Why is this happening now?

1.) Hope! Even the smallest signs that the economy and jobs are recovering, gives people a reason to consider making a move. The smallest positive sign makes buyers realize this may be the time to buy. Not to mention Warren Buffet spoke and said now was the time to buy. : )

2.) Low inventory. Bottom of the market (six months ago), keeps regular equity sellers off the market (buy low – sell high mentality) and therefore the only sellers on the market are …BANKS and motivated private sellers. Banks in the form of short sales (lender must approve sale) or REO/bank owned/foreclosure properties and private sellers in the form of relocation and “I’m not going to wait any longer to get the bigger/better house I want” or “I am not going to wait any longer to move on and retire!”.

A brief side step on this topic of “deals” and short sales and bank owned properties. The banks have already taken their losses. We the taxpayers bailed them out of their loss. Now, it is upside time. Most banks are completing full appraisals on short sales and REOs. They know the value. They also know, the market is starting to improve in certain areas (Silicon Valley being one). Therefore, they are countering buyers more often than not and only pricing below market to create a frenzy.

If you are an REO or short sale real estate agent, presenting the best offer out of 10 has a better chance of acceptance than presenting one low ball offer. REO and short sale agents business model is based on volume. They do not have time to keep a home on the market forever. Also, they have no patience for agents and buyers that can follow their rules. If the offer requirement states get a pre-approval through their lender – do so. If their requirement is show a proof of funds to close escrow – do so. If you don’t want to do so, don’t make an offer or don’t assume the agent will place your offer at the top of the pile. The truth sometimes hurts. So recognize the pricing strategy in the market place and become savvy about average price for the neighborhoods you are looking at. If the home is priced 2-10% under market there is a reason why. Oh, by the way, banks do not care what Zillow says the value is for a home. : )

3.) Low interest rates hovering around 4%, homes, sales prices in the bay area being pretty much back to 1998-2000 prices (pre-boom), low inventory particularly in highly desired areas and/or great school score neighborhoods, and you have the complete making of a hot market.

According to Santa Clara County Association of Realtors “re-sale homes continued to rise in April, gaining 3.4% from March, and up 11.2% year-over-year. This is the 4th month in a row home sales have been higher than the year before.”

If you are a buyer, why should you buy now? It is most likely you missed the bottom of the market and therefore you have to decide why you would wait any longer? It is pretty definitive rents will be going up. All indications (cyclic market) interest rates will go up over the next two years. Home prices are going up (slowly in some areas – faster in others). Palo Alto, Mountain View, and Cupertino are all reporting complete rebound in average sales price. What they lost between May 2007 and May 2010 has been recovered and climbing. If you want great schools, be ready to compete and the more money down the better. If you want good schools, be willing to do a little repairs/updates and you can find a solid deal in Blossom Valley, Berryessa, and areas of Morgan Hill. If you want an investment property look to East San Jose and Gilroy. Condos/townhomes have fewer choices because of litigation and non FHA ability in most newer developments. Look to older, stable complexes close to tech for good value.

If you are a seller, why should sell now? The biggest reason to sell now is that you want to buy a bigger/better home in the bay area. If you price your home competitively, you can reap the benefits of low inventory and see multiple offers. The more your home is “Move in ready!’ the better your chances will be to create a frenzy. If you have outdated baths and kitchens, talk with me before completing major updates. Let’s make sure you only invest in items that will get the most return. If you need an updated valuation on your home let me know. Buyer’s have become very savvy about what a flip home means. They would prefer to buy from a seller who has taken care of the home and completed appropriate repairs and updates. Based on a recent article here are the top items to complete that give you the best return on your investment:

1. Cleaning and de-cluttering ($200 cost / $1,700 price increase / 872% ROI)

2. Home staging ($300 cost / $1,780 price increase / 586% ROI)

3. Lightening and brightening ($230 cost / $1,300 price increase / 572% ROI)

4. Landscaping ($320 cost / $1,500 price increase / 473% ROI)

5. Repairing plumbing ($385 cost / $1,250 price increase / 327% ROI)

Let me know how I can help you with your next real estate move!

Now for the numbers!

Sales Price to List and days on average to sale – by city – Detached/Condo/Thome

New listings over last 6 months by neighborhood in San Jose Single Family Detached

Average Sales Price last six months by City Santa Clara County – Detached/Condo/Thome

Average Sales Price by neighborhood last 12 months San Jose Single Family Detached

Average Days to Sale – and List Price to Sales Ratio – year to date Detached/Condo/Thome

Q. I just purchased a 900 sq. ft. 2 bedroom, 1 bath home back in April near Los Angeles. I am considering either adding an additional full bathroom off the master bedroom and/or enclosing the patio to make a sun room.
My questions are:

1. What is the better addition to make in terms of resale value, resale potential, return on investment?
2. Do you think the investment is worth it in terms of resale value, resale potential, and return on investment?

I’m curious if a 2 BR, 2 BATH is much more marketable than a 2BR, 1BATH? I am also considering adding an entire master suite, complete with full bedroom and bath, making the home a 3+2 but not sure if the extra expense would be justified in terms of return on investment.

