Real estate agents who want to be successful in this business can’t hide in their shell or be a “wilting lily” - at least not in Silicon Valley.  Being able to get out there and find new clients with whom to work, encourage offers on listings, and negotiate well for buyers and sellers all require a level of assertiveness.  We may need to work outside of our comfort zone if the situation requires it.

But sometimes real estate sales people can go too far and venture into aggression instead of assertiveness.  The words “pushy” and “salesperson” almost seem to go together at times, don’t they?  (Personally, I hate buying cars because I loathe being on the other end of what feels like pushy sales tactics.)

A few years back, someone I met at an open house said that he didn’t need to like his agent because the agent wasn’t someone he’d want for a friend – it was someone who would push through what needed to be pushed and he didn’t need to be likable.  I found that a really interesting idea, but fundamentally, I disagree with the guy’s premise that successful Realtors basically have to be jerks.  It just isn’t true; in fact, the opposite is the case.

The most successful real estate agents share a few recognizable traits, at least most of the time.  I will list them off as I see them – not every top Realtor will possess all of these habits, skills or traits, but as a group, they emerge as a commonality found among most of them.

Top Silicon Valley real estate agents share these traits (at least most of the time):

1. Prospect or market themselves continuously to attract new business (they cannot simply work on today’s business or tomorrow they will be unemployed).
2. Have systems in place for how to work with buyers, sellers, sales in contract, prospects who are long term, follow up etc. Good systems are crucial.
3. Work well with other agents and consumers – they play fair, communicate well, respond in a timely manner.  They are usually well liked by their colleagues. (This helps you to sell or buy a home – agents want to work with others they can trust to work well and fairly.)
4. Know the contracts and forms and use them appropriately. They explain the contract to their clients so that expectations are in line.  Surprises are bad most of the time and can be avoided if everyone understands exactly what they are agreeing to.  And the contracts we use are clear: if it’s not in writing and agreed to by all parties, it is not a part of the transaction.
5. Present their listings in their best light with enough photos, good descriptions on the MLS and online, make sure the home is staged or at least tidy and decluttered. You won’t find their photgraphs on the Facebook group’s page “Really Bad MLS Photos”.
6. Take care of any mistakes they make to the best of their ability. (Mistakes happen: the question is, how do you address it when they do?)
7. Can be both assertive and pleasant, not rude.  They are mannerly and follow instructions on the MLS when showing homes and abide by their clients wishes as to when and how to be contacted.  They are not afraid to ask tough questions or work around obstacles.
8. They work hard and don’t blame when things go awry.  The go the extra mile – and will even ask if it’s possible to present an offer in person.
9. Are discreet.  They don’t talk about their high profile clients or their business, but know how to keep personal matters (that don’t involve others) personal.

Recently I had a listing in which the MLS clearly stated that showings were by appointment only.  The for sale sign had a rider with the same information on it:  “Appointment Only”.  But because some agents don’t behave, naturally one of them knocked on my clients’ door a couple of hours before an open house and asked to be let in.  The answer was no.  Not only was the answer no, but the seller remembered this guy and later wanted nothing to do with him or his buyers.   His behavior crossed the line.  If you’re rude before you’re in escrow, when you should be trying to make a good impression, what would you be like if my clients accepted your offer?  Thanks but no thanks.

Another story of an agent who went too far:  at an open house of my listing, where there were many buyers and agents circulating through, one real estate licensee loudly called out all of the defects or flaws in the property.  The sales person holding this house open for me said that some  buyers left when they heard him. Didn’t sound like much of an accident.  That kind of nastiness makes it easy for an agent and her or his buyer to be passed over in a multiple offer situation.

A year or two ago, I was holding a listing open with another realty  agent, a friend and colleague of mine.  The open house was packed and there were agents showing the house as well as neighbors and serious buyers all circulating around.  I could just hear the tone of voice a showing agent was using on my colleague when asking her questions.  This real estate licensee sounded like he was being very critical, there was an ugly undertone.  Although it was hard to hear what was said, I could get the vibe – and it wasn’t nice.  Later, this same guy presented one of many, many offers on my listing. He was terribly pushy then – sort of slimey pushy.  I was relieved that he had the worst offer.  If necessary, of course, I could have dealt with him but what a relief to have a much more pleasant person on the other end of the transaction!  My clients were relieved too. In a tie, guess what? The nice agent/buyer(s) usually wins.

It is a huge mistake to think you should hire an aggressive agent, a pushy sales person.  Don’t do it.  Your agent is in many ways you – he or she represents you.  If you want to be perceived as someone nasty, then go ahead.  But you attract more flies with honey than vinegar, as the saying goes.

For further reading:

Do you need to like your real estate agent? Do you need other agents to like yours?

What do Silicon Valley real estate agents do?  (you might be surprised how they spend their time)

How responsive should your real estate agent be?

Silicon Valley Home Buyers: Should You Use a Buyer Broker Agreement?

Months of Inventory or Absorption Rate for Cupertino Real Estate

Cupertino is a red hot sellers’ market, but primarily or the most in the lower price ranges.  The higher the price of the home goes, generally speaking, the cooler the market gets.  Part of this is because Cupertino is not considered a luxury market.  Luxury homes are far more likely to be found in Los Altos and Saratoga than in Cupertino. Even so, there are areas, primarily in the foothills and west of Foothill Blvd., where high end homes can be found.

