Right now there are about 4664 active residential real estate listings (homes listed for sale on our local MLS) which are houses, duet homes, townhouses or condominiums in Santa Clara County.  Of those, there are 1255 short sales (27% of the inventory) and 463 bank owned properties, or REOs (9%),  on the market.  So the “distressed properties” segment equals 37% of the Silicon Valley real estate market (or Santa Clara County real estate market).

Some areas are flooded with short sales & bank owned homes. Others are going through this meltdown nearly unscathed. Below please find a sampling of areas in and around San Jose with the percentage of distressed homes for sale (including both short sales and REOs or bank owned properties).  In most areas, there are usually about 3 times as many short sales as bank owned homes, but sometimes it’s a lower percentage, closer to 2.5%.   I pulled the numbers from our MLS tonight – info is deemed correct but of course not guaranteed. 

If you’re interested in buying a distressed property, or would like to discuss selling one, please contact me today! I have a team of experts with whom I work to assist home buyers & sellers throughout the county and with all types of home sale or home buying challenges.

Silicon Valley home owners who are thinking of putting their properties on the market are wondering a few things:

• how much is my home worth?
• how long will it take to sell my home?
• how long will it take to close escrow?

Today we’ll discuss how long it takes to sell a home in the San Jose – Silicon Valley areas.

Of homes that have sold and closed in Santa Clara County, the speed of sale and the pending sale time frame depend a lot on the sale type. 

• For short sales, San Jose area homes are typically on the market for about 123 days, then once they are sale pending, it’s approximately 100 days until close of escrow.  Start to finish, it’s about 8 months long! 
• For bank owned properties in Santa Clara County, days on market are often around 75 and the length of escrow 38 days.
• With regular sales, the DOM is a quick 51 and length of escrow averages 39 days.  
• For all sales, the Days on Market was 113.

Let’s look at a particular area within San Jose to see how the numbers might vary.  We’ll take the Cambrian Park district of San Jose for our example (zip codes 95124 and 95118 primarily).  In Cambrian Park, right now there are 184 houses on the market and they average 94 days on the market.  In the same area there 95 pending sales and they average 76 days on the market. In the last month, there were 46 houses that sold & closed and their days on market averaged 52 overall.  Not every home, though, sold so fast or so slowly!

Days on market of Cambrian closed sales in last 30 days:
All combined average DOM = 52
Short sale DOM = 121
Bank Owned DOM = 128
Regular sale DOM = 40

These numbers could be further teased out by price point and school district – but you get the idea.  Some homes will be difficult to sell and some much easier! Even among the “regular sales”, certain homes will tend to sell faster: newer homes, homes on larger lots, houses which are professionally staged, properties which are priced aggressively (rather than “testing the market”).  In many cases, well priced homes that are in good condition and with no “issues” will sell within a month.

Complicate the situation with showing challenges (appt only, no lock box, tenants in the home etc.), a rough condition, difficult sale type or other problems (such as being too close to high voltage power lines, a busy road etc.) and those homes could take much, much longer to sell.

For information on your particular situation and to get a more precise sense on the timing, please contact me today!

It's frustrating to wait for a bank response on a distressed home you want to buy or sell!

A challenge we’re running into with the market weirdness is the deceptive status of listings in and around San Jose and Silicon Valley.  Sometimes a house or condo appears on the web to be a listing that’s available and ready for your offer, but in fact the agents are no longer accepting offers on the seller’s behalf.

Since a large percentage of our San Jose real estate sales consists of distressed properties (short sales or bank owned properties), the situation is more complicated than with a “normal sale” for many homes.  (Non-distressed listings gleefully proclaim, “this is a NORMAL sale! no bank approval needed!” because they know that serious buyers, particularly highly motivated ones, just want to buy a home without delays and games.) 

With distressed sales, the complications usually come in the way of bank involvement on the seller’s side (beyond just funding the buyer’s loan).

REO or bank owned properties require several days to a week for a decision to be made on offers presented.  Listing agents are the gateways to the banks and if they decide that they have enough offers, that’s it.  So the property may show as “active” and available on the MLS, but the agents won’t take any more offers – they are waiting on a response from the bank. So while the home isn’t sold, it is not available either – it’s in a sort of “availability limbo“.

What would help in this “limbo timeframe” would be updated comments in the MLS (agent section) so that other real estate professionals don’t waste their time.  Recently I showed my buyers an REO in Willow Glen and we were prepared to write an offer after doing a bit of research.  Today I phoned (after last night’s email got no response) and found out that they aren’t taking any more offers but are awaiting the bank’s response on the four that they already have.  It would have saved my clients and me a lot of time had the comments been updated to reflect the fact that they didn’t want to see any more offers.  The best agents are doing this, but some agents (including some of the top producers) are not.

Short sales require that the bank approve any sale (since the bank is agreeing to a short payoff), so the seller has a contingency that the sale is subject to the bank’s approval. (Normally only buyers have contingencies.)  So the sale is really a two-step process.  First, the owner of the home must come to a meeting of the minds with the buyers as to the price and terms of the sale. In other words, they must have a ratified contract.  Second, the ratified contract and other documents relevant to the sale are forwarded to the bank (or banks if there are two or more loans) with the short sale package.  Once the bank approves the sale, then the more normal phase of the escrow begins: buyers put their initial deposit into escrow, order inspections, etc.