If you had the money for any of these additions, which one(s) would you do? Or should I just leave the property as-is?

First, your return is dependent on a several factors:

1.) Will adding rooms/bathrooms be consistent with neighborhood? In other words, if you build a mansion in the middle of 2BR/1BA bungalows, you will never get the return as if you were building a mansion along Bel Air Avenue. So make sure you have input from a local real estate agent in regards to the neighborhood consistency, value, and general appreciation predictions. Is this an up and coming neighborhood? Are other owners remodeling? etc.

2.) Additions should flow well with the rest of the house. Quirky add ons ( cramming a bath in a closet etc) do not get the return that a well planned, within flow of the current floor plan will. Make sure it can be done in a way that improves the floor plan and not hinders it.

3.) Bedrooms in general bring the most return but must be balanced with baths and living space. No sense in having 6 bedrooms and 1 bath. Two bedrooms/two baths are great for small families,roommate situations and guest. Great rental combination as well if the property may someday be used as a rental. Sun rooms, least value when compared to adding a bedroom or bath. In my opinion bath, bedroom, then sun room but again it depends on how it will be done and the rest of the neighborhood. For example, the cost of adding a bath may be significant simply because current plumbing can not be tapped into and new plumbing (slope), significant trench digging etc may make a bedroom more cost effective and a better return on investment.

You can see how my answer quickly becomes: It depends.

Here is a great link to remodeling returns by the NAHB. Let me know if this helps.

http://www.nahb.org/reference_list.aspx?sectionID=136

My top recommended additions for California residences:
1.) Green wherever you can (grey water, low flow water systems, tankless, low maintenance yards – less grass)
2.) Efficient living space – larger kitchens (busy families eat,entertain, and do homeward around the evening meals)
3.) Master suites = walk in closets, shower tub separate, double vanity for busy couples getting ready for work.
4.) Outdoor kitchens – our weather is perfect for taking it outside. Inset grills and refrigerators with low maintenance arbors and patios.
5.) Movie rooms – spaces large enough to view the large panel screens coming.
6.) Beds/Bath consistent with neighborhood growth and ideally one bedroom/bath on first level of any two story home. (aging parents, won’t leave the nest kids)

Got a real estate question? Talk to CJ!

Q. We’ve sold our house. We have 30 days rent back. We would like to ask for 4-5 months rent back extension due to the fact we have not bought a house yet. Our agent (seller’s agent) told us that the bank wont allow the buyers to rent out more than 30 days because this will ruin the buyers loan. But lots of our friends had stayed at their houses for 4-6 months after they closed the escrow. We were told that it can be done as long as both buyers and sellers agree. The bank should not be an issue.

Can seller rent back more than 30 days after close the escrow by law?

If there is a contract for rent back (and there should be) the buyer’s lender is privvy to it and can apply its own rules (each lender – potentially different rules). I have seen some lenders only allow a 30 day rent back and I have seen others only allow a 60 day rent back. Nothing more.

In past times, it was not as big of an issue but things have changed and if the borrower signed a loan document that states it is a primary residence, then the lender wants to see them occupy the property as their primary residence.

With all that said, you don’t know until you ask. If the buyer’s are in agreement, write it up and see if the lender says anything. I am not sure where you are in the process but if the loan is already approved it may delay the timeline for closing.

Got a real estate question? Talk to CJ!

Q. How is the Brickyard Condo complex in San Jose area?

I like this complex design a lot. The units have some unique features and different layouts, not so cookie cutter style. I think it is a great space with community rooms available for residents that promote the kind of “live/work” idea. It is a secured, gated garage, and internal entry so that certainly provides a level of security.

The challenge to me is the economic issues have not allowed the neighborhood to change with the Brickyard and unfortunately, many of the units are under water. The last time I checked there were legal action being taken against the HOA and builder. Either one of these issues would prevent a loan being used to purchase unless it was a private lender (hard money lender). The REO lenders may provide financing.

If you want to look at crime in the area and general downtown area – check out http://www.crimereports.com

Got a real estate question? Talk to CJ!

Q. We’re buying a short sale. There have been differing points of view from the selling and buying agents, greatly impacting our contingency timeframe. If anyone can offer insight, that would be great.

The California Association of Realtors Short Sale addendum form leaves some ambiguity in regards to “acceptance” of a short sale approval is conveyed. The short sale addendum simply states the approval letter needs to be delivered to the buyer. However, the listing agent sending you a copy is not confirmation of acceptance of the short sale terms by the seller unless it is signed by the seller. Different banks issue different letters. Some require a specific signature agreeing to the terms by the sellers and acknowledgement from the buyer. Some don’t have a signature and simply state the terms of the short sale acceptance.

Unless your agent specified in your contract or the short sale addendum that the delivery required seller’s signature, it would not need to be signed by the seller to meet the standard wording in the short sale addendum. An attorney might argue why would the seller deliver the letter if they weren’t in agreement but many times it is the listing agent passing on the approval letter to get the timeline going.

