Silicon Valley’s Latest Real Estate Trend: Begging Buyers

http://www.dreamstime.com/stock-photos-dog-begging-image3133443The media is telling you all about the hot housing market in the San Francisco Bay Area.  It was predictable.  You do not build 1/10th of the housing needed over the last 5 years and expect not to enter a low inventory market once the economy began to recover.  As real estate professionals, our jaws drop along with our clients.  When buyers ask what is a reasonable offer would be, or what was  the last comparable property price, we bewilderingly respond, “There is no ‘reasonable’ offer and the trend of the last 5 comps, showed a 10%, 15%, 20%  increase over each last sale.”

There are many examples of “reasonably” priced homes on the market.  Slightly above the last home sale and then, multiple offers, and a new neighborhood high is set.   Basic 3 bedroom, 1 bath, 1500 square feet in downtown San Jose listed for $750,000, 7 offers, finale sale over $800,000.   Another simple home in Santa Clara, not the best schools, 3/2, listed at $850,000 pushed up to over $1million with 17 offers.    Stats show, on average homes in good school districts selling for $100,000 – $250,000 over list.  In other areas in San Jose, $50,000 – $100,000 over list price.  There are approximately 50 buyers for every home on the market.  Maybe more.  Many get scared off as soon as they walk into an open house where they wait in line to pass other buyers in the hallway.

All cash buyers are on average 1 out of 4 offers presented.  But more and more the trend is toward, no contingencies, and fast closes with borrowing buyers.  This trend began as buyers and lenders became frustrated with losing to all cash buyers.  Lenders realized with the refinancing market drying up, they could not afford to lose 25% of sales.  Sales volume was already down, so the extra employees on the payroll could now be doubled-up to speed the processing and reduce to cash like closing times of 14 days.  Equally, buyer crossed their fingers and held their breath as they wrote offers with no escape routes if the loan or appraisal did not come in at offer price.  Cashing stocks, and asking for family gift money to bridge the gap, if needed at all.  Personal letters are back in vogue with buyers trying to convince sellers not to throw their homes to the wolves of uncaring investors.  Bottles of wine, sports event tickets, and the like became part of the offer package when real estate agents went back to presenting in person and in their Sunday best.   Agents are being nice to each other again, as they recognize they need every possible edge to get their client’s offer accepted.  Reading disclosure packages and pushing DocuSign speed limits to be able to submit completely disclosed AS IS sales on their buyer’s behalf.

“This looks like another bubble, don’t you think?”  Yes, in ways.  I try to explain, clients were competing in 2005 for homes and paying over list.  Buyers were competing in the bust as foreclosures “REOs” were being sold in bulk to investors and bank agents were not returning phone calls.  Buyers competed with banks on the value of short sales and how long they would be willing to wait as the bank hoped the price would increase and reduce their loss.  In an area that produces the highest paid average for jobs, has limited new construction, clogged municipal planning processes, no mass transit to allow for true rural commutes into the job arena, and a continued growing population: buyers will compete.  Buyers will beg.  Because once you are in a home, your chances of financial growth and family stability  will outweigh the risk of any related rental home scenario.  People speak of the wealthy made by Facebook, Apple, and the like.   I have met many a home owner, raised working in the orchards of Santa Clara Valley who’s family bought several little homes along the way and are now splitting the proceeds of millions and millions of equity in sales.  There are many ways to make a million in California.  Begging for a couple of months while trying to get your offer accepted may not be so bad in the big scheme of life’s challenges.

If you want to understand the strategies I implement with my clients when they are selling or buying a home, call or email for a free cup of coffee, glass of wine, or mug-o-beer and we’ll discuss your goals,  your wants and needs as it relates to real estate and come up with the best plan to making you successful.

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