Thursday, March 5, 2015

Real estate: the misunderstood "as is" clause.

Real estate: the “as is” clause.

In my experience, the iconic "As Is" term is largely misunderstood, by buyers and sellers equally.  This is where your (professional) agent may save you money, and hopefully some mistakes.

“As Is” merely means that the seller and the buyer accept the fact that the seller is not obligated to correct anything at all. The seller still has to fully disclose everything that could affect the value or the desirability of the property (any negative aspect of the property, past present or future - if known) - unless the seller is exempt. “As is” does not relieve the seller of his/her legal disclosure obligations.  Also, at a different level, in most contracts the property has to be, at close of escrow, in the same general condition as on the date of contract acceptance; so, if something is damaged after the contract has been signed, the seller would most likely be obligated to correct it, even if it is an "as is" transaction. - or the buyer may cancel, possibly.

In the past, when the market was different, I would often advise a seller to contractually limit any and all liability to a certain amount, after the buyers had done their inspections.  The buyers could ask for certain repairs, but at least this way the seller did not have to go over that limit if that had been negotiated in the contract.  Today, the "as is" clause would mean that the limit placed on the works possibly done to satisfy the buyers would be zero dollars.  That's as simple as that.  If the buyer has a contingency, the buyer can always ask for something to be corrected, repaired, replaced…. Depending on how the contract is written, the buyer then may be able to cancel the purchase if the answer is not what (s)he likes.  The sellers could always agree to some repairs, why not, if they otherwise are happy with the end result. But they don't have to.

New homebuyers are often scared by the term "as is", and they should not.  I have found that when something big pops up that was not known upfront, both buyers and sellers are willing to work together to address it.  Of course, market conditions will play a large role.
A contract is a living thing: things change during a transaction, new stuff is found, other inspections may happen, and items which were acceptable yesterday may not be acceptable today. “As is” is not the end of the story. It depends a lot also on the other terms and conditions negotiated in the contract.  Knowing the real estate contracts and their subtleties is one of the most important criteria in your choice of an agent to represent you.

And when you sell a property, disclosing as many things upfront as possible is a good strategy: it seeks to remove the majority of the unknowns, and makes it a lot more possible to go into an “as is” contract that is meaningful for both sides.

Thank you for reading,

Trends: Local prices and graphs.

A noteworthy local event coming up:
The French Fair, March 21, 2015

Friday, February 27, 2015

California State drought situation.

California is in a deep drought, as evidenced on this map of the state of drought in the US, from the NIDIS web site (National Integrated Drought Information System).  It is not going to go away.  Knowing where we waste water is useful:

Thanks for reading,

Trends: Local prices and graphs.
The total yearly stats, locally by City, for 2014.

RecycleNote: our next free E-Waste collection and shredding event will be on: Sat. 4/11/15, at our Coldwell Banker office at 161 S. San Antonio Rd, Los Altos. Times: E-Waste 9am to 3 pm. Shredding: 10 am to 2 pm (or until our truck is full).

Wednesday, February 18, 2015

Owning a home - the Consumer Financial Protection Bureau.

Thinking about owning a home one of these days, even if it is not going to be very soon?

A good way to start is of course to talk to a Realtor® (not just a real estate agent).  A Realtor® is a member of the National Association of Realtors®; he adheres to a very strict code of ethics. Not all agents are Realtors®!

Some of us however like to do some research first, investigate and read about a subject, and be comfortable before making a move. 

A very good place to start, which is not very well known, is the Consumer Financial Protection Bureau which was created right after the 2008 financial meltdown.  Their “Owning a Home” page is really comprehensive, full of essential information about the whole process.  It touches on the financial aspect of the journey to owning a home (loan options, rates etc…) to the actual procedures of closing such a transaction.  By the way, these procedures include new documents and disclosures  that will be taking effect on August 1 of 2015.  The old closing documents and forms will be shelved.

In the financial part, you will see that no one can quote you a rate right off the bat, without knowing a good deal about your personal situation.  So, when you read about that fabulous rate in the paper or in an ad, you’d better be careful, - it is probably for the cleanest, richest, ideal top-credit-rating person   My advice is rather to choose a loan agent whom you know will look out for the best loan for you when the time comes (not necessarily the cheapest).  You will also see that depending on the type of loan, you can borrow more or less…
that walked on the surface of this earth.

As far as the details on the procedures, paperwork, customs and uses, and the most efficient ways to go about doing your search and purchase, I’d go back to your Realtor® of choice - the one whom you know will look out for your best interest.