In your case, because the seller was obtaining counsel from their attorney, it appears they did not accept it until the 8th. The bottom line, unless the stipulation of seller signature upon short sale approval was included in the contract/addendum you may have a hard time enforcing the 8th.

Ultimately, all want to close the deal. If you can convince the agent and seller that a longer contingency will not impact the actual closing (what most are worried about because of the approval date expiration) then you may very well be able to get to an agreement.

Obviously, contract interpretation, legal liability are always best interpreted by a real estate attorney. Good luck, I hope it works out to your satisfaction.

Got a real estate question? Talk to CJ!

Q. I am considering buying an REO foreclosure home. Do REO foreclosure homes sell for less than regular homes?

The answer is YES, in general. Listing agents for banks tend to price aggressively and lower the price consistently until they find a solid offer. The more important strategy is how you and your agent will manage the offer if there are multiple offers. You have to be clear on what you see as the “value” of the home and set your limits clearly with the help of your agent. I have seen buyers get into bidding wars for many emotional reasons and end up paying more for the home then they might ought have. But if they are happy? Then does it matter?

Whether it is a short sale or REO, patience and the clearest view of value wins out. The market is very dynamic and it takes homework, and a strong negotiator, on your behalf, from your agent. I would also add that if you find a private owner with equity, you can many times get a lot more for your dollar (repairs, closing cost paid, etc).

One of the first priorities to establish – are you looking for a deal or a home? From there, go shopping. You may change your mind either way about what is ultimately important. I believe there is a lot of pressure on buyers when their friends ask about their recent home purchase. Everyone wants to be able to come off as a savvy purchaser, taking advantage of a down market, and reply, “Yeh, I got this great house for X dollars under market!” It is possible, but not always true.

Got a real estate question? Talk to CJ!

Q. Campbell has evolved as an amazing small town, there are still quite a few Fixer Uppers out there and am wondering if now is a good time to invest a bit of sweat equity?

The answer will depend on the actual property. In general, Campbell is a good strong neighborhood. The return will depend on crunching the numbers. Make sure you obtain all the right inspections on the property you are interested in. In this market, many times the seller can be coaxed into paying for all the inspections. Once you know what the repairs are, touch base with a Realtor (or three) to find out the current market value of the home and neighborhood. Most investors look for properties they can get for 30-50% under market value.

Knowing the repairs needed will help you negotiate the price down to the “investment price”. If you are planning on renting the property, make sure you take a peek at Craigslist.org and local papers to see what rents are running. Add in 2-10% maintenance/management costs and make sure the rent can cover this with some additional cash flow. The CAP rate (http://en.wikipedia.org/wiki/Capitalization_rate) is what normally tells the investor whether or not this is a go-no-go. Many times, California properties become long term investments as the CAP rates tend to be pretty low.

Look for properties that have been on the market for a long time. The ones that have been noted on the MLS as pending and then back on the market tend to have motivated sellers. Getting your price may take patience, but it is a big key to getting your money back.

Finally, the cost of repairs depends on how much you can do yourself and how much you have to hire professionals. Be careful with items that require licensed contractors (electrical, room additions) as they will make a difference in what you can ask for in the end. Don’t cut corners with permits. It only bites in the end.

Got a real estate question? Talk to CJ!

1.) Home prices may fall even more! Yes, they may. When you make a stock purchase, you certainly buy with some understanding it may go up, down, up, and down over the course of ownership. The same with the home.  You don’t sell when its low and you hold until its high. Now that the “crash” has passed, do we really believe housing prices could fall another 10-40%? OK, maybe if the entire EURO fails. OK, maybe if the sky falls. But really, unless you plan on putting your money under a mattress (and even that has risks – rodents, fire…) every investment has risk. The real question is how do you reduce your risk? First, understand what you are buying. Much like buying a stock, review the history, check out what the professionals are saying about that market, look at competition, and with your real estate agent pull together some predictions. Know what you’re buying and set reasonable expectations on the holding of that investment. In spite of real estate history between 1992 and 2007, real estate is a “BUY AND HOLD” investment. Long term. Not forever, but not 2 years.

2.) I need a deal or my friends will think I am stupid!  Yes, they may.  There is a huge amount of pressure on any home buyer in this market because whether it is around the water cooler, over dinner, or sporting events, a buyer’s friend upon hearing you are shopping for a home will say, “What? No, don’t do that now!  What do you mean you are writing a full price offer?  You should be getting 10-20% below market!”  Really? Oh yes, I forgot, your friends spend time looking at Zillow and reading the web and believe they know everything about real estate anyone could possibly know.  I understand they mean well.  But I have to ask, do you also take their advice on buying stocks for gospel?  Do you call them before you buy a TV? Maybe you do.  Certainly buying a house in the Bay Area can not be compared to buying a TV but the point is really, know your own stuff.  Advice is nice but knowledge is power.  The best way to respond to the questions you may get from friends and family is to know why you are buying a home and then know the reasons why this is a good deal even if it isn’t 10-20% below market and you are writing a full price offer.  Make sure your real estate agent is helping you pull together this information and support. 

