notary remains an option, and may be preferable for you, but make sure that you are informed so that you are making a choice with all the factors on the table. (As of October 2022, if the Covid pandemic worsens again, this could change.)
(more…)

Why is that house so cheap?

House with words - why is that house so cheap“Why is that house so cheap?” asks the puzzled home buyer. Is there something wrong with it? Is it a trick to drive up the number of offers or the price? Is it a bad area? Is it too good to be true? Bargain hunting home buyers may delight in purchasing a home at a low price, feeling that they got a great deal.

Often, though, the great deal is a reflection of a defect of some sort – and the defect may or may not be easily fixable. When they go to sell that property, they may find that most buyers aren’t interested and that when it’s sold it’s a great deal for the next owner.

Today we’ll look at the 3 categories of reasons why certain properties get bargain basement prices and make consumers ask “why is that house so cheap?”

  1. strategic pricing by sellers and their agents only, nothing wrong (except a deceptive price)
  2. property problems (that can be mitigated)
  3. location problems (that cannot be mitigated)

Why is that house so cheap – when the list price is a marketing tactic only

We’ve written about the strategy of a price mirage here before. If you didn’t see that article, it comes down to this: a home is priced lower than it’s worth, lower than the seller will accept, in order to get a dozen or more offers that will drive the price sky high. It’s risky to underprice a home in a declining market especially. If the buyers don’t jump on it, it is not that easy to convince later home buyers that it’s worth more than that initial list price.  This can work but it is a gamble, and for that reason we don’t recommend it.

By the way, a tool which can sometimes be useful for pricing is Realtor.com. They offer 3 “auto comp” valuations on the listing page of homes for sale. If a property is close to a boundary (zip code, school district, area), it may be off because it seems to just pull sales from 1 mile in all directions. It can also be off if the home is in very poor or extremely excellent condition. Here’s more information on their system: Realtor.com estimates

Defects with the home can make the house so cheap when it sells that you may wonder what happened

A number of problems within the house or yard can cause the home to appeal to fewer buyers, and that will make the home sell for less  when it does sell. Since these are in the home or yard, though, they are likely fixable in most cases. Whenever you ask “why is that house so cheap?” you also want to ask “if I buy it, is the problem fixable?”
(more…)

Exercise caution when viewing or showing homes for sale

Potential Danger sticker with house and keys - exercise caution when showing homesReal estate professionals are becoming increasingly aware of the need to exercise caution in their line of work. This is true for both buyer’s agents and seller’s agents. It is good for our Silicon Valley buyers and sellers to be aware of some of these issues, since they could also be at risk.

Quick tips on how to exercise caution:

  1. Meet people you know, or for whom you are able to validate. (With real estate licensees, you can usually find their phone number and email on their company website.)
  2. Don’t presume that because a house is for sale, it’s empty (don’t peer into the windows or walk into the backyard). View the home through the proper channels, either by appointment or during an open house.
  3. Buyers should not be allowed to enter the home without their agent, who is to follow the instructions on the MLS. Some buyers may knock on the door and ask to see it. The answer should be no. It is not safe to let them in.
  4. When hunting for the home you’re trying to see, please be careful, particularly out in the country or in the mountains, where homes are not always well marked. I had two scary episodes in those types of areas, both involving my being on the wrong driveway.
  5. It’s wise to exercise caution when entering a home, even if you have an appointment and your agent is with you.  Sometimes communication isn’t great between residents, and it’s possible to surprise someone who’s not expecting you.

 

Agent colleagues: don’t have your first meeting with a stranger at a home for sale, especially if it’s vacant. (This doesn’t apply to referrals from your past clients, friends, etc., where that person is already vetted.) It is best for consumers and Realtors to initially meet in a public place, such as the realty office or a coffee house, and for others to know where you are during that meeting. Even better, get a pre-approval letter and speak with the lender to make sure the person is legit.

