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

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

• precise location (view, proximity to something undesireable)
• lot size
• lot shape & access (flag lots may sell for less than homes directly on the street)
• whether the house is below or above grade/street level (most people don’t prefer being down from the street)
• back yard size
• amount of remodeling (and how recently it happened, whether with permits/finals)
• care for the home
• additons vs original square footage
• whether the street is a good one or full of parked cars & RVs
• sale type – regular vs distressed
• landscaping (especially “hardscaping” – patios, pools, summer kitchens etc.)
• amount of down payment
• whether it’s all cash, conventional financing or if the seller carries a note
• whether there were multiple offers soon after it hit the market or if it was one offer after languishing for weeks or months

The variance from “all original” to “all remodeled” alone can swing value 10% – 20% in the San Jose area.  Add to that other factors and the divergence in value can be much, much greater.

Additionally, smaller homes tend to sell for more on a per square footage basis than larger houses. The reason why is that kitchens and bathrooms are the most expensive rooms, but often there is just 1 kitchen and a similar number of baths with smaller vs larger homes.  Even if the properties are comparable in many ways, a 10% difference in square footage can make the price per SF very wrong.

What about new construction?

In a tract neighborhood of NEW HOMES, if the locations are similar and finishes are similar (no upgrades), there’s a better shot of the price per SF being useful information. Many new homes, though, offer a completed home with basic finishes, and the buyer must opt for upgrades such as adding a fireplace with custom mantle to the family room or master bedroom, better appliances or counter tops to kitchen and baths, etc.  Further, some new homes have basements and it’s possible that they may not be included in the square footage – and yet, of course, they may have immense value!

So even with tract homes, there are lots of caveats.  Additionally, the older a home gets, the less likely this approach is to be accurate because some owners will remodel their home every 10-15 years and others won’t do a thing, not even basic maintenance, and the home will be “tired”( at best) very soon.

Online and automatic valuations

Often when home buyers look at Silicon Valley properties for sale they compare the list prices via online valuations.    The difficulty is that the “auto-comp” figures are often wrong because they are based primarily, if not exclusively, on the “price per square foot” of the house’s listing. The online valuations often pick the middle of the viable range between “total fixer, probably needs to be demo’d” to “completely remodeled or brand new home”.  Most of the time, the “range” is about 10 – 15% from fixer to fixed, so most of the time, the online valuation will be right in the middle with a 5% swing either way. But some of these sites (if you read their disclaimers) say that they are within 80% of market value most of the time.  That’s not too accurate.

Let’s use round numbers to make this easy.  Let’s say that the online real estate pricing says that a home is probably worth $1 million dollars.  It might be that the actual pricing range goes anywhere from $900,000 to $1,100,000, but the virtual pricing tools don’t know if the home is next to high voltage lines, a busy road, is in the lesser school district, is remodeled or what.  Or, conversely, if it’s a short sale, has been a rental property that got totally trashed, or has terrible terrible neighbors in the immediate vicinity who have garage sales on a weekly basis and need safari gear to get through their front yard.  The true market value could be 5-10% higher or lower. It just depends.

So please take these things with a grain of salt.  If you look at the online pricing and decide it’s correct but the house you’re buying is in a lesser location or in worse condition, you’ll overpay.  And if it’s better, you’ll be too low and will wreck your odds of succeeding.  Don’t forget to include market heat when trying to determine the likely selling price of the home you want. If similar homes are getting multiple offers and selling 5% or more over list, then the sale from 3 months ago is only old news, not today’s prices. In those cases, if you only rely on comps, you will find that you miss the mark every time.  Home buyers who lowball their offers in a rapidly appreciating market will find that an expensive mistake to make, with the biggest risk being that they could even price themselves out of the market entirely.

My suggestion is to hire a good Realtor who can assist you with pinpointing the pricing, whether you are buying or selling, so that you can negotiate competitively and get the best deal you can for your home.   I don’t mean buyers hiring the listing agent, either.  When you do that, the agent also represents the seller and may be inclined to fight just for the other side – or for the highest price. Get your own real estate sales person who’s in your corner, helping you to evaluate properties and market value, and who will provide you good counsel all the way through the shopping, contract writing, negotiations, inspections, closing and beyond. There’s no reason to go it alone, and in fact doing so could cost you more in the long run.

For more reading on the same topic:

Assessed Property Value vs. Market Value of Silicon Valley Real Estate

Sometimes the List Price Isn’t the Expected Sales Price, So Run Comps!