Why are you paying list price? Answer:  Because this is 1 of 1 houses in a good school district and this is the only one that has been updated and I am competing with 4 other buyers.  Why aren’t you buying a foreclosure? Answer: After pulling estimates together on the cost of repairs and remodeling needed, the 10% under market price was not real.  Why are you buying now?  Answer: Because I want a home not a rental.  Rents are projected to increase 4% this year alone!

3.) With all the maintenance of a home, it is better to rent!  Yes, there is maintenance.  If your landlord is completing maintenance (important point: IF), then you will also be paying for that maintenance in increasing rent over the years. You will also be helping to pay the landlord’s taxes.  You will also not be taking advantage of the current mortgage interest deduction (assumed to last for at least some period of time).  You will also not know when your landlord is taking your rent and not paying her/his mortgage and then suddenly you see a for sale sign in the yard or worse, a notice to vacate because the home has been foreclosed upon.  But more importantly, maintenance is a part of anything you own.  Your car needs oil changes but that does not prevent you from purchasing a car.  You can buy service packages that cover your oil changes.  You can also pay for gardeners and handy persons to help maintain the home.  You can also purchase a condo/town home or PUD (planned urban development) and pay a monthly HOA (home owners’ association) dues to maintain the exterior and the like so you don’t have to think about it.  Life requires maintenance. (relationships, cars, skills…)

4.) How do I know I am getting the best loan?  Great question.  Maybe even more importantly, how do you know when you aren’t getting the best loan?  First and foremost, do your home work about loans.  There is a great book called, Mortgage Confidential: What You Need to Know that Your Lender won’t tell you by David Reed.   Great book.  Easy read.  Know the different products and decision points about how to decide on a loan product.  There is not just one product.  Like finding a deal in real estate, you need, must, find a professional that you can trust.  The loan products available are available to almost anyone completing loans.  Whether you work with a broker or a direct lender (advantages and disadvantages to both – read the book), find someone that can review your specific situation, your short and long term financial goals and offer the best options for you.  ALERT:  The lowest interest rate may not be the best product to meet your financial goals.  Seriously, it is not all about rate.  Understand this and you will be 95% closer to mastering an appropriate decision on what loan to choose.

5.) All real estate agents are liars and you can’t trust them!  Yes, the industry has its issues.  There are some really bad, bad agents out there.  I feel your pain.  However, there are those of us who went into the profession to make it better, to really help home owners and home buyers, and we really, really know our stuff.  We are professional, we return calls, we do our home work, we know the neighborhoods like the back of our hands, we see anywhere from 12-50 houses a week (a staggering 3000 homes a year), we drool over MLS (multiple listing data) until wee hours in the morning, and maybe most importantly we believe in the concept of home (read land) ownership.  Tangible dirt ownership.  Tangible memory producing home ownership.  Tangible legacy and generational asset potential.  If you don’t have an agent you feel you can trust, if you don’t believe they have your back; fire them.  Find an agent that supports your goals, places your best interest first, will answer every question with a smile, and addresses every concern before, during, and after the sale.

In summary, caution in any market is prudent and necessary. If you are considering buying a home there must be a reason, an understanding of the reason and a desire to support the  goal with true professionals and knowledge.  Knowledge is simply smart living.  If you have questions or concerns about buying a home contact me.  Whether you buy a home or not, don’t go without addressing your questions and concerns.

Q. We are looking to buy a home in good school districts and we have Cupertino/Fremont in mind.
1. Can some one explain the pros/cons of buying in Cupertino vs. Fremont?
2. With very good api scores in Fremont, why are the home prices way less than Cupertino area? Will they appreciate in the future? Also, I have noticed that town homes in Rivermark are expensive than SFR in Fremont good school areas. Is it because of the Rivermark homes being new vs Fremont homes being old? If so, Cupertino even though they are 40 year old homes they are still priced more than the Fremont homes. Why is that?

a) Is demand only factor which drives prices higher in Cupertino?
Demand is definitely a key component. Commute to tech hub of Apple, HP and others makes it a highly desirable area as well of course, recognized schools. Many relocation clients simply go to Cupertino first because if they are not familiar with the area, they know they have a short commute and great schools. IMHO, Cupertino itself is one of the best examples of urban sprawl in our area. Not very walkable, lots of franchise based food and retail (although more ethnic diverse restaurants are making headway) and triangulated by three highways. But, based on Apple’s recent decision to build a new campus I don’t see the desire for Cupertino going away anytime soon.

b) Are there any factors other than shorter commute and demand which differentiates East bay and peninsula
Prestige?
Commute to San Francisco (although that is a perception not reality because of East Side Bart). More greenery? East Hills are nice but brown most of the time. West Hills provide more green feel.

c) Any other major factors which differentiates peninsula from East Bay living
Both sides have some incredible public parks and open space which really make them great places to live. Proximity to other walkable hubs goes to the peninsula (Mtn View, Palo Alto, Stanford, Los Altos etc…) But big houses in more affordable ranges goes to the East Bay. Get away from the hustle and bustle could go to either peninsula or East Bay anytime you get up in the “hills”. I am not sure, but I believe the property taxes for Alameda County may be less than Santa Clara? Transfer taxes on purchase may vary (Fremont no transfer tax but many Santa Clara County cities do.) Also look at who is responsible for paying what in a closing transaction. Alameda – buyer pays escrow title (customary) whereas Santa Clara seller pays.

