Tips for Home Sellers
This is going to sound a little harsh, but it is true. Sellers: some, perhaps many of the things which you think are huge selling points are not important at all to today’s home buyers. Most Silicon Valley house hunters do not care about your wet bar. They care even less about your expensive wallpaper, or your pricey and heavy 1970s era curtains, which they probably hate. In fact, many of the improvements you made when personalizing the home for yourself may have cost you a lot of money, but many California home buyers either won’t like them at all or even find them to be a negative. That is often the case with wet bars!
If wet bars and wallpaper aren’t important, what is?
Buyers DO care about your foundation (please, no cracks), your roof (hopefully newer with many years left on it), your plumbing (tell us it’s 100% copper). They care a great deal about updating and remodeling of things seen – bathrooms, kitchen, popcorn ceiling removed – and unseen. Is the electrical really as old as the house? Is the sewer line on its last leg? Did your disclosures mention that rats are a problem? Do you have an issue with water in the crawl space which will eventually wreck the foundation? Does your house back up to a train line, school, freeway, high voltage line or something else undesirable which cannot be fixed? Buyers do care about these types of things. Above all, Silicon Valley home buyers want security. They want a solid house without problems. They don’t want to worry. It is scary enough to buy at all! Continue reading
In 2012 and 2013, Santa Clara County saw many single family homes selling for all cash, no loans. The peak may have been in March 2012, when the percentage of all cash sales was a whopping 25%. That was the beginning of a long housing boom, and today the percentage of all cash sales in Santa Clara County has settled down significantly, though it is still in double digits in most months.
Today I crunched the numbers on MLSListings.com (first pulling the number of sales per month, then the number of cash sales, and after exporting the data to excel, did the math to get the percentages). The chart below reflects the sales of homes sold with all cash, no loans in Santa Clara County among houses and duet homes, which combined are known as single family homes. (Duet homes are not the same as duplexes.)
All cash sales, month by month, in Santa Clara County (single family homes)
The data from one month alone does not make a trend. Please note that in the percentage of all cash sales, above, we had under 9% in April 2020, but then it did bounce back up into double digits until October. It may well do that in November, too, once we have cleared the election jitters period.
What does the lower percentage of cash sales mean? In Santa Clara County, we saw a declining number of pending sales in October. I believe that together, these point to less buyer confidence, or perhaps more buyer fatigue.
Here’s that chart (posted recently in my newsletter and also in the Santa Clara County market post on this site):
What is an exclusion in a real estate contract? What is an inclusion? Both of these refer to fixtures at the property which is for sale.
What is a fixture?
Generally speaking, a fixture is any item affixed or attached to the house, townhouse, condo or property which is installed with the intention that it be there permanently.
Examples of fixtures (items which stay or are included):
- built in in cabinets (in the bathroom, kitchen, or anywhere else)
- lights mounted from the ceiling
- built-in ovens or other appliances which are built-in
- in-ground (not potted) rose bushes.
- built in fire screens
- a fireplace insert
- window coverings
- wall air conditioning unit
- built in speakers
- built in wine fridge
- hot tub (unless it is a portable model, which most aren’t)
The exception to the rule is anything attached solely for earthquake safety. This would be the case if you have a large hutch which you have bolted to the wall so that it doesn’t topple in the case of a big quake. In Silicon Valley, fixtures are normally included with the sale of the home.
What is an exclusion?
Exclusions refer to fixtures which the seller does not want to include with the sale of the real property (real estate) but which otherwise would or should stay.
- there may be a light fixture in the dining room which is a family heirloom and the seller does not want to leave it with the house
- an in-ground plant, bush, or small tree that the seller wants to take when moving out
- curtains which match a bedspread or other decor
- stereo speakers that are built in
- surveillance equipment, such as a Ring doorbell or camera (I saw this recently where the seller wanted to keep it)
A common mistake among real estate agents and consumers both is estimating a home’s probable value using only the living space’s square footage. But what about the total number of rooms? Specifically, what is a bedroom worth?
Clearly other factors have a significant impact, such as remodeling done (or deferred maintenance that’s taken place), whether or not there are special features such as pools or tennis courts, the quality of the landscaping, or the presence of a view. Some of these are challenging for pinning down a value since they may be unique to a particular property and there may be no similar comparable properties or “comps”.
All homes, though, have bedrooms. We know (almost intuitively) that it will be challenging to sell a 1 bedroom home and that 6 or more bedrooms may sound like a boarding house and have diminishing value for most consumers. (I’ve known 6 bedroom homes to be presented as 5 bedrooms plus a den or home office.)
Recently I ran into this issue again, where some lovely people I was discussing the market with appeared to be looking at their house’s likely sales price based only on square footage and not seeing the highly likely limitation of having fewer bedrooms than most home buyers want. I decided it would be a good study to pull up two and three bedroom sales in San Jose over recent years and check on the average sale price of each – keeping the properties within a fairly close band of square footage and lot size so that it would be a level playing field. (Most accurate would be in a very small area with a very tight range of square footage, but going that narrow likely leaves us with too few homes for a decent pool of data.)
