Select Page

No more love letters

Love Letters and Implicit Bias word balloonFor years, Realtors have encouraged their home buyers to write “love letters” to go with their purchase offer on the home the buyers were trying to buy. The idea was to be more likeable so that the sellers would want to sell to them, as opposed to any competing home buyers. But as of now, the guidance from the National Association of Realtors is different: no more love letters.

What is wrong with buyer love letters?

The U.S. Fair Housing Act protects home buyers and renters from discrimination or bias under protected categories of race, color, national origin, religion, sex, familial status, and disability. (In California, there are even more protected areas.) Put another way, when a home seller looks at a buyer package, the decision should be based on the offer price and terms, not on who the buyers are.

The concern with love letters is the risk of implicit bias: that the sellers would like or dislike buyers, even unconsciously, because of non-contractual facets that are protected.  While it’s not illegal for a doctor to want to sell to another doctor, it is illegal for one member of a religious group to give preferential treatment to another member of the same religious group. It’s also illegal to give preferential treatment to buyers who have children versus those who do not. Photos are especially risky as they may enable things from the protected class list to be known.

Last October the National Association of Realtors published an article for its members in Realtor Magazine on this topic, Why a Buyer Love Letter Could Turn Into a Poison Pen. This short piece admonishes that even innocuous sounding statements are problematic:

Even a mention within a letter of envisioning “children running down the stairs on Christmas morning” could stir up trouble. After all, such a statement reveals the buyer’s familial status and religion, which are both protected under fair housing laws.

(more…)

The Cambrian Park Real Estate Market Update

Cambrian Park Real Estate Market graphicThe Cambrian or Cambrian Park district is a popular residential market with good “bang for your buck.” It remains a strong seller’s market with signs of spring warming in the air. This article provides a detailed look at the residential real estate markets of Cambrian with live and monthly updates. Here are some points of note from the latest monthly update for Cambrian Park single family homes:

  • The sales to list price ratio keeps rising, reaching a red hot 111% of asking!
  • Sales are happening quickly with an average 15 days on market.
  • Market activity is growing into spring with a rising number of closed and pending sales.

The Cambrian Park Real Estate Market

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 well, with multiple offers, and overbids right now. But not all. So let’s separate them out by time and see how it looks.

Before we begin, it’s important to recognize how much has changed since last March. With almost a year behind us we can clearly see some the pandemic’s affect on the real estate market, but it will still take time to see the full picture. For more on the impact of the pandemic on the market, check out my post titled Coronavirus impact on real estate sales.

Early on in the lockdown, the Multiple Listing Service (MLS) stopped the timer on all Days on Market (DOM). Therefore these numbers will be off beginning from March 17th through around May 17th, 2020. In the data below, this will affect any numbers related to the days on market, the absorption rate, and the days of inventory for the months involved. Current numbers are accurate.

Fast sales are stronger sales: under 14 days is best for Cambrian Park realty sales 

Just now (as of April 12th) I pulled the single family home sales for Cambrian (MLS area 14) for the last 30 days 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 55 properties sold in the last 30 days, 50 of them or over 90% sold in 14 days or less, with the average days on market (DOM) for this quick group a lighting speed 6 days! For these fast selling homes the average list price $1,458,633 and average sale price $1,667,897 (averaging an overbid of $209,264 or approximately 114% of list price)! In total, none in that group sold below list price, 3 sold at list price, and the remaining 47 properties sold over asking.

The 5 slower sales, just shy of 10% of all sales, were on the market between 19 and 108 days. All 5 sold above list price (1 sold for $1 more), which is strong for the slower sales.

(more…)

Why do you keep losing out on multiple offers?

A crowd running to an open house - many of these losing out on multiple offers

Multiple Offers

The real estate market in Silicon Valley is a hot seller’s market, and that means that often there are multiple offers, overbids, and sales with no contingencies. (I would say it’s the most overheated market I’ve seen in my 28 year career.) Some buyers may get it on the first attempt, but many are bidding over and over – why do they keep losing out on multiple offers?

Over the course of my career, I have noticed that often there is a consistent “spread” of offers.  Most of the time, there’s a pack or band of offers at about the same level, sometimes 10% or more over list price, then a couple higher that that, and maybe one or two (once in awhile 3) at the top of the heap in terms of both price and terms which are attractive to the seller.

