Weather, mother nature and home sales

Without stop signSo many variables impact the real estate market, both here in Silicon Valley but across the country.  Employment, interest rates, the stock market, the availability of real estate inventory, the confidence of the buying public (say, in the wake of a terroristic attack, announced layoffs, or global conflicts like the invasion of Ukraine) all can move the housing market one way or the other. But they’re not the only forces that do.

Weather and natural disasters can likewise have a pronounced effect on a local housing market too.

My Experience: The ’89 Quake

Anyone in the San Jose area in September of 1989 will vividly recall the Loma Prieta Earthquake, which occurred in the Santa Cruz Mountain Range between Los Gatos and Aptos. Jim and I were buying our first home at that time, in San Jose’s Cambrian district, and in fact did our “final walk through” just two hours before the quake hit.

Our closing got delayed as the lender refused to fund the loan until the home was professionally checked out by an appraiser. They’d seen images of the Bay Bridge, homes off their foundations, fallen chimneys and other disastrous structural failures and weren’t taking a chance on any home!

Luckily for us, the property we were in contract for was essentially unscathed. It was not a young home, but built by a respectable builder, and more importantly it was on solid ground. Thankfully the house was fully vacant since we were close to the planned close of escrow, so there was no fallen furniture or broken glass in the carpeting and most everything was visible and easy to check later for damages. We did close, though it was about 10 days later than expected.

For listings not yet sale pending, it was already a slowing market and the beginning of a correction, but the earthquake plunged the market more deeply into the doldrums. At least for awhile.

Weather Forecasting the Market Activity

There are similar stories with markets all across the state, country, and globe after similar disasters. More recently here in California we’ve seen major impacts on various markets after fiercly destructive wildfires. But mother nature can effect the housing market in much more subtle ways as well, no disaster necessary.

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What are your cold feet costing you?

What are your cold feet costing you?It remains a strong seller’s real estate market in Silicon Valley, with many properties selling with multiple offers, but there’s an undercurrent of concern that we are the near the peak of pricing.  That has some buyers nervous (though most will quip that Apple and Google and others are still hiring, and the local economy is strong – so they are not too worried).  For those who are a little nervous, sometimes it turns into cold feet – and it’s costing them.

What we are seeing in terms of cold feet with Silicon Valley home buying:

This undercurrent is not being widely reported but we are experiencing it in our real estate practices as a few things have been taking place.

First, a larger than usual number of transactions have been falling through.  Many of these, though, are not recorded on the multiple listing service, as they take place right after an offer is accepted, so the listing agent and sellers turn to one of the other bidders and put them into contract within hours.  Because they aren’t recorded, it’s impossible to track – but the stories are out there of this happening more now than a year or two ago.

In other cases, offers are written and submitted but withdrawn before they could be countered or accepted.

And in others, buyer agents say that they will be submitting an offer, but on the day of offer presentation, the home buyers back out and the offer is never submitted.

In my experience, all of these things are happening “more than normal” right now.  A lot of it is not easily measurable.

Symptoms of cold feet to come

Home sellers want to feel confident when they accept a contract that it will stick, both because they don’t want the work or emotional upheaval associated with a transaction that falls through, but also because often the best price is the first price.  When a home ‘resells’, most of the time it is for less than the origanlly accepted bid.

For that reason, smart listing agents are looking for the symptoms of cold feet.  They’d rather not get their sellers into contract with nervous buyers who will change their mind about buying the house or condo.

Symptoms of nervousness about the property at an open house:

  • Dominating the listing agent’s time with incessant and low-level questions – best to give most of your questions to your own buyer’s agent, who will help you with them.   It’s good to ask about the home, the reports and so on, but you don’t want to take so much of the Realtor’s time that he or she cannot talk with others there.   Think balance both in terms of the time and the nature of the questions.   You want to present yourself as reasonable and easy to work with.
  • We often say that the longer a buyer stays, the more likely he or she is to write an offer.  This is true, up to a point.  Buyers who come to an open house and stay for 2 hours, or who make 4 or 5 trips to see the house go from looking interested to appearing unsure.

