San Jose’s Cambrian, or Cambrian Park, area is a very hot seller’s market.  Multiple offers are not uncommon, especially in the Union School District, where schools are trending upward.  My Cambrian Park Real Estate Report has just been published with the updated numbers from the closed sales in April. Please click on the link to see much more information there.

Prices are up nicely year over year! Inventory is crazy low – just 35 homes for sale in April compared to 57 in March and 84 in April 2011. Days on market is far lower too. All around, it is a deepening seller’s market.

Even stronger is the Cambrian condo market, which is skyrocketing!!!  Please see the Cambrian Condominium & Townhouse Real Estate Report for all of the numbers, but I’ll include a quick summary below.

Here again, notice the ratio of active to pending homes, the sale vs list price (over 100%), and most of all, the tremendous rise in both the average and median sales price.  Few homes closed escrow in February, so it is possible that these numbers are a little exaggerated.  We will know more in a month – if it’s a trend or if this is a fluke.

Now let’s work with Altos Research’s graphs and get a feel for the Cambrian realty market in “real time”.  These use list prices, whereas my REReport uses sold data.

First, the statistics by quartile for houses in San Jose 95118:

Next, the stats and trends by price quartile for houses in San Jose 95124: (more…)

Home buyers (and sellers too) here in Silicon Valley like to “see the comps” when trying to determine fair market value or the probable buyer’s value for real estate.  Usually that translates into seeing what sold & closed escrow recently and for how much.

In a rapidly appreciating market and a strong seller’s market, though, the comps are not so much help as you might hope.  They are yesterday’s news!  What closed escrow last week was negotiated 30 or 35 days prior, in most cases.  By the time a San Jose area home is on record as a newly closed sale, it may already be out of date information. Not only that, but the MLS won’t tell us, at least not in most cases, how many offers there were or details about them - such has how many of them were all cash offers.

I see this mistake a lot in my real estate practice across Santa Clara County.  Clients want to view sales around a property they’re interested in. With our terribly severe inventory shortage, there may not be enough recently closed sales – so we look further out in location, futher back in time.  If prices are going up fast (as they are in Cupertino, Palo Alto and elsewhere), the only way you will be in step with the market is if you also factor in the appreciation that has likely taken place since each comparable property has closed escrow, whether that was 2 weeks ago or 3 months ago.  And that’s hard to guage.

What to do, then?

Your best knowledge will come from or be supplemented by information from pending sales; the most recent ones and closest ones are going to be the best, of course.  This is where your agent may be of great help to you either from the networking he or she does naturally, from direct experience on sales made or lost, or from proactively reaching out to listing agents to see if they can glean some information.

Addionally, you will want to factor in the number of offers a property is getting before deciding the price you will offer.  It is another very common home buyer mistake to look at the price of sold homes nearby, determine what seems fair, and then plough ahead without considering the level of interest that the house or condo is generating.  If there are multiple offers, you can reasonably expect that most of the time (if not all, in today’s market)  the sales price will be above the list price.  It will be unproductive for you to lowball (writing an offer more than 5% or 10% under list price).  Even if your offer is all cash, remember that sellers want the most possible for their property – they are not going to give you a huge discount on pricing.  Some, yes – in my experience usually around 2-3% – but not a huge amount off. They would rather wait a month and get a lot more money!

Factoring in the absorption rate (months, weeks or days of inventory) may be helpful to you also, especially if you cannot get info on the homes which are sale pending. (My Santa Clara County REReport includes this information, btw.)

In summary, don’t just look at the comps – they are a backward and incomplete view of what happened when the sale was negotiated.  Consider what’s under contract or pending now, and perhaps above all, take into account the current competition for the property you want.

Multiple offers continue to be a common occurance in the Silicon Valley real estate scene right now.  When there are an abundance of home buyers for one property, it can be overwhelming for the seller.  Some home owners may want to issue a multiple counter offer to the best qualified, most serious bidders.  But not all do.  You should never count on it.

Sometimes property owners in the San Jose area simply accept the best offer.  If so, that’s the end of the story. It does happen.

Often, the highest price is not the offer with the best terms, even in a bidding war.  Home sellers want both, of course – the least risk with the most cash. (Sometimes there are other factors, too, such as a rent back, escrow length, or other issues beyond cash and risk.)  In those cases, frequently the Realtor or real estate sales person (the listing agent) will coach the seller to counter one or more of the better buyers (best prices and terms) to improve the final sale on both counts.   Some sellers don’t want to do this, though – it’s stressful, they are afraid that everyone will say no and they’ll be left with the property unsold.  Alternatively, then, they may counter only one offer – and tell the buyer’s agent that they are the only one, at least for now. If negotiations don’t work with the first buyer, the listing agent may go back to the others.

