Default is a dirty word, but how many Silicon Valley home buyers and sellers understand what a it is?  Consumers often confuse the term default with cancelling the sale at any time – even backing out of a contract during the contingency period for a legitimate reason. Buyers cancelling during the contingency period is very easy to do in most cases and is very seldom a default.

Default is a strong word which refers to a failure to do something promised in contract or not doing it on time; we sometimes call it “non-performance”.  In the purchase agreement, buyers and sellers both make promises to do certain things within a certain time frame, so either one could potentially default.

Defaults don’t always cause the sale to not go through, but they can cause a delay and it may harm the other party – at the very least, not fulfilling the promises of the contract adds unnecessary stress and drama to real estate transactions, which are already, in & of themselves, stressful.

Home buyer defaults

For instance, the following items are areas where a buyer could default (not an exhaustive list):

• not putting the initial deposit (good faith deposit) into escrow on time
• cancelling the sale after removing all contingencies or without cause allowed by the contract
• not removing contingencies on time (or possibly ignoring other deadlines)
• not completing loan papers on time
• not returning the signed disclosures on time
• not bringing “good funds” to escrow in time for closing

Missing contingency removal deadlines may be a default.  For instance, the PRDS contract states on page 1 of that agreement:

BUYER’S  FUNDS:  Buyer  represents  that  all  funds,  including  deposits,  cash  balance,  and closing costs, will be readily available as “good funds” (as determined by Escrow Holder) at  the  time  of  payment.  Obtaining  these  funds  is not a contingency of this Contract.

The loan approval, though, may be indirectly tied to whether or not the buyer liquidates stocks or other accounts to provide the down payment.  What happens if the loan is fully approved except for the verification of this down payment?  The buyer’s job is to have the funds available so that obtaining them later does not cause a delay.  If a delay is caused because the buyer didn’t get the funds ready on time, that is a buyer default.

Not every default is an equally grave problem, of course.  In the case above, the buyer can go ahead and remove the loan contingency and continue to liquidate the down payment assets (which should have been done much earlier in the escrow).  BUT, if the buyer does not complete the sale due to a problem with getting those funds, his or her good faith deposit will be at risk via the liquidated damages clause because getting those funds is not a contingency.

Home seller defaults

Sellers, too, can be guilty of defaulting on contractual promises. Here are some areas in which a seller could default:

• not moving out on time
• not providing completed disclosures or reports on time
• not having work done which was contractually required (such as pest work or repairs)
• not keeping the power & water on for inspections and final walk through
• not providing the loan payoff information, or any other required information, in a timely manner to the title company (escrow)
• causing a delay in closing due to not signing off on time
• refusing to schedule or attend a sign off to sign the closing papers

In Silicon Valley, there are two purchase agreement forms in use: the California Association of Realtors (CAR) contract and the Peninsula Regional Data Service (PRDS) contract.  Generally speaking, the PRDS & CAR contracts are similar on many points.  They are not so similar in the treatment of defaults, though.

What does the contract say about defaults?

Oddly, the CAR contract only mentions the word default twice, and in both cases the topic is a buyer’s default, first in the liquidated damages paragraph (25) and next in the other terms & conditions paragraph (27). (more…)

Periodically, components of a home have to be replaced, whether a furnace, water heater, washer/dryer set or anything else.  They simply don’t last forever, and too often they don’t last nearly as long as we expect.

Ten years ago, about a year after purchasing our home in the Belwood area of Los Gatos, we remodeled our kitchen.  It was quite an upheaval and very expensive, so we were hoping it would “last” awhile.  (Kitchens get a remodel on average every 16 years in the U.S., by the way.)  But by years nine and ten, some of our kitchen appliances started to act up, and this week our dishwasher gave up the ghost entirely.  I really had hoped it would have gone closer to 15 years, but the apparently the fancy newer appliances have a lot of parts, all of which can fail.  I was told that ten years is about average now.