What’s my home worth? Home owners may request an online evaluation by me by filling out this form. (The more info you provide, the more accurate the results will be

How common are “all cash” transactions for Silicon Valley real estate right now?  Throughout Santa Clara County, they were 25% of all sales, up from 20% in October 2011,  among houses, duet homes, condominiums and townhouses (class 1 and class 2, does not include mobile homes, 2-4plex or apartment buildings or raw land).   What’s trending? Lots, including more cash offers.

Some areas and some types of sales are more frequently all cash than others.  Here are a few quick stats for the last month (last 30 days from today – numbers from MLSListings, crunched by me – disclaimer on good intentions but no guarantee). Also, please note that this is for CLOSED SALES. As of this writing, we are seeing a huge uptick in multiple offers in all price ranges in many parts of the valley, and it seems that many are all cash or very large cash downpayments.

• Santa Clara County: 25% all cash
• San Jose (entire city): 27% all cash
• San Jose short sales: 27% all cash (down from 33% in Oct 2011)
• San Jose bank owned or REO sales: 39% all cash (38% Oct 2011)
• Short sales & REOs were 52% of all sales in San Jose in last 30 days (was 48% Oct 2011)
• Of SJ homes listed at $300,000 or less: 44% all cash (was 48% Oct 2011)
• Of SJ homes listed at/under $500,000: 33% were all cash (didn’t track in October 2011)
• Los Gatos: 9% all cash
• Saratoga: 8% all cash
• Almaden Valley area of San Jose: 10% all cash

Some of these sales will have no financing and the new owners will occupy the home.  Particularly in lower priced homes, though, these are investor buyers who will be renting out the property.  This is often the case with the lower price distressed properties in particular.  In higher priced homes, some new owners will put financing on the property after close of escrow.

With the crazy new demands that keep coming at us from banks and new requirements being imposed on appraisers, now more than ever, cash is king.  That doesn’t mean that the cash buyer will get a deep discount, but there will be a slight one in most cases and certainly preferential treatment that will create a great advantage in multiple offer situations.

Learn more about buying and selling Silicon Valley real estate with cash offers:

Cash offers: what do you need to know if buying “all cash”?

Q & A: Making an Offer

What’s My Silicon Valley Home Worth? Estimating the Probable Buyer’s Value  (financing impacts market value)

Both buyers and sellers in Silicon Valley find themselves having to compromise in order to purchase or sell homes in today’s market. In a red hot seller’s market, the buyer usually makes most of the concessions. In a deep buyer’s market, that can be said of the sellers. Right now, though, it is fairly balanced in the sense that homes are selling fast – but only if they are priced aggressively. In some areas, such as the Cambrian Park area of San Jose, prices continue to inch downward.  Sellers often feel as though they are compromising left and right before they even get their property on the market! What kind of compromises might you expect when buying or selling a home in Santa Clara County now?

Silicon Valley Home Seller Compromises

Most sellers want to sell for full price and to not have to do any repairs – that is, they want to sell “As Is”.  Unless they get multiple offers, though, often that’s not the case.  Often sellers must compromise on both price and terms, and may find themselves providing a pest clearance or do other repairs in order for the property to sell.  In some cases, though, the compromises are larger still: they may need to pay points for the buyer’s loan, provide credits, re-roof or do other work to make the transaction work. A suggestion for most sellers is to do pre-sale inspections. One of my clients this last year objected, asking why they needed to spend money (the cost of the inspections) to find out that they needed to spend money (the cost of the repairs)?  But in truth, by doing this, the seller can take care of some items up front, create a more secure feeling for the buyers and then maximize the sales price in most cases. It is a compromise, though, to do these inspections upfront. That said, it’s a worthwhile one because normally it will net the sellers more money in the end! A word to the wise: selling As Is often means not getting top dollar for the property (most sellers want Top Dollar with NO WORK – it doesn’t work that way).  To get the most money out of the sale, usually a hoe owner will need to make the property worry proof: do repairs upfront, before a buyer ever even sees it.

