What makes an offer lowball?

Lowball offer - baseball with the word LOWBALL imposed over it - what makes an offer lowball?Silicon Valley real estate offers few simple answers but many recurring questions. One of them is whether or not you should write a “lowball offer“. So the first question is this: what makes an offer lowball?

What makes an offer lowball?

In general, contracts with prices more than 10% lower than list price will be considered low at best, and insulting at worst, but there are many nuances, and this may not always be the case.

  • What is typical for the area? If most properties are being sold at 10% lower than list price, then 11% or 12% won’t be viewed too dimly if the home has been on the market for a while.
  • How long has this piece of real estate been listed for sale? What might seem low in the first week might look OK after 3 weeks.

What’s the immediate market climate like there?

What makes an offer lowball is above all related to what is happening in that precise micro market. It’s entirely relative to how the market in that area (not the county, not the state, but that particular area) is selling.

If houses in one area of San Jose are selling within plus or minus 1% of list price and you come in 5% under, the seller may feel that your offer was not in good faith, that the offer is insulting, or you are not a serious buyer who takes the opportunity to buy seriously.
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What has waiting cost you?

Row of houses with arrow indication price appreciation - What has waiting cost you? Indecision can be expensive If you’ve been on the fence about buying a home, have you considered what has waiting cost you? Indecision can be financially and emotionally crippling. 

Both home buyers and home sellers can experience delays in buying and selling, and also experience losses in what they could accomplish in a real estate transaction because of slowdowns in execution. Since our Silicon Valley real estate market has more periods of home prices rising than prices falling, the majority of damage from delays appear to fall on home buyers.

Sellers may be locked in with low rates and may now be upset that they did make their move up or move down purchase when mortgage rates were better. Buyers may feel like their opportunity window has passed them by.

  • If you’ve been thinking of buying a home for 5 years or more, that wait has cost you lower home prices. There is a chance that you may be priced out of the market.
  • For those who bought a home before rates bottomed out during the worst of the COVID pandemic (rock bottom was January 2021), there was a chance of refinancing and getting a loan at under 3%.  Today rates are closer to 7%. Buyers now are watching rates for a chance to refinance and get a better deal and lower house payment. Rates are hugely important when gauging housing affordability.
  • A fair chunk of buyers are hoping that prices will decline.  Demand far outstrips supply, though, so for now that appears to be wishful thinking.
  • There are some times when home prices go up faster than you can save. Right now appears to be one of those periods. If you decide to “wait and save”, the gap will increase between you and the home you want to buy, sadly.

Home buyers, what has waiting cost you?

Since 2012 our housing market has experienced prolonged periods of rising home prices with only a few corrections here and there. For would be owners, those few corrections were opportunity moments. Our last one was the second half of 2022. When home values are soft, few buyers jump in, though, waiting to get more for their money by holding off.

Trying to time the market seldom works, though. Blink and the market shifts back into the other direction! There’s almost never a perfect time and some objection to buying.

As am example, here are the average and median sale prices for Cambrian Park (MLS area 14), a section of San Jose that is often fairly reflective of the county’s appreciation overall.

The first year is 2013 since from 2006 – 2012 we had a bit of a wild ride with the Great Recession, but by January 2013 we were solidly into an appreciating market.

Cambrian home prices over time - what has waiting cost you?

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Preparing to buy your first home in Silicon Valley

Preparing to buy your first home - couple looking at computer at their dining room tableIf you’re mulling around a home purchase, it’s a good idea to formulate a plan. Preparing to buy your first home will take some time, even before you see any homes. Just thinking about it can be a little overwhelming!

In this article we’ll share tips for folks interested in buying how to get started:

  • video discussion of the first three steps
    • online research (various areas of interest to you)
    • talk to folks you know who have recently purchased about their experience so that you can learn what to anticipate
    • talk with a Realtor (or a few of them) and learn how they work
  • a list of things to consider researching when considering home buying
  • a list of other resources at the end

Preparing to buy your first home: 3 steps

 

When preparing to buy your home, slow down, make a plan, do some research online, talk with recent home buyers, and then speak with a Realtor (or two or three).