Not everyone is losing out on multiple offers: what are the winners doing?

  1. The top offer frequently has the highest price and best terms. It is 10-20% over list price or more, 25-30% down at least, and has no contingencies for inspection, loan, and most of all, appraisal (the percentage over has to do with whether the home was priced spot on the value or strategically under).  But that’s not all. The winning offer’s buyers and agent followed directions. Normally that means that they come with all disclosures signed, and the buyer’s agent has even done her or his Agent Visual Inspection Disclosure.  They include the proof of funds (all needed) which prove that the buyer can absorb any appraisal shortfall and is prepared to do so. ( Right now, many homes are not appraising to sale price, so this is awfully important for sellers.) Sometimes the listing agent asks for a particular contract to be used or a particular summary sheet to be filled out. The best agents do all of that. The 2nd tier offers often are incomplete – the listing agents may or may not circle back and ask about missing items, so it’s important to remember that you only get one chance to make a first impression.
  2. The best offer is also someone who’s been SURE that he or she or they wanted the home from the very beginning and looks ROCK SOLID. NO WAVERING, not a “last minute” offer. Any hesitation on your side will cause the seller to not feel good about your odds of closing the sale. Be consistently interested if you want the sale. A shaky looking buyer may not include their proof of funds. They don’t come across as certain about buying this property and need a few days to see the property again, or show it to their parents, or otherwise confirm the decision to buy. Their agent is not so thorough. If the TDS is not fully signed off, is the buyers’ agent trying to sneak a 3 day right of cancellation into the contract? The best buyer’s offer doesn’t look shaky – it looks dead set on buying the home and has done everything possible to convince the seller of their conviction and competence.
  3. The second best or next runner up is usually strong on terms (at least 25% down, few or no contingencies) but perhaps made an offer price a little under the top value.  Sometimes the next runner up has a good price and mostly good terms, but something is not quite as solid – they didn’t offer to put the deposit into the escrow account the next day, they didn’t check all the needed boxes in the offer, they have a contingency when all the competing bids have none..  If the offers are tied but one buyer has no contingencies and the other has any, that will be the tie-breaker.
  4. Middle of the pack is usually a combination of a price where the home should appraise, a solid down payment, and few or no contingencies. It may be a price that seems “reasonable”. Buyers may feel that it is “a fair offer” or a win-win. Often the fair offers aren’t good enough to take the prize in multiple offers. If you can project what most buyers think a home will be worth, maybe you might want to consider getting ahead of that pack and seeing where the pricing trajectory will take you. The folks in the middle of the pack are usually the ones, together at the bottom, who keep losing out on multiple offers. (They will say things like “we are cautious…)
  5. Bottom offers are under, at, or barely over list price, and include an appraisal contingency as well as others (one for loan or one for property condition). If there’s a rent back, they want their PITI covered.

If you  repeatedly find yourself losing out on multiple offers, try to see your own pattern in this spread.  Is there one thing, or perhaps are there two or more things, you’re just not ready to do?

Why it is so hard

(more…)

How long does it take to write an offer?

ClockIn the current hot seller’s market here in Silicon Valley, most real estate agents representing the seller set an “offer date” for would be buyers and their Realtors to submit their offer packages, also known as their bids, for the property. How long does it take to write an offer? You may be tempted to do it on short notice.

The time commitment it varies – I would say you want to give yourself 2 days for a reasonably comfortable amount of time to read and absorb everything and to write your offer.  It is difficult if you only have 24 hours between when you see and like a home and when the offer is due.  It is possible, but only if you (and your Realtor) drop everything and only focus on this for the next 24 hours.  And let me tell you, that is not fun – in fact, it’s miserable!  Much better is to have several days.

Last week, though, I showed a home at 9 a.m. and turned in an offer before the 4 p.m. deadline. Never again. It was incredibly stressful and there was no way that we could all review everything as much as we should have done. The stress of it was sickening (literally) for me –  I take my fiduciary obligations seriously and felt like I was cutting corners left and right to make a deadline. And I had to ignore all my other clients for a few hours to make it happen. (And no, my clients did not get it. Their offer was far too low, unfortunately.)