Got a real estate question? Talk to CJ!

Q. Is there any chance of selling a home in east San Jose (between Story and Tully of Mclaughlin) and getting anything for it?

There is no doubt the East Side is suffering in this market. There are a lot of short sales and foreclosures in the area you mention and that has had a huge effect on prices in the last 6 months. If you take a look at ForeclosureRadar.com you can see up to 20 houses around your location that are in pre-foreclosure or foreclosure. Unfortunately, foreclosures will be playing the biggest role in prices for next period of time.

Whether or not you can get the money you owe out of the home in this market is going to depend on the actual street and surrounding neighborhood, the presentation of the home, and of course -how much you owe. If you purchased your home after 2004 it will be difficult to get the monies back.

Most important is to sit down with a couple of Realtors and see how they value the house. The only way to know what your house is really worth is to talk to professionals in the area. I would be glad to help you evaluate the home.

Got a real estate question? Talk to CJ!

Q. I had a buyer ask for money to repair and or clean things on the day of the walk through. He threatened to stop the closing if I didn’t open my wallet. I called his bluff—I was sick of this guy as he’d already gotten a great deal—and the closing went through. My lawyer and realtor provided no real help other than to ask me if I was willing to let the deal fall through over a few hundred dollars. What should a realtor and lawyer really be doing to guide their client through this kind of scenario?

Recently, I represented a seller and the buyer kept coming back for more and more request after getting a great deal on the house. The buyer went as far as asking for “all debris to be cleaned out from under the crawl space”. Now the crawl space was not in horrible or even cluttered but had a couple of bits of plumbing supplies underneath one area.

At first when the buyer would come back with a request and my client would ask me what she should do , I presented the scenarios as most agents do. It is a buyer’s market, you have a million dollar deal on the table, do you want to risk that over a $150 of clean up?

However, after the 3rd non-standard request, I told my seller that she had every right to be frustrated and the buyer was being unreasonable and ultimately the decision was hers to say yes or no. The seller refused the addendum and the contract was canceled. From the moment the contract seemed stinky, I was on the phone keeping up with other parties that were interested in the house but had not brought an offer forward. I was able to secure a back up offer with 24 hours and closed the sale in the typical time with an AS IS sale. The final buyer was very reasonable with their request and this made the seller even more willing to do a couple of things.

In this market, I try to advise my clients to be as flexible as they can. But in the end, when you feel like the other party is taking advantage of you, I think it is best to stand your ground. If you have a motivated buyer, they won’t walk away. If you have a motivated seller, they will be reasonable with completing request.

With that said and as I told my client – It is her ultimate decision. If I would have advised her to walk away at the first request and not found another buyer for months, would that have been the best for her? It is one of those, pick your battle type situations.

I am sorry you didn’t feel your agent and lawyer did not support your take on the situation. To me that is a very stressful situation to be in and I pride myself on doing everything I can to reduce the stress of the transaction for my clients.

Congrats on closing. Obviously sticking to your guns was exactly what needed to happen in this situation.

Got a real estate question? Talk to CJ!

Q. How do you speed up a short sale? I am already pre-qualified to the price the seller is asking. What is the average waiting period on a short sale?

So many variables. I once had an approval from lender, and they WOULD NOT email/fax etc me the letter insisting that it would be coming in the mail to my client. It took 21 days to get the letter! Really!

On the other hand, I had another short sale approval letter in hand 2 days after the offer was presented.

The variables?
The buyer’s agent
The seller’ agent
The negotiator(s) (How many loans?)
The processor(s)
The investor(s)
The Mortgage Insurance company (if applicable)
The Escrow company
The method of communication (email/fax/equator/slow boat…)
The weather
The stars…

I am being sarcastic but there is no definitive answer. Even if it is the same lender as last time, I have no way of predicting. I simply stay on top of it and make sure it happens as fast as the list above allows it.

Got a real estate question? Talk to CJ!

Q. Do home prices generally rise in the spring months? If so, when is the best time to sell if you are not in a rush?

It is an ‘ole real estate tale to say that there are some months better to sell than others. Maybe there was a time when predictability ruled the market place but not anymore. I have looked at the stats for the last 5 years, the last 3 years and here are the market realities that effect home sales:

1.) Homes sell – when there are a lot of homes on the market (inventory high).
2.) Homes sell – when interest rates are low and more when rates are low AND inventory is high
3.) Homes sell – when government incentives create demand (tax incentives)

In regards to “seasonality” and prices, we are not seeing a trend consistent enough in this market to target a selling period. I would look at your specific neighborhood and run the numbers to see if I could find a trend but speaking generally about the San Jose area, it is not the time of the year but the market dynamics and inventory being sold that is driving average sales prices up or down.