Meanwhile, everyone waits, everyone wonders what’s going on.  The longer it takes to hear back, usually the lower the odds are that their contract will be the successful one, or even one getting a counter offer.

Why didn’t I get a counter offer?  Why didn’t the seller at least give me a second chance? Buyers wonder this all the time.  Some buyers submit 5 or 10 offers, all unsuccessful, and they still wonder.  The harsh reality is simple: your offer wasn’t good enough.  Either your price or your terms (or supporting documents) didn’t cut it. Write your contract as if you only have one chance, because that’s the reality most of the time.

What is an exclusion in a real estate contract? What is an inclusion? Both of these refer to fixtures at the property which is for sale.

Generally speaking, a fixture is any item affixed or attached to the house, townhouse, condo or property which is installed with the intention that it be there permanently. For example, cabinets in the bathroom, kitchen or elsewhere are fixtures. So are lights mounted from the ceiling, built-in ovens, in-ground (not potted) rose bushes.  The exception to the rule is anything attached solely for earthquake safety.  This would be the case if you have a large hutch which you have bolted to the wall so that it doesn’t topple in the case of a big quake. In Silicon Valley, fixtures are normally included with the sale of the home.

Exclusions refer to fixtures which the seller does not want to include with the sale of the real property (real estate).  For instance, there may be a light fixture in the dining room which is a family heirloom and the seller does not want to leave it with the house.  It would be noted either in the MLS, with a note at the property or mentioned when the buyer’s agent calls the listing agent to ask about offer instructions. Other examples could be a special fireplace screen, curtains in one or more rooms (may match a bedspread or other decor), or even a rose bush in the garden that has sentimental value.

Inclusions refer to personal property (property which is not affixed) which the seller will leave even though it is not required since it’s not attached.  Commonly we see refrigerators, washers and dryers included, even when they are not attached.  Sometimes furniture may be negotiated also, such as patio dining set, a sofa or perhaps a very large dining table that won’t fit into the seller’s new house, but fits where it is perfectly.

It is important to note that if an inclusion is mentioned in the MLS, it still should be written into the purchase agreement if the buyer wants it (and this is written into the contract form as a reminder). Otherwise the seller is free to donate, share or sell those items.

When in doubt as to whether or not something is included or excluded from the sale, always ask before writing or accepting a contract to avoid unhappy surprises or conflicts later!

Home buyers in Silicon Valley are getting frustrated, discouraged and disheartened as they write offer after offer, only to lose out in multiple bid situations. It’s not just the poor FHA home buyer either – this is happening to those with 20% down and more too.

What can be done to improve the odds of success?

Sometimes the buyer’s agent either does or doesn’t do certain things which can impact how your real estate purchase offer is viewed by the listing agent and seller(s).  Here are 5 important things that the buyer’s Realtor or sales person can do which will help the odds of success:

1. The agent should read the MLS printout carefully to see if there are any instructions regarding offers.  This one may seem obvious. but too many buyer’s agents just draft the offer and send it in, ignoring information that will probably be useful (such as offer deadline, preferred form - CAR or PRDS contracts, availability of disclosures, the request to call before writing the contract etc.).
2. The buyer’s agent should call or email the listing agent before writing the offer (and after reading the MLS!).  Sometimes there are requirements or just preferences that won’t be known unless contact is made.  Additionally, though, the listing agent will simply want to know about the level of interest and not have any surprises – it’s a courtesy call.
3. The agent should ask if it is possible to present the offer in person…and be willing to do it, of course.  Many seller’s agents won’t want a live presentation (most would email), however the fact that your agent is willing to spend the time and make the effort to present in person usually speaks volumes about his or her professionalism. It’s also a hint that the agent is a cut above most.  In my real estate practice, several times I beat out other offers by asking if I could meet with the listing agent and sellers to discuss my clients’ offer, and then doing it.
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Real estate professionals are becoming increasingly aware of the need for caution in their line of work.  It is good for our Silicon Valley buyers and sellers to be aware of some of these issues, since it may not be obvious to everyone:

1. Don’t have your first meeting with a stranger at a home for sale, especially if it’s vacant.  It is best for consumers and Realtors to initially meet in a public place, such as the realty office or a coffee house, and for others to know where you are during that meeting.




2. For sellers who are marketing their home for sale without professional representation, be very careful about showing your property to people who call you from an ad or otherwise learn that your home is for sale. A few years back, an elderly woman showing her condo as a “for sale by owner” was attacked and killed in her northwest home by a pretend buyer.  (Real estate licensees know that agents are murdered around the country when alone or sometimes even in pairs, but home buyers and sellers are not usually aware of this risk to our safety.)  Homes which are shown by real estate licensees will usually be on a lock box – you can be gone when the home is shown, and each agent who accesses the key using the box will have his or her information recorded.  Safety is greatly increased. (I have looked but cannot find the link to that story about the older home seller. If any of my readers remember the city or town and can share that info, I’d be most grateful. I think it was in the greater Seattle area where that crime happened.)