When does the status change from “active” to “sold” with a short sale? Although in a sense the property is still available until the bank approves the contract, there is a ratified purchase agreement on the home prior to that and it is, in fact, a pending sale. It’s just pending with a contingency. So the correct answer is that once the seller approves the contract, the home’s status on the MLS and on the web should be changed.  Many agents are showing these sales as “status 2″ or “pending release”, but others are showing it as a normal “pending sale” while still others display it as available – the latter of which is wrong.  Lots of confusion there.

To further complicate it, again, agents are the gateways.  The home may be sale pending subject to bank approval and it might be that the bank would want to see a higher offer but the listing agents may be unwilling to present it.  

Is that a problem, legally or ethically? It’s not all that clear – it depends on the communication between the seller and the listing agent.  The agent has a fiduciary duty to the seller, not to the bank – so it depends on what the seller wants.  To expedite the sale, some Realtors are virtually bypassing the owners of record and dealing primarily with the banks, and this is an agency nightmare worthy of a lawsuit. The seller is still the client, and that’s the person to whom the agent owes the highest fiduciary duty – not the bank.   The seller probably wants to see the highest price for the home since there is less forgiven debt and less of an issue with “phantom gain” and banks later coming after them for the amount forgiven. The seller needs to be educated and kept in the loop.

A good solution is for listing agents to update their comments appropriately.  Our local MLS is making it more clear what’s required, but even agents with the best of intentions get confused since the house doesn’t “seem” sold until the lender blesses it.

Such are the murky times we’re in.

Be careful what you wish for. The news stories make it sound so attractive – get a home for 10% less than market value. That may happen. Sometimes. The national average for short sales actually closing is extremely low, by some counts as low as 10 or 11 percent.

What about San Jose area short sales? Lets start with the lay of the land in Santa Clara County specifically (Silicon Valley includes Santa Clara County and a bit of Alameda, Santa Cruz, and San Mateo Counties). Some areas are loaded with short sale listings, others have few, if any. The ˜best deals, in terms of low pricing, are going to be in areas with a lot of the short sales because they sell for less and pull property values down, making them more and more affordable. Those are the areas with lower priced homes, generally, the entry level areas.

In places like South San Jose, the south county areas, and Blossom Valley, for instance, most of the entry level homes are short sales. Values are plummeting there.

In places like Cupertino, Saratoga, and Los Gatos, there are hardly any short sales. Virtually none. And home values are rising.

If you can afford one of the rare short sales in the higher-end neighborhoods, this can be a good opportunity for you. No guarantees, but if you can purchase in an area that’s appreciating, you may be able to get equity in your home without waiting years for the market to recover.

If you are looking to buy an entry level single family home for about $500,000, though, there are a lot of pitfalls that you need to be aware of. I’ll list a few here:

• Home values in most of these areas are falling quickly
• If you buy today, the home will likely be worth less tomorrow
• The seller may agree with you on a purchase price, but with a short sale, you will need the approval of at least one bank (or in some cases, the lender has a servicing company, which is another issue, and in other cases, there will be a first mortgage and a second mortgage, so there may be more than one bank involved)
• Lenders are overwhelmed with short sale requests and are taking a month or longer to respond to buyers and sellers who’ve agreed on the contract – some banks are taking 90 days, and some never respond at all. A few are saying that they will not process any short sales at all. Period.
• It is important to calculate out how fast the market is changing, because if you agree to an amount one day but the bank doesn’t say ˜yes for 30 or more days, it may no longer be a good price!
• There is a lot of ˜smoke and mirrors going on with short sale listings, duplicity on all sides. Be aware that things may not be as they seem!
  • Many homes are listed as available but they already have a ratified contract between buyer and seller and it’s awaiting bank approval. (Agents are not supposed to do this. Technically it should be reported as a pending sale. On the other hand, the home is sort of available because the bank has to approve the sale and reserves the right to take a better offer.)
  • Although a buyer and seller may have a ratified contract, the bank may continue to look at offers (perhaps until they approve an offer, perhaps later). So a buyer may be ˜bumped” at various points in the attempted transaction. In a normal sale, that really cannot happen unless the buyer badly missteps and is in default.
  • Also, some buyers are putting offers out on multiple homes, even though obviously they can purchase only one. The reason is that banks are responding so slowly, if at all, that buyers are thinking “I will go with the first one that responds”. So in some cases, listing agents have changed the status to sale pending, the seller is counting on that sale, but the buyer may not really try to complete the purchase at all.
  • You may be preapproved to buy and find out that your lender decides to change the loan conditions. Recently some of the larger lenders stopped being willing to loan to folks with 10% down and insisted that they now have 15% down. This is an unhappy surprise for buyers who are relying on their preapproval!

My advice: skip the short sales and wait for them to go through the process and become bank owned properties. Most of them will go through the process and will be less expensive and not involve the risk of having to evict someone when it’s all said and done. With the bank owned homes, there may also be issues (usually with property condition) but if you get into contract to purchase a home, the bank will do its best to see that you can close escrow on the deal.

Related post (on my Live in Los Gatos blog):
Can a Real Estate Agent Help You to Buy a Distressed Home or Pre-Foreclosure in Los Gatos?