Silicon Valley Home Buyer Compromises

Most San Jose area home buyers want to purchase a home for 10-20% less than what the sellers think it’s worth.  The main compromise is on price!  It’s sticker shock every time, but especially for real estate purchasers who are coming from out of the area. Additionally, buyers tend to want homes in turnkey, perfect condition.  That is, they don’t want issues with permits, repairs, health and safety hazards, termites, and so on. They want to move in and “not have to worry” for a few years. So moving from this position to a purchase where they take on some responsibility for repairs or updating is a major concession or compromise right there. A word to the wise for buyers: demanding every little repair and home perfection will not usually work UNLESS you pay “top dollar” for a property. If you want the best price, be prepared to take on some of the responsibility upfront. For buyers and sellers to agree on price and terms it’s going to involve compromises on both sides. With proper planning, though, these compromises will result in a win-win for all.

What happens if your home does not sell within a few months and you take it off the market? If your property status is changed to a cancelled, expired or withdrawn listing, it may be viewed by real estate agents as their potential business, and you may begin to hear from them  – a lot!

What is the difference between expired, cancelled and withdrawn listings?

Let us begin by discussing the difference between cancelled, expired, and withdrawn listings and how each impacts your vulnerability to being swamped with messages from real estate agents.

1. A withdrawn listing means that the property is still listed for sale with a real estate agent or broker but is no longer listed on the multiple listing service (MLS).  It’s still a valid listing and other agents should not approach you about working with them since you are still in a contract to sell your home with your current agent.
2. An expired listing means that the contract for your listing has come to an end and the listing is no longer in place.  Other agents may approach you since there is no valid listing in place.
3. A cancelled listing is one in which the seller and agent or broker agree to terminate the listing. Since the listing has ended, other agents are free to contact you.

In a nutshell, if your Silicon Valley home’s listing becomes either cancelled or expired, real estate sales people may contact you, but if it is merely withdrawn, they are not supposed to reach out to you because you still have a valid listing in place.

My agent removed my phone number before changing the status, but agents still call. What gives?

If you and your agent terminate the listing on good terms, and perhaps even if that isn’t the case, he or she will likely do you the courtesy of removing your phone number to cut down on the barrage of phone calls you will get from agents “working the expireds“, as it’s called.  This helps, but many salespeople routinely download listing information from our MLS so that they have the old info in case anything helpful to them is removed – such as your phone number.  Unfortunately, if your number is ever listed, it’s likely that someone may have it and try to contact you later if your home does not sell.

It’s not just phone calls when your property goes off market

Many of the agents who are “working expired listings” won’t just phone you, but will mail you stuff or even drop by in person (dropping by is called a “pop by” in Realtor circles).  It is unlikely that any of them will have your email address, though, so there’s a small silver lining!

How long does all of this last?

Usually the worst of it is the first week or two and then it begins to taper.   Some sales people, though, only begin at 2 weeks because they want to miss the avalanche of activity (and your likely irritation at it).  Of those late bloomers, some will literally mail you or phone you only once.  Most realty professionals who regularly list previously expired listings and make that a significant portion of their business plan will attempt to reach you many, many times over a month or two, maybe longer.

Drip campaigns and off market homes

The agents who seriously focus on getting the expired or cancelled listing business will most likely try to connect with you by doing all three: phoning, mailing goods (or drop them off or have them delivered) and also stop by.  Real estate trainers teach them that most prospects say “no” four or five times before they say “yes”, so for these highly determined business people, each no means that they should be closer to a yes.

At what point do they quit?  Perhaps after 6 – 8 attempts over a 4 – 8 week time frame.  They will have a marketing plan that includes drip mailing programs, calls and visits in the hopes that their persistence will indicate to you their overall professional determination.  (“If he’s working this hard to list my house, he’ll probably work just as hard to sell it” is the message they hope to convey.)

How can I make the calls, mail and visits from all of these agents stop?

The clearest cut way to make them stop is to list your property for sale (either with your previous agent or a new one of your choosing).  Agents absolutely cannot (should not) contact you if your home is listed for sale with another broker or agent.  Along these lines, rather than have your listing expire or be cancelled, you can make the status “withdrawn” instead – leaving it listed but currently unavailable and not on the multiple listing.

Short of having it listed, you can simply let all calls roll to voice mail and delete them once you know it’s an agent calling; you can leave a message on your VM that you don’t want any agent contacts also.  You can keep a log of everyone who contacts you, and how, and ask each one to not do it again.  They are supposed to respect your wishes if you ask them to not call, drop by or mail you things.  (You can not answer your door and leave a note up that you do not want to be contacted by any real estate sales people t0o.)

Most of the time, the agents who try to get ahold of you will be polite and well intended.  They should not call before 8am or after 9pm.