More than the month, the drivers for best price are:
1.) Move in ready – no deferred maintenance and no big ticket repairs
2.) School districts – not only for family demand but for re-sale
3.) Consistency in the neighborhood – pride of ownership throughout the area

Bonus points for:
1.) Updated baths and kitchens
2.) Hardwood floors
3.) Copper plumbing and dual paned windows
4.) Open Floor plan
5.) Shortest commute to tech hub
6.) Convenience to shopping, parks,…coffee

Usually, holidays are a slow time simply because only those who have to sell will interrupt family time for showings. However, this season could go either way. Inventory is climbing, and interest rates are low. On the other hand, the global economy is in “sky is falling” mode, loan limits have taken out 6-14% of the Silicon Valley buying pool (depending on who you talk to), and many believe we may see a third dip.

In my humble opinion, we have only certain things within our control. How the home presents, how the home is priced, and how the home is marketed.

Got a real estate question? Talk to CJ!

1.) Who is the bank and/or lender?

Some banks are simply better at the short sale approval process than others.  Wells Fargo, Chase, and Bank of America have seemingly put the most effort into streamlining the process. Bank of America utilizes EQUATOR (an online transaction management system) and this has definitely helped in reducing the amount of duplicate requests for paperwork.  Wells Fargo and Chase have implemented fast track processes where they don’t require complete financial package documentation if the seller has already attempted a loan modification.

2.) Has the seller submitted all the paper work?

Some sellers are not at good at record keeping and many times, bank statements, pay stubs, and tax returns take time to locate and submit to the lender.  The lenders want all pages and sometimes sellers simply throw documents away.  Requesting back statements and copies of tax returns can take time.  Sellers may also have to provide copies of divorce decrees, alimony and child support statements and all of these documents must be updated at the time an offer is presented to the lender for approval and every 30 days after.

3.) How many loans and/or liens are there?

Every lien must be negotiated in a short sale.  This can be mortgages, HOA (Home Owner Association) dues, tax liens, personal tax liens, mechanics, and utility liens (like garbage or electric).  Liens are negotiated by position.  The senior lien holder gets to decide how much the junior lien holders will receive from the short sale.  This is where conflicts can arise.  Property tax liens take seniority over mortgages as do personal tax liens, child custody and the like.  Many lenders will not pay back HOA dues or penalties and attorney fees related to delinquent bills. The higher the number of liens, the harder and longer a short sale approval can be for all involved.

4.) Is/Are the mortgage(s) is a portfolio lien or an investor(s) held lien?

Many loans were made and then sold in bulk to 3rd party investors.  If the bank/lender actually kept the loan and did not sell it to another bank or investor, it is considered a portfolio loan.  If the loan is held by the lender you only need the lender management to agree to the short sale.  If there is an investor, state entity like Cal HFA, federal entities like Fannie Mae or Freddie Mac, or mortgage insurer involved, approvals can take longer.

5.) Has the lien been discharged?

If the lender or investor has already “written off” the loan as bad debt it is typically sold to a credit collection agency for pennies on the dollar.  Collection agencies are very common for HOA past due amounts.  Since the collection agency has paid for the debt based on a recovery amount in mind they can be challenging to negotiate with when it comes to short sales.

6.) Does the short sale seller qualify for HAFA?

HAFA is a great government program attempting to bring some standardization and incentive to the short sale process.  HAFA (Home Affordable Foreclosure Alternative) provides cash to the lender and the seller to complete a short sale but the program is voluntary.  Many of the big lenders like Bank of America have outsourced the HAFA files to third parties and unfortunately they are not always as organized and appropriately staffed to handle the volume.  Again, it is a voluntary program and investors do not have to accept the HAFA terms of a short sale.  Sometimes the question; Does it qualify as a HAFA short sale? – takes longer to obtain than the actual standard short sale approval.  However, it does provide a $3,000 relocation assistance to the seller and this can be very important to help sellers move out of the home they are losing.

7.) Are the real estate agents involved experienced, organized, diligent, communicative, and polite?

It is so very important the agents involved in a short sale are the very best professionals.  It takes solid experience to know which short sales are likely to succeed and which ones will not.  If the listing agent is not upfront about the sellers situation and poorly organized in the short sale package, the buyer can be waiting a long time simply to find out there is no deal.  Equally, if the buyer’s agent is encouraging buyers to write multiple offers with no real intent to work the deal, sellers can find themselves pulling all of it together for the lender only to find the buyer cancels before a short sale approval is issued.   The short sale process takes commitment from everyone involved to be successful.  Short sales make up nearly 30% of all homes for sale in the Bay Area and only 3 out of 10 actually close.  Ask your agent a lot of questions about their experience, their strategy, and their commitment to the short sale process before selling or buying a home.

8.) Is the buyer’s agent  setting proper expectations with AS IS, market value, and timeline?