Once you select a Realtor, he or she can help you to create a path forward. Often they’ll ask you about setting priorities (and as much as possible, for you to rank them), your budget, your tolerance for doing repairs, your desired timing, and a few other things.

The folks who get into the most trouble with a real estate purchase are those who do it spontaneously.

What kind of research should be done when preparing to buy a home?

There are many areas you’ll want to investigate:

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Doesn’t the listing agent have to show it to me?

Telephone Photo with dialogue between a caller and listing agent - Doesn't the listing agent have to show it to meIf a buyer wants to view a property, does the listing agent have to show it to him or her outside of regular open houses? The answer might surprise you!  Here’s a quick overview:

  • The listing agent and seller decide about showings that the listing agent is expected to do. Does the listing agent have to show it privately, or during open houses, or only on one weekend before offers are reviewed?
  • The listing agent will make showings possible for buyer’s agents with instructions on scheduling in the comments that members of the MLS can read.
  • In many cases, the real estate licensee working with the home seller will hold the property open for the public on the weekend and sometimes mid-week as well. It may or may not be the listing agent holding it open.
    • For safety reasons, many listing agents will not have private showings with buyers whom they don’t know and who aren’t clients of theirs. Realtors are harmed every year in the line of duty.
    • For agency reasons, a listing agent who plans to only represent the seller may not want to have an appointment with a buyer who plans to write the offer with someone else.
    • There are many other reasons why the listing agent will not personally show the home for sale outside of open house times, but may be able to arrange for the buyers to see it with another agent.

When does the listing agent have to show it?

The most important thing for buyers to understand is that the accessibility of the home for viewings depends upon the agreement, verbally or in writing, between the owner of the property and the agent/brokerage hired to market, negotiate, and sell the real estate as to whether or not the seller’s agent is obligated to show it privately.

It’s not an “on demand” situation where an interested buyer can insist on seeing the property as desired. To make an absurd point, no one would say “doesn’t the listing agent have to show it to me at 10 p.m.?” Without any thought, we know that’s unreasonable.
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Property Tax Basis Transfer for Seniors

Interested in moving your property tax basis when you sell your current home and buy the next one? For those over 55 in California, this is a great one time option.

There are actually two propositions involved.  Prop 60 applies to moves within your own county, and Prop 90 relates to moves between counties which are participating in the transfer arrangement. Unfortunately, of California’s 58 counties, only 10 have the cooperative agreement to accept a property tax basis transfer from other participating counties.

Cooperating Property Tax Basis Transfer Counties (Prop 90)

The counties cooperating in the property tax basis transfer are only these, as of the date of this posting: Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, and Ventura.

Some of the basics for the property tax basis transfer:

  • Homeowners must be 55 and older at the time of sale of the original property.
  • Homeowner must be on record both for the home that’s sold and the replacement property.
  • The replacement residence must be equal to or lesser in value than the original residence.
  • There are special rules for multi-family (duplex, triplex, fourplex) properties and for mobile homes.

In the most typical scenario, a senior homeowner would sell a house (or townhome or condo) and “downsize” to another, less expensive, smaller house or condo.  If the homeowner had been in the first property for a very long time, then the low tax rate would be hard to give up, but Props 60 and 90 enable that homeowner to go to another, less expensive home and carry the old tax rate along – one time, and either in the home county or in one of the participating counties.

I have known seniors to sell a house in Los Gatos, Saratoga or San Jose and move to The Villages or to gated senior communities out of the area but closer to their grown kids and make use of these two propositions.

It should be noted that while the price of the replacement home must be less than the home being sold, that doesn’t mean that the new home must be smaller. I’ve known people to move out of area and get a larger, newer, nicer home – at a lower price tag. So it’s really an economic downsizing (or “right sizing” as some like to say now).

For more information and to get all the details, please click on the California state page for these two propositions.

