Q. We’ve been looking for investment property in San Jose and everywhere in Silicon Valley from Alum Rock to Mountain View. My friend tells me the ROI is harder to calculate on a condo vs a townhome, and that they are riskier investments compared to a single family home. What do you think? A. Certain condos/townhomes are riskier when comparing ROI to single family home. Location plays into the comparison for type of home and ROI. If you are comparing a townhome in Mountain View to a single family detached home in Alum Rock, then you may have a better ROI on the townhome. In addition condition plays a part in ROI. If a condo/town home HOA is in trouble financially, has low reserves and lots of deferred maintenance, compared to single family home with updated roof, furnace, etc – the return on ROI is clear. Visa versa, if the single family home has lots of deferred maintenance, has not been updated, the condo townhome may yield a better return based on how much you invest into fixing/updating the single family home before you resale. Finally, ROI is not just a number. If the ROI pencils out but you wish you had a backyard, you might as well be renting an apartment. Lifestyle and sometimes affordability is why buyers choose condo/thomes over single family homes. But for the most part, single family homes include land, and that is the “scarce resource” that provides the potential upswing for appreciation in the long haul. There are more variables I could throw out but I think these are key. Tags: Talk to CJ
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Q. For new homes, do people usually keep the contingency on appraisal? When I asked about it the home builder got quite defensive. There is no house similar to this in the area and I am afraid it may not appraise. The builder’s finance person said she thought it would be ok. A. The key phrase here is is – “The builder’s finance person it will appraise”. Well of course they do. If you are concerned, it may be worth ordering your own outside appraisal. $500 or so is well worth the peace of mind. Tags: Talk to CJ
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Q. I’d like to know your opinion on using past sales as comps to submit an offer. With the quick slide downward since 2007, would it be accurate to say that 2007 sales are pretty much invalid? If there have been April/May 2009 sales for similar homes in the same area, can I take those and lower it by 20%ish to compensate for the still declining market? I want to use this info to decide whether or not I should place an offer at all. Yes, but of course there is more to it than that: 1.) The 20% is a number but whether or not it makes sense depends on the other numbers. 2.) A recent interview with a professor at Santa Clara University discussed with NPR that the average seller over prices by 13% in a up market and 33% in a down market. So your 20% may be right on. Here is the story about on NPR. http://www.npr.org/templates/story/story.php?storyId=89225406 3.) To your point about future value, I would bracket my comment on – if you were looking for a deal you would not pay over market in a up market or down market. The point was more to say, you want to get a deal in the PRESENT market, not the future or the past. Good eye! I think the waiting has to be weighed with interest rates and the neighborhood trends that you are looking in. Some neighborhoods will continue to drop enough to off set any rise in interest rates (within means). Others will not drop enough to off-set even a .25% change. Happy house hunting! CJ Tags: Talk to CJ, buying a home, Housing market
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Q. I’m Thinking of buying a condo in San Jose area but notice they are all short sales. How easy is it to buy a short sale and how long does it take? It it all depends on the lender(s) involved the listing agents experience with short sales and the value perceived by the short sale lender. I have had short sales approved in as little as two weeks and one with WAMU/Chase that took 9 months because of a third investor note carrier that caused all kinds of problems. On condos, it is particularly important to know whether or not the HOAs are in arrears. If they are, who’s paying. Short sale lenders will not always pay these back payment and that can hang up negotiations if the seller is not willing to catch them up or help. Have your agent pull the historical sales records for the complexes and nearby that are same age and look at how re-sale has gone. If there is not a historical perspective because of age, find an older complex that might compare. Got a real estate question? Talk to CJ! Tags: Talk to CJ
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Q. We just put in a offer on a home in South San Jose and it is a short sale home but our agent thinks it may be a forclosure now, not sure yet. The house is trashed with stuff (garbage, furniture, toys, junk .etc) oh, and a bunch of mouse droppings. Will we have to clean up all the mess if it is a short sale? what about if it is a foreclosure? If the home is a vacant foreclosure, most bank owners will complete a “trash out” before close of escrow. This isn’t a thorough cleaning by far, but simply a haul away of furniture and trash in the yard. However, if it is occupied or is a short sale, any clean up is between the seller and you. It is very advisable to make part of your purchase contract a “verification of condition” X number of days prior to close of escrow. This is a challenging situation for most short sales and one of the risks involved in purchasing a short sale. You may ended up literally taking it – AS IS. By the way, verification of condition is not a way to “back out” or cancel the contract unless specifically written and agreed to by both parties. However, if the seller indicates (bank or private) that they plan to have all cleaned up by a certain date, verification of that prior to close is better than finding out the day of closing. I reiterate that cleaning up the mess is one of the potential risk with any purchase. Tags: Short Sale, Talk to CJ