Yesterday afternoon I ran the “months of inventory” by price point in the city of Cupertino.  The absorption rate, or MOI, will tell us how long it would take for the current inventory to be totally absorbed by the market of buyers if no other homes came on the market.  The shorter the MOI is, the hotter the market is.  (Houses and duet homes only, not condos or town houses.)Have a look:

Houses up to $500,000: n/a (there aren’t any)
$500,000 to $999,999:    .2 Month of Inventory or MOI (2/10 of a month)
$1 million to $1,499,999: . 61 MOI
$1,500,000 to $1,999,999:   2.75 MOI
$2 million to $2,499,999:  infinite (3 homes for sale, none closed in last 30 days)
$2.5 million to $2,999,999: 1 MOI
$3 million and up:  n/a

It’s a little bit of a fluke that the 2.5—3 million group was “1”. There was one sale and it was just barely over the line – it sold for $2,505,000.  Had it slipped just a little bit, the group prior would have had 3 months of inventory (1 closing for 3 listings currently active). The trend is pretty clear: the higher the price, the longer homes take to be absorbed into the market.  We can fairly think of this segment as 3 months of inventory, which isn’t bad at all but is not “red hot”.

Hottest of the hot are houses listed for sale at under $1,000,000 in the city of Cupertino – they are flying off the market at .2 months of inventory, or about 1 week!  It cools as prices rise.

Cupertino Median List Prices Compared to Neighboring Saratoga, Sunnyvale and Los Altos

We know that the median sales price in Cupertino has been climbing steadily since March 1st (reflecting sales beginning in early February). How does it compare to nearby areas?

Los Altos is selling for the most of these 4 areas, but list prices are now falling. Saratoga was dippping but now rising again. Sunnyvale has been somewhat flat recently but improving. But Cupertino’s prices are making the steepest improvement. Perhaps these low prices are the drivers for the crazy hot market activity.

Cupertino median list price of houses by price quartile

Focusing just on Cupertino, let’s see how the information looks if we break it down into the pricing tier. Often the entry level houses are a very different “market” than the luxury homes segment.

The last few months have had some ups and downs in pricing, but most segments of the Cupertino real estate market have seen an uptick since early Feb (when the market seemed to turn on a dime for the west valley communities with the best schools).  The luxury market in Cupertino has been a little slower to see improvement but it is registering there now, too.

What if we look back more than a year? Combining the quartiles, the trends look pretty volatile:

What’s happening with the most expensive homes for sale in Cupertino?  They have had a rough time of it – but currently there’s an uptick in the market at this price point. Here’s the same data just for the top quartile, the most expensive properties (luxury homes segment):

For the 2nd top tier (upper middle):

3rd level or lower middle:

And most affordable Cupertino houses or lowest quartile:

Cupertino Days on Market by Price Quartile: What’s Selling Fastest

Not surprisingly, the luxury market has had a harder time selling than entry level houses in Cupertino. This is true for most of the West Valley areas of Santa Clara County. Here’s a look at the days on market (DOM) for Cupertino by price point over the last year.

Remember, all real estate is local. For information on your exact area or price point, please contact me. I work with my clients to pinpoint the pricing.

What drives the Cupertino real estate market?

The residential real estate market in Cupertino, California, is driven in large part by the extremely high quality of its local public schools.  Many in Silicon Valley would state that for San Jose area home buyers, Cupertino offers the best “bang for the buck” when one lines up the cost of purchasing a home to the schools’ API scores. (Conversely, some residents are concerned that the very top schools – including but not limited to Cupertino – are so focused on academics that there may be too much pressure on kids and may lack balance for them.)

Other drivers are, of course, the local economy (such as the initial public offerings happening with some of the Silicon Valley tech giants), the availability of more affordable financing, and how the realty market in general is performing for any particular price point or particular school area. (Even within Cupertino, some schools are much more in demand than others.)  Comments in this article refer generally to this city of about 50,000 residents – real estate is local, though, so for precise information in any given area or tier of the market, please contact me!

Houses for sale in Cupertino California

Please browse houses for sale in Cupertino, listed from the lowest prices up to the highest.

Showing properties 1 - 5 of 28. See more city of Cupertino real estate.
(all data current as of 5/25/2012)

1. $759,000 : 10650 Minette Dr, Cupertino
   
   3 beds, 1 full bath

   Home size: 1,048 sq ft

   Lot size: 5,600 sqft
   
2. $899,000 : 10326 Byrne Av, Cupertino
   
   2 beds, 1 full bath

   Home size: 840 sq ft

   Lot size: 7,375 sqft
   
3. $939,888 : 20237 Bollinger Rd, Cupertino
   
   3 beds, 2 full baths

   Home size: 1,688 sq ft

   Lot size: 7,500 sqft
   
4. $949,900 : 20345 Via Volante, Cupertino
   
   3 beds, 2 full, 1 part baths

   Home size: 2,167 sq ft

   Lot size: 2,613 sqft
   
5. $990,000 : 10042 Byrne Av, Cupertino
   
   3 beds, 2 full, 1 part baths

   Home size: 1,616 sq ft

   Lot size: 2,356 sqft
   

Listing information deemed reliable but not guaranteed. Read full disclaimer.

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:

Median list price of homes for sale in 95124 and 95118 (all quartiles combined):

Very interesting that the 95124 pricing appears to be swinging upward while the 95118 pricing continues to go down.  I believe that this is mainly because the schools in 95124 have been trending upward strongly with the API scores.  Prices are also at a higher level, and those are less impacted by short sales and REOs countywide.  So it may be the result of multiple factors.  (95124 is about 2/3 of the Cambrian real estate market.)

Inventory in Cambrian area of San Jose 95124, 95118:

Surprising, isn’t it, to see how differently these two San Jose zip codes are behaving from each other?

Average days on Market in San Jose’s Cambrian area

And again, really different trends on these neighboring zips, both in Cambrian!