Stress and real estate sales and purchases: as much as possible, don’t sweat the small stuff

Photo of Walden Pond and the words "Real estate stress can be helped by knowing what to expect"Buying and selling residential real estate, particularly the place where you have been living or will be living, is extremely stressful, even under the best of circumstances, such as when the reason for selling or buying is happy. (This is less true for investment property, at least for most people.)   It’s even tougher if there’s a serious illness, suicide, death, divorce, unwanted relocation or some other cause that is not of one’s own choosing.   Or if selling when the market is down and home values are falling, as they were doing in 2008.

Stress can be helped tremendously by knowing roughly what to expect and then accepting it.  Certain things tend to happen when buying or selling a home.  Things aren’t going to be perfect or 100% predictable every inch of the way, but if the buyer wants to buy and the seller wants to sell, most of the time we can get to closing without too many bumps and bruises.

Sellers:
Although most Realtors who want to show your home to their clients or preview your property will be very polite, request the time via the proper channels and will be respectful in your house and while locking up, unfortunately a few are just not as professional.  It is annoying, but almost without fail something will go wrong when a whole lot of people (Realtors and others) come through your house or condo.  Some agents will just knock at your door without an appointment.  Some will fail to lock up 100%.  Some may forget to wipe or remove their shoes or follow some other request (such as not entering a garage or particular room).  Sometimes agents simply mess up (or their clients do, or members of the public coming in at an open house). On very rare occasion, personal items will be disturbed.  Recently at a client’s home something was broken.  I’m sure it was inadvertent, but it was upsetting to my sellers. (more…)

Visiting Santa Clara County Open Houses? Things to Consider, Do and Look For

This Way OutVisiting Silicon Valley and San Jose area open homes is a great way to get to know neighborhoods, architectural styles and the market overall. I encourage people thinking of buying or selling to visit the opens nearby to get a pulse on the market and what’s “out there”.

A few open house tips, in terms of what to be aware of:

  • feel the floor as you walk through the condo or house: is it level?
  • smell the various rooms – are there candles or other scents intended to mask odors?
  • note the light and time of day, as well as the direction the home and windows face and ask yourself if the home gets adequate light for your taste
  • is the layout good?
  • is there enough storage?
  • if there are problems with the home, can they be fixed?
  • what needs updating or remodeling, or will need it soon?
  • how are the homes, yards, and cars nearby?
  • where are the power lines? are they regular, or high voltage power lines?
  • was the home flipped or being lived in by long term owners?
  • does each room have appropriate furniture, or is it barely furnished to make the room and space appear larger?
  • have interior doors been removed? (this is an old “model home” trick)

The best homes will have presale inspections and disclosures completed which you can view prior to writing an offer.  It can be very helpful to familiarize yourself with the various reports, inspections, and disclosures so that you understand the range of normal. Older homes will not be defect free, and sellers will not make them perfect either – so get a feel for what to expect by perusing some of these if the binders are available during your open house. (Do understand that the agent is likely going to read it as a “buying signal” so explain that you just want to understand how the paperwork looks.)

For more tips on what to include when viewing Santa Clara County homes for sale, please see:
Viewing An Open House  on my main website.

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(all data current as of 6/13/2024)

Listing information deemed reliable but not guaranteed. Read full disclaimer.

 
 

 

 

 

Silicon Valley Home Buying Tip

Newer Silicon Valley Home in Blossom Valley

Are you house-hunting in Silicon Valley? If so, you may be viewing homes which were last sold just a few years ago. This is especially true among distressed properties which were purchased, renovated and now are being flipped (foreclosures, REOs, short sales). Most sales are reported on the multiple listing service, so it’s easy for your agent to find this information for you. If there’s nothing on the MLS, a quick look at the county records online will reveal the last sale date.

Why does it matter if the home sold just a couple of years ago? Because it may be possible, when you are buying such a property, to request the old inspections and disclosures. If the current sellers are using the same agent who helped them to buy the home (which is also learnable from the MLS), he or she should have a copy of the old file. State law requires that brokers keep transaction records for 3 years. Sellers and agents tend to keep them for longer, though. (When agents change brokerages, though, sometimes it’s harder to get ahold of old files.)