Buyers – exercise caution for your own sake, and for the residents of the home

For buyers who see signs on properties: do not presume that the house is empty and that you can peer into windows or walk around into the back yard of the house. (I have seen people do this and it is creepy at best.)  You don’t know the situation – the house could be for sale but not viewable, it could be occupied.  Some homes are offered with the instructions that the home can only be seen once an offer is accepted (“write offer subject to inspection”).

The home could be tenant occupied.  A resident could be ill.  Children could be in the house and if they look up and see a stranger at the window it will scare them badly. Don’t do it.  (Most buyers won’t do this, but I have seen it often enough that it warrants saying.)

If you need more information, call your own agent to pull it up on the MLS and give you the info you seek.  If you aren’t working with a Realtor, call the listing agent. In all cases, don’t go onto the property except to grab a flier from the box on the sign post. It’s imperative to exercise caution for not just your sake, but everyone’s.

Sellers – be careful for your own safety

(more…)

What are typical buyer closing costs in Silicon Valley?

Typical buyer closing costs - home buyer costs to close escrowWhat are typical buyer closing costs in San Jose? How much extra money will it take, beyond the down payment, get into that new home in Silicon Valley? The cash needed at the closing table varies depending on many factors.

Today we will offer some general information on home buyer‘s closing costs in Silicon Valley. Different jurisdictions and situations may have additional closing fees.

Typical buyer closing costs – rough estimate

Just need a rule of thumb on the costs? The average closing costs percentage is between one half and two percent of the purchase price, but your actual figure could be substantially more or less, depending on many factors. Most of our buyers pay between .5% and 1%. 

 Recurring versus non-recurring closing costs

Please note that some fees will be recurring (meaning they will be things you’ll pay again, like property taxes or HOA bills) and others non-recurring (which are one-time fees like title insurance). Where you are in the calendar year can impact fees like property taxes due at closing, too.

Some of the main factors that cause the fees due at closing to rise or fall include:

  • loans and related required fees are generally a home buyer’s steepest fee after the down payment
  • home buyers who buy down the interest rate with points will see their cash needed to close escrow rise significantly
  • whether or not you pay for inspections
  • what city you’re buying in
  • what type of home, or if it’s in an HOA or not
  • and many other smaller escrow related fees, such as if you both fund the loan and close on the same day
  • any pest work or other repairs that you pay for on the home prior to the completion of the sale (this is uncommon, but I’ve seen it happen)
  • when the next property tax bill is due (you won’t pay more or less, but it’s whether that amount is due at closing or a few months later)

There are online tools that can bring clarity to the typical buyer closing costs, but again only roughly. You will find a closing costs calculator for buyer at ORTC.com, the Old Republic Title Company’s site, and then click on the link for the online netsheets. Or use this link for their online netsheets.

Next we’ll go over what these various typical buyer closing costs can run.

(more…)

Transparent pricing

Pricing reality check - it is transparent pricing, aspirational pricing, or motivational pricingHome sellers are employing different strategies to sell in today’s mixed market. One of them is transparent pricing.

Transparent pricing, aspirational pricing, and motivational pricing

  • Transparent pricing refers to the seller’s intention of offering the home for sale at a price that the seller is willing to accept. It’s what the seller believes to be fair market value.
  • Today some homes are priced with aspirational pricing, which means what the seller aspires to get.
  • Other properties have motivational pricing, or what I like to call mirage pricing. That’s an unrealistically low number used to obtain more offers and push the ultimate sale price higher.

Aspirational pricing usually results in homes that either don’t sell or that only sell after price reductions and at a price lower than would have been obtained with more realistic pricing.

Motivational pricing causes confusion for many buyers, especially if they are new to the market, or uneducated about that home’s neighborhood or the market, or those who are either discouraged or unrealistically hopeful about today’s prices.

Transparent pricing is supposed to be more honest about the seller’s wants, needs, and expectations.

Most of the time, new construction offers transparent pricing. However, sometimes there are so many upgrades that buyers will want that the final price can be considerably higher than the base price.

Sometimes, though, when a listing agent describes the  price as transparent, it’s actually on the high side and is likely closer to aspirational pricing. In those cases, the label really only tells you the seller’s willingness to sell: “I’ll sell if and only if I get my price”.

