Why are lease options to buy so unpopular?

Kitchen scene with the words Lease options to buy - the good, bad, ugly - why are they unpopularSometimes I’ll get an inquiry from someone interested in lease options to buy property in the San Jose area.  It’s been a while, but I remember that phone call pretty vividly.  “I’m tired of wasting money on the rent”, she explained.  Hoping to locate one, she was phoning the agents of San Jose houses for sale – maybe one of them would do a lease option?  Not likely.

Why are lease options hard to find in Silicon Valley?

It is a challenge to find a lease option in the greater San Jose area for a number of reasons, most of them related to the extra risks involved as opposed to simply renting or selling the real estate outright.

1 – Cash needed at close of escrow: An overwhelming majority of the home sellers here want their cash at close of escrow, so the buyers can be all cash or part cash and part loan (20% down, for instance).  Most real estate sellers want to take the cash from the property being sold and do something with it immediately – and the majority of the time that means putting it into another home in which to live.

2 – Don’t want to be a landlord: Doing a lease option means that not only will the owners of the property not get their cash right away, but they also have to become landlords in the meantime.  If they pay a professional property manager, that may cost 8% per month in overhead, too, so it cuts into any profit.

3 – Lease options are risky: With lease options, there is far more risk for the seller, of course, but also for the buyer!  (And by extension, real estate licensees who get involved with lease options.)

  • The seller risks a default by the buyer/tenant and then having to go through the trouble of evicting him/her/them.
  • Pricing risks for both seller and buyer:  the purchase price is decided upfront, but the sale isn’t finalized for a year or more.  During that time, the real estate market could appreciate like crazy (leaving the seller to feel that the house is sold for too little, less than market value) or the prices could fall (with the buyer unable to complete the sale since the property wouldn’t appraise – thus losing all of the down payment in the process).  Either way, buyer or seller could feel unhappy and cheated. (more…)

How to fix incorrect property records in Santa Clara County?

Professional man working at computer in a sunny room - Fixing incorrect property records in Santa Clara County - what do you need, who do you callWhat do you need to do about incorrect property records in Santa Clara County? Sometimes public property records are wrong or have missing information.

Info needed to rectify errors on the public record

What you need to do about incorrect property records in Santa Clara Co depends on what needs correcting. If your square footage is correct but the number of bedrooms is not, you may be able to phone and just tell the person over the phone what the issue is and it will be changed.

If the square footage of the lot size is not right, you’ll need documentation from a surveyor or another professional qualified to measure the parcel and document the calculations. That paperwork will need to be submitted, probably by email, but possibly in person.

In all cases, you need your parcel number for the most efficient help.  More on that below.

Incorrect property records in Santa Clara Co – who to contact

In Santa Clara County (San Jose, Los Gatos, Saratoga, Campbell etc.), you must go through the county tax assessor’s office to address these errors, and specifically, you need to speak with your property’s assigned appraiser. Here’s what you need to do:

  1. First, find your APN or assessor’s parcel number and keep it handy, as you will need it (also paper & pen).  You will find it on your property tax bill.  You can also find your APN online via the Santa Clara County website.
  2. Phone the Real Property & Appraiser Department at (408) 299-5300.  Someone there will ask you for your APN so that the correct appraiser can be contacted – I was surprised to learn that there are several dozen appraisers on staff! You can also try emailing them at RP@asr.sccgov.org
  3. From there, you’ll need to talk with your assigned appraiser and see what needs to be done.  He or she may need some documentation, may ask you some questions – just call and find out.
  4. More info can be found here, on their FAQ page: Santa Clara County Tax Assessor’s Office FAQ page. The phone directory for that office is here. But do yourself a favor and do not phone any other number besides  the -5300 one. I made that mistake myself and was passed from one department to the next, each person not understanding what needed to be done, and it ate up 40 minutes of my time. If you want to fix incorrect property records in Santa Clara County, it’s imperative that you call the appropriate number and get put in touch with an appraiser, or you may have an unpleasant experience, as I did.

Why are the public records on real property sometimes wrong?

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When a parent, spouse or loved one dies – what do you need to know or do about the house?

Death and Real Estate - Dealing with a Property after A Loved One DiesWhen a parent, spouse or loved one dies and he or she owned a home, there’s a lot for the survivors to do in addition to the very real and painful process of mourning. I have been through this with my own parents (and their house in Saratoga), a great aunt in Willow Glen, and many clients in San Jose, Los Gatos, Palo Alto, and elsewhere in Silicon Valley.