So back to your Silicon Valley real estate issue. You’ve located a home that you would like to buy, and there has been some recent remodeling done, “permits unknown”. By requesting the old inspections, reports, and disclosures, you may learn the true status of that repair work. Perhaps the current owner doesn’t remember, and doesn’t think to look at the old paperwork, but by going through it yourself, you may gain a clearer understanding of the nature of those improvements. Or you may find out that an addition or remodel was done without permits.

Knowledge is power, and by requesting the information on a home where it was sold in recent history, you gain some of each.

 

 

 

How to make sure that real estate agents won’t take you seriously

Real estate professionals usually spend time, effort and money to grow their business, and that means attracting new clients while working with those currently buying and selling homes, or getting ready to do so.  Some consumers believe that realty sales people will give out tons of information, and spend loads of time, without having any kind of commitment from the consumer that they are working together.  In other words, the idea is that they “work for free”.   Better business people won’t do that – they recognise a waste of time when they see it and won’t take you seriously.

If you’d like to be taken seriously by a real estate agent or broker, it’s important that you get started on a good foot together.  If you are cagey, want to remain anonymous, or expect the Realtor or other licensee to do work for you before you ever have a conversation, you’re probably not using a winning strategy.

Here are some common reasons why a prospect (not a client yet) may get eliminated:

  • use a fake name (or only your first name, or other partial name)
  • use an email address that has no connection to your name or appears to go to another name
  • refuse to provide a cell number
  • make appointments but then cancel, reschedule – over and over
  • expect the agent to be available on short notice, but require tons of time (for appointments, to respond, etc.)
  • ask for pricing information or analysis on a property before you establish a working relationship (or meet in person) with the Realtor
  • requesting any other extreme expenditure of time & effort prior to your hiring the agent to help you to buy or sell a home

Anything that smacks of dishonesty, disrespect, or expecting a lot of “something for nothing” will be a big red flag to a real estate professional.

Want to have a great agent want to work with you?  Here are some tips:

  • be honest and upfront with your name, your goals, timeframe etc.
  • provide contact info so that the agent you’d like to work with feels you’re on the level, honest and transparent
  • respect the agent’s time, give enough lead time, be on time, understand that he or she has other clients and projects which all have to be part of the day or week
  • it’s fine to interview several real estate sales people, but then decide on one and be loyal

It’s important that on top of all other things, you and your realty expert have a good working relationship.  Buying and selling is stressful.  You and your Realtor are a team – if you begin the relationship with that mindset, the whole experience will be much improved.  And if not, it will seem like a doomed relationship, and you may never even have that first face to face appointment; instead, you’ll be eliminated as a bad prospect.

 

 

 

 

How to prepare for a home inspection in Silicon Valley

Home Inspections Home Sweet HomeWhat needs to be done for a house, townhouse or condominium to be ready for a home or pest inspection?

Inspections 101

The property inspector will need to be able to see what’s being inspected, of course, so the first and most basic thing to do is to make the home and garage accessible and visible.  For people trying to move, some areas under the roof, such as the garage or a spare bedroom, may be packed full of boxes and other stuff, so this may come as a surprise.  Anything inaccessible or covered up will need to be excluded from the inspection and report, often causing pest inspectors in particular to call for “an unknown further inspection” with a cost for a return visit being levied too.

Room by Room

Because most Silicon Valley homes do not have basements to serve for storage, garages tend to accumulate a lot of stuff.  In some cases, the walls cannot be visible due to built in storage cabinets, work benches, etc.  But for non built-in items, such as boxes, it is best to either move them out of the garage for the inspection or at the very least, place them in the center of the floor so that the inspectors can view the walls, particularly where they meet the floor.  Automobiles should be moved out for the inspection too.

This same principle is also true for the outdoors with anything which might be stacked up against the house under the eaves.  The walls need to be seen.

Indoors, if the property is built on a raised perimeter foundation with a crawl space (not a slab foundation), the access hatch needs to be accessible. (more…)