Home sale strategy: set a date for offers, or not?

Home sale strategy: set a date for offers, or not?

You have prepared carefully for the big day when your property goes on the market;  first it goes on MLS, then you have a Realtor tour, and an open house during the week end.  The critical “exposure” time has started, a full marketing campaign is in place, with paper advertising and internet advertising - the world is starting to learn about your house.

Should you hold off for offers until a certain date (hoping for multiple offers), or do you take offers as they come?


Holding off for offers is a good strategy, if the house is well priced: it ensures that the house has been seen enough, and that potential buyers have had the time to decide what they want to do, and look at all the disclosures and reports your agent carefully helped you prepare upfront.  When offers are reviewed, chances are they are well thought out, and you have a choice between solid offers.  Odds are higher the transaction will close without problems.

But the down side of this strategy is that some buyers are turned off by the process, and do not want to participate in a competition.  Also, if you hold off too long, other competing properties will come on the market and you will lose some potential buyers.  Finally, with this strategy comes the difficult choice to make if a “preemptive offer” is presented to you, often higher than the asking price.  If you take it you will never know what the other offers could have been (the ones that followed your instructions and waited for the “offer date”).  If you do not take it you could lose out on that high offer.

So the alternative is to “take offers as they come”.  But what do you do when one comes too fast, may be even higher than your asking price, and you have the feeling that “not enough people have seen the house”?  Could you have a higher offer by waiting for more people to have the time to see the property and work on an offer?  In real estate we say that the first offer is often the best one...  In a typical market it is often true (the subject of another blog), but the Bay Area market is not typical.

Several elements are in play here:

1/ the (pricing) strategy you prefer to use (low, average, high?)

2/ how active the market is at that precise moment.

3/ how easy it is to show your property,

4/ how desirable your property is (objectively),

5/ the quality of the information you get.  The tools your Realtor is using are going to be critically important, in order to assess the real interest your property generates.  You’ll want to know: - number of showings, - number of page views on the various web sites, - how many people are looking at the info online, - and what exactly they are looking at: some info, or all of the info available?

What I would like to stress here is that you must have this conversation with your Realtor ahead of time, and stick to your chosen course of action. One cannot really have it both ways.  If you set a date for offers, and take a pre-emptive offer, you may hurt yourself by never seeing the offers that played by the rule, and waited to come forth.  The thing is that you will never know - it is a gamble.  My experience has been that, in very active markets, it is better to hold off until about a week after the house has been in full marketing mode.  Taking an offer too fast may leave you with a lot of question marks about what other offers could have been a few days later.

Finally, it is critical that your Realtor follows closely any interested party, and answers questions as best as possible: better informed buyers, or agents, will bring you an offer, and one additional offer may mean a big difference in the final sales price.

Thank you for reading,

Francis

Silicon Valley real estate specialist
Detailed, local trends etc...
Current mortgage rates
A worthy local non-profit to remember: Community Services Agency in Mountain View.

How sellers have changed over the past decade.

How sellers have changed over the past decade:
a Coldwell Banker Seller Survey - Nationwide.

According to a Coldwell Banker survey of home sellers, today's home seller is notably different than the seller of 10 years ago. The recession not only changed the housing market, but it also changed the way home sellers approach the sale of their home. The Coldwell Banker Seller Survey looks at approximately 1,500 home sellers and analyzes trends from before and through the recession, as well as the initial recovery years and today:

• 2014-2015 - Recent Years (Sellers Today)
• 2010-2013 - Initial Recovery Years
• 2008-2009 - Recession
• 2006-2007 - Pre-Recession
• 2005 and Earlier

Notably, since 2014, more than 1 in 4 home sellers in the US sold their home in less than two weeks.

  Those sellers are twice as likely to choose an offer based on emotion rather than money alone, compared to sellers in pre-recession years.  “There is a notable difference in seller psychology today compared to 10 years ago” says Budge Huskey, president and CEO of Coldwell Banker Real Estate.  “Home sellers often want to feel emotionally connected to the buyer.  These findings should give solace to buyers in highly competitive markets who may present a compelling story as to why they should be the next owners of the home”.   - hint:  think “the Bay Area housing market”…

You can see the whole survey on this Coldwell Banker article.

Thank you for reading,

Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A worthy local non-profit to remember: Community Services Agency in Mountain View

Is it a condo, is it a townhouse?

Is it a condo, or a townhouse?

If you are wondering if you are looking at a condominium, or a townhouse, it may not always be so obvious: many condominiums do look like townhouses, with 2 stories and even a real enclosed garage attached (as it is the case in this complex: the Old Mill in Mountain View).