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If you are reading or listening to news reports about the housing market, you may find conflicting information. Hard to believe that three out of the four largest banks showed profits for 2010 while so many home owners are continuing to struggle. Hard to believe that anyone above us in pay grade knows what is going on when the reports are so contradicting. That is when I turn off the television and start digging into the local numbers. When I look at the local real estate market, I look for several key things to tell me where we might be heading. First, I look at the basic model of supply and demand for each neighborhood. Which neighborhoods have a lot of houses for sale? Which neighborhoods have desirability (schools, shopping, commute)? Which neighborhoods have a higher percentage of short sales and bank owned homes? Which neighborhoods have more pending disasters with owners behind on their mortgage but the homes are not yet on the market? Where was the market before the bust for a particular neighborhood and where is it now? All these questions brought me to the following analysis. First, in this analysis I have only addressed single family detached homes and not condos and town homes. The condo, town home market has an entirely different set of issues going on with legal battles between builders and home owner associations, non-FHA certified complexes, and rules that only allow for a certain percentage of rental properties within the complex. I will save that digging for another day. This first graph takes a bird’s eye view of how the local markets have shaken out from boom to current bust. A couple of key items to note: 1.) The higher priced markets (Los Gatos and Palo Alto) did not drop quite as…
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Q. What repairs do lenders require in Santa Clara County, Ca before approving a loan? We’re buying a 1940′s house in forclosure. It needs a lot of clean-up & cosmetic work. It has almost no kitchen cabinetry, a really grimey counter & sink and the stove doesn’t work. We think the roof leaks too. There are some standards an FHA appraiser will look for but you should recognize the appraiser has the right/ability to point out anything that he/she thinks affects value and place in that in the appraisal report for the underwriters review. “Below Average” condition is one that can catch a underwriter’s eye. For most, there must be a working range – oven, stove. Windows and doors that are able to be secured (not broken out). Working furnace. Water tight roof (from visual inspection). These are top of mind issues but recognize dirt and grime is not normally an issue for approval. They are mainly looking for structural issues (Broken foundation in a way that house is leaning or shows movement), safety related items (doors windows) and minimum appliance operation (like stove and furnace working so that hot plates and space heaters are not main sources). It is best to touch base with your loan officer and agent and find out any specific requirements to your loan type. Different loans have different requirements. Homepath verses FHA verses conventional – all different. Good luck, CJ Got a Real Estate question? Talk to CJ! Tags: Talk to CJ, appraisal, FHA, Foreclosure, Santa Clara County
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Q. I’m moving to the Silicon Vally/San Jose area from San Diego and I’m looking for active living opportunities for seniors and proximity to good health care facilities. Can you help me identify my options? There is a lot to offer active adults in San Jose. First and foremost we are blessed with some of the best medical facilities in the country. Locally, some of the options are the world renowned Stanford Hospital in Palo Alto, the University of San Francisco Medical Center, and the extensive Kaiser Medical System available throughout the Bay Area. Secondly, the community and senior centers offer a great deal of activities to choose from and there is almost one in every neighborhood. These centers provide everything from organized trips to Las Vegas to computer classes, to community gardening. I have included a link but you can also search the web for senior centers San Jose and read about all the different activities. Finally, the mass transit system is not as connected as other metro areas but if you choose the right neighborhood, you can access the light rail, Cal Train, and BART fairly easily. There also several transport services in the area to help those with special needs. I believe the strongest vote for San Jose and elders is the variety of activities the city has to offer. Theater, community groups, an active library system, and lots of volunteer opportunities allow many opportunities for the active adult. Contact me if you would like more specific information about a certain area of San Jose. Got a Question? Talk to CJ! Tags: Active Adults 55+, Talk to CJ, San Jose, senior living, silicon valley real estate
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