Most of the time, right now offers in the San Jose – Los Gatos – Saratoga – Campbell area are due on Tuesday.  Once in awhile they are due on Monday and rarely on Wednesday.   Seeing a potential target on Sunday is possible but it is still really hard (and about impossible if the due date is Monday).  Much better is seeing it on Saturday, or, if possible, before the weekend even begins.  If you can do that, it will be immensely easier and less stressful!

Why does it take so long to write an offer?

(more…)

How many offers will there be on that Silicon Valley home?

Graphic of person with computer and cell phone and words "How many offers are expected for that listed home?"The deep sellers’ market continues to frustrate Silicon Valley home buyers.  With scant inventory and sales, sometimes there’s very little to pick from, and many, many buyers all vying for the same property. A common question from Realtors and buyers alike to listing agents is this: “how many offers are you expecting?”

In short:

  • when showings change from 30 minute windows to 15 or 20 minute viewing times, you know that there’s a lot of interest
  • online, look to see if Redfin calls it a “hot home” – those are more likely to attract multiple offers (also, watch the Redfin price estimate, it changes with its website traffic)
  • the ratio of disclosure packages out to offers written is about 1 in 3 for most homes (a near perfect house will have a higher ratio – perhaps 50% or a little more, a home with issues will have a lower ratio)
  • it’s not an exact science – some buyers will drop out even after writing an offer, and some buyers will swoop in at the last minute
  • the overbids are often proportional to the number of contracts received, but not always (an old rule of thumb is 1% per offer)
  • listing agents may play down the number of offers expected since they don’t want to discourage anyone from writing

It can be hard to know.  While some real estate agents advise their sellers to market the home with an unrealistically low price in an effort to obtain an avalanche of bids, most do not, but instead caution that it’s better to list on the lower end of the probable buyer’s value than the high end. If it’s a little low, the market will correct it (at least in a sellers’ market) but if it’s too high you may see no contracts on it at all.

How many offers? Communication is key

(more…)

Can you change your purchase offer after it’s signed?

Pen and edited text with the words - Can you change your offer? With multiple offer situations in Silicon Valley real estate bids, sometimes buyers write an offer and later decide that it’s too much or too little, or that some other change is warranted (before it’s submitted).  Can you change your purchase offer after it’s written, or is it a “done deal” once you’ve signed it?

The good news is that you can change your offer before it has been given to the listing agent / sellers. Many buyers do, either because they changed their mind or strategy, or because they just got new information. What is key is circling back to your buyer agent quickly, before the email is sent.

Why would you change your purchase offer?

Awhile back, some of my buyers were bidding on a San Jose home. As I asked the listing agent more questions and we got a little more information from that agent on the numbers of offers being received, my clients wanted to improve their offer. We redid page 1 of the contract, which is where all the financial basics are listed. Their improved offer went to the listing agent and it was seamless.

At other times, even after the offer is submitted, I have had buyers ask to improve their offer. The pages of the contract which were involved in the change were redone, signed and resubmitted. This is a bit like going through the counter offer process yourself. (more…)

Getting priced out of the market when housing prices rise rapidly

Home being carried up and away from earth by balloons with the words "Priced out of the market?"Are you getting priced out of the market? If so, you’re not alone. In Silicon Valley, the prices of houses are rising dramatically right now. In some cases, homes are selling for 20% or more than list  price. In the last week I’ve heard of at least 2-3 homes which sold $400,000 or more over the asking price. This is happening in prices up to $3 million especially, but I’m also hearing it in the luxury tier.

With rapid housing price appreciation in Silicon Valley, home buyers who are “patiently waiting” for more inventory and just the right house to come on the market can end up finding themselves “priced out of the market“.

What does it mean to be “priced out of the market”?

In a nutshell, it means that while a few months before, you could afford the type of house you wanted (more or less), but prices have risen so fast that now you feel that you cannot buy anything at all.

If that’s the case, you feel that it’s no longer worth it to buy – so you continue to rent (or not purchase that investment property).

The waiting strategy may backfire

Have you been patiently waiting for just the right house to come on the market?  Let me suggest to you that it may not be forthcoming. What you could afford a year ago is no longer possible today, and we do not see that situation changing anytime soon. In fact, appreciation would appear to be steeper now than it was 12 months ago. Waiting can be very expensive in a market like this one.