Quick summary of what to do regarding the home first and soon when a loved one dies:

  1. Engage the help of of an attorney and tax professional within the first 30 days or so. Sometimes there are deadlines or goal dates that will help the beneficiaries, and if people take too long to connect with these professionals, some opportunities may close.
  2. Some attorneys are also tax professionals, but most likely these will be different people.
  3. A professional valuation of the home will be needed, usually done by a licensed appraiser, but sometimes a real estate professional can do a market analysis that is acceptable. The home does not have to be empty or cleaned out to have this done.
  4. If you need the names of good tax and legal professionals, feel free to reach out to your real estate agent (or to me, if you are local). Most of us have worked with trust situations and can provide names. Or ask friends and family who’ve recently gone through the same situation and were happy with the people that they hired.
  5. You will need several copies of the certified death certificate. Discuss how many with your tax and legal professional. If you sell or transfer the home, the title company will need it and it will be recorded with the county.

Death, dying, & real estate: where to begin when a loved one dies?

In terms of settling the estate, it is wise to first speak with an attorney and tax professional about the property to find out what is required and advisable.

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Selling your home in Spring? Find and hire your agent over the holidays!

Hire your agent over the holidays and hit the ground running in January - business man in front of fireplace fireIt’s mid-November, and it may not be intuitive, but if you want to sell your home next Spring, I’d encourage you to find and hire your agent over the holidays.

Why hire your agent over the holidays?

Thanksgiving is late next week, and you may want to shelve the whole idea of anything related to home selling until sometime after January first, or maybe after Super Bowl. Many home owners determine that in the new year they’ll start decluttering, fixing up the home and yard, and stat thinking about contacting a real estate agent or two (or three).

But that’s backwards from the ideal!

If you can take a few hours now to select and hire (yes, sign the listing contract) your real estate professional, that person can help you make key decisions that will impact your return on investment.

It does not cost more to bring her or him into the process early, and it may save you some money and keep you from making improvements that are counter productive to your goals.

Not only that, but Realtors often have trusted vendors for yardwork, painting, hauling, and even for help with sorting out what stays, what goes, and what gets donated or tossed.  Hire your agent over the holidays, get in touch with those vendors in December, and schedule the help you need for that first week in January and get the job done right the first time.

 

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Expired, Canceled, Withdrawn Listings: What Happens If You Take Your Home off the Market?

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?

3 Minute Video Overview

 

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.

On the multiple listing service, these are very distinct statuses.

MLS status for listings

  1. 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.
  2. 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.
  3. 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. (more…)

The percentage of all cash sales in Santa Clara County

The percentage of all cash sales (all cash, no loans) rose in July, but the actual number of sales, shown immediately below, shrank a little. I pulled this data from the MLS today and it’s reflective of whatever the listing agent entered into the fields for financing.

Number of Cash Sales of Single Family Homes in Santa Clara County

 

Percentage of All cash sales, month by month, in Santa Clara County (single family homes)

Next, the actual percentage of all cash sales in the county for houses and duet homes.

Percentage of All Cash Sales in Santa Clara County for Jan 2013 - July 2023

 

The average for the 11 Julys shown is 13.9%, so July 2023 with 15.7% is interesting to see. Interest rates have skyrocketed over the last 14 months, forcing home prices down in the 2nd half of 2022. It’s a little surprising that we did not see a surge of cash buyers then, but their numbers stayed in the typical range from what I’m seeing.

Now, in mid 2023, we have seen both interest rates and home prices rising – at least for the first 6 months of the year – in most of the valley.

Cash buyers are usually investors, but not always. Sometimes they are homeowners who sold their long held family home and are now downsizing and buying with the proceeds of the larger home that they just sold. We don’t get that piece of data from the MLS, but anecdotally, that’s what I’m seeing with the cash offers I’m seeing and hearing about.

 

What does it mean that cash buyers are an increasing percentage of the closed sales?

  • Rising interest rates not only don’t harm the all cash, no loans buyers, it actually helps them as it weakens their competition
  • These buyers may be feeling more confident with the softened market and easier buying conditions generally
  • My thinking when we saw interest rates rising is that it would help the mortgage free buyer more than anyone else – that seems to be the case.

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Hot Times, Home Selling in the Summer!

Selling in SummerSelling your Silicon Valley home this summer? Don’t make the two most common mistakes which cost sellers money when marketing their home in the hottest months of the year!

Common Home Selling Mistakes in Summer

The “Closed Up” House

Many people try to beat the heat by closing up the house, turning off all the lights, and shutting blinds and curtains.  I see this all the time in summer, particularly if the San Jose area is enduring a horrendous heat wave. While it’s good practice for homeowners, it can cost home sellers!