Thanks for reading!
Trends: Local prices and graphs.
The total yearly stats, locally by City, for 2014.

RecycleNote: our next free E-Waste collection and shredding event will be on: Sat. 4/11/15, at our Coldwell Banker office at 161 S. San Antonio Rd, Los Altos. Times: E-Waste 9am to 3 pm. Shredding: 10 am to 2 pm (or until our truck is full).

Thursday, February 5, 2015

Properties off MLS...

Properties off MLS…. controversial.

 A lot has been said and written on the subject of properties selling “off MLS”, meaning they have not been on the Realtors’ Multiple Listing Service and were sold before making it to that database, common to all Realtors.

 Coming from a country where a common database of properties for sale is nearly non-existent, I can definitely vouch for the huge benefits that such a common database offers, both to buyers and to sellers. We could go on and on describing those benefits, but let’s just say that it pretty much ensures that a property for sale, by virtue of being exposed to all the agents around, will sell for its real, highest market value (low, high, but the most accurate result of supply and demand).  Also, a buyer will find all that is available for sale in one place, which means more choice and less wasted time going from one provider of information to another provider of information.

 So, why sell a property “off MLS”?  There are some unique situations where the sellers do not want the whole public to know that they are selling, and that is understandable.  There will always be special circumstances (i.e. very high price range, specific sellers’ needs or preferences, etc..).  But these exceptions aside, I see mostly downsides to not offering a property for sale through the MLS:

-          Less information for buyers and sellers about current sales activity, and "comparables". How do you price a property if you don’t know how, and how much similar homes sold for? This information is easily accessible (and reliable!) in the MLS.

-          A situation where both the seller and the buyer are “gambling”; one gambles that he/she bought for a lower price than if the house had been offered to all potential buyers, the other one gambles that he/she sold for the best, highest price.

-          A lack of confidence by the clients-buyers that they are being treated fairly: after looking for a home for several months and missing out on several offers, a buyer is not happy to learn that “that” house was for sale, but (s)he did not know about it,

-          The creation of smaller entities, or “channels”, where such properties are “known” or “available” to select agents and their clients; again, this is going back to a system without a reliable common database for all, and in my opinion does not serve the public well. Indeed, even those agents may be unaware of some other offerings in a different channel, and their clients will miss out on those opportunities.

 The practice of selling real estate through an MLS is not perfect, but it is the result of an evolution, and it is immensely practical and fair, and someone coming from a system where it does not exist sees it right away.  As an agent, I keep close tabs on all channels showing properties available for sale, even “off MLS”.  But using “alternative channels” excessively undermines the MLS, and I am afraid this will make it more difficult and unpredictable for the public to find or sell real estate – and a lot less efficient.

Let me know what you think!
Thanks for reading,


Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates

Thursday, January 15, 2015

Property sales price is public.

Up until the end of 2014, property sales prices could be withheld from public records.

If someone selling a property did not want the sales price to be disclosed, they just instructed the escrow officer to show the transfer tax amount on a separate page from the Grant Deed (the Grant Deed is public record).

Since January 1 of 2015, this is not going to be possible any longer: the hidden tax form will no longer be accepted by the County Recorder, regardless of when the documents were executed.  The tax amount will have to be shown on the Deed.

What newspapers do when they publish the recent real estate activity is this: they calculate the sales price from the Transfer Tax (when shown on the public document), and show the final sales price.  So from now on, it will not be possible to hide the sales price...

Thank for reading!

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates
A place worth noting: Our Brother's Home in MountainView

Tuesday, January 6, 2015

Silicon Valley real estate: ratio sales price/list price - end of the year inventory.

The number of properties available for sale is always smaller around the first of the year, and the market less active as the Holidays take people to other places, both in their minds and physically.

This year for the area covering the five cities of Los Altos, Los Altos Hills, Mountain View, Palo Alto and Menlo Park, we start the year with a total inventory of homes for sale of 37 (24 of those are over $2 million).  This total includes houses, and condominiums/townhouses.

As a comparison, last year we started with a total of 51 properties.  This, coupled with the huge activity I see at open houses, indicates that for a foreseeable future there is a large imbalance between the number of buyers and the number of sellers.

For the area covering the whole County of Santa Clara, we start the year with a total number of properties for sale at: 606…  Last year, we had 751 homes for sale at the beginning of the year.  Even though many areas are not as extreme as around Los Altos and Palo Alto, we still see a strong sellers’ market out here, especially in the entry-level / lower price range.

