How long does it take to prepare an offer? Recently I wrote about how much time it takes buyers to put an offer together in Silicon Valley. But I didn’t go over how much of the buyer’s agent’s time is involved with drafting the bid In Silicon Valley, it’s a lot more than just typing up the contract and emailing it to the listing agent.
The first time I write an offer with a buyer, it may take me about 10 hours, because there’s a lot of information that will need to be explained, such as what is needed with the proof of funds, or going through the boilerplate disclosures that will be found on every sale (or most sales).
How long does it take to prepare an offer? There’s more to do than you may realize!
Here are some of the places where that time goes:
- Data entry on ZipForms (where we generate the contracts) – estimate 30 minutes if it’s done correctly. (Some agents cut corners, leave blanks, don’t fill in the listing agent’s contact info or address, etc.)
- Pulling comps (comparable properties) could be anywhere from a half an hour (if properties are not reviewed individually and it’s simple, such as a condo with the same floorplan that just sold ) or 2-3 hours if your agent does a deep dive and it’s a custom home / lot / anything unusual going on or no recent solds nearby.
- Providing you market information (stats, but also finding out from the listing agent how many offers may be expected, how many disclosure packages are pulled, etc.) at least 30 minutes, possibly an hour.
- Doing an Agent Visual Inspection Disclosure (visiting the property, taking notes, photos, type up, electronic signing) at least 1 hour, probably more.
- Reading the disclosures: at least 1 hour. If it’s complicated, and the agent needs to get more information, at least 2 hours.
- Discussing with buyers the disclosures and inspections, pricing thoughts, terms of the offer, and questions that need investigating: at least 1 hour (usually several emails plus a phone call or video chat).
- Talking with the lender, if applicable, and getting the pre-approval offer included and coaching the lender to call the listing agent after the offer is submitted – a few minutes.
- Tagging the disclosures for electronic signing (seller’s disclosure package, buyer agent’s company forms, plus the Agent Visual Inspection Disclosure) 1 – 2 hours, depending on how the listing agent has put the disclosure package together. Some have a signing package, others don’t.
- Doing a contract review with the home buyer(s) – usually about 1 hour. If the buyers are first time home buyers, estimate 1.5 hours or more.
- Emails back and forth with buyers on a myriad of topics related to offers – varies.
- Pulling together the proof of funds, making sure to white out what isn’t wanted or needed (bank accounts, individual transactions), combining pages and creating a summary sheet – estimate a half hour.
- Creating a cover letter / offer summary – just a few minutes.
- Combining PDFs so the listing agent doesn’t get 25 attachments – a few minutes.
If the home buyers don’t get the home they first bid on, it is a lot simpler and faster, probably half as much time with subsequent offers.
Open houses are returning to the California real estate scene, and private showings are also becoming more relaxed, but it won’t be a return to pre-pandemic practices just yet. The announcement that open houses would be permitted caught most of us Realtors (and our managers and brokers) by surprise a couple of days ago, and all of the details are not yet published, but I’ll share what I have learned so far.
Required protocol and open house paperwork
First, a home seller must decide whether or not to permit an open house (and a listing agent if he or she wants to do it). Naturally, there’s a form for that – an addendum to the listing agreement, LOHA (LISTING AGREEMENT OPEN HOUSE ADDENDUM OR AMENDMENT). Here’s a bit of a screenshot to give you a sense of what is required if the seller agrees to have an open house at the property:
If the seller wants the home to be held open, and the listing agent is willing to do it, there’s a bit of protocol to follow. Visitors to an open house must sign in for contract tracing purposes. If you’ve been house hunting over the last 14 months, you are probably used to signing the PEAD-V form for visitors. With that document, the listing agent got your name and saw your electronically signed signature, but that is it. Only your buyer’s agent had your contact info.
As open houses are returning in this transitional phase, the new Property Sign-In (PSI) will ask you for your name, phone number, and email address. This is not for marketing purposes, but for contact tracing purposes only. (Some agents may opt to still use the PEAD, but if so, they’ll need a way to contact you should you end up exposed to COVID-19 at the open house.)
You should expect that at an open house there will likely be a table set up before you can enter where you sign in and use hand sanitizer, which is required. The agent will make sure you are wearing a mask. Some sellers and / or listing agents may have additional requirements, such as your wearing shoe covers (usually provided) or gloves (not usually provided).
You should also expect that it’s possible you’ll need to wait to get inside. This is very important to keep in mind if there’s a heat wave. More on that below. (more…)
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”.