Walking into a darkened house, condo or townhouse is a huge turn-off for home buyers. It’s depressing, unflattering, can make a space feel smaller and less inviting. Yes, we can turn on lights and open blinds, but the initial impression is terrible, and that feeling is often the one that sticks with buyers!

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Check the months of inventory to see if it’s a good time to sell your home!

Months of Inventory explained with an hourglassIs it a good time to sell a home in Silicon Valley? One of the best ways to get a pulse on the real estate market with an eye to selling or buying is with the months of inventory (MOI), also known as the absorption rate. This is the months of supply of housing for sale.

The months of inventory tells us how fast the current inventory of properties will be sold off if sales were to continue at the same rate with no new inventory were to come on the market.

The easiest analogy is with a bathtub full of water. If we added no more water to the tub, and the drain were opened, how much time would it take for the water to be depleted if it continued to empty at the same rate? That’s the question being answered with the absorption rate of inventory.

Or, simpler still, if you have an hourglass that you turn over, how long does it take for the sand to empty from the top (since you cannot add more sand to that end)?

How to calculate the months of inventory or MOI

The way to calculate the months of inventory is simple:  find the current available inventory of homes for sale (not under contract or sale pending), then find the number of homes with that exact criteria which have closed escrow in the last 30 days.  Divide the first by the second and you get the months of inventory. Or, I can just use the stats program on the MLS to generate that number, as I did today.

Earlier I pulled this data from MLSListings.com, our local MLS association (of which I am a member) and I ran the numbers for single family homes (houses and duet homes) in Cupertino, Los Altos, Los Gatos, Monte Sereno, Mountain View, Palo Alto, San Jose (all areas combined), Santa Clara, Saratoga, Sunnyvale. Separately, I also ran this same query for the City of San Jose by district.

The months of inventory by city or town in Santa Clara County

A balanced market for our area is 2-3 months of inventory (for most of the US it’s 4-6 months). Two months or less is a seller’s market, and one month or less is a very hot seller’s market.

Here’s a look at the months of inventory by city or town in SCC in April 2023 for single family homes.  As you can see, the vast majority of the county is a strong seller’s market, with the only exception being Los Altos Hills.

 

Santa Clara County months of inventory by city in Santa Clara County - single family homes for April 2023

 

Which are the hottest markets?  They’re the ones with the smallest months of inventory -Sunnyvale, Santa Clara, Cupertino, Milpitas and many more are well under the 2 month market. A few are a tad higher and in the “balanced market” area, and only one is in a deep buyer’s market.

The months of inventory by area within the City of San Jose

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Should You Move Out Before You Sell?

Should You Move Out or Vacate Before You Sell?A decade ago, it was the norm for Silicon Valley homeowners to occupy the home they were selling – today a majority of homes are being sold unoccupied or vacant. Why is that? And should you move out before you sell?

A few years ago, around the mid- to late-2010s, we began to see an increasing number of vacant and professionally staged properties for sale. Last year, most sellers simply felt safer moving out before selling due to the pandemic. Today that continues to be the case.

Over time, the reasons for homeowners to move out before marketing a primary residence have increased. While sellers can certainly still occupy a home on the market and sell it successfully, it’s not our recommendation for most people and here’s why.

Seller Stress

First things first, if you are able to move out before you sell it can reduce a lot of stress. And this has almost always been the case.

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Sell Your Home in 2021

Sell your home in 2021 - it is a great time to sellAre you thinking that you might want to sell your home in 2021? If so, you may be wondering how Covid-19 will impact the marketing and sale of your property. It’s stressful to sell in normal times, but during a pandemic it’s a whole new level of concern.

 

How hard will it be to sell your home in 2021?

 

The short answer is that it’s a lot easier to sell a home for top dollar right now because there’s a dire shortage of inventory. I know, we’ve been saying that for years, but it has only gotten worse since 2013 when it started feeling scant. The odds are that it will stay that way for at least the next six months or so, and perhaps longer. The months of inventory is a rock solid statistic that displays how quickly the inventory of available homes is absorbed. (If no new inventory were to come on the market, but sales continued at the same pace, how long would it take for the available inventory to all be bought? That’s the question being answered.)

The flip side of this, of course, is that if you are planning to sell one home and buy another, it’s no slam dunk since there are many multiple offers. But for the selling half, it’s amazing.

Here are the numbers from 2014 to now:

 

Months of Inventory - Santa Clara County Single Family Homes

 

 

I did spot check pre-2014. Our numbers go back to 2003 on the MLS. Except for November 2017, no other Novembers were below 1 month. November 2007 was the worst at 9.8 months of inventory.

In other words, it doesn’t get any better than this in terms of the odds of selling.

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