Jim and I are very analytical about major purchases, so I spent a lot of time on Consumer Reports (where I’m a member) first, reading reviews, watching videos and eliminating a few brands right off the bat.  Unfortunately the CS site does not include Energy Star ratings info, so I also visited the PG & E site and was cross referencing.  Naturally, I’d like to get a rebate!  There’s also a sort of cash for clunker appliances deal, too – you can get $100 back for your old dishwasher if you purchase one of the newer models on a list that the stores have.  Buying a dishwasher is a little like booking airline tickets now: you have to factor in any rebates, trade ins, delivery charges, haul away fees, etc. as well as the actual price so you can compare the true net cost of one appliance versus another.

We visited seven stores on Saturday, hoping for good Labor Day sales and wanting to end hand-washing our dishes as soon as possible.  We stopped by businesses in Campbell, Santa Clara and San Jose (skipping another good store in Mountain View as it was just too far for us):  Fry’s, Home Depot, University Electric , Western Appliance, Sears, Costco and Best Buy.  I didn’t want to make this purchase online as there are too many things that might not be fully disclosed with a web purchase but can be understood in person.
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How important is the marketing of homes for sale in Silicon Valley?  First it’s important to understand what we mean by the term marketing: generally, it is the way we attract potential buyers to the homes for sale.  This is more than just the flyer or newspaper ads.  It includes:

• pricing the home
• photographing the property
• describing the home on the MLS (and including good pictures)
• the quality of the flyers
• the print advertising
• the online advertising & exposure
• the networking with other agents
• the direct outreach and appeal to consumers
• the accessibility of the home
• staging the home to sell (appeal, cleanliness, no odors, etc.)

Marketing can be good, bad, or somewhere in between. Bad marketing will likely cost sellers money and good marketing will likely make them money.  

Today we’ll go over the most important elements of marketing because sellers should evaluate them when hiring a Realtor to assist them in the marketing and sale of their home.  While there are many areas of marketing, the most crucial, by far, are these three: pricing, photos, and the description on the MLS.

Pricing:  The biggest marketing mistake which is commonly seen is overpricing.  Sellers sometimes believe that their home is worth more than the buying public do and a home will remain unsold no matter what else is done right.  In fact, you could fly airplanes aroud the home and put full page color ads in every paper around the world but if the home is overpriced, it still won’t sell!  Pricing is the most important part of marketing.   With a too-high price, traffic will be diminished and offers will be low at best (lower than actual market value).

Of course, most homes are worth not just one exact dollar amount but somewhere within a range of prices, depending on terms, the speed of the sale etc.  If the pricing is well done and the rest of the marketing is also quite good, the home ought to sell on the high end of what is possible at that time.

Pricing mistakes are very costly and very easy to make.  Here are some of the ways which sellers can be misled about the probable market value of their home:

• using old comps
• relying upon online home valuations
• basing their home’s sale price on what they “need”
• hiring an agent based on his/her suggesting the highest list price (we call that “buying the listing” when an agent overstates value to secure the listing)
• expecting 100% back from all improvements done to the home
• believing buyers can “always make an offer” (if it’s overpriced, they usually won’t)
• thinking there’s no harm in just reducing the price later (if the market is going down, you will be “chasing the market down”)

The one thing that neither the sellers nor their Realtors control is the real estate market, which is fickle and can change.  In recent years it’s been up and down, depending upon location, price point, school districts and more.  Using six month old comparable sales to establish current market value just isn’t appropriate.  Sometimes even the most recently closed sale is not enough, especially if the market is sliding.  Instead of just relying on the solds, also look at the pendings and the current competition.  The less competition your home has, the better odds you have of selling it – and for more.  But a surge of inventory will cause home values (including yours) to drop.   To understand the probable buyer’s value, all of these must be factored in together.  (The online valuation sites do not do that.)

I should add that it is harder to sell a property that has issues such as high voltage power lines, deferred maintenance, messy tenants who make showings difficult, busy road, junky neighbors, or some other undesirable element.  Many agents will suggest a lower price to compensate for whatever issue is hurting the marketability of the home.

