First time homebuyers
If you read a termite or pest report, you may bump into the phrase “cellulose debris.” What does it mean?
Usually cellulose debris means that there are scraps of wood, sawdust, or bits of wood (possibly paper). It’s any kind of material made of wood. It could be old form board left in when the foundation was made. Most often, cellulose debris is mentioned as found in the crawl space of a home. Sometimes it’s infected (meaning there is a wood destroying organism such as termites present), other times it’s simply an invitation for “wood borers” such as termites to come and feast on the wood members that are laid out as a buffet for them. Wait long enough and it might get infected.
Where do you see cellulose debris in a pest inspection?
In our Silicon Valley area, pest reports are normally “separated” into Section 1 and Section 2 findings. If the cellulose debris is called out as Section 1, that means that there’s an infestation of termites or other wood-destroying organisms present. If it’s Section 2, that means that it’s not yet infected but is an invitation to trouble and you should get rid of it to prevent future problems.
Pest control operators will suggest that cellulose debris be removed so that termites and other wood eating organisms aren’t attracted to the crawl space or other areas of the home. It’s possibly a nuisance to get rid of it, but much better to dodge a problem upfront than to wait and have to solve it later.
How is buying a home in Silicon Valley different from in other parts of the country? (Move2SiliconValley relocation site)
As data becomes more available to consumers online, and new real estate brokerage models present themselves, the question is arising in the industry: will buyer’s agents will become obsolete? After all, the thinking goes, travel agents are mostly gone and journalists are being replaced by bloggers. It’s possible that this will be the case for buyer’s agents in the future, as there is a trend in thinking that there are no real experts if everyone has access to information.
Recently I heard about a book that takes on this concept regarding expertise and it really resonated with me. The title is “The Death of Expertise: The Campaign against Established Knowledge and Why it Matters“. Confession: I have not yet read it, but want to do so. I did hear it discussed on KGO Radio by Pat Thurston, one of the radio personalities there, and her take on it was that it presents the concept that everyone’s opinion is as good as everyone else’s opinion.
That certainly does happen in real estate, along with the persistent idea among some consumers that buyer’s agents don’t really add any value other than unlocking doors. (I wrote about this idea that “it’s all on the web” so buyer’s agents aren’t perceived to be needed back in 2013.) Even this morning I had someone email to ask me if I would split my commission if they bought a home with me and would “do all the research”. The answer, by the way, is no.
You can have a 20 or 30 year veteran Realtor with oodles of transactions, but a home buyer armed with a real estate app may not always know what he or she doesn’t know. And that’s dangerous. Information does not equal knowledge or skill.
A good buyer’s agent will be able to help with these items (and many more, depending): Continue reading
Sometimes I meet people who work hard but aren’t saving anything – and they want to buy a a home.
Let me tell you: It doesn’t work that way. Few truly important things in life are that easy, actually.
If you want to buy a home in Silicon Valley, you have to embrace the “new frugality” and start saving your money for the down payment, the closing costs (estimate 1% of the purchase price, but more if you also pay points on your loan), and improvements you’ll want to do to the property. (Many homes have $10,000 to $20,000 worth of needed repairs when sold. Not to mention curtains, paint or floor coverings that you like, etc.) Real estate isn’t cheap, and the taxes, insurance and upkeep will require that you have a reserve account to pay these things after you purchase the townhouse, condo or house.
How much should you be saving? As much as humanly possible. Yes, that means probably giving up a lot of ski trips in winter, lavish nights out on the weekends, dinners and maybe even coffees out. When you do buy a house, you will probably be spending 33% or more of your gross income (total, pre-tax) on the property (mortgage, interest, taxes and insurance). Try living on what’s left now – see how you do. If you can’t live on just 67% of your gross income, you might reconsider whether you can or want to sacrifice that much to purchase a home here in Santa Clara County.
Yes, there are lower down payment options like FHA backed financing, but with a tiny down payment (6% or so) you will have very high payments and to top that off, your interest rate will be higher.
If you really want to buy a house, you need to sacrifice and save. Aim at 25% down so you can afford to fix it once you’re in and pay lower interest rates. Or if FHA is the way you want to go, more like 8%. Save, save, save.
Selling and buying homes can be exhausting and emotional, even overwhelming. This level of stress can rise when children are involved as parents also “run interference” to a degree to help make the transition smooth for their kids. Another added stresser is relocation to a new community far away.
What can parents and their real estate agents do to help the youngest members of the family to move as peacefully and contentedly as possible?
Communication about the moving process is key
Few of us like surprises that come on a big scale and change the way our lives are lived on a day-to-day basis. This is also true for our offspring, for whom routine can be a comfort. Just as you wouldn’t begin a vacation without explaining to your three year old that it’s only a trip and that you will later return home, so too it helps to explain to your child that the family is staying together, the toys, furniture and pets are coming along, but that the house or condo will be “new”. Providing a sense of security and reassurance first can enable the process to be possibly even fun. (Young kids will think that the furniture and toys go with the house so will likely vocalize their preference for a new place with the most fun stuff unless they understand that their toys will move with them.) Continue reading
If you are tired of paying $3,000 per month in rent for a 1 or 2 bedroom apartment and have decided that you want to buy a Silicon Valley home, you may find that it’s complicated and scary as the San Jose area is in a very deep seller’s market. Let’s take a quick look at the major challenges and decisions you’ll face as a potential Silicon Valley home buyer.
