Tips for Home Sellers
Coronavirus numbers in SCC continue to rise dramatically
As of right now, April 6, there are 1224 diagnosed cases in Santa Clara County per the county health department’s website. (Side note, the county has a new website with enhanced data, including reporting the number of hospitalizations and numbers of people in the ICU. I strongly encourage you to check it out.) We need to see the number of new cases per day decline before we’ll see things approaching more of a normal. Hence the daily count posted. Right now, they are beginning to slow down. The daily increases are lower, which points to a flattening of the curve and the results desired. (The New York Times has an excellent article on cases by county throughout California.)
Side note: You may want to pay attention to the number of cases when the Shelter in Place order was imposed, as we may need it to be less than that for the order to be lifted. Scientific American has a well written piece on what it will take to remove the restrictions. I found it useful.
Short answer about what is happening now: the real estate market is close to a full stop at the moment. A few homes are closing escrow, but fewer homes can sell or get through inspections / appraisals now. As of today, April 6th, a few restrictions have been lifted, but there are many challenges to buying or selling a home right now. Full answer is below.
There are 3 stages now for us to consider when asking about the implications on real estate sales: the current Shelter in Place period, the period just after the Shelter in Place order has been lifted, and the long term after effects / changed reality. There are also multiple layers of restrictions that have been in play even apart from the Shelter in Place, such as a restriction on the number of people who could be in one area at the same time. When the Shelter in Place begins to lift, most likely some other restrictions will remain. It won’t be a black and white scenario, like the end of the school year. Expect nuances.
1 – During the Shelter in Place: Can real estate listings, showings, sales, and closings take place now?
The landscape for home sales is complicated and very restricted. My own opinion is that it may not be back to normal until June or July. Overall, no, it’s not broadly possible to show homes, making it tougher overall to sell them. There are a few caveats and exemptions, however.
Santa Clara County has had a Shelter in Place order for everyone since March 17 (and that order came one day earlier for those over 65 or with chronic health conditions). Order of the Health Officer of the County of Santa Clara. Most of the other SF Bay Area and Santa Cruz County followed suit the next day. Then the governor called for a lockdown for the whole state a few days after that (with no end date). Initially, real estate was not deemed essential, and therefore we Realtors were told that we could have no face to face appointments (and certainly no open houses).
And as of March 31, six Bay Area Counties came out with new guidelines on the concept of what is an essential business. They have loosened up the rules A LITTLE. Here is the new order:
x. Service providers that enable residential transactions (including rentals, leases, and home sales), including, but not limited to, real estate agents, escrow agents, notaries, and title companies, provided that appointments and other residential viewings must only occur virtually or, if a virtual viewing is not feasible, by appointment with no more than two visitors at a time residing within the same household or living unit and one individual showing the unit (except that in person visits are not allowed when the occupant is still residing in the residence);
To clarify, my company reached out to the county to make sure that we understood what was allowed. Only seeing vacant, non-occupied homes is permissible. That doesn’t mean that the seller lives there but steps out for a few minutes. It means the home is not being lived in at all. Further, the county relayed:
ADDED NOTE: Nothing has changed from our original position that EVERYONE should be following the strictest interpretation of the Shelter in Place order. The essential services re-classification has changed nothing about the restrictions on you. Showing a property should be done as a LAST RESORT. You are expected to conduct business as you have for the past two weeks, which is in the safety of your home and all tasks and appointments should be done virtually.
- Real estate agents may show vacant homes only (not occupied 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 who currently live in the same household, no more
Recently a friend asked me about the way in which vendors are selected when people buy and sell homes. In some cases, Silicon Valley home buyers or home sellers know which title company, home inspector, home warranty provider or other vendor to hire. Most of the time, though, they don’t. They are hoping that we real estate professionals can put them into contact with good providers to ease the task of choosing vendors.
When working with my clients, for most vendors I provide a trusted list of sorts. For the various inspections (roof, chimney, home, pest, etc.) or other service (lender, home warranty, title company) there might be as few as two or as many as six resources listed. Most often, my clients ask me if I have one or more which I prefer, and most of the time it is one company for each category (I have a favorite termite company, favorite home warranty company, etc.).
The home buyer or seller in Santa Clara can pick or hire anyone or any company he or she pleases for these various jobs. We agents can and will assist with sharing the names and numbers of those whom we know, like and trust, but at the end of the day, it’s the client who chooses. So really it’s up to the client – he or she can do some research or not. But if they tell me (as they most often do) to go with my preferred vendor, there’s one in each category and I don’t tend to “spread the business around”. Over the years, agents tend to build relationships with people in these companies and get a sense of whom they can trust and want to work with. (We agents would hate it if a client with six homes to sell picked six different Realtors to rotate through, too. We tend to want and also to give loyalty.)