A condominium is a unit inside of a larger complex, where the owner owns a small part of the whole
complex. It is also said that in a condominium, you own "from the paint on", meaning that the rest is owned in common.  For instance if there are 100 units, you would own 100th of the whole property; many times it includes several buildings, the land, the pools etc...  So in a way you do not really own where you live, you own a portion of a much larger property.  Of course you have exclusive use of your location, and also the exclusive use of a parking space, a balcony, a storage area.  The legal description (shown in the preliminary title report) indicates that it is a condominium.

In the case of a townhouse, you own the land you are on, and the house which is on it, and typically you are responsible for the maintenance of the whole place: you have to pay to repair or change your own roof, you have to paint the home, you take care of your own stucco, garden, fences etc...  If you have rules that limit what you can do, it would be because of the association that regroups all the townhomes around you, which might be responsible for the walkways, the access roads, the common facilities (pool, tennis etc...).  Those rules help keep a common look and living experience to all the homes inside the complex.

In many areas, especially where there is very little land to build on (think "the Bay Area"), the exact definitions get blurred, and you can have homes that may look like townhouses but are in fact condominiums.  So be careful and ask your agent to double check on that for you (in the preliminary title report).

Even though it is always good to "own your own land", lifestyles change, and many buyers prefer that an association take care of the roof, fences, pools, paint, and so on.  A condo can be better for that.  The "association dues" are meant to be used for those repairs, and often a management company takes care of them.

Also, if you are considering a purchase soon, be aware that the financing on condos will not be as easy or cheap as for townhouses, which are considered "houses" by most lenders.

I had written a blog in 2010 on the subject of condominiums, with an updated page on condominium details and explanations, which you may be interested in checking out ....

Thank you for reading,
Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A worthy local non-profit to remember: Community Services Agency in Mountain View

California real estate: to keep in perspective...

To keep in perspective:

- California's largest gain in annual median price was in 1977: it went up 28.1% from 1976.

- California median price was $3,527 in 1940, and it was $447,010 in 2014.

- The largest decline in annual median price was in 2008: it dropped 37.8% from 2007.

- Between 1968 and 2014, the median price for single family homes has increased at an annual rate of 6.6%.
Source: California Association of Realtors.

Local Inventory:
In the County of Santa Clara, the number of houses and condominiums on the market went up to 7000-7500 in 2008.
By contrast, it was around 700 to 800 in the first few months of 2015.
This is an essential element of the real estate market locally, and the fact that it is currently (as of the last week of September) at around 1680 is also important: it is a relatively better time to look at buying a property than at the beginning of the year.  The inventory has been steadily increasing.

Thank you for reading!
Francis

 

Silicon Valley real estate

Trends: Local prices and graphs.
A noteworthy local non-profit event:  Second Harvest Food Bank

Median Sales Price - Santa Clara County - Good time to buy now?

Median sales price in Santa Clara County: is it a good time to buy now?

The time is about right now for an update on this fairly important matter, especially for buyers who have been in the market to buy for a while, or are thinking of making a move in the near future.
My last post on the subject, "the ratio of sales price over list price", and last year's post in September "the evolution of average prices" provide some perspective on this (as well as an article last week end in the SF Chronicle, BTW).

Below is the graph showing the monthly change in median price for all homes (houses and condos) sold in the County of Santa Clara, since the beginning of last year (2014).  On this graph we see the median price, and not the average price.  "Median Price" means this: the same number of homes sold over that price, as the number that sold under that price. But one can see that either way, the trend is similar to the one that the average price followed last year.

All in all, it means that it is statistically a better time to buy during the last months of the year than during the first six months of the year, when prices go up - because more people are looking, and need to buy during those months, to be settled in for the next school year.  Probably it also means that fewer people are looking to buy as we get closer to the winter months, and the Holidays.  It can also mean that the homes that sell during that time are in general less expensive than during the first 6 months (smaller homes may be?).  It is not a definitive call that a house will be bought for less money all things considered, but it certainly is worth keeping in mind the seasonal trend.

One last remark on the subject: the trends in years past are a lot more pronounced.  In the past 2 years, or so, the market is such a sellers' market that the slowdown in the market is just mild towards the end of the year.  One should remember that it is still very much a sellers' market, and that there continues to be a strong competition among buyers for the nicest homes.  But my experience has been that buyers are less stressed when buying a house closer to the end of the year.