While it’s true that there is no problem that a better price cannot fix, most sellers are trying to maximize their sales price.  For that reason, I’d always suggest asking your real estate agent if there’s anything that can be done to improve the market value aside from that lower price.  Sometimes fresh paint and carpet and a professional house cleaning can do wonders for the home’s saleability.  Or giving tenants a lower rent in exchange for their cooperation during the sale will create an easier time for buyers wanting to see and purchase your home.   A little effort may have a great payoff.  (Some agents focus almost exclusively on price and may not be worried about any other element of marketing.  This is a mistake, so be aware that you may run into an agent with this belief.)
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Are you thinking of selling your Cambrian Park home? If you live in San Jose’s Cambrian neighborhood (primarily zip codes 95124 and 95118), I have a resource for you: a page I created with TONS of information and links specifically for Cambrian home sellers. 

The page is Cambrian Home Sale (www.CambrianHomeSale.com). There you’ll find:

• current Cambrian real estate market activity
• Cambrian homes for sale
• recent sales of homes in Cambrian Park
• information on finding out your home’s current market value
• Cambrian real estate market trends & statistics
• FAQs by Cambrian home sellers
• links to relevant posts on the Cambrian market
• downloadable (pdf) pre-listing packet
• and tons more!

Please visit Cambrian Home Sale for loads of helpful information specifically provided for Cambrian Park home sellers.

The Campbell real estate market appears to be “past the bottom”, as is the case with much of the Silicon Valley housing market. In some parts of San Jose, “the bottom” was in February or March of this year.  Campbell may have hit that point sooner – but in any event it is now heading back toward a balanced market (30 is the balance point for this formula). (Images and charts from Altos Research, to which I have a subscription and permission to use these, as well as the RE Report, another subscription service of mine. Altos uses list prices, the RE Report uses sold data as well as list prices.)

Let’s look at the data for October in Campbell – actives, pendings, and closeds (care of the RE Report).

While in many parts of the greater San Jose area the Days on Market (DOM) are lengthening, they are shortening in Campbell! Sales are up, but prices are still declining a bit (in several areas of Santa Clara County, prices are again inching up – this tends to happen in less expensive areas).  Pending sales are up and inventory is down.  So there are some mixed indicators but Campbell appears to be at or near “the bottom”.
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Luxury Homes and Estates in the Town of Los Gatos, CA

Los Gatos offers a wide variety of home styles and size, acreage and useage. From small, modest cottages to large estates, there’s something for everyone in Los Gatos. Immediately below, please find the links to available and listed Los Gatos homes for sale offered at two million dollars or more.  These will take you to my other website, PopeHandy.com, and open in a new window.

Los Gatos Homes between $2,000,000 and $3,000,000
Los Gatos Homes between $3,000,000 and $5,000,000
Los Gatos Homes priced over $5,000,000

Browse listed homes in Los Gatos over $2 million

Or, if you prefer, browse all price points within this luxury range in Los Gatos here!

Showing properties 1 - 5 of 47. See more city of Los Gatos real estate.
(all data current as of 5/25/2012)

1. $2,239,000 : 16111 Escobar Av, Los Gatos
   
   4 beds, 3 full, 1 part baths

   Home size: 3,692 sq ft

   Lot size: 8,132 sqft
   
2. $2,450,000 : 17 Glen Ridge Av, Los Gatos
   
   4 beds, 2 full baths

   Home size: 2,982 sq ft

   Lot size: 7,500 sqft
   
3. $2,148,000 : 100 Bella Vista Ct, Los Gatos
   
   5 beds, 2 full, 1 part baths

   Home size: 3,247 sq ft

   Lot size: 8,276 sqft
   
4. $2,890,000 : 15303 Top Of The Hill Ct, Los Gatos
   
   5 beds, 4 full baths

   Home size: 3,780 sq ft

   Lot size: 1.23 ac
   
5. $2,195,000 : 14745 Golf Links Dr, Los Gatos
   
   4 beds, 2 full, 1 part baths

   Home size: 3,325 sq ft

   Lot size: 16,660 sqft
   

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