Although the Silicon Valley real estate market remains hot, and generally is a strong seller’s market, not every home is selling in 2-3 weeks. At some point, sellers may wonder if they should lower the list price.
While being overpriced is not the only reason why a property won’t sell, that is the case 90% of the time or more. The first question is whether or not there are enough showings to generate a sale. If not, then the problem is significant. If there are showings, what is the feedback? Why are buyers not writing an offer?
How soon should you lower the list price?
Most of the time, if the property is unsold after 21 – 30 days, it’s time to reevaluate the marketing strategy. Is the home easy to see? (If showings are too restrictive, they won’t happen.) Is the house or condo presentable – clean, well lit, tidy, without bad smells and so on? Are the photos good? If all of this is in order, it’s time to consider the finances.
The biggest piece of the marketing effort, of course, is price. (Please also see Why didn’t my San Jose home sell? for info on other remedies to real estate not getting pending.) if the home isn’t selling, it may be time to lower the list price or asking price.
Usually, the main reason why a home doesn’t sell is that buyers think that it is overpriced. Sometimes you, the seller, can compensate by improving the condition or some other relevant factor, but often, the solution will be to adjust or lower the price.
How much should you lower the list price?
It really depends on what the market reaction has been – no traffic, light traffic, or heavy traffic? The colder it is, the more likely you’ll need to take stronger measures.
Recently I visited an open house in which there’d been less than a 1% price reduction after 30 days on the market. That very minimal kind of repricing tells a buyer “I’m not budging”, which the buyer may read as “My price is high and I’m unreasonable; move along, this is not the house you seek”.
It’s all about the traffic
First, how much activity is your property getting? How many showings per week?
If you are getting at least 3-5 showings per week, but no offers, you are probably close on price. Perhaps a smaller reduction, combined with some other adjustment (restrictive hours loosened up, scary pets removed, alarm disarmed) may do the trick in getting you more traffic to create a viable offer.
If you are getting NO showings, or close to no showings, you may well be way, way high on your price or have other major issues which need to be corrected. My general advice, below, may not apply in that case as you may need something more to get the qualified traffic in through the door. The more qualified traffic you get, the better your odds are of selling. An atractive price is the bait that can attract those buyers.
Here are two old rules of thumb, which I think pretty much still work today:
- for every week it’s been on the open market, lower it $10,000 (so a reduction in 3 weeks would be $30,000 or a reduction in 5 weeks would be $50,000)
- alternatively, for every week it’s been for sale and active on the MLS, lower it 1% of the sale price (hence at 3 weeks, a 3% reduction would be appropriate and at 5 weeks a 5% reduction would be indicated)
Every situation is, of course, unique, so it’s important to look at the big picture. If buyers and agents are staying away because the home smells of pets or cigarette smoke, or if there are people constantly home during showings (you should all vacate), or if you demand that the listing agent be present for all showings, any of these things can drive away qualified traffic. But if the marketing is good, the home is clean and reasonably accessible, and all the other basics are correct, it probably is price. Sit down and talk with your Realtor to get good guidance. If those who have shown the home have provided feedback, take it to heart – whatever that input is.
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.
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).
All cash sales, month by month, in Santa Clara County (single family homes)
February is almost over so I included this month in the formula for all cash sales. Our market is red hot, and it’s interesting to see that we have the largest percentage of cash sales in almost 3 years.
I also spot checked the last 30 days for condos and townhomes, and on average the townhomes had 13% selling all cash, no loans, and the condos were at 17%. For all of these home types combined, the average of all cash sales was at 18%.
During the early part of the downturn, the percentage of all cash buyers was not only in single digits, but for the couple of windows I pulled up, it was in the 3% to 4% range (spring 2006 and spring 2007).
I think you could read the percentage of all cash buyers as a data point of home buyer’s confidence in the real estate market. Right now, the market is hotter than a year ago – and I don’t see that trend changing soon.
Willow Glen is one of the most charming areas of San Jose, consisting of many older homes which feature lovely, classic architecture. Most Silicon Valley home buyers treasure the Willow Glen charm and ambiance, but many are seeking newer homes. A fabulous option is “The Willows“.
KB Homes built “The Willows” in 1999 to 2000. It is tucked away at the southernmost tip of Willow Glen, off of Foxworthy Avenue & close to Almaden Expressway, but only about 2.5 to 3 miles from all the action on Lincoln Avenue.