Why do buyers wait when they might do better to jump in?

Want to be a home owner in the San Jose area? Hire a great agent, but then LISTEN to him or her! (more…)

Why listing agents don’t like to issue counter offers in today’s hot market

Gotta Get That Call!It’s a little funny that when Silicon Valley home sellers and their listing agents get contracts or offers, many do not want to deal with issuing or negotiating counter offers.  In many cases, it can go like this fictional bidding scenario:

Offer due date set, and let’s say there are 5 offers.  Of the five, perhaps one is all cash, one is half cash, and the rest are 20-25% down.  Most offers will be in a tight cluster of pricing (this is probably “true market value”).  One may be far higher than the rest. Or perhaps two a little higher than the others.

  • The seller wants the highest price, no contingencies, and preferably, all cash.
  • If the all cash offer is non-contingent (no contingencies for inspection, loan or appraisal) and is the highest price, there will be a straight acceptance in almost all cases.  No counters.
  • If the best combination of cash and contingencies and pricing is the half-cash offer, most likely the listing agent will phone that buyers’ agent and ask if those buyers would match the highest price.  If those buyers say yes, one counter offer will be issued and it will have a short deadline for response.
  • If the “best combination” buyers say no, the listing agent and sellers will move to the next best offer, however they decide “best” looks, and phone them, giving them the opportunity to come up.
  • In these scenarios, meanwhile, the rest of the buyers and their agents wait – and hear nothing in the meantime.

Once in awhile, there are a few good offers that are all neck-and-neck, and perhaps there’s one flaky looking offer at a higher price.  If that happens, the listing agent and sellers may issue a multiple counter offer to most or all bidders.  That used to be really common, but today, I’m finding the most typical scenario is the “one phone call” approach instead.  (more…)

Why do sellers care if the offer has a loan or is all cash?

Image of $20 and $10 bills with the words "Why do sellers care if it's a loan or all cash?"Buyers who are getting slammed out of the Silicon Valley real estate market due to low inventory and multiple offers are extremely frustrated. Part of the problem may be the amount of cash in their offer. It can be hard to compete with bids with smaller loan amounts or which are “all cash, no loans”.

The question arises all the time: why isn’t my 20% down offer just as good as the 50% down or the all cash offer? Isn’t 20% down good enough? Or for that matter, why wouldn’t a 3.5% FHA backed loan be suitable?

All cash is better because there’s less risk

Twenty percent down is “good enough” if there are no other offers. If it’s multiple offers, though, it’s probably not sufficient for most sellers provided that the all cash offers are written with realistic pricing. Right now, about 15% of home sales in Santa Clara County are all cash, and sellers would far rather deal with an offer that includes no finance or appraisal contingencies.  For sellers, the fewer contingencies the better and no contingencies is ideal.  Particularly now, when we are seeing a very sudden and dramatic upswing in pricing, appraisal contingencies can kill an offer’s chances of success due to the fear of a low appraisal. With all cash, there is no appraisal at all – it’s a slam dunk on that front. (more…)

Listings with few photographs

Forbidden symbol over a large camera and a house to represent homes with no or few photographsListings with few photographs or none at all typically are skipped by most home buyers. The reason is simple: if it’s not showing, the room (or yard, or whole house) is assumed to be in terrible condition.

The seller’s loss, though, is a buyer’s gain.  The poorly marketed house can be an opportunity for home buyers who are having trouble in multiple offer situations. With few or no images, the odds of having multiple offers go way down.

Why would there be few photographs, or none at all, in an active listing?

The home may have no or few photographs for other reasons: the seller is extremely private, the home is occupied by tenants, the seller has not yet decluttered or made the home show ready, etc.

It’s also possible that a photographer will be at the home at some point, but has not yet been available.

The bottom line is that a property with no or few photographs online presents a possible opportunity for the home buyer who would like to purchase a home that not so many others are vying for. The home may not show as well as one that is properly staged and marketed, but it could be the thing that gets you into your next home sooner rather than later.

 

Related reading:

Why didn’t my San Jose home sell?

Selling your home in a declining market

What do you need to know when selling your Silicon Valley home?