Another anecdotal story to share: Recently I closed the sale on my listing at 5114 Nerissa Way in Cambrian with Union Schools and Alta Vista in particular. We were listed at $579,000 and received 4 offers and sold at $585,000. Interestingly, we received 2 nearly identical “best” offers, both at $585,000. One was completely As Is and the other was almost As Is (they wanted a fumigation and pest clearance provided).  That is usually a pretty good affirmation of market value, and the property did appraise at the sales price.  The other two offers we got were below list price.  One was all cash and it was extremely low.  Buyers who are purchasing without financing sometimes misunderstand the type of discount that their all-cash status will get for them, so sometimes the worst offers are all cash and that was the case this time.

Want more info on your neighborhood, your house, or your target home to buy? Please call me!

Showing properties 1 - 5 of 34. See more 95124 zip code real estate.
(all data current as of 5/25/2012)

1. $699,000 : 2757 Theresa Ln, San Jose
   
   3 beds, 2 full baths

   Home size: 1,563 sq ft

   Lot size: 8,580 sqft
   
2. $699,000 : 1898 Kay Dr, San Jose
   
   3 beds, 2 full baths

   Home size: 1,331 sq ft

   Lot size: 7,062 sqft
   
3. $1,299,999 : 14904 Leigh Av, San Jose
   
   4 beds, 3 full, 1 part baths

   Home size: 3,340 sq ft

   Lot size: 10,125 sqft
   
4. $682,950 : 3591 Gavota Av, San Jose
   
   3 beds, 2 full baths

   Home size: 1,600 sq ft

   Lot size: 7,500 sqft
   
5. $1,180,000 : 1777 Kirkmont Dr, San Jose
   
   4 beds, 2 full, 1 part baths

   Home size: 2,306 sq ft

   Lot size: 8,249 sqft
   

Listing information deemed reliable but not guaranteed. Read full disclaimer.

Showing properties 1 - 5 of 22. See more 95118 zip code real estate.
(all data current as of 5/25/2012)

1. $829,950 : 1259 Bryan Av, San Jose
   
   5 beds, 3 full baths

   Home size: 2,238 sq ft

   Lot size: 8,050 sqft
   
2. $670,000 : 4241 Ranwick Ct, San Jose
   
   4 beds, 3 full baths

   Home size: 2,199 sq ft

   Lot size: 5,000 sqft
   
3. $785,000 : 3339 Beacon Ln, San Jose
   
   3 beds, 2 full, 1 part baths

   Home size: 1,952 sq ft

   Lot size: 6,784 sqft
   
4. $998,000 : 5715 Mireille Dr, San Jose
   
   4 beds, 2 full, 1 part baths

   Home size: 2,000 sq ft

   Lot size: 6,566 sqft
   
5. $649,000 : 1373 Adobe Ct, San Jose
   
   4 beds, 2 full baths

   Home size: 1,966 sq ft

   Lot size: 8,800 sqft
   

Listing information deemed reliable but not guaranteed. Read full disclaimer.

Browse lists of Cambrian & Cambrian Park homes for sale:
Houses for sale in the 95118 part of Cambrian
Cambrian Park Houses for Sale in 95124

Mary Pope-Handy, Realtor, CRS, ABR, e-PRO, SRES, ASP, CNHS, ACRE
Helping Nice Folks to Buy & Sell Homes Since 1993
Co-Author: “Get The Best Deal When Selling Your Home In Silicon Valley”
408 204-7673 (Cell)
emailto: Mary (at) PopeHandy.com
Blog: www.LiveInLosGatos.com & www.ValleyOfHeartsDelight.com

How is the Monte Sereno real estate market? Because the city is small, with just about 4000 residents, there usually are few homes listed for sale or selling, and with small numbers we can get seeming volatility.  Here are the quick statistics for the closed sales in the last 4-7 weeks to give a sense of how things are going. Sales data for April comes from my Monte Sereno Real Estate Report  and data for the last 30 days comes from me via the MLS (I crunched them this morning).

Median sales price of houses sold in Monte Sereno in April was $1,415,000.  For the last 30 days, it was $2,169,857.

Average Days on Market of houses sold in April was 97.  But for the last 30 days, it’s 78.

The sales price to list price ratio in April was 95%.  The last 30 days it’s up to 97%.

The market is better all around for home sales in Monte Sereno than it was just a couple of months ago. Next, let’s look at the live charts from Altos to see how active listings reflect the market as seen from viewing the solds.

Live Altos Charts for the Monte Sereno Real Estate Market

The median list price of all homes listed on the MLS in Monte Sereno and in San Jose – an interesting comparison!  San Jose has far fewer dips and jumps than Monte Sereno….Good improvement showing recently, though.

Pricing in Monte Sereno, California, by price quartile – the high end took a nose dive on its list pricing for a few months, but now is in recovery too!

Average days on market in Monte Sereno, CA, by price point Interesting that the most expensive homes are not the hardest to sell:

Inventory for all Monte Sereno listings over the last few years (back to 2005) – quite a jump in homes on the market in 2010 compared to normal for this small city:

About Monte Sereno, CA

Monte Sereno is a lscenic, upscale residential community of about 4000 people. It’s located adjacent to the town of Los Gatos and the city of Saratoga, California. There are no businesses in Monte Sereno – just Daves Avenue School, homes, the post office, and the city office building along Highway 9.  It is semi-rural. Some folks mistakenly think that whatever is happening in Los Gatos with the housing market is also reflective of the Monte Sereno real estate market. They are sometimes quite different, particularly as prices are higher in Monte Sereno and about 1/3 of Los Gatos is served by the Campbell or Union School Districts (while only a tiny sliver of MS is in those districts). A couple of years ago, I listed and sold a lovely home on in this city.  You can check out the information on my popehandy.com website (link above).