Best of all, it’s temporary.  They’ll stop trying within a few weeks in 99% of the cases.

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

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

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

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

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

At what point can you give a “notice to perform”?  There’s a little debate about this, so before electing to send over that kind of missive it might be good to have your agent check in with his or her manager or broker.  Some agents and sellers, if feeling harassed, may issue one before a deadline is even missed by the other side.  Normally this is taken as hostile – it is – and can seriously worsen the relationship between buyers and sellers without having any practical or helpful impact on the problems. In other words, it’s a bit like waving the red cape.

It’s not fair, having to deal with rude, nasty people who say untrue things, who bully others and seem to be just emotionally playing with the folks on the other side of the transaction.  I know.  Sometimes there’s not much you can do about it in the immediate sense.  But nastiness finds its own punishment, eventually – even if you never see it.

Rude, nasty agents (and agents who encourage or allow their buyers to be that way) risk every future transaction in the area since their colleagues will talk about them – a lot!  There are a few Realtor bullies in the Saratoga and Los Gatos market areas, but who they are is no secret to other real estate professionals in the area.  Agent reputation is so important! When there are multiple offers, the loathed agent and his or her clients will be at a huge disadvantage. So too with some homes that don’t sell – it can be that the agent community is literally boycotting a jerk. In the long run, it doesn’t pay to be obnoxious.  Call it karma, but other agents remember the guy who took advantage of a typo for personal gain, who showed the love of bullying at every turn or who controls to the point of choking out everything and everyone.  So too on the other end of the spectrum – a well liked agent who “plays fair”, communicates and performs without drama or game playing will find doors open that might otherwise be closed.

This is also true of everyone else we deal with too – title companies, inspectors, repair people.  A bad turn will be told to the entire agent community, but so will a good turn or going the extra mile. Reputation eventually is its own reward or punishment.

Got a nasty situation on your hands? One of the best things you can do is to keep a calm head. As a seller, you can say no to unreasonable demands.  If the buyers shoot you an addendum, even if it is reasonable but you want them to back out of the sale, you can say no. You are not obligated to do more than make the home available for inspections, provide your disclosures in a timely manner, keep the house and property up and any other contractual requirements.

Sometimes the listing agent is so frustrated at the inability to protect sellers from rude buyers’ agents or buyers that he or she gets emotional too. This doesn’t help.  If you’re angry or upset, don’t leave a voice mail or shoot over a snarky email.  Let yourself calm down first.  If the other agent is doing it to get a reaction out of you, don’t give him or her the pleasure.  Let calm heads prevail.

Now’s the time of year to start preparing to sell your home if you want to catch the early spring season in Silicon Valley.  It’s not too early to do the basics, which are extremely important because they give home buyers confidence and confident buyers write stronger offers and tend to stay in contract once they make an offer which is accepted.

The first and most important thing is to go through your property – both interior and exterior – and get everything into good working order.  This may seem intuitively obvious but it doesn’t always happen.  Recently I assisted some buyers with a home in which one of the bathrooms was not fully usable.  The owners just used other bathrooms but to the buyers it raised an enormous red flag and a ton of questions: when did it break? why didn’t you fix it? what’s the cost? are the sellers just hiding something?  This is a typical reaction when there’s deferred maintenance, particularly in a kitchen or bathroom. It happens in condos, townhouses, single family homes and even luxury homes.  But if you’re selling, don’t do it: get your repairs done first and foremost.

Where to start? Grab a clipboard, a paper and pen and walk around the exterior of your home.  Look for things which don’t work, need cleaning or otherwise need repair.  Note each one, whether it’s a torn screen on a window, a non-functioning item such as a doorbell or faucet, or an item that may need touch up paint.  (Wood on the outside of the home tends to need painting every 5 years, by the way.)  Pay attention to overgrown bushes or trees (which should not be hanging over the roof or obscuring windows).

Do the same indoors.  Going room by room, check light switches, faucets, fans, windows, doors.  Do the doors rub or not close? Have the door glides disappeared?  Do the window shades open and close as designed?  Write down anything which needs attention, especially if it’s safety related.  Don’t forget the garage, either.  If your home has a crawl space, check to see if it’s damp there – if so, see what can be done to fix it (often it’s a matter of adding extenders to the downspouts).