How can you tell if the listing amount is realistic or too high or too low?

(more…)

What is a preliminary title report? Why does it matter?

What is a Preliminary Title Report?The preliminary title report is provided by the title insurance company not long after escrow is opened.  In Santa Clara County, unlike many parts of California, usually escrow is opened once a listing agreement is signed (not after a buyer is in contract to purchase the home).  That means that the preliminary title report (sometimes called the “pre” or “prelim”) is ready to be viewed by the time the home goes on the market or shortly thereafer.

What is in the preliminary title report?

  1. Information on where escrow is opened (which company) and who the escrow officer is along with their contact info
  2. The form of title insurance anticipated by the report (there may be options available)
  3. Title – who the owners are, if it’s in a trust, an LLC, etc.
  4. Legal description of the property  (assessor’s parcel number, address etc.). If it is is a property held in condo ownership, that will show as well.
  5. Info on any and all liens recorded against the property (mortgages, property taxes, supplemental taxes etc.)
  6. If there are any covenants, conditions and restrictions (CCRs)
  7. If there are any easements (usually there are at least public utility easements)
  8. A plat map of the property
  9. and a few more items….

Why does a prelim matter? (more…)

What Are CCRs?

CCRs are the Covenants, Conditions, and Restrictions  (sometimes “Covenants, Codes & Restrictions”) for a neighborhood, subdivision, condo or townhouse community.  They are drawn up by the builder or by a board comprised of the builder and a few others who want to set the neighborhood standards. Sometimes you’ll hear them called CC and Rs or CC&Rs.

The CCRs  are put in place, usually for a set number of years such as for 30 or 35 years, with automatic extensions of a prescribed number of years (such as 5 or 10) unless the homeowners in that tract or area vote t hem out.

The weirdest time line I ever saw in CCRs referenced something like “until the death of the last living great grandchild of…” and it mentioned one of the Kennedys. Odd, but apparently legit.

What are the CCRs about?

Ordinarily the CCRs tell us that homes cannot be too small, that livestock cannot be raised at the property, that home owners may not drill for oil or water, and many other kind of common sense things.  The older ones will also state that the house must have a minimum value – often so small it might make us chuckle.

 

CCRs sample one

 

Additionally, the covenants, conditions, and restrictions will state what kind of signage may appear (only for sale and for rent signs, for instance, no billboards), and normally there’s a admonishment against noxious or offensive materials such as rubbish piling up on the property.

Newer CCRs, especially in condo communities or townhouse complexes, may have restrictions on things like what color the curtains or blinds must be if facing the street (white or off white or beige only). Often they state that garage doors must be fully down except when vehicles are entering or exiting. Some communities, like Rinconada Hills in Los Gatos, do not permit you to park your vehicle in the driveway overnight – it needs to be in the garage.

CCRs only one car on the street allowed

Many disallow washing vehicles in the complex. Right now that’s moot since the drought has the water company prohibiting all of us from doing that.

Condo and townhome CCRs

In condominium and townhome complexes, the CCRs are crucially important! Some of them have rules like:

  • no more than 2 pets
  • dogs may not be of these breeds (list)
  • dogs may not weigh more than 20 pounds (or some other number)
  • laundry may not be dried on balconies
  • storage may not be left on balconies
  • laundry and dishwashers may not run after 10 pm
  • only people over the age of 55 (or some other age) may live at the complex

And MANY other clauses. Always always read the CCRs !

Illegal restrictions in the CCRs

Many years ago, some CCRs also had restrictions on who might buy or live in a neighborhood (racial, religious, and other restrictions).  This is illegal today, of course, and so the first page of any CC&R document you see now will have a large disclaimer stating that any fair housing violations are illegal and are null & void. (At least it should be there.)

Click on the following link to download the PDF of the typical CCRs cover sheet.

Since the C C & Rs “run with the property”, until recently we were told that they cannot be amended. Want to see the cover sheet itself? Now, though, thanks to recent legislation, those offensive restrictions can be stricken from the CCRs.  (more…)