More info on this city: Official Monte Sereno city website Wikipedia article on Monte Sereno

Monte Sereno Real Estate

With very few exceptions, Monte Sereno consists of houses and estates or luxury homes (there are a few townhouses). Most lots are larger, usually at least a quarter acre lot.  One neighborhood enjoys a shared stable and horseback riding trails (those homes are on about 1/2 acre lots). As of this writing, properties currently available (listed on our MLS) range from about $1,300,000 to more than $5,000,000.  This can vary tremendously.  A move-in ready house will not likely be found in Monte Sereno for less than one million dollars.  (Last year a fixer on a busy road did sell for $750,000, though.) It is not uncommon to spend upwards of $1.5 million in home buying there.

Find Homes for Sale in Monte Sereno, California

Showing properties 1 - 5 of 9. See more city of Monte Sereno real estate.
(all data current as of 5/25/2012)

1. $3,999,999 : 18090 Daves Av, Monte Sereno
   
   6 beds, 6 full, 1 part baths

   Home size: 7,000 sq ft

   Lot size: 43,560 sqft
   
2. $2,295,000 : 15630 Michael Ln, Monte Sereno
   
   5 beds, 4 full, 1 part baths

   Home size: 3,924 sq ft

   Lot size: 9,583 sqft
   
3. $1,599,950 : 16172 Rose Av, Monte Sereno
   
   4 beds, 2 full baths

   Home size: 2,212 sq ft

   Lot size: 17,327 sqft
   
4. $1,799,950 : 16215 Rose Av, Monte Sereno
   
   4 beds, 2 full, 1 part baths

   Home size: 3,508 sq ft

   Lot size: 9,147 sqft
   
5. $4,500,000 : 16036 Greenwood Rd, Monte Sereno
   
   7 beds, 7 full, 1 part baths

   Home size: 7,336 sq ft

   Lot size: 1.17 ac
   

Listing information deemed reliable but not guaranteed. Read full disclaimer.

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.
   
4. Ideally, the offer package should be comprehensive and come with as much documentation as possible, including an offer summary (by the buyer’s agent), pre-approval letter, copy of the initial deposit check, contract with all initials and signatures and all mandatory spaces completed.  A good buyer’s agent will also run comps and coach the clients on offer price and terms and may encourage the buyers to write a letter to the sellers.  Depending on the circumstances, “proof of funds” may be wise to include too.  Each situation is a little different but the more comprehensive the buyer’s offer package is, the better the odds.  Many agents send over only partial documentation. Don’t let this happen to you!
5. Finally, the buyer’s agent needs to behave with professionalism and courtesy.  This is another point that might seem obvious, but sometimes buyer’s agents say things which are not polite to either the listing agent or, worse, directly to the seller.  When in the presence of the seller, the listing agent and the public especially, a buyer’s agent should not loudly or harshly criticize the property.  That’s just plain hostile and it won’t make the listing agent want to work with that agent (now or later).  Realistic assessment of a home’s flaws is totally fair, but doesn’t need to be done with a bullhorn.  Discretion is appreciated.

It doesn’t happen often, but sometimes agents just don’t slow down long enough to get the process and the offer package “just right”.  It matters because frequently there are several equally good bids on a property, and the one that stands out as better, even by a small margin, will either win the deal or at least win a counter offer.

For more reading:

Silicon Valley real estate bidding wars
Is your lender keeping your offer from getting accepted?
Home buyer tips

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.

What is a real estate bidding war, and why is it back in Silicon Valley?

It is a supply and demand issue.  When there’s not enough supply for the demand, prices get pushed up.  The way that this happens is often through bidding wars.

When a lot of home buyers want the same property and write purchase offers for it, we have multiple offers.  In some markets, multiple offers come in at or under list price (I have seen this in cooler markets). But when the realty market is an overheated sellers market, inventory is too low for the demand, prices rise with those multiple bids.  Then you have bidding wars.

This can happen intentionally, as when home sellers knowingly under price the property to attract multiple buyers, or it can happen unintentionally, when the owner and agent priced the home in line with the comps and the market, but there’s an unexpected avalanche of interest. (The latter just happened to me when I priced a listing to be exactly in line with the market, but got 20 offers and a lot of overbidding.)   Either way, the result is similar.  Buyers up their price and sweeten their terms to win the deal.  Here’s what can happen:

• offers come in over list price
• usually the escrow period is short, to assure the seller it’s a “done deal”
• if owner occupied, often there’s a free rent back of a month or two
• some buyers may offer to pay costs that customarily are paid by the seller, such as an owner’s policy of title insurance, the escrow fee, transfer taxes, and in some cases, even the commission
• most of the time, “cash is king”, and the all cash offers will win the deal (or large down payments) – very hard for 20% down or less to compete against cash offers because they usually include an appraisal contingency (with prices escalating, many homes won’t appraise)
• many offers with no contingencies for inspections, loan, and appraisal – non-contingent offers can be dangerous, most of all if there are no presale disclosures or inspections
• most offers will come with proof of funds
• some will have the disclosures already signed too
• some will include a letter from the Realtor, the buyer or both – buyers may also include a photo

But let’s focus on the bidding part in particular for a moment.  How is all of this a bidding war? Is it just that offers come in over the asking price?  Yes, but sometimes even more is going on too. Let’s look at that now.

Sometimes an offer is submitted when it appears that there are only 2 or 3 others, but within a day there are 10 offers.  That is a very different landscape!  The buyer who submitted the offer earlier may submit a new offer, without even knowing what the prices are – often it’s just a new page 1 of the contract since that’s where the pricing information is.