Once you’ve caught up on your maintenance items, you can declutter, and then you can have pre-sale inspections done.  The home inspector may find more items that need repairing or replacing.  Take care of these, as is practical, prior to getting your home on the market.

In escrow, the best surprise is no surprise

One of the worst things which can happen after a buyer is in contract to purchase your home is a surprise.  If they read your disclosures and inspections before writing the offer and then discover something amiss once they’re in escrow, it will raise all kinds of fear, uncertainty and doubt.  You may even lose their trust as they wonder if you were simply trying to avoid disclosing something. So if there’s something you are not going to repair, for whatever reason, it is imperative that you disclose this carefully and thoroughly and upfront.

Buyers would much rather have full disclosure of every defect upfront, with as many details as possible, then to worry that once they move in there will be more unpleasant surprises.  Ideally, there would be only past repairs to disclose (yes, if it was broken and you fixed it, you still must disclose both of those facts), but buyers can be very forgiving of non-working items if they are given a lot of info about it upfront. It’s like the old tag line from Holiday Inn: “The best surprise is no surprise”.

Want to sell your Silicon Valley home in the new year?  Start getting it into good shape now.  Take notes on everything and be prepared to share that information.  Your home’s buyers will be more confident, the escrow will be smoother and the chances of the sale falling apart will greatly diminish because you did your work upfront and were transparent about it.

Normally I do not reference other Realtors’ blog posts on any of my blogs or sites, but this morning I read one worth calling out because it raises a good issue that home buyers and sellers often never consider: the ongoing exposure of sold listings’ information, videos and photos on the web will continue to be present long after the home sale is closed.

The post, by Norma Toering of ReMax Palos Verdes Realty, is entitled “Please remove my home from the internet” and can be found on the Active Rain website at the link provided above.  This conscientious Realtor sold her listing and got it closed last week.  Now the buyer, the new owner, wants all traces of the listing removed from the internet.  Many people are private and may be uncomfortable with videos and pics of their home online (even if with the last owner’s consent, decor and furnishings).  But it is nearly impossible to remove all online photos because they are syndicated or pushed to other sites where we agents have no control. 

One commenter suggested that perhaps we need another disclosure so that buyers know and understand that what’s out there on the internet cannot be removed (and for that matter, that agents don’t want to spend many hours to remove them – a challenging task for which there is no compensation).  Having photos on the web is part of marketing and once it’s done it simply cannot be undone (at least not fully and certainly not easily).  I don’t think a new disclosure is a bad idea.  Our purchase agreement forms or contracts inform buyers and sellers that there will be dissemination of information on the MLS regarding the sale status and later the closing price and terms.  It wouldn’t hurt to also warn the parties that once images are disseminated on the internet, they are very likely to remain online a long, long time.

There are a number of things which are related to the purchase and sale of real estate which require the professional guidance of those other than your Realtor, namely a legal or tax professional.  This sometimes surprises consumers.  Once I was discussing one of these areas with a prospective client and she felt quite frustrated and exclaimed, “you know the answer, you just won’t tell me!”  That was many years ago, but I’ve never forgotten it.  Many Silicon Valley home buyers and home sellers assume that they’ll never need to talk to a tax or legal professional, and if advised to do so, may balk.

So let’s talk about it.

In other states, such as New York, attorneys are very involved in real estate transactions. Here in California, though, that’s not the case most of the time.  We call on CPAs and lawyers when there’s a problem or a question which is beyond the real estate licensee’s scope.  I’ll provide a few examples.

Holding Title: Probably the most frequent question I get that I’m not allowed (or qualified) to answer is about how people should hold title when buying a home.  The purchase agreements we use (both CAR and PRDS) lay it out best and puts it in bold so that consumers don’t miss it:

“THE MANNER OF TAKING TITLE MAY HAVE SIGNIFICANT LEGAL AND TAX CONSEQUENCES. CONSULT AN APPROPRIATE PROFESSIONAL.” (newest revision of the CAR contract, April 2010)

Most title companies have a nifty little chart that summarizes the pros and cons of the various ways in which people can hold title.  But neither the escrow officer nor the real estate agent can tell you what’s best for you.  We know what’s most common, but that doesn’t mean it is best for you and your particular set of circumstances.  So talk to a CPA or talk to a lawyer (or both) if you do your research and are at all unsure of what to choose! (Old Republic Title has a summary of the most common ways to hold title in a downloadable pdf file, which you can access via this link.)