Short sales are almost always AS IS.  Many buyers obviously do not want to invest in inspections before knowing their offer has been approved by the short sale lender.  However, an experienced real estate agent can help a buyer anticipate items like termite repairs, roof age, broken furnaces and the like before inspections are ever complete.  Do a thorough walk through of the home before writing an offer on a short sale and calculate a guesstimate on repairs.  Have a contractor walk through with you if possible.  Check light switches, flush toilets, turn on the furnace or AC, look for damaged wood and the like to get a good idea of repairs.  Make your offer based on the current market value minus repairs cost.  Take pictures, write it up and have the agent submit with your offer.  All good short sale agents should be supporting listing price/offer price with market activity, photos, and repair lists.   Nothing is more wasteful then to have a offer fall out because of repairs that could have been anticipated and written into the offer prior to submission to the lender for approval.

9.) How many humans are involved with the file?

People make mistakes, lose paperwork, make the wrong decisions and all can go to Hades in a hand basket. The volume of short sales is staggering with any of the major lenders.  Short sale agents that are good may have taken on too many short sales and can’t keep up with the volume of paper work and constant contact needed to take each sale to close. Fax machines are still in use by many of the lenders and we all know how it goes when faxing 25 pages and page 6 doesn’t make it.  Electronic faxes and files are helping but there are lost pages out there.  Departments don’t always talk to each other and I have seen homes foreclosed upon when the short sale approval was in process and even approved.  Short sale approval letters seem to come by slow boat and many times the anxiety of waiting can challenge the most zen-like person’s patience.  Some agents use 3rd party vendors to “manage” their short sales.  They charge the buyer or the buyer’s agent a fee to do this and I totally disagree with this practice.   A short sale listing agent can either pay the fee for shifting the work of phone calling everyday to someone else or handle the process themselves.  But charging the buyer or buyer’s agent is wrong in my book.  In my humble opinion, those who manage their own short sales are better and more motivated to make it happen and all incentives should be provided to keep the buyer committed to the process.

10.) How many months has the seller missed paying their mortgage?

This is a big one that is many times over looked.  Latest statistics tell us that the average home owner has lived in the home 375 days without making a payment before foreclosed upon.  The more payments missed, the less likely the short sale will be approved.  The more payments missed, the more steps are taken toward foreclosure.  Notice of Default and Notice of Trustee sales are legal actions taken against a homeowner in default.  Sometimes, the train has left the station and is there no way to stop the foreclosure.  Buyers and buyer’s agents should always find out which if any of these notices have been served and whether or not they have been placed on hold.  Some lenders will not approve a short sale within 20 days of a Trustee Sale.

There are many questions to ask when pursuing a short sale. Whether you are a buyer or seller considering a short sale, make sure your agent can give you the right information to make the right decision.  As a Certified Distressed Property Expert (CDPE), Certified Short Sale Negotiator (SSN), HAFA Certified Specialist (CHS), and an experienced, committed professional with success closing short sales transactions for sellers and buyers, I am here to answer any of your questions about the short sale process.  If you would like to talk about your options regarding the selling or purchasing of a short sale home, contact me for a no-obligation consultation.

Tracy Lee is also the founder of Dish Crawl, a wonderful food adventure where people collect and experience various tastings provided by local restaurants and chefs in a quasi flash mob fashion.  I have also attended several of the Dish Crawl adventures and have enjoyed each one.  Not only did I enjoy the wonderful food, but also the chance to meet new people while walking between food spots.  If you haven’t experienced Dish Crawl, check it out and join us next time!

Last night was Pitch Crawl and the concept was to bring together people with ideas and people with money and see what happens.  At the same time, having the opportunity to see new spaces in downtown San Jose and enjoying more great food offered by Tracy’s food partners.  We first began at the San Jose Tech Shop.  From the outside, I thought this was simply a bunch of work benches where people could come and tinker with their toys.  However, the tour showed me so much more.  They offer classes, they offer computers that you can design and print posters, wood working equipment, plastic mold injectors, CAD conversion systems, a machine shop, and even an area to pull out a motor of a car!  If you haven’t had a chance to see this space, stop by and take a tour.  There is no doubt one day you will be reading how the next great thing was started on one of these benches.

Next, we visited Next Space a collaborative work space located at the corner of 2nd and San Fernando Avenue.  Gretchen Baisa, hostess for the evening and Next Space member explained how Next Space worked with open space, private offices, and conference rooms available to members.  Fees vary for space needed and the concept and tag line is simply, “Working alone sucks”.  The concept provides a professional space with utilities, internet, etc and a group of entrepreneurs, free-lancers, consultants with a variety of experiences which creates an environment of support, networking, and a potential referral source.  The membership is growing rapidly and as a member you also have access to other Next Space spaces in Santa Cruz, San Francisco and anywhere else a Next Space  location is present.

Onward to the Irish Innovation Center on Santa Clara Street.  Another incredible space where connecting businesses in an open work space is blossoming. How can you argue with Gigabytes and Guinness, the name of the networking event held routinely at the center?  You can rent a desk, cube, office, or conference room.  Rates are reasonable and also provide you access to funding, legal, and human resource support.  This is an idea past due for the brilliant minds of Silicon Valley.