As more offers pour in, the listing agent may tell the buyers’ agents what the status is.  More buyers may “improve” their offer, essentially bidding up the price before there’s ever a presentation to the seller or a counter offer to be seen (or hoped for). The bidding can be self-inflicted, in other words.

Once the seller sees the offers, there may be a counter offer to one or more of the bids – though perhaps not.  Buyers should NOT count on the opportunity of getting a counter offer (a mistake I see all of the time).  The old saying that “you only get one chance to make a first impression” counts here.  Some sellers will simply pick the best offer and be done.  Seeing a stack of contracts and all the ancillary documents can be overwhelming and exhausting for sellers – so many do not want to deal with countering a lot of them.

During the counter offer period, if it happens, some buyers may accept the seller’s price and terms.  But some buyers will go a step further and up their offer and terms further – either in a new counter or yet again with a new page 1 of the contract.  Here you really see “bidding wars” in action!

You may be wondering why we don’t just auction houses instead.  That’s a valid question.  It does happen in many countries around the world (Australia comes to mind first).  There are some auctions of houses here, too, but it’s not popular just yet.  Who knows, it may come to that at some point. But right now, most of Silicon Valley real estate is sold the normal way, but often with extraordinary circumstances when there are many buyers seeking the same house, townhouse or condo.

Silicon Valley real estate’s market madness is back -in case you weren’t looking, this is what we are seeing in places like Cupertino, Palo Alto, Los Altos, and Saratoga – or anywhere in which there are great schools (especially with a shorter commute) or some other reason why a neighborhood is very highly desirable:

• multiple offers, bidding wars and sky high overbids
• non-contingent offers
• buyers willingly paying costs that the seller normally would cover
• pre-emptive offers

If this all sounds vaguely familiar to you, then you were here in the South Bay or San Francisco Peninsula and involved in real estate in 2000 (and to a lesser extent in 2005).  Whether you’re a Realtor, lender, or consumer trying to sell or buy a house or townhouse/condo in a great area, you knew it was happening.

One of the elements for this madness is the pre-emptive offer.  What is it?

When the real estate market in Santa Clara & San Mateo Counties runs red hot – in the seller’s favor – often the listing agents will direct that there is an offer date or deadline. Most of the time it’s about a week after the property is listed for sale on the MLS.  The reason for the wait time, of course, is to provide enough exposure so that all interested parties have a chance to tour the home, review presale inspections and to write up a purchase contract for it.  Otherwise, you have a foot race and only the swift have a chance. The lack of multiples will limit the sales price, so savvy Silicon Valley home sellers will usually set an offer date if multiples appear to be likely.

A pre-emptive offer is one in which the home buyer doesn’t wait for the offer deadline, but submits a purchase agreement ahead of time. Sometimes it’s even “sight unseen”! Obviously the latter will be considered shaky since the buyer could easily get a bad case of buyer’s remorse.

Smart listing agents will warn their home sellers about the temptation to accept a pre-emptive offer.  That Siren Song can be tempting!  But those would-be home buyers are unlikely to disappear if made to wait a week, so in many cases, it’s best to stick to the plan.

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:

ADVISORY REGARDING MARKET CONDITIONS,
MULTIPLE AND NON-CONTINGENT OFFERS,
FINANCING/APPRAISAL AND PROPERTY CONDITION

This entire 2 page form is worthwhile reading & comprehension, but let me bring just a couple of points forward about non-contingent offers:

“. . . a Buyer whose offer is fully “non-contingent” – - wherein all contingencies
are waived – - foregoes important protections. Among these is the right to cancel the contract based
upon an inability to obtain financing or upon a post-acceptance discovery of serious physical defects
and other problems. It is important to note that the discovery during escrow of previously unknown
defects does not (absent fraud) create for the non-contingent Buyer a new right to terminate the
contract.”

So with non-contingent offers, there’s no backing out without risking the entire initial deposit, which normally is about 3% of the purchase price.

How risky is it?  That answer depends in large part on how much information the home buyer is provided up front.  How thorough were the pre-sale inspections?  Are there any major red flags noted, or important further inspections recommended – such as a foundation or drainage inspection?  The form states:

“Risk factors vary in each transaction and must be thoughtfully considered in
each case. For example, where a non-contingent buyer has access to a seller-provided pre-sale
disclosure “packet” containing essential inspection reports produced by reliable, reputable professionals,
the risk to that buyer regarding those issues is far lower than it would be where no inspections have
been undertaken at all. The latter involves maximum risk, and is strongly discouraged by Broker.”

For San Jose area home sellers who would like to receive a non-contingent offer, the odds are increased if you do thorough pre-sale inspections: home, pest, roof, chimney, and possibly others (pool or?).

For home buyers, you need to be aware that other motivated consumers may be throwing non-contingent offers into the pile, and it can be a game changer in multiple offer situations.  The more homework you do upfront, the more carefully you read the disclosures and inspections prior to putting a contract on the table, the more comfortable you may be swimming in this sea of sharks.  Personally, I cannot recommend a non-contingent offer and I don’t think that I would ever do it myself.  But in some cases, unfortunately, that may be what it takes to beat the competition right now.  That’s a personal choice you will need to make should you be up against a lot of multiples.

Today we’ll have a look at the most recent closed residential realty sales numbers and then also view “live charts” which are updated weekly for Los Gatos real estate.  This segment of Silicon Valley real estate can be viewed from many angles: zip code, school district, sale type, view or no view, acreage, luxury home or basic home type…. This post will serve as a brief overview only. For information on YOUR Los Gatos subdivision or neighborhood, please contact me!