Arbitration: Realtors or other real estate sales people should not tell you whether or not to initial for arbitration.  We can explain it, but on that point we cannot advise.  (I will share that in my experience, virtually everyone does initial for it, so as a practical matter I explain that it will likely be a counter offer issue in a purchase agreement. Again, though, the ramifications of agreeing to arbitration, or not agreeing to it, are a discussion for a legal professional.)

Distressed sales: In addition to these two areas, right now we are seeing many short sale and bank owned (REO) transactions.  The paperwork involved in them is significantly different than in a regular transaction.  Often the bank involved has addenda which nullify many of the “buyer protection” clauses in the purchase agreement, for instance, more so with REO sales than short sales, but significant in both cases.

And that’s only the tip of the iceburg.  It’s not unheard of that with a bank owned sale, the bank will not provide to the buyer signatures and initials on the contract which make it binding – but they want the buyer to go ahead, put the good faith deposit in escrow, proceed with inspections while the purchase agreement may still be voidable! (In other words, the bank may kick the buyer out of contract.)  Because there’s so much increased risk to buyers in purchasing homes in which the bank is the seller (or in some cases needs to approve a short sale), I advise my clients to consult with a good attorney to make sure that they understand what they’re agreeing to and what the actual risk is.

For home owners doing a short sale transaction, even the bank approval letter may be something to run past your attorney as the language used may indicate whether or not you will be open to trouble from the bank later. In my experience, short sale sellers are the most likely to need but not be willing to pursue professional tax & legal advice. Not so long ago I had a client who wouldn’t even make use of low cost or free legal services, insisting instead that he could find everything he needed on the internet.  That is really a mistake!

Transactional Nightmares: Finally, if a transaction is hitting a bad, bumpy stretch in which the other party appears to be in default (not performing), your Realtor may suggest that you consult with a real estate attorney if other avenues don’t get the desired results in a timely manner.  Every once in awhile, there will be a weird and unforeseeable turn that may put the sale on shaky ground.  It may even be that  who must (or can) do what may be unclear.  Realtors don’t often suggest that home buyers & home sellers call an attorney for a consultation, but if they do, take their suggestion seriously.   A good lawyer (or tax professional) can often get you an answer quickly and soon put your mind at ease and help you to establish a game plan, if that’s what’s needed.

In conclusion, if your trusted real estate agent suggests that you seek tax or legal advice from a qualified professional (or any other professional), it’s probably in your best interest to do so.  Your Realtor will not get any kickback or payment for the referral – it is made only for your own best interest.  While there’s a lot of good information to be found online and in blogs, none of it will be tailored to your precise set of circumstances, so it cannot substitute for a confidential conference with a lawyer or CPA.

Pricing is the most important element of “marketing a home for sale” that sellers and their agents do and over-pricing is the #1 reason why some homes don’t sell.  Here’s a quick list of the most common pricing errors which Silicon Valley home sellers should avoid because they often lead to overpricing:

1. Selecting the list price of the home based on what you want or need rather than on what the market will bear (the “probable buyer’s value” of your home).
2. Using dissimilar “comps”.   The best comparable properties will be within a mile  of the subject property, within 10% of the home’s size and 10% of your lot’s size,  in the same school district and ideally in similar condition and very recently sold.
3. Hiring an agent who tells you an inflated price and then using that number. Look at the numbers yourself.  A better practice is to first select the best Realtor and then arrive at a pricing strategy together. Many agents are pressured by homeowners to tell the owner what he or she wants to hear.  This is truly counter-productive! 
4. Not factoring in negative issues which could impact your home’s value, such as proximity to busy roads, high voltage power lines, the look of nearby homes and yards, non-permitted work or additions, etc. Ignoring it – or believing that buyers will – means you will be perpetually too high in your assessment of your home’s value.
5. Failing to include the current competition in your assessment of your real estate’s value.  Are there a lot of homes like yours on the market? Are they just not selling? If so, the buyers are telling you that the whole lot is overpriced!  Are there lots of short sales and bank owned homes selling nearby? Unfortunately, those are going to pull your home’s value down, so those need to be included in your assessment. It is very important to establish the probable sales price of your home by looking at the competition as well as the pending sales and recently sold homes.

Formal appraisals are not the same thing as a competitive market analysis (CMA).  An appraisal only looks at the already sold homes (and perhaps may factor in the current market climate, but not to the same degree at CMA would do).  A good CMA will provide data on the active listings, pending sales and nearby solds which are similar to the subject property.  It ideally will be very honest about any negative (as well as positive) elements that alter the likely sales price of your home.  A home’s appraised value may NOT be its market value! 