Symptoms of nervousness about the property (your potentially cold feet) when your offer is submitted:

  • Sending in an incomplete offer and supporting documents. If the listing agent requires proof of funds, provide it.  If the disclosures are to be signed, do all of them – not just the cover sheet.  Aim to be thorough, it will present you as serious.  It will also show that you are not a pain to work with, that you and your Realtor can follow directions and that the listing agent won’t have to chase down the paperwork later.  Go the extra mile, it helps!
  • Submitting an offer package “last minute”, without the buyer’s agent giving advance notice that it’s coming.  Related to this is seeing the property and reviewing everything well in advance, but only deciding a few hours before the deadline to actually write, sign, and submit the bid.   The serious buyers who are rock solid are the ones who know early on that they want the property and are committed to it early on.  Their buyer’s agent will let the listing agent know long before offers are due that these home buyers are going to bid on it.  One agent recently told me “my buyers are madly in love with the house” many days before the offer due date.  This makes a big impression on sellers and their agents.
  • If the buyer’s agent needs to call every few days to see how things are looking, it usually hints that the buyers are not too sure or that they will only write an offer if there’s limited competition.  The truly sure buyers plunge ahead despite competing bids or the lack of them.

Want to buy a home?  Try not to come across as skiddish to the listing agent!  Your cold feet may cost you the home, even if your offer’s got the highest price.  Home sellers and their agents want to feel confident that you will close on the sale if your offer is accepted.  Present yourself as serious, capable, reliable, and easy to work with and your odds of success will be increased.  At the end of the day, it is always “price and terms”, but never underestimate the influence that your behavior and your real estate agent’s behavior play into the overall package, because shaky buyers may not close the sale, but home buyers who are rock solid and madly in love with the house will.

Lastly, in an appreciating market, as we have right now, it should be noted that often the next house or townhouse or condo will be more costly or in worse shape than the one you could not decide to get serious about.  Stay nervous too long, and you could ultimately really impact how much home you can buy at all.  Worse yet, take too long and you may price yourself out of the market entirely.

 

 

 

Silicon Valley real estate: the importance of confidence in the most successful home buying and selling

ConfidenceConfidence is perhaps the most under-appreciated factor in Silicon Valley home buyers and home sellers in getting more of what they want, or being successful at all.

Home buyers who feel confident about the market generally may buy, but when they have a lack of confidence that properties are holding their value, they don’t – even though a “buyer’s market” is often a great time to purchase real estate!

Silicon Valley home buyers who are confident about a particular property are more likely to pay more and to go into the bidding process with fewer contingencies and shorter contingencies, if any at all.  When they lack confidence in a property, the seller’s truthfulness, the listing agent’s professionalism, in the neighborhood or in the real estate market itself, they either don’t bid or they bid low.

Home sellers who feel confident about a buyer and that buyer’s financial abilities are more likely to choose him or her over others.  They want to feel that the buyer can perform, that the sale will close and there will be no “re-negotiation” are more likely to accept that offer than one which is riskier.  Sellers know that when a home falls out of contract, it often sells for less the 2nd time – so they do not want the sale to fall apart.  For that reason, most of them now want offers which are without any contingencies (or perhaps very short ones).

They also want the most money possible, of course, but if it’s neck and neck between the higher price with worse terms or slightly lower price with stronger terms, they will either counter the lower price up a little or they will outright accept the offer with more security of closing.

Often with multiiple offers, there will be a solid “band of pricing” where most home buyers seem to think the value lies.  Then there will be one or two who are higher.  Maybe one will “spike” the price.  But if the spiked price comes with an appraisal contingency, it is really a mirage, an illusion, since the price will likely be renegotiated later.   When listing agents see that kind of spread in prices offered, most of the time they’ll try to get the people with the best terms to move up in price.  It may not go all the way to the spiked price which is laiden with contingencies, but it will probably move in that direction.

What can San Jose area buyers and sellers do to improve their odds of success?  I would say the number one thing is to improve the sense of confidence on the other side of the bargaining table.

What can Silicon Valley home sellers to do enable buyers to feel confident (and to pay top dollar)?

Home sellers can increase the confidence levels of buyers by doing the following: (more…)