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!

Several years ago, perhaps around 2005, there was an elderly woman I met (at my dad’s retirement communithy in San Jose) who wanted to hire me to list her Santa Clara house for sale.  She was a nice lady, very kind, but mentally, she seemed to “come and go”.  One moment she appeared lucid and could comprehend our conversation.  A few moments later, her mind seemed to be gone.  She was suffering from dementia and it came and went like a fast moving tide.

What to do in a case like this?  I could not take her listing with her signing the paperwork because I knew that she did not have the mental capacity – at least not consistently – to understand what she was signing. (One cannot legally enter into a contract if the mental capacity is lacking.)   As much as I had wanted to list and sell her home, I could not do it if she was to be the one signing the contract.

I spoke with her adult son, and I explained my concerns. I suggested that he obtain a power of attorney so that he could sell the property for his mother and provide for her best interests regarding the real estate transaction.   He expressed to me that he wanted his mother to be in charge, to feel that she was in control.  When I reviewed with him my experience, and explained that I felt that she lacked the mental capacity to enter into a contract, he stunned me by replying “that’s what the other Realtor told us, too”.  They had met with another agent who was equally uncomfortable getting this home owner’s signature on the paperwork.  That should have told them something!

Sadly, the grown son would not agree to working as his mom’s signer with a power of attorney. He insisted that if they hire me, she do all of the paperwork.  I knew that this would be a disaster on every level.

So I had to bow out.  I don’t know how many other real estate licensees they talked with before finding someone here in Silicon Valley who would list the house, but I am hoping that each Realtor said the same thing so that they didn’t put this poor woman in the position of having to deal with the contracts, disclosures, and other paperwork which would no doubt agitate and confuse her further.

It’s a tricky thing when our elderly relatives need to sell a beloved home or investment property but aren’t mentally sharp any more.  For their own protection, it is best if they can allow someone trusted – ideally a close family member – to take the reigns on the home sale.  If a real estate agent or broker suggests to you or to your family that perhaps someone else should be signing the paperwork, there’s a good chance that this is something to be investigated a little more.  Talk with other Realtors or brokers. Speak with a good real estate attorney.  Real estate licensees seldom ask for family support regarding signatures, but if they do, please take it seriously – it is most likely in your loved one’s best interest.

For further reading:

Can home sellers back out of the contract or force a buyer out?

What is a seller contingency?

Real estate market conditions advisory

This week I’m having a deja vu from 2000.  If you were here in Silicon Valley then, during the “dot com boom”, you remember a frenzy with the hot sellers market, of home buying with multiple offers, and prices rising rapidly.

In some parts of the market, it’s back.

One of the ugly parts of that market is back too, the “non-contingent offer“.  I’m not talking about offers subject to the sale of another home (aka “contingent offers”). I’m talking about home buyers waiving their inspection contingency and their loan & appraisal contingencies.  (Not clear on home buyer contingencies? Please see my article: “Competing against multiple offers: contingencies and timeframes“.)

Listing agents know better than to give a counter offer demanding a non-contingent offer; that’s a lawsuit waiting to happen if the buyer feels coerced and later gets some sort of nasty surprise. But boy oh boy, do they know how to hint that it’s what they want.  And that’s not a lot different from demanding it.

Silicon Valley home buyers are given many disclosure and contract papers to sign when submitting their bids to purchase residential real estate.  It is important to read and understand them and the risks about which they warn.  One disclosure which is used – or should be used – on most every transaction is the “market conditions advisory“, which warns of risks in multiple offers and some of the ways that buyers may try to have the winning bid that may not really be a good idea in the long run.  The full name of the form is this: (more…)

Silicon Valley home buyers want to understand time frames, expectations and requirements when signing a purchase offer on real estate.  One of the most important to fully grasp is when the initial deposit check will go to escrow and be cashed.

The quick answer to the question about when the Silicon Valley real estate purchase offer check will be cashed:

Your initial deposit check or good faith deposit check (or wire transfer or other means of conveyance) is due within 3 business days of acceptance (also called “contract formation”) unless the contract is changed by checking the box and filling in the blank for a different answer.  By the way, everywhere else in the contract, time is measured by “days”, not “business days”. This is the one exception! (more…)

Silicon Valley home buyers (and sellers) are faced with a myriad of questions and choices when completing or reviewing residential real estate contracts to purchase the property.  One of them, early on, is whether or not a particular day is chosen for closing escrow or if instead it’s a number of days from contract formation (acceptance) to closing.

Which is better?

The are pros and cons to each approach, of course.  Many buyers want to be able to plan, without any ambiguity, when they will move in to their new home.  (For some this can be a matter of feng shui, astrology or a sense that some days are more fortuitous than others.)  This can work if negotiations are not protracted.

With distressed sales, though – bank owned properties (REOs) and short sales – and sometimes with multiple offers, the negotiations time frame can be hard to predict and if you pick one particular date, you may well have to change it later or find that you don’t really have enough time because a week or more gotten “eaten up” with counter offers, waiting for a bank or seller to respond or other delays. In those cases you may want to have the flexibility of writing in the length of escrow (number of days) rather than picking a certain date.

As always, talk with your professional real estate licensee for guidance as each case may be different.

Selling a house or home is usually very challenging and emotional, even under the best of circumstances.  It’s all the worse if the folks on the other side of the transaction – the buyers, their real estate agent or both – are difficult, rude, hot headed, verbally bullying, not performing on time or otherwise making the escrow and sale more upsetting than is necessary.  What can a seller or listing agent do about it? Can the seller cancel the contract and boot the bad guys out?

If there is a seller contingency, it may not be hard to do this at all. (For example: home sale subject to seller finding replacement property – they can just not look!) But that’s rare. Most of the time, only the home buyer has contingencies.

In Silicon Valley, we have 2 different contracts in use – the CAR and PRDS.  Before we can answer the question of how to get rid of nasty buyers or agents, it’s important to know and understand the contractual agreement clearly.  So the first question is “what does the contract say?“  Often the sellers don’t have an easy way to boot obnoxious agents out of contract.  But it may be possible to catch the buyers in a default (that is, not performing) via some subtlety in the contract and that may eventually enable the sellers to cancel the contract.

Both of the purchase agreements used in Santa Clara, San Mateo and nearby counties include a list of rights and responsibilities for both sellers and buyers.  They also include time frames: buyers and sellers must do these certain things within a specified number of days (some are boilerplate and others are written in and variable). So these contractual “technicalities” may be time frames which have been ignored inadvertently.

It’s no slam dunk most of the time, though, to get rid of buyers and their real estate representatives.  Usually it will be necessary to put the other side on notice that they are out of contract and to give them a chance to get back on track.  This official notice that they are at risk of having the sale cancelled is called a “notice to perform“. (more…)