Thank you for reading!
Francis

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

A worthy local non-profit to remember: Community Services Agency in Mountain View

Investing in Real Estate - Where is it best?

Investor clients often ask me where it is best to invest in real estate, in the U.S.

This is a tough question, and there is no easy answer: it depends partly on the circumstances and needs of the client, whether the investor wishes to manage himself/herself, where you believe the best prospects for appreciation are, opportunity, future family needs?...

RealtyTrac puts out a good study on their web site (see "RealtyTrac study on rental condition") showing that the best performing markets for rental returns are:

Baltimore, Maryland:  24.82%, followed by:
Clayton, GA with 24.26%,
Wayne, MI: 21.08%,
Pasco, FL: 19.2% .....

The markets with the lowest return on investment are:

New York County, NY, with 2.34%, followed by:
San Francisco County, CA: 3.2%,
then Kings County/Brooklyn, NY: 3.63%,
Marin County, and close behind San Mateo County and Santa Clara County, at 4.31%
... and Santa Cruz County at 4.54%

Return on investment is defined in this study as gross return: rental price divided into the purchase price.  There is a lot more that goes into a more real "net" return: you have to take into account expenses, which include such costs as: - management company, - repairs, - vacancy, - taxes & insurance, - wear and tear on the house etc ...  More on this subject with this "net operating income" link, noted above.

This study does not look at the rental market from the point of view of someone who has owned a place there for a long time, just someone who would be buying right now, in the market as it is currently.  What I mean is that it does not take into account the appreciation of the asset in that location over time.  This can be a strong factor in the buying decision, and an unknown in the future.

Thank you for reading,
Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A noteworthy local non-profit event:  Coalition on Homelessness, SF - ArtAuction15

Los Altos Below-Market-Housing Update

Los Altos will soon have 17 additional BMR units:

As read in an excellent recent article in the Town Crier by Staff Writer Alicia Castro, Los Altos will soon have 17 additional below-market-rate apartments at the "Colonnade Los Altos" at 4750 El Camino Real (in front of the recently remodeled San Antonio shopping center).  Currently the City has 105 affordable multiple-family BMR units, including 32 rentals and 22 senior units, and 44 second-living units, according to the city's planning services manager, David Kornfield.

 

The requirements for people applying for these below-market units are as follows:

“Very low income” requirement is $37,250 for 1 person to $57,450 for 5 people.  “low income” requirement limits the range from $59,400 for 1 person to $76,400 for 3 people. (based on the County’s median income of $106,300 for a 4-person household).

 

The deadline for preliminary applications was extended to the end of July 2015 in order to allow more eligible applicants to participate.  Preference is given in the selection process to salaried employees of the city, the schools and fire department serving Los Altos residents.  Some preference is also built-in the selection process for Los Altos residents and workers.

More info on this subject in the Town Crier of July 8, 2015.  To submit a preapplication for the lottery process, and for full details on the program, go to: www.leaselosaltos.com/affordable-housing-information  

 

Francis

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

Bay Area at Forefront of a National ‘Rental Crisis’

Bay Area at Forefront of a National ‘Rental Crisis’  - A Zillow report  followed by an in-depth view of the current market in the Bay Area, area by area.

There’s no doubt that Bay Area home prices have been climbing steadily since the recession, but as it turns out rental housing costs are going up even faster and it is creating what Zillow calls a national rental crisis.

Rents all across the country are going up faster than home prices, and they’re going up in our region faster than anywhere in the U.S., Zillow reported in its latest rent index.

In the five-county San Francisco metropolitan area, the Zillow Rent Index soared to $3,162, up 14.9 percent in April from a year ago, the fastest increase in the nation. And who was number two? The San Jose metro area, where the Zillow Rent Index rose to $3,287, up 12.9 percent.

Denver, Kansas City and Portland rounded out the top five rental markets with the greatest price increases. Nationally, the Zillow Rent Index rose 4 percent in April from a year ago to $1,364. The rent index is the median monthly rent “Zestimate” of all properties in a region, not just those for rent.

While home prices have moved up and down over the past decade, Zillow said that rents have been rising steadily during that time. In April, rent increases nationally outpaced home-price appreciation for the first time in years, accelerating what Zillow called a “rental crisis.”

In the San Francisco metro area, rents started rising faster than home values in July 2014, according to the report, and they have been growing faster ever since on an annual basis.

The report added that a slowdown in home-price appreciation will help renters looking to buy a home in much of the nation.

See the rest of the story there:  The "Coldwell Banker Market Watch".

Thank you for reading,

Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A noteworthy local non-profit event:  Community Services Agency