A plat map comes with your preliminary title report (provided by your title company with maps from the Santa Clara County tax assessor’s office when you purchase or sell a home in California), tucked away at the back and somewhat mysterious with lots of numbers in small print. It holds quite a bit of helpful information if you know what it is you’re seeing. Today we’ll view a sample of one of these – breaking down the plat map shown as a small thumbnail image on the right to more readable parts so that you can learn how to “read” or understand a plat map.
Quick overview of what’s on a plat map
There’s a wealth of information on the plat map. Take a look and see what you can pick out on your own first.
In many parts of the U.S., a buyer broker agreement is normally used between home buyers and their real estate agents, much like a listing agreement is used between sellers and theirs. It’s not so common in Silicon Valley, though. Often home buyers are a little spooked at the prospect of signing a contract for buyer representation & compensation.
My Realtor colleague and blogosphere friend, Elizabeth Weintraub, has a great article on this topic on About.com, Buyer’s Broker Agreements & Buyer’s Broker Contracts, in which she explains the various types of buyer contracts and agreements which are commonly found around the country. The one which is used the most, if one is used at all, is the “exclusive representation” (which again is similar to a listing agreement, which is also usually an “exclusive representation agreement”).
Why use a buyer broker agreement?
Why would anyone want to use a buyer contract? Whether you’re the consumer or the agent, the answer is pretty much the same: to have options. In my real estate practice, I do not request nor require a buyer contract as long as my buyer client is willing to purchase something from the selection available on the multiple listing service (MLS). If that isn’t enough, though, then we chat about the buyer’s options.
The probable buyer’s value for a home is very similar to market value, as a home is only worth what a buyer will pay. If the seller wants more, it won’t sell.
Sometimes it can be tricky to estimate what a home might sell for. I usually talk with my seller clients about trying to find the probable buyer’s value. The seller may have a range of prices that he or she anticipates and would accept. So too with the buyer, whose range will likely be lower than the seller’s. The key is finding where the buyer and seller price ranges overlap. If it’s unlikely that their ranges overlap at all, we’ll have a listing that is difficult or impossible to sell.
Let’s take a hypothetical case of a home worth about a million dollars (see image above). The seller would love for the property to sell close to $1,040,000. The buyer would like to purchase it for $960,000. The agent’s competitive market analysis indicates that similar homes have sold or are selling at around a million dollars, give or take a percent or two. If the buyer and seller can come to a meeting of the minds, and there’s no undue pressure on either one of them, we have (hopefully) a sale and we have market value.
But as we know, sometimes homes sell for much more than they would seem to be worth, and other times much less.
What causes property values to go above or below what would seem to be the probable value? Undue pressure can certainly cause values to rise (desperate buyer who just has to get into a house, even if overpaying or desperate seller who has got to unload a property, even if selling too low).
Who is present at home inspections for Silicon Valley real estate sales? The answer really depends on when the inspections are done and who is paying for them.
Timing of the home inspections
Pre-sale inspections: In Silicon Valley, many home sellers get pre-sale inspections of the home (property), roof, chimney, and a pest inspection or termite inspection too as they tend to provide an excellent return on investment. With the seller’s inspections, often the listing agent will be present for either all of the inspection, or, if the seller is there and prefers, only at the summary. Inspectors are not ordinarily left at the property alone in this area – though in some states that is the norm.
Sale pending: When the home is in contract, both the buyer’s real estate agent and the buyer or buyers will be present for the inspections. The seller and listing agent ordinarily are not there, but may be. Being present is a great way for the future owners to really learn about the property, so we Realtors strongly encourage them to attend if at all possible.
More than a written report
A lot of time, there are nuances to the home inspections which you will only get in person and not find on the written report. Some inspectors may volunteer info on how to maintain things in the future, such as tips on keeping rain gutters from rusting. If you don’t attend, you won’t get that education.
As much as possible, Realtors try to get all home inspections to happen at once (same day, same window of time) to minimize the buyer’s time away from work and inconvenience to the seller. In some cases, however, the roof or other inspection may not be able to be scheduled at the same time. Roof inspections normally are not tightly scheduled – the inspector comes during a window of time which is not precise. Since no interior access to the home is required, this is usually not a problem. Even so, it’s nice if the buyer and selling agent (buyer’s agent) can be there to hear the verbal information when the home’s seen.
(Side note: a few years back, I met some Realtors from Utah who said that their inspectors have lock box keys and that they inspect with buyers present but the real estate agents absent. “My broker discourages our being present at home inspections – too much liability”, one of them explained to me.) (more…)
In recent years, we have seen a boom in smart home technology with an emphasis on safety, energy efficiency, and entertainment. Security cameras are now seemingly ubiquitous. With so much technology in our homes, it’s fair to ask if it’s being used when homes are on the market. Are sellers spying on buyers?