February 2012 sales numbers for Los Gatos real estate are in via my Real Estate Report.  Have a look:

(1) Houses and Duet Homes

Prices are going way, way up!  And yet the market is cooler – more homes are on the market, the list price to sales price ratio shrank a little.  The rest of the west valley areas are seeing multiple offers, overbids and rising prices – and we are hearing of them here, also.  That may not be reflected in the stats for another 30 days or so.

(2) Condos and Townhouses

More skyrocketing prices!  The LG condo market has been very challenged – but now there seems to be a great turnaround. Have a look at the chart below!

Next we’ll have a quick look at the town by zip code and will use Altos Research charts and graphs (using list prices, not sold ones) to get a pulse on the market.  Disclaimers aside, here’s the broad overview by zip code – hope you find this helpful!  I will be using “live charts” here so they will always be current!

95030 stats:

90-day stats for Single Family properties in LOS GATOS, CA95030 as of May 18, 2012
Median List Price:	$1,963,038	Average List Price:	$2,754,730
Total Inventory:	45	Price per Square Foot:	$734
Average Home Size:	2,812	Median Lot Size:	33,335
Average # Beds:	3.74	Average # Baths:	3.29
Homes Absorbed:	3	Newly Listed:	3
Days on Market:	205	Average Age:	50

Continue via link for more information on Los Gatos real estate trends and statistics.

95032 residential real estate statistics:

90-day stats for Single Family properties in LOS GATOS, CA95032 as of May 18, 2012
Median List Price:	$1,335,885	Average List Price:	$1,892,544
Total Inventory:	66	Price per Square Foot:	$618
Average Home Size:	2,180	Median Lot Size:	10,517
Average # Beds:	3.83	Average # Baths:	3.12
Homes Absorbed:	7	Newly Listed:	7
Days on Market:	109	Average Age:	47

And a look at Los Gatos “in town” as a whole:

90-day stats for Single Family properties in LOS GATOS, CA as of May 18, 2012
Median List Price:	$1,301,496	Average List Price:	$1,828,065
Total Inventory:	184	Price per Square Foot:	$554
Average Home Size:	2,405	Median Lot Size:	26,674
Average # Beds:	3.67	Average # Baths:	3.01
Homes Absorbed:	13	Newly Listed:	15
Days on Market:	149	Average Age:	45

 

95033 (Los Gatos Mountains) real estate info:

90-day stats for Single Family properties in LOS GATOS, CA95033 as of May 18, 2012
Median List Price:	$803,585	Average List Price:	$1,207,157
Total Inventory:	73	Price per Square Foot:	$364
Average Home Size:	2,344	Median Lot Size:	110,877
Average # Beds:	3.49	Average # Baths:	2.75
Homes Absorbed:	4	Newly Listed:	5
Days on Market:	153	Average Age:	39

 

Monte Sereno shares many services with LG so I will share these stats also:

90-day stats for Single Family properties in MONTE SERENO, CA95030 as of May 18, 2012
Median List Price:	$2,447,077	Average List Price:	$2,648,285
Total Inventory:	18	Price per Square Foot:	$688
Average Home Size:	3,429	Median Lot Size:	37,139
Average # Beds:	4.16	Average # Baths:	3.64
Homes Absorbed:	2	Newly Listed:	2
Days on Market:	171	Average Age:	40

Los Gatos is a very complex real estate market because there are so many variables, including:

• proximity to downtown (“walk to town” always a huge plus)
• school district (“Los Gatos Schools” usually strongly preferred)
• historic nature of homes & neighborhoods
• slope and usability of the land
• views
• neighborhood amenities (cabana, nearby park, walkability)
• access to popular venues and locations (parks, shopping, schools)
• negative features such as busy roads, high voltage lines, being too close to freeways/trains, natural hazards such as earthquake faults etc.
• type of sale (distressed or regular sale)

Often homes in Los Gatos will have some positive and some negative features, and the same goes for the location.

Likeability is a subjective term.  Who’s likeable? How important is it? Most of all, how relevant is your Realtor or agent’s likeability to your home buying or selling success in Silicon Valley?

At times I’ve been shocked at what I’ve heard from consumers and industry insiders alike:

“You don’t need your clients to like you.  You need them to respect you.” (As if these were diametrically opposed.) – a real estate trainer & coach

“I didn’t want to hire someone I’d like or who’d be my best friend. I wanted to hire a tough negotiator.” (Again, seeing these as juxtaposed.) – a real estate home seller

Why do some people think that being a good negotiator means that you have to be rough around the edges, a difficult person with whom to get along?  Strong negotiating doesn’t mean being a jerk, or even being aloof.

In many cases, it’s the exact opposite.

Many of the top agents in the San Jose, Los Gatos and Saratoga markets are indeed quite gracious and pleasant.  They are smart and they are driven.  Most are genuinely nice people, while a few have learned that good manners is part of good business.  Yes, there are a few successful ones who don’t match this description – but they are the exception, not the rule.   And in truth, their lack of likeability is inhibiting at least some of their success. If you hire one of them, it may impact yours, too.

An arrogant, rude and nasty agent may find that his or her colleagues are less excited to show his/her listings.  Or that they will be less enthusiastic if he/she brings an offer in on one of theirs.  Conversely, if that agent is well liked (and, of course, well respected) by the real estate community, it’s far more likely that agents will want to have him or her on the other side of a transaction.

Realtors do not like to speak badly of one another. In fact, part of the Realtor code of ethics involves not disparaging the competition.  So you may be challenged to try to figure out, from a distance, whom to avoid. What’s easier might be finding who is liked and respected.  If you are on Facebook or Twitter, you may be able to see positive interactions up close there.  You may also see it while touring open houses should another agent come through with clients.  Agents who are active in the industry, either paid or as volunteers in assisting other agents or the broader real estate community, may be a good pool to draw from also.  Of course, always consider references too.  Real estate transactions can be stressful even under the best of circumstances, so it’s good to hear how your prospective agent does when things get tough.