My monthly market update, accessible in a detailed form on my local newsletter, shows that the average ratio of sales price over list price is lower towards the end of the year (this graph is for the County of Santa Clara):
These are two facets of the local market around the New Year: statistically, properties sell for less of a premium, but the fact is that it is still a very strong sellers’ market.  Many clients ask me why and the answer is not straightforward.  I think that it reflects on the fact that over large numbers, statistically, there may be more properties on the market that must sell, as compared with the rest of the year.  It may also reflect on the fact that the quality of the real estate offerings is lower, and/or there are fewer buyers looking.  Remember, these are statistics.  However what it does not mean is that a desirable property, in a desirable area (schools, prime location etc…) will sell for less, if there is not a “time pressure” factor involved.

Any input on this?  Do let me know,

Thank you for reading,

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates

Tuesday, December 30, 2014

Foreign investments in the U.S. real estate market.

Foreign investment in the US real estate market.

Year-in year-out Realtors in the Bay Area deal quite a bit with foreign buyers.  It is interesting to keep some perspective on this phenomenon at the national level.

From March 2013 to March 2014, foreign purchases in US real estate increased 26% from the year before, to a total of $92.2 billion (National Association of Realtors Profile of International Home Buying Activity).

4 states accounted for 55% of the total: Florida, California, Arizona and Texas.
Nearly 60% of reported international transactions were all cash, compared to just one-third of domestic home purchases.  - Still 1/3 is an impressive number!

54% of all international transactions last year came from Canada, China, Mexico, India and the U.K.
Clearly, the United States remain a destination of choice for investors for its stability, and future prospects.

Separately, but still relevant to this subject, it is good to note that the foreign-born population by state looks like this:
- California: 25.4%
- New York: 10.8%
- Texas: 10.4%
- Florida: 9.2%
- the rest (~44% ) is divided between the other states.

Do you have an input on the subject?  Please let me know.!

Thanks for reading.

Trends: Local prices and graphs.
A noteworthy local non-profit event:  Coalition on Homelessness, SF

Friday, December 19, 2014

Getting a new loan - things to do and not to do....

Are you getting a new loan?  Here are some tips of things to do and not do, in order to facilitate the procedure.  Some are essential, while others are more subtle.

-       Always pay on time:  your payment history is one of the biggest factors in your credit score.

-       Monitor your credit regularly:  make sure you stay on top of your credit history. Be sure to check all 3 credit bureaus annually to make sure there are no errors.

-       Know your credit limits:  being close to or maxing out your credit limits may negatively impact your credit score.

-       Set up alerts, do not be late.  Set up email and text alerts, as well as auto-pay, to help ensure that you pay your bills on time and build positive credit history.  The first missed payment has the largest impact on a credit score, so don’t miss payments. If you are late, don't be 30 days late, and if you have difficulty, call your lender - often time they can work with you.

-       Do not do charge anything unusual on your credit card - no cars, no motorcycles - do not increase your debt ratio as you are trying to get a new loan. 

Beware of moving debt. Be wary of moving around debt repeatedly - you need to pay debt down to improve your credit score. Also beware of moving large amounts of money during the loan process, unless you can document it thoroughly.

-       Know your debt-to-income ratio.  Lenders look at the amount of debt you have compared to your monthly income   - it’s good to keep that under 35%.
-  Good scores = Good rates:  better credit scores in most cases get you better credit interest rates.

-       Don’t open too many accounts: opening up a bunch of credit accounts you don't need may negatively impact your credit score.

-       Keep balances low:  keep balances low on credit cards and other revolving accounts  - this may help your credit score.

-       Think before closing accounts.  Closing credit card accounts may lower your available credit and could hurt your credit score in the short term.

-       Length of your history matters.  Lenders care about the length of your credit history because they want to see that you can manage credit accounts responsibly over time. 

-       Finally: know that others view your credit.  Landlords, public utilities, and potential employers may review your credit history, in addition to lenders.

I always tell me clients: when it is time to apply for a loan, follow closely the instructions of you loan agent, and in doubt: ask the question.  They know best what the underwriter is going to scrutinize, what works and what does not work.

Do you have an input on the subject?  Please let me know.!
Thanks for reading.

Trends: Local prices and graphs.
A noteworthy local non-profit event:  Coalition on Homelessness, SF