If you haven’t been downtown lately, check it out.  Not just the Christmas Park or the Shark Tank  but the restaurants like Morroco’s and Vino Vino, visit San Pedro Square Market and the entrepreneurial spots like The Tech Shop, Next Space, and the Irish Innovation Center.  Visit the San Jose Museum of Art, take a moment to sit in the pews of Saint Joseph Cathedral where Pope John Paul II is quoted, “Every city needs a soul if it is to become a home for human beings.” , walk around the campus of San Jose State and enjoy a cup of coffee at Philz coffee shop.   Tour the high rises; The 88 (my favorite), Axis, City Heights, and  then visit the Martin Luther King Library and ponder what you have seen.

Walking back to my car last night, I thought about downtown San Jose and how I have watched it grow.  In spite of these strange economic times, there is a palpable energy pushing up from the sidewalks, busting out of the corporate cubes; a force that is clearly determined to succeed.   Much like our small orchard valley history, this new generation believes in hard work and an attitude to change the world.  There are so many brilliant, beautiful people attracted to our valley, to our downtown, and San Jose is reaching out with open arms to provide them space.  Welcome.

But this is not simply an issue of value and square footage.  It can be a safety issue.  What may seem like simple updating regarding new electrical receptacles, newly re-plumbed baths with nice new tile, or more extravagant kitchen remodels can look good but have hidden issues.  I see this more and more with “flipped” foreclosures.  Investors comes in, applies granite to the kitchen, and new tile to the bath but disclosure indicate no permits and many times, no documentation the work was completed by a licensed contractor.

The debate goes on regarding the cost of permits for “simple” work but the rules are the rules and sometimes buyers are more concerned with “updated” than permitted work.  There are not enough inspectors to keep up with the number of foreclosed flips and many times non-permitted work has been a part of the house for several decades without any issues.  The obvious converted garage is not the only type of non-permitted work but commonly San Jose residents have made their homes larger without properly following easements, square footage to lot limitations, and many did not use licensed contractors.

If you are buying a house, you can find out about permits through the local municipalities building department.  Some cities in Santa Clara County have online searches and others require a written request.  Not all permits are online and sometimes you will need to go down to the building or planning office and request to see the plans or documents.  Plan to spend anywhere from 1 hour to a day depending on the nature of the building change.  Sometimes the online files are not clear on whether or not the permit was inspected and given final approval.  If it doesn’t have a final sign off, it is not a completed permit.  Ask questions and understand the impact to you as the new owner of the property.  Even if it didn’t effect value ten years ago, it may now, or may in the future.

Here is a list of links for permit searches in Santa Clara County. Also, don’t hesitate to ask your real estate agent to help you.

San Jose
Campbell
Santa Clara
Sunnyvale
Milpitas
Palo Alto
Los Gatos
Mountain View
Morgan Hill
Gilroy
Saratoga

• The Wall Street Journal’s third-quarter survey of housing-market conditions in 28 of the nation’s largest metropolitan areas found that home values declined in all but five markets compared with the second quarter, according to data from Zillow Inc.
• Meanwhile, rent levels have risen briskly across the country and mortgage rates, hovering around 4 percent, are the lowest in six decades.  As a result, monthly mortgage payments on the median priced home – including taxes and insurance – are lower than the average rent levels in 12 metro areas, according to data compiled by Marcus & Millichap.
• Homeownership also is looking more affordable because after several years of declines, apartment rents will rise approximately 4 percent this year, and rents are poised to pick up even more momentum across the country next year, according to Marcus & Millichap.
• Affordability could continue to improve as prices slide even lower in coming months. Price declines are likely because the share of “distressed” sales, including bank-owned foreclosures, tend to rise in the winter, when traditional sales activity cools.

It is now 2 ways past escrow. Since the neighbor does not want to sign the easement, the seller wants to move a portion of the driveway. This house is on a hill, with a steep driveway. We are concerned that if we move the driveway, then fire trucks or any delivery person will not be able to reach the house (the movers, with the existing curvature of the driveway could not reach the house). What are our options if we want to get out of this contract and still get our full deposit back? Thank you.

Answer:
1.) This issue is best resolved before close of escrow.  Understanding the cost, the implications, and possible solutions is critical to making a decision on whether or not to follow through with the purchase.  Since you have already move into the house and I assume some money has been exchanged it is best to resolve it instead of cancelling the deal.  Work it out with the seller to find an acceptable solution to all regarding the easement and/or the driveway.

2.) If a newly disclosed issue and its possible solutions effect the value perception of the property, this could be a solid enough reason to cancel and retain your deposit. However, the only way to be sure that you are not at risk for breach of contract is to consult with an attorney.

3.) If there may also be other methods of keeping the easement under adverse possession and certainly an attorney can help evaluation the situation to see if it applies in this case.  A true survey may be needed as well help from the chain of title via the title company used during the transaction to understand where exactly the property line resides and how it has transferred with either lot.

4.) If the previous owner wants to move drive way it would seem most appropriate to make sure it is a drive way that does not create safety hazards.

I would highly recommend you consult with a real estate attorney immediately before proceeding with close of escrow or canceling the contract.