My advice:  because buying and selling homes is both a business transaction and a big event physically and emotionally, find someone who is knowledgeable, hardworking, ethical and – yes – pleasant. Your real estate sales person represents you.  Be a good negotiator, be tough – but don’t treat people badly in the process.  That part is never necessary and is counter productive in the long run.

Seen on Realtors board tour: Pull out wine rack for under the staircase

Many of our houses in Santa Clara County are ranch style, tract homes which were built from the 1950s to the 1970s (or ’80s). Often they include one coat closet, normally near the entry area of the home, and one linen closet, usually found close to the hall bathroom.  To the surprise of folks relocating to Silicon Valley from colder climates, we don’t have basements in the majority of houses here.

Where does all of our “stuff” go? That’s what these home buyers are wondering. It is really a critical question in smaller homes with fewer, and tinier, closets.

It is not uncommon to see garages in the San Jose area acting as a catch-all for seasonal decorations, old financial documents that can’t yet be shredded, business files, boxes from the last move which haven’t been opened yet, keepsakes and things that the residents haven’t had time to handle yet…for years at a time.  Guilty here also!  We will not be featured on an episode of “Hoarders”, but our garage also needs thinning out.  In this case, I have real estate files going back until 1993.  Rather, I did.  I have been scanning them, saving to both an external hard drive and to CDs, and shredding them.  So far about 10 boxes are gone.  Only a few more to go (I wish!).

Clutter increases stress for most of us.  Home buyers love built ins and see a future with less clutter when viewing cabinetry in home offices, family rooms, hallways, etc.  It’s a great surprise that assures them of better organization and less clutter in that home.

Most houses, townhouses and condos have places where a little more storage can be squeaked out, or even where wasted space was planned in!  This is especially true for structures with attics (sorry, Eichler and mid-century modern home owners). Here are some possibilities to consider in your own home:

• A furnace in a closet inside the home may be able to be relocated to the attic, providing another inside closet
• Water heaters hogging interior closet space could be moved to the garage or a different type of water heater could be installed in the attic.
• When remodeling the kitchen, consider removing soffits and bringing the cabinetry all the way to the ceiling (assuming your kitchen has a normal kitchen height, not vaulted ceilings!).
• Don’t forget the corners in the kitchen!  Often at the bends in a u-shaped kitchen, hard-to-access spaces can be lost. But by inserting a lazy Susan, or at least access from the other side should it face the nook, you will capture some of that back.
• If your house has interior stairs, make sure you are using the “under the staircase” space well.  That area can be more than just one large closet with a hard-to-access area.  Home or interior designers may have great ideas for you.
• Consider adding closet organizers, particularly in bedrooms.  Some master bedroom suites offer only one small closet – it is really critical to get the most use out of that, so including more than a coat hanger rod is important!
• Adding built in cabinetry to garages and interior spaces can be a huge boost to storage space.  Even more so if they include pull-outs rather than just shelves.
• If you’re a business owner, as I am, you may have a lot of paperwork in your garage that you could toss, but are concerned that it might be useful some day.  Scan and shred!  If you are too busy to do it, hire someone. Many photocopy places can handle this task. As your garage thins out, you will feel better and your storage space there can be put to better use – holding the stuff that you really do need to hold onto.
• Outside, consider a small storage shed for gardening tools, patio furniture, etc. A small shed on the side of the house should be unobtrusive but very useful.

Decluttering

Adding storage is great, but the other half of the equation is getting rid of items that aren’t truly needed.  If you are preparing to sell your Silicon Valley home, one of the best things you can do to boost your sales price is to declutter.  After that, you’ve probably heard me say (or seen me write) that a storage pod is a good idea.  I strongly suggest going through the decluttering before the storage, though, or you may actually increase the problem at the new place. It can be hard to find the time to go through boxes of stuff later, especially when you know that really, half of it should have been thrown out prior to the move.

For many home owners in Los Gatos, Saratoga and San Jose, this really is one of the toughest challenges in a move: getting rid of accumulated things, some treasures but many not.  The lighter the load, though, the less it will seem to you and to your home’s prospective buyers, that storage is not really an issue.  For many, senior home sellers especially, it can be a good idea to start thinning out possessions years ahead of time.  A bag a week each to family, friends or a charity and another to the trash or recycling.  After a few months you’ll see a huge difference!

A Silicon Valley home seller’s joy and buyer’s nightmare, multiple offers are back and exceedingly common in San Jose and nearby areas right now.  It has been true for many months that the most affordable houses in Santa Clara County, especially those under $450,000, are often selling with several purchase contracts on them (about 25% of which are investors, and many of those are “all cash“).  One Sereno Group real estate agent shared that their client was up against a whopping 37 other offers last week for a house in the entry level pricing tier!

What’s new, then? The price points.  Today we are experiencing the same situation in homes between $1 million and $2 million (though fewer offers) and sometimes higher still.  A few days ago I was involved with bids on a Saratoga house priced a little under $2,000,000 and it ended up getting 5 offers.  This wasn’t a turnkey property with a Section 1 pest clearance, but rather a nice house with “good bones” that needed work.

Why are we seeing so many multiple offers, and in such a broad range of pricing, in Silicon Valley?