3. Similarly, if you have listed your San Jose area home for sale with a broker or agent, buyers should come to view your house through the proper channels (i.e., during an open house or with their agent, who called ahead of time).  Do not open your door and allow entry in by people who simply “pop by” when they saw the sign, whether they are buyers or agents.  If agents, they can pull up your property’s information on the MLS, call and make an appointment.  If you have a lock box, you can perhaps let them enter if the agent is willing to use his or her display key to open the lock box – officially recording the visit with the agent’s ID now known.




4. For buyers who see signs on properties: do not presume that the house is empty and that you can peer into windows or walk around into the back yard of the house. (I have seen people do this and it is creepy at best.)  You don’t know the situation – the house could be for sale but not viewable.  Some homes are offered with the instructions that the home can only be seen once an offer is accepted (“write offer subject to inspection”).  The home could be tenant occupied.  A resident could be ill.  Children could be in the house and if they look up and see a stranger at the window it will scare them badly. Don’t do it.  (Most buyers won’t do this, but I have seen it often enough that it warrants saying.) If you need more information, call your own agent to pull it up.  If you aren’t working with a Realtor, call the listing agent. In all cases, don’t go onto the property except to grab a flier from the box on the sign post.




5. When entering a home that you have scheduled to see, be cautious and enter slowly to avoid surprising anyone or being surprised yourself.  Sometimes sellers forget that you’re coming, have the time mixed up, or someone in the house failed to tell someone else about the appointment.  When I go into a property with my clients or alone, while previewing, I do so slowly.  First I knock and/or ring the doorbell.  I wait. Sometimes people are in the bathroom, have stepped into the yard or can’t respond fast.  Give it a minute.  Then I’ll use the lockbox, and while opening the door and stepping in I’ll call out loudly, “hello! Real estate!” so that anyone in the far reaches of the house can hear me.This is where you’re most likely to encounter a surprise – when you first enter the home.  I’ve seen just about everything, including unclothed people running for cover, couples who were occupied with each other (they knew we were coming right at that moment!), all kinds of things.  Once I had a small child with a baby snake come running at me, pushing his pet into my face.  (Good thing I like animals and didn’t freak out.)   Sometimes sellers are home but don’t answer the door, so as you go through the house you may find them. (I hate that!  They should at least hollar for us to use the lock box.)  I’ve stumbled onto sellers sleeping on a couch, showering (we leave fast) etc.  It’s not good to either suprise sellers or to have them surprise you!




6. Be cautious when trying to locate the correct house, especially in the foothills or mountains where it can be hard to find some addresses due to private roads, unmarked houses etc.  Once I went down the wrong driveway and had a man emerge from his house holding a rifle.  Another time I went down a wrong driveway – should have been the one next door – and the owner drove up behind me and blocked me in such that I had no exit, came over and started hollaring at me in  a very threatening way.  Turns out I needed to be at his sister’s house next door, but the homes were not well marked and I simply had the wrong leg of the road.  He apologised but it was harrowing.  Both of those experiences have made me appreciate cell phones and GPS (both happened in the early to mid 90s). (The listings agents for these homes should have directional arrows and alert the neighbors about properties for sale nearby.)

It’s very important, when buying or selling homes, to keep your wits about you.  Crazy things can happen so pay attention and follow some basic rules of caution for your safety and that of those around you.

One of the mental traps I see that can foul up real estate expectations across Silicon Valley is the over emphasis placed on “price per square foot“. Here’s where the internet can seriously mislead people into thinking they understand home values more than they do, resulting in botched negotiations, frustration and disappointment. So let’s talk about it.

As one factor among many, it’s completely fair to include the price per SF when trying to determine what a home’s probable market value ought to be. (Remember, too, that a house, condo or townhouse isn’t worth one exact number, but a range – because the terms involved also impact the sales price.)  Although price per square foot is one way of finding approximate value, often is not the best, especially if you use it alone, because there are other factors besides the square footage of the house.  Here are some of the other factors that can mess up that valuation based on price per SF alone:

• precise location (view, proximity to something undesireable)
• lot size
• lot shape & access (flag lots may sell for less than homes directly on the street)
• whether the house is below or above grade/street level (most people don’t prefer being down from the street)
• back yard size
• amount of remodeling (and how recently it happened, whether with permits/finals)
• care for the home
• additons vs original square footage (more…)