Some are. And sometimes their real estate agents don’t even know about it, and they are being surveilled, too.
On the outside of the house, you may notice a smart doorbell with a camera, such as a Ring doorbell. These are motion activated, and the owner of the device can both see and hear whatever is triggering the Ring to begin recording. If you are on the front porch and speaking in front of one of these devices, you should expect that what you say and do is being recorded.
Or you may notice security cameras mounted outside (they may or may not have sound recording abilities).
What about inside?
Baby monitors have been around for awhile, and of course they pick up audio as well as video. More recently we’ve seen the advent of “NannyCams” so that parents can spy on their childcare workers.
They can just as easily spy on any visitors to their home, of course. What is amazing to me is how tiny and cheap some of these video cameras are. I’ve seen some advertised for as little as $40, and some are disguised as other appliances or devices, such as a clock radio.
Bottom line is this: if you are in a home that’s for sale, assume that everything you say and do can be seen and heard. As a home buyer, it’s best to keep your feedback on the home to yourself until you are far enough away (perhaps on the sidewalk?) so that your conversation is truly private. For those of us who are Realtors, working in real estate, we are also pulling back on comments in the house or condo for the same reason. We don’t want what we’ve said or expressed to be used against us later.
Silicon Valley real estate professionals will usually do open houses while marketing their listings, and at these events, they have the opportunity to meet new people who may be interested in the property. The potential home buyers who truly want the condo, townhouse or house would do well to know that in a hot seller’s market, their behavior at the open house could influence the ultimate outcome as to whether or not they will be the successful bidders when it comes time to present the contracts.
Here, then, are a few tips for aspiring home owners – a few thoughts, Dos and Don’ts on how to help move the odds into your favor when meeting the listing agent or a colleague of the listing agent’s when visiting the home.
- Think of the open house as not just your opportunity to check out the property, but also for the seller’s agent to check you out. Many people may want the house, but only one buyer or couple will get it. Make a positive impression.
- Do either remove your shoes or at least ask if you ought to do so. (Or come with your own shoe covers.) Usually the property will be clean and the sellers and their Realtor will want it to remain that way.
- Do say hello to the real estate licensee at the home and introduce yourself with your first or full name. If you are working with an agent, tell him or her so. Often you will be seen as a more serious home buyer because of that.
- Many agents will ask you to “sign in”. If so, do that but also make a note there of who your agent is (assuming that you have a buyer’s agent) since often these sign in sheets will be used for follow up and you want to be transparent that you already have your own agent. If you don’t, by the way, you should! If there’s no sign in sheet, do tell the agent that you have a Realtor so that he or she knows this upfront.
- Need a Realtor? Want the listing agent? Careful there…. If you love the house but do not yet have your own real estate agent, be careful about the way in which you ask the listing agent if he or she can represent you (if that is what you want – which I do not recommend, see related reading notes below*). Sometimes total strangers will approach the person holding the house open and say things that imply that they do not value the agent’s expertise at all – that they believe that the agent is only an order taker who will complete the paperwork and get a huge commission, of which the buyer wants a slice. This is not a heart-warming comment to make and in fact is pretty insulting.
- Be respectful. Ask good questions but be careful about what you say regarding the house. Potential buyers who walk through the house insulting it loudly (I have seen it happen) will irritate the listing agent because that kind of behavior is just unnecessary and nasty. Even asking questions with a really negative edge or tone will make the Realtor wonder if you are “difficult” to deal with. Keep it pleasant. Calling an updated home a “fixer” can be off-putting, for instance.
- Want to take photos or video? ASK. Do not presume it’s ok to start taping or shooting pictures without permission.
- Kids: along the same lines of respect: do keep your kids with you and do not let them run wild or “play” rambunctiously. Do not let them go onto beds or jump on furniture. It is ok to look in closets or to open kitchen cabinets, but no one should be opening dresser drawers or medicine cabinets.
- Need to use the restroom? ASK. And then be very careful that it’s clean when you’re done! Most Realtors have horror stories of parents letting a child use a restroom at an open house and leaving a nasty mess behind that they don’t clean up. Don’t do it. This is someone’s home, not a public building. (And the agent probably doesn’t know where the Lysol wipes are.)