Feeding the frenzy are the low, rock bottom interest rates (for most real estate consumers in lower or mid range pricing), lower home prices than a year ago – resulting in increased demand – combined with a dire shortage of inventory, or lack of supply. (Some sellers are waiting until later this year, when they think that they can make more from the sale of their home, too.)  If that weren’t enough, we have money pouring into the valley due to the initial public offerings of companies like Zynga in Los Gatos and LinkedIn and Google in Mountain View plus Facebook in Menlo Park.  And don’t forget Apple, in Cupertino, which is now trading at over $500 per share!  Even for companies which are either not yet public or there’s a waiting period for selling stock, there are means of cashing out some value via private exchanges or borrowing on options.  Some tell me that this has been the case for a year!

These high tech giants are fueling more than just the luxury market in Mountain View or Palo Alto.  Much of Silicon Valley is feeling the impact as some workers may be commuting from Willow Glen, Blossom Valley, Cambrian or elsewhere.   Also, newer employees may have smaller bonuses or gains – just enough to get them into an FHA mortgage with a low down payment.  Where do you see those white, unmarked Google commuter buses? Or the silver ones from Apple?  Where you see them, there’s an impact underway!

The good news is that all of this infusion of cash is good for our local economy.  It’s a little tough on home buyers, or even people looking for rental homes, right now.  It will likely improve as the year goes on because inventory normally rises with the peak being somewhere in the summer most years.  No guarantee – sometimes it doesn’t behave “as usual”. Inventory has been down quite a bit over recent years, so much that the 4th quarter of 2011 for houses in Santa Clara County was off 43% from the same quarter 3 years prior. On a monthly basis, Jan 2012 was off 30% from January 2010. Please see trends below for last 2 years – typically, inventory does rise beginning in January or February.  In 2010 the rise was very dramatic but in 2011 it felt like nothing happened at all, the increase of homes for sale was so slight!

The new year has started out with a tremendous shortage of inventory.  There is pent up demand for people to be moving so I would expect it to burst through at some point – hopefully not to the extreme where it again pushes prices back down.

Right now I’m working with a number of very frustrated home buyers.  Silicon Valley real estate inventory is painfully low, and in the lower price ranges especially, that means multiple offers are fairly common.  FHA home buyers, in particular, are getting out bid and out negotiated by all cash buyers, many of whom are investors.

How low is the inventory?  Let’s have a look at January’s inventory for houses & duet homes (“class 1″ or single family homes) over the last ten years in Santa Clara County (San Jose, Los Gatos, Campbell, etc.):

2012  1,382
2011  2,007
2010  2,426
2009  4,759
2008  4,872
2007  2,698
2006  2,202
2005  1,285
2004  1,612
2003  3,119

The average January inventory of available houses over the last 10 years is 2,636.  At 1,382, January 2012′s available inventory of houses for sale in the San Jose area was just 52% of normal.  It’s not really much different now, in early February (just did a quick check on the MLS and it’s  1509 houses now – 630 have sold & closed in the last 30 days so that’s 2.4 months of inventory – a hot seller’s market).  This is what constitutes a very severe inventory shortage.

Demand hasn’t slackened, but supply has.  You know what that means – it will push prices up, it will make buyers crazy feeling.

Why is inventory so low?

A common question is this: why is inventory so low?  I believe that there are a few drivers.  First, many home owners who would like to move really need more equity to do so.  They are waiting for the market to recover.  Some may be waiting for prices to return to their previous highs (they could be waiting awhile). Others just need a little more to make the move possible at all.

Many owners of higher priced homes are holding on until the second half of 2012, when it is expected that there will be more people with buying power due to recent and upcoming IPOs.  Economists are now predicting a bit of a frenzy the second half of this year with prices in more expensive homes getting pushed up due to competition from employees of various high tech firms.  Smart buyers are trying to get in before that hits – a real challenge given the inventory situation.

Reality check: not every house is selling!

The best properties are selling well – those which are newer or nicely remodeled, in turn key condition, easy to see, great marketing with multiple photos, appropriate MLS exposure and priced aggressively.  This is what every buyer wants, the perfect house.  Most of my clients tell me that they are willing to replace carpet and repaint, but they don’t want to do anything big, such as kitchen or bathroom remodels, removing a pool, foundation or drainage repairs, etc.  No one does!

One of the easiest ways of improving your odds on being able to purchase a house is to move away from the new or fully remodeled vision of your ideal house.  Lower your budget a little, decide to prefer homes that have been sitting on the market not due to location issues, but rather to pricing or condition issues – both of which can be fixed.

For instance, many home buyers will take a pass on properties which have a pool in the backyard.  A few months back, I did some research and found that houses with pools are harder to sell right now.  Appraisers count a pool as an improvement, but many consumers view it as a liability – an ongoing monthly expense to heat and maintain and a risk if there are small children.  Many think that it will be overwhelmingly difficult to remove and relandscape a pool, so will not even consider writing an offer if the property includes an in ground pool.

Truth is, it’s not that hard to hire a company to redo a backyard; it is not invasive the way a kitchen remodel is.  You could have it done before even moving in!  The cost varies on whether you want the pool fully removed or partially as well as how to relandscape afterwards.  I have seen bids for pool demolition work under $10,000 (relandscaping extra) with more bids between $10,000 and $25,000.  Lawn and sprinklers are not so expensive to add!

The pool issue is just one example – there are many other properties for sale which are passed over due to the condition not being ideal.  Remodeling can feel a little scary but when inventory is so tight, it can be the ticket to home ownership.

Likewise with over priced properties.  Although most homes sell within a couple of percent of list price, there are exceptions.  Sometimes real estate is badly overpriced, and in those cases you may get a seller to agree to a larger price reduction – 10% may even fly.  (This is unusual, I would note. Usually if a house is not worth within 5% of list price, the seller is unreasonable and won’t accept an offer which is less. But sometimes it can work.)

Here’s to the over priced ugly duckling.  It could be your best friend when inventory is rock bottom!