I did a spot check of smaller, older houses in San Jose 95126 (roughly the Rose Garden, Shasta Hanchett, and St. Leo’s areas) and used square footage of 1000 SF to 1500 SF and small lot sizes of up to 6000 SF. Also I removed sales on busy roads, such as Hedding. Bottom line: the 3 bedroom houses were selling for an average of $897.72 per square foot, while the 2 bedroom houses were purchased at an average of $837.04 per square foot.
What if we looked at a broader area, and not just older houses? The next section covers all of San Jose and also from 2017 to the present.
The market is hot
Pent up demand during the tightest quarantine period has thrust the number of sales upward. Multiple offers are common.
As of today (Oct 11), there are 995 single family homes available in Santa Clara County. Over the last 30 days, there are 984 that went sales pending. Those are pretty good odds for home sellers!
The odds are better still for houses and duet homes priced at or under $1,200,000, which can often be a first time home buyer purchase price. For that pricing tier, there are just 270 active listings and 383 that went pending in the same 30 day period. In the most affordable pricing tiers, homes are selling faster than they are coming on the market.
Why are the entry level houses such a hot commodity? We don’t have data on motivation right now, but my best guess is that many of them want to get out of small apartments and into houses with yards since we are likely to be sheltering in place for a long time to come.
Quick overview of what is and isn’t allowed with real estate listings and sales
The landscape for home sales is complicated and restricted, but easier than it was earlier in this pandemic. The market is strange in many ways, but it is possible to buy and sell now, with restrictions.
What’s changed with Covid:
- No open houses or in person broker tours allow.
- Real estate agents in Santa Clara County may show homes, but this should be only after everything possible has been done virtually and as a “last resort” per the county.
- Real estate agents may show up to 2 people at a time. (Previous requirement that they be from the same home is dropped.)
- NEW FORMS: Paperwork must be signed by buyers before they can view a home. One is the brand new PEAD-V advisory regarding the risks of being in a home at this time and a promise by the buyer that he/she is healthy and asymptomatic. Adults visiting the properties must sign it. If children will be going in, their names must be listed on the form. The paperwork is emailed to the listing agent before the home can be seen. (A few listing agents will not even schedule the appointment until they receive the form.)
- Additionally, there is a “best practices” document that buyers must receive. Some brokerages have more paperwork as well.
- The current Best Practices document states that the home is supposed to be disinfected between showings by the buyer’s agent (this is new as of June 20th). The responsibility for this has bounced around and there is tremendous confusion on this issue. Buyers should not assume that the homes are disinfected between showings.
- The listing agent is to provide hand sanitizer, disinfecting wipes, and masks in case the buyers or their agent do not have them. (Tricky requirement as they can be difficult to obtain. Some are doing this, but many are not.)
- Paperwork must be posted outside of the front door with the rules for the showing and the best practices to prevent the spread of the virus. (State law.) In some condos / townhomes, I’m seeing them inside, though.
Expired, canceled, and withdrawn listings are all frustrating situations for both home sellers and the Realtors they worked with. After considerable effort, and likely also significant cost. the property failed to sell (or it went pending, fell through, but did not re-sell). What happens next?
What is the difference between expired, canceled and withdrawn listings?
Let us begin by discussing the difference between canceled, expired, and withdrawn listings and how each impacts your vulnerability to being swamped with messages from real estate agents.
- A withdrawn listing means that the property is still listed for sale with a real estate agent or broker but is no longer listed on the multiple listing service (MLS). It’s still a valid listing and other agents should not approach you about working with them since you are still in a contract to sell your home with your current agent.
- An expired listing means that the contract for your listing has come to an end and the listing is no longer in place. Other agents may approach you since there is no valid listing in place.
- A canceled listing is one in which the seller and agent or broker agree to terminate the listing. Since the listing has ended, other agents are free to contact you.
In a nutshell, if your Silicon Valley home’s listing becomes either canceled or expired, real estate sales people may contact you, but if it is merely withdrawn, they are not supposed to reach out to you because you still have a valid listing in place. Continue reading
Home buyers & sellers in Silicon Valley hear about various types of real estate related insurance products and they can sometimes be confused with one another: Homeowner’s (or Fire) Insurance, Title Insurance and Home Warranties. We’ll discuss them today and hopefully will clear up the confusion.
Insurance Choices: Homeowner’s Insurance, Title Insurance, and Home Warranties
Homeowner’s Insurance pays you money to cover losses in the event of a fire or other unseen catastrophe (such as a tree falling on your home, a fire caused by lightening or a fence falling down in a windstorm). Often there’s a deductible but beyond that you have major coverage for losses in most cases. There are some caveats, of course. If you purchase a home using financing, your lender will require you to buy this type of insurance. It is sometimes also called Fire Insurance.
Homeowner’s insurance does not cover damage from earthquakes or flooding from creeks, rivers or dam failure. If you have a fixture that fails and the home floods, though, that is probably covered.
Homeowner’s insurance does not guarantee that if something is destroyed it can be rebuilt. For instance, in older parts of Santa Clara County (such as downtown Saratoga, San Jose, Los Gatos and Willow Glen) there are detached garages built right up against the property line or very close to it. In most places there are now setback requirements of about 5 feet or so. Should that garage burn down (or be destroyed by termites or anything else), it can only be rebuilt, most often, if it’s moved. Creating a new foundation is expensive – and that may not be covered by your HO insurance.