The tree-lined streets are built in something of a loop shape with Rubino Circle being the main access or loop road. Situated on the inner part of the loop are homes with smaller lots that are a little more affordable. The outer part of the circle is built with slightly larger homes on larger lots (but none of the lots are “big”). Sidewalks with soft curbs at the corners accompany the streets and make for a pedestrian-friendly, bike, wheelchair or stroller friendly area. Visit in the early evenings and you will see children and adults walking, strolling, taking dogs for a walk etc. – always a good sign! Because the neighborhood is a bit like an oversized cul-de-sac (no through traffic), it is very quiet in terms of traffic. The area has large street lights, too, making for a safe feeling community.
Homes which are dark inside, or which feel dark to potential homebuyers, are much more difficult to sell, and virtually always sell for less money than those which are perceived as “light, bright and airy”.
While a property’s owner might love the cozy feeling of dark paneling, deep overhangs and low lighting, it’s not what most buyers want today. To maximize the amount a house, condo or townhouse in Silicon Valley will sell for, it’s imperative to make it as attractive to buyers as possible. In many cases, that means it needs to be lightened and brightened to sell for top dollar.
How to make a darker home a little more light: start with the windows
How can a home owner make a house or home be – or seem – more bright? One of the biggest “offenders” in this area involves windows! Here are a few window-related problems that can make a home feel significantly darker than necessary, together with some potential solutions:
- Tinted windows, such as yellow or other colored glass at the front door or entry way: replace with clear or translucent, colorless glass. If there’s a darkening film (for instance, for privacy), remove it and replace with a clear or translucent but uncolored film instead.
- Curtains/blinds which obstruct part of the window: get tie backs to pull them further back and let more light in (goal is to not obscure windows at all).
- Furniture blocking windows should be moved or swapped out for lower items that do not cover up any of the windows. I see tall headboards often situated right in front of the glass panes – they are counter productive. Perhaps remove the headboard, or place the bed in another location?
- Shrubs and trees covering some of the window: trim back so the window’s glass panes are 100% visible, if at all possible, to let maximum light in.
- And of course, do make sure your windows are sparkling clean!
When listed properties get multiple offers, sometimes all or most of the bids are in a similar range or band. Sometimes, there may be one buyer who’s lost out on several multiple offers and spikes the price high to make sure that he or she “wins”. That ultra high price, far more than the other willing and able home buyers were offering to pay, is called an outlier. (We are seeing a lot of this in Silicon Valley.)
When that house closes escrow, neighbors and real estate professionals themselves see the closed price, and may be amazed at the amount the new neighbors paid, as it often sets a new high for the immediate area.
Below is a sample scenario of bids in a “band” of pricing with one outlier.
Sample list price $999,000
Offer 1 $999,999
Offer 2 $1,100,000
Offer 3 $1,250,000
Offer 4 $1,200,000
Offer 5 $1,000,000
Offer 6 $1,260,000
Offer 7 $1,275,000
Offer 8 $1,400,000
Offer 9 $1,325,000
Offer 10 $1,265,000
Offer 11 $1,215,000
Offer 12 $1,335,000
There will always be a couple of offers that come in close to list price, despite all clues that a property is under priced and the activity leel is high. Offers 1 and 5 are essentially at list price and they haven’t got a chance. Half of the offers, 6 of 12, are between 1.2 and 1.275 million. We’d call that a band of pricing. There are 2 in the 1.3s and 1 at 1.4.
The offer at 1.4 million is $65,000 higher than the next best offer, but the buyers don’t know the prices being offered. If no one had spiked the price, anything over 1.3 would have trounced the rest of the offers. But we just never know how high a very highly motivated buyer will go.
Will that one spiked sales price or outlier establish the value for the neighborhood?
Not by itself, it won’t.
Appraisers look for three comparable home sales in establishing valuation for residential real estate. Real estate agents do too. One sale in a tract could be a fluke. Several of them and you have a trend – something more dependable, indicative of rising values for the region as a whole.
Home buyers do not want to be outliers, but if they have lost a number of homes and see prices continuing to rise, they can project a likely value a few months into the future and decide it’s better to pay the “two months down the road” price today and get the house rather than continue to lose as prices go up and up and they risk getting priced out of the market. So they may pad what they think is reasonable just to make sure they get their home this time around. Of course, this is a seller’s dream. Recently I sold a home where there was this sort of buying activity with most bids in a band and one super high. My seller’s response? “Scrape me off the floor” followed by a simple “let’s take it”.