Silicon Valley home buyer challenges
Affordability – or the lack of it
Challenge # 1: the cost of housing is staggering, whether you are renting or buying, whether you are a first time home buyer or you’ve just relocated from somewhere else less expensive (meaning almost anywhere). Homes under a half million dollars are few and far between, as the newspapers and media have recently announced, and the median price of houses in Santa Clara County is about $1.1 million (and closer to $1.3 million in San Mateo County, less in Santa Cruz County), with the average price being higher still. Of course, condos and townhomes are less pricey, but they will have Home Owner Association or HOA dues to factor in. Same with mobile homes, which nearly always have space rents of $1,000 or more in Silicon Valley. If you want to buy a Silicon Valley home, figuring out “how much house” you can afford when purchasing can be a painful exercise. (Hint: your success in life is not reflected in the size or remodeling of your home here. The odds are good that you will be disappointed when you see how little you can buy.)
How much can you afford in this hyper expensive real estate market?
The old rule of thumb is that a consumer can qualify for a mortgage for 3-4 times his or her annual income. Translation: if you make $200,000 per year, and don’t have other debt (student loans, car payment, etc.), you may get a mortgage of $600,000 to $800,000 (and then you need the down payment on top of that). In most parts of Silicon Valley, that means buying a condo or a townhouse, not a single family home. In addition to the down payment, there will be closing costs, and most likely repairs to the property since in the current market sellers usually aren’t providing section 1 pest clearances or doing other repairs. Cash is crucial.
Challenge #2 if you want to buy a Silicon Valley home: money for the down payment, closing costs, repairs, and reserves – it’s more than you might think. Pulling together the hefty down payment and other needed money is always hard. In this crazy area, though, most people who want to buy a Silicon Valley home need not just 20% down, but additional funds in order to be competitive with multiple offers. So you may need to be able to throw $200,000 to $400,000 down on that normal, non-luxury house or townhouse. Saving that much money is a trick, and many first time home buyers either get help from parents or are cashing in on stock options to pull it off. Most of the time, home prices seem to appreciate faster than buyers can save, so having some sort of boost beyond your own saving power is critical for most. This has been true for many decades here – both the relatively high cost of housing and the difficulty in pulling together 20% or more for the down payment. (It was true in the late 1980s when my husband and I were trying to buy our first home, too.) It’s even harder now, though, as 25% is often the bottom amount that will get your offer seriously considered if there are multiple bidders on a home for sale. Continue reading
When trying to figure out what market value or a fair price is for a property, Silicon Valley consumers will often look at recent sales nearby which they find online, extract an average price per square foot, and then decide that this is likely to be what a house or condo is worth based on those “comps”.
First factor: the unique real estate itself (how similar are the comps, really?)
Unfortunately, it’s not that simple to figure out that home’s likely sale price or the probable buyer’s value. Homes are much more nuanced than just the average price per square foot. Unless the comparable sold property is truly comparable in every way – similar quality of updating or remodeling, similar location, similarly expensive landscaping – and the timeframe recent, too, you’ll have to try to adjust based on varying factors. (And that’s not easy – it’s an appraiser’s area of expertise. But you may say “those comps had remodeled kitchens, so that may be worth X amount of money”. You would not ignore that big of a difference.) Look at the list of homes below – how much can you tell about remodeling, landscaping, or upgrades from a simple list? Not enough.
Second factor: speed of sale, number of offers
The situation surrounding each sale is likewise quite varied. A property that gets 4 or more offers on day 7 on the market is a different situation than 1 offer on day 43. If you are writing a real estate contract on a home that is getting multiple offers, it’s not going to help you to compare it to a stale listing that sold with just one offer. It’s not just comps: it can be the current competition that largely determines the final sale price of that house or condo.
What is the function of a title company or title insurance company in real estate purchases or refinances? In Silicon Valley, and the San Francisco Bay Area and northern California generally, title companies perform two specific services:
- provide title insurance for real estate being bought or borrowed against
- provide escrow services, acting as the neutral third party which takes in the deposit money and holds it during the escrow period, disbursing all funds when escrow closes and having someone go to the county recorder’s office to record the deeds to complete the sale
Title insurance companies research the title history, find out what recorded easements may exist,reveal any encumbrances (leins, clouds on title, etc.). An escrow officer from the title company is usually the professional with a notary’s license who will sign off home buyers and sellers on the final documents, too.
There are many other services that title companies provide. Many people wonder how to hold title, and while neither your Realtor nor your escrow officer can advise you on how to do so, the title companies all have a little 1 page handout explaining the major concepts for each option on how to hold title.
If you need to sign off on the final documents out of town or even out of the country, the escrow officer and her or his support staff will work with you to coordinate it. (It can be a little tricky if overseas and outside of the U.S.).
If you are selling your house or condo and discover that an old loan that you paid off is still showing up in the preliminary title report, the escrow officer at the title insurance company will work to get it resolved and removed.
The customer service department at title companies can research the chain of title, too. Sometimes it’s quite interesting as the chain brings you back to the time of patents and land grants, with hand written deeds in a style of cursive which is somewhat foreign to us today.
There are many other things that title companies do – big and small – and most of them are “behind the scenes” that few of us ever witness directly, but without which no one would be able to close out sales with the safety net of title insurance which we value so much.
Title insurance can be a confusing concept, but I wrote about it elsewhere on this site.