If you’d like to chat about selling your home in San Jose, Los Gatos, Saratoga, or nearby, please call or email me.  When we meet, I will give you a complimentary copy of my book, “Get The Best Deal When Selling Your Home in Silicon Valley“.

You keep reading that it’s a “seller’s market” in Silicon Valley real estate.  You hear about multiple offers and home prices getting pushed up.  There are tax credits which cause buyers to fight to buy homes.

Should you jump in as a San Jose area seller now? 

Maybe, but if you do it, do it right!  The dirty little secret that no one talks about is that most Santa Clara County homes for sale are not selling.  They sit on the market, popping up on MLS searches for month after month.

There are quite a few common myths that home owners believe about selling their property. Believe these, and act accordingly, and your chances of selling are dramatically damaged:

• my price is high, but buyers can always “make an offer”
• it’s a seller’s market, my home does not have to be perfect
• if I fix up the home to sell, the buyer may not like the changes
• it was like this when I bought it, so I don’t have to improve it now
• I have lived with (fill in the blank) forever, there’s nothing wrong with it

Getting the staging and pricing right matter tremendously.  Today let’s just focus on staging.

Buyers often spend everything they have to get into a new home, and usually they can’t afford to improve it once they move it.  So the first thing to understand, if you are selling your home in Los Gatos, Saratoga or San Jose, is that your home needs to look “turnkey”.  This is what 90% of the buyers need.  If your home isn’t move-in ready, you will automatically eliminate most of your home buying audience!

Let’s look at some photos to drive the point home.  I won’t say where these were taken, only that it’s a Santa Clara County home for sale right now.

When buyers and their Realtors first arrive at your home, they get a first impression of what kind of shape your house is in.  What does the landscaping say? What does the driveway say?

This driveway has a lot of cracks.  Buyers view it as money they’ll have to spend to make it look right.  Real estate agents know that this is a “red flag” that the foundation may also be damaged and cracked.   Either first experience of your home is not positive.  If they’re doing a drive by, they may or may not come back to see what’s inside.  Usually a cracked driveway alone won’t kill showings, but if the rest of the front of the home is bad, that may be enough to stop traffic.  If they don’t see your home, they won’t buy your home – so getting good, qualified traffic is top priority.

The next impression isn’t better.  Here are the windows which also face the street on the same home. Are they dirty?  Has the seal on the dual pane windows failed?  No matter what – it’s a horrible “first impression”. 

Sure enough, when I went inside, it was consistent: the inside what just as bad as the outside.  The kitchen was “beat up” looking.  It had been cheaply remodeled and was treated badly by its owners.  Whoever buys this house probably will have to gut and replace the current kitchen. Below is a large, closeup of a kitchen drawer that exemplifies what’s seen in the home. 

What to do?  A seller could have refaced the cabinets (and replaced the countertop with an attractive formica or Corian countertop) to clean it up.  Few buyers worry about the inside of the cabinets – it’s the outside that they care about.

The back yard is the least important of all the areas to worry about, since buyers are braver about tackling a part of the property that isn’t visible to the world and that they can avoid going through for awhile if needed.  Even so, it’s best to at least cut down the tall weeds!

Most homes are not this bad, of course, and it doesn’t take nearly so much effort or money to really get a home in shape to sell.

Are there any general “rules of thumb” for preparing your home to sell? Yes! The vast majority of times, these items are needed to be done to maximize your home selling price:

1. Decutter – often we live with too much stuff in our homes, in our garages, in our bookshelves, closets and cabinets.  How much? Usually, to sell, about 1/3 of everything must go!  (Donate it, sell it, store it, but get it out of the home!)
2. Repair – if your door sticks, your bathroom fan’s too noisy, your faucet drips, get them fixed.  Small annoyances add up to a bad impression.
3. Clean – this is no time for dirt, rust, streaks or mildew!
4. Make it light – trim back bushes that grow in front of windows, pull back curtains (or perhaps eliminate them), add lights to dark rooms. Whatever the need is, make sure it’s handled so your home is light. Dark homes are a turnoff to buyers.  They often cannot imagine what it will take to lighten up the house.
5. Focus on an inviting front of the home, add color, make the pathways clear of hoses, debris, etc.   Declutter.  Add colorful annuals near the front door.  Make sure your front door is impeccably clean (it may need refinishing, repainting or replacing). 