- Love the home? Look serious. If you are there a very long time, the agent will believe that you are serious about the house. If you come back the next day with more people, the agent will believe you’re serious about the house. If you ask some good, thoughtful questions and even take notes, the agent will believe you’re serious about the house. All of these things will get you noticed and put you on the radar. If, however, you slide in and out unnoticed, and you never chat with the Realtor there, you will probably not be remembered unless the open house was exceedingly quiet. With multiple offers, it is best to be perceived as someone serious – so best to be noticed in a positive light.
- Do not dominate the listing agent’s time. It’s good to engage with pleasant conversation and thoughtful inquiries about the house, but please remember that this person must try to connect with everyone there and make sure that others’ questions are answered too.
- When it’s time to leave, thank the Realtor holding the open house and say goodbye.
- Don’t arrive once the open house is scheduled to be closed. Realtors sometimes have appointments after the open house and don’t want to rush you, but getting there after it should be closed puts them in a bad position.
“When in doubt, disclose” is the advice that real estate and legal professionals use as a guiding principal in home sales. And yet many sellers forget or miss things that should be told to the buyer, and some listing agents are a bit sloppy in reviewing their clients’ disclosure paperwork. It is not uncommon to see questions unanswered or only partially answered. The home owner may presume that if the disclosure paperwork was done wrong, the Realtor hired to help market and sell the home will catch it. Would that it were so, but too often, that is not the case.
To avoid problems later, whether small or big, it is best to be thorough and careful while making your disclosure.
Small problems are created by seller (and listing broker) omissions when the paperwork gets kicked back for clarification or to complete the needed response. Bigger problems are forged when a sale is nearly closed and a new disclosure is made – introducing a brand new 3 day “right of rescission” for the home buyer. Worse yet is something substantial which is only brought to light after the close of escrow. At that point, it’s not an inconvenience, it risks being costly and time consuming to resolve it.
The State of California requires that the Transfer Disclosure Statement or TDS be filled out in most realty transactions. The intention of the form is to help you, the property owner, to disclose anything materially impacting value or desirability. That’s a tall order to fill, so other forms have been created to supplement the TDS, which has pretty much become Step #1 for disclosing defects and other issues to buyers.
What kind of things are often skipped in the real estate disclosure paperwork?
On the TDS, a very common error involves the question as to whether the property has any shared features with other properties. Almost always, this answer is “yes” because there’s a fence sitting on a property line (or in the case of a condo, a common wall or at least common HOA facilities). Some sellers think that if they respond yes to anything, it’s a problem, so just check no, no, no. And many of the agents working with them don’t catch it.
Another common mistake is to answer “yes” but not explain further. Often a question will broach a broad subject. In the question about shared features, the question specifies walls, fences, and driveways – so if the owner marks yes, it needs to be clear which of these applies, or if it’s something else.
There are two other disclosures that sellers complete, the Seller Property Questionnaire (SPQ on the CAR forms, used in most of the San Jose area) and the Supplemental Seller’s Checklist (SSC on the PRDS set of forms, which is commonly used in Silicon Valley between Los Gatos and San Bruno). Both ask about modifications to the property (PRDS is far more thorough on that subject). Recently I showed a home that was almost completely remodeled in recent years, but when asked if the home had been modified in any way, the seller answered “no”. And the listing agent did not catch it.
Why an incomplete TDS is bad for seller
If a Transfer Disclosure Dtatement or TDS isn’t completed, the buyer gets an automated 3 day right of rescission when it is completed and delivered. Miss a box or an explanation? You’re at risk, Mr. or Ms. Seller, of giving the buyer(s) a new 3 day contingency.
Beware of under-disclosing. If you have had 6 repairs on a leaking deck over 6 years and it seems to leak after each repair, you don’t want to say simply that “the deck was leaking but repaired”. The new owners will find out, eventually, that you had what appeared to be an unfixable problem. It will not go down well.
It’s important for the home owner to really take time in thoroughly filling out this paperwork. Non-disclosure, or under-disclosure, by sellers to buyers is the #1 reason for real estate lawsuits.
It is also extremely important for home buyers to thoroughly review the disclosure paperwork and to look for any hints of further issues or red flags. Often the seller makes mistakes quite unintentionally due to rushing or sloppiness. But you do want to catch it if that happens. Ask questions. Look at the property carefully – you may see something that the listing agent and home seller missed completely. Investigate.
For more information, please also read:
What Do You Need to Know About Disclosures when Buying or Selling a Home in California?
Why do real estate agents do a visual inspection of the properties they sell?
What remodeling or replacing work requires permits and finals?
Why Is There So Much Paperwork When Buying or Selling a Home in Silicon Valley?