I co-authored a book, “Get The Best Deal When Selling Your Home in Silicon Valley“, and would be happy to give you a copy of it when we meet to discuss selling your home (no obligation).  Or you can find it online or in local bookstores.  The book contains many more ways to get top dollar when you sell your Silicon Valley house or condo.  Please email or call me today to discuss selling your home in Los Gatos, San Jose, or Saratoga.

A very common seller concern, understandably, is selling the home for too little money.  Oftentimes they want to price their Silicon Valley home so that they “have room to negotiate” and “don’t leave too much money on the table”. 

The trick is in figuring out how much room you really need to negotiate and at what point you’re dramatically hurting your chances of selling by overpricing. Where’s the tipping point?

Let’s do some mythical math – let’s say a 4 bed, 2 bath home in Los Gatos or Almaden Valley is worth approximately $1,000,000 (depending on terms like “As Is”, the loan type or all cash, free rent back, etc., the probable sales price range might go from about $975,000 to $1,025,000). 

If the home’s likely value on the market is worth about one million, many agents will suggest listing the home at about $999,000 in order to get buyers who may not search over the $1 million mark and to drum up interest, traffic, and hopefully at least one offer.

Saavy and experienced agents know that most homes sell fairly close to list price in today’s market (Almaden Valley houses are selling, on average, at 99% of list price and Los Gatos homes are selling at an average of 97% of list price), so most would not want to go beyond that percentage – whatever it is – since we also know that most homes are not selling.  Five percent over probable list price is ususually the upper limits of what may be wise positioning.   In the case of our mythical million dollar home, the highest that some agents would see as potentially viable might be $1,050,000 – but many others would not venture that high, feeling it creates a big risk of the home sitting on the market too long and ultimately selling for much less if the home is perceived as shopworn. They might place the upper limit at $1,025,000 or close to there.

Sellers, though, sometimes see the numbers but want to list their home higher – perhaps 10% higher or more over probable market value.  Why is this so often the case?

Sometimes it’s a misperception of how to get the highest price for the home.  “I’m not in a hurry… I can wait for a good offer” is a common retort.  The fallacy is that waiting will bring more offer – in most markets, it will bring less. The exception is in a rapidly appreciating market, waiting may cause the market to simply catch up with you.  If you’re really not in a hurry, wait until the market is where you want or need it to be before selling.  Putting your home on the market and waiting 4 or 6 or 12 months for it to sell is most often frustrating, not fruitful.

Sellers may hire the agent who tell them the highest price. If you were to interview 3 or 4 real estate licensees and ask about the market value of your home, they should all be fairly close if they’re looking at the same comps.  If all but one are in a “band” and one is much higher, beware.  That agent may be attempting to get your listing by providing you with a price that can’t truly be justified.  In the business, we call it “buying the listing”.  (I have lost a few listings by simply telling the truth about pricing, only to see the home get listed at a crazy high price – and never sell at all.)

Another reason seller may err with overpricing  is that being emotionally attached, home owners occassionally feel that certain improvements or changes that they made create more value than most buyers will accept.  For instance, if your home is wallpapered in very, very expensive and imported or antique wallpaper but the buyers hate it, it is not an “improvement” per se.  Same with high quality but out of favor colored carpets.   Feeling very attached to a house, its memories and meaning can make it very difficult to view selling the house as a business decision.  But to maximize what you take away from the property financially, that’s what’s needed.  At the extreme, some sellers may become defensive and angry if they ask a Realtor or an appraiser “what’s my home worth” and the answer doesn’t measure up to expectations.

It is very important to have the assistance of professionals who can give you unbiased (neutral) information & advice.  A dangerous plan is to tell your agent what the home should be worth and then insist that he or she agree with you under pain of not being hired (or getting fired).  As a fiduciary, your real estate agent should give you correct information – even if it’s not what you want to hear.  Ultimately your best help in pricing, and hopefully in working with an offer when it comes, will be by teaming up with someone knowledgeable who can give you good information, data, and advice so you can make the most of whatever market your home sale happens to be in.

To answer the original question, then, agents suggest pricing a home at market value because that’s one of the key things you need to do to increase the odds that your home will sell.  They are providing good advice.  This alone – pricing it “at market” – isn’t enough to sell a home, but it’s probably the most important part of any marketing plan.