Los Altos Real Estate Blog

Last week I wrote a blog about my "Naught and Nice Lists" for 2011 and in that list I included the Accredited Consultant in Real Estate (ACRE) designation on my naughty list.  Why?  I didn't think I could easily fit into my business model and I didn't have time to finish up the testing (even after completing the fee schedule).  Well, guess what.  It's officially off the naughtly list.  The last two days I finished the testing and graduated!

Why did I change my mind so quickly?  Well, this week has been all about catching up and I had the time.  More importantly, I also reflected back on a variable pricing structure in which I could charge different prices based on the type of real estate service and property price range.  I've decided to combine consulting with traditional commissions (that's in the course).  In the end, it became clear that I'd be much better off if I offered consulting for certain services based on client need.

In 2012, I will offer consulting and commission-based compensation options to my clients based on the type of services they need and the price range of the home.  Using this model will enable clients to choose what services they get and ensure I deliver what that want and need.  Here's an overview of who I offer consulting to:

• Buyers looking at homes up to $1M
• Sellers with properties valued to to $1M
• Developers needing pricing and marketing assessments or plans

The services will include all the things I do for my buyer and seller clients, regardless of the price range.  Each service will be priced on a "per service" and "per hour" basis, depending on the service offered.  I'll be offering consulting services on a trial basis in Q1 2012 and will evaluate how well they work in my market.  Based on how my clients like the services, I'll make adjustments to how they're delivered for the remainder of the year.

I saw a great article from Renee Burrows this morning about expired listings in Las Vegas and some of the many reasons they didn't sell.  In Silicon Valley, we have a lot of expired listings and many of the reasons they don't sell include those she cited; overpriced, poor photography, badly staged, ridiculous showing instructions, and so forth.  There are thousands of licensed agents in Silicon Valley and a large number of those sell nothing all year.  They get their license to help family and friends sell their homes at a discount, largely as a favor.  So, as a home seller, are they doing you a favor if your house doesn't sell?

Congratulations on hiring your relative!  They got licensed to help you save a little money.  They'll be cheap.  A lot less expensive than the full-price agent at the leading local brokerage.  However, remember that you get what you pay for.  That offer to help you sell your home and kick-back most or all of the commission will backfire.  Do you really expect someone with no experience to print a flyer, put it in the MLS, and sell your home at higher than market price?  To effectively sell your home requires knowledge and experience about marketing and sales, specifically in four key areas:

Product - Your home and how good it looks.  If it needs repairs, paint, staging, or anything else to make it look good you need to know and it needs to be done.  I'll tell you what you need to do and you may not like it but it's what is necessary to get your home sold.  Failure to clean it up will prevent it from selling.  Will your cousin tell you that?

Price - Your home needs to be priced competitively.  I don't care what you paid for it or how much effort you put into maintaining it.  A buyer will pay what it's worth in the current market.  I'll tell you what the price should be to appeal to that buyer - within 1-2%.  Pricing too high will prevent it from selling.  Telling you it's worth more just to be nice will not get your home sold.  Will your brother-in-law tell you that?

Place - Location is everything and if you're at the end of a bad intersection, near a busy road, or backed against a commercial zone your home will be worth less - period.  No matter how nice it is, buyers will discount for location.  I'll tell you that and if you really want to sell, you'll listen.  Telling you a bad location won't make a difference isn't honest.  Will your sister the agent tell you the truth?

Promotion - Your home needs to be marketed effectively.  Putting it on the MLS is not marketing.  Taking a couple of photos with an iPhone and putting them in a flyer made with Microsoft Word isn't marketing either.  Professional marketing means professional photos, video, virtual tour, flyers on card stock, mailers, ads, and more that the inexperienced, bargain-basement, newbie relative is very unlikely to be able to do.  Doing cheap marketing or incomplete marketing will not get the word to the buyers and agents.  If you're going to sell, do it right - with a professional REALTOR who knows how to do it.

So, feel free to use a relative to try and sell your home.  When the listing expires after being unsold for several months, call me.  I'll help you get it done right.

I'd like to wish a Happy Thanksgiving to everyone and you have my sincerest wishes for a wonderful holiday week.  Hopefully you're all spending time with friends and family, enjoying good food and good times with all.  This is one of two days where I try to take a real break from real estate and focus on the important folks in my life.

We've all heard the stories of how this holiday started and developed over the years.  To me, Thanksgiving is about spending quality time with family and friends.  Showing appreciation for those relationships by spending time over this whole week enjoying games, movies, good conversations, and quality time over everything from fast food to a traditional Thanksgiving Feast.

I am thankful for:

• My friends, no matter where you are, because I would not be who I am today without you
• My family, because they are who I work hard to take care of and with whom I spend great times

Take advantage of this time to think about what makes you happy and why.  That's what you're thankful for.  Give thanks to the people and things most important to you, not just today, but all week and...hopefully...all year.

I've done the "Black Friday" thing - getting up at 2AM to stand in line, freezing my butt off, waiting for a "deal" that I never ended up getting.  How about Black Friday for home buying?  Are buyers willing to head out on Friday morning shopping for awesome real estate deals?  I certainly hope so!

For the savvy home buyer, this is a great time of year to snap up a great deal on a home.  While inventory levels are low all over Silicon Valley and especially in Los Altos, there are still some very nice homes that qualify as doorbusters.  If you see a home you like, make an offer.  Unlike Best Buy or Kohls, home buyers can negotiate a sweet deal on a home and, depending on how they're financing, be moved in by Christmas.

I've done open houses on the weekend following Thanksgiving.  For REALTORS, its' a great time to be out meeting prospective buyers.  Rain or shine, they come out to look because they're dedicated, serious shoppers looking for that awesome deal that can only be found at this time of year.  Sellers are just waiting to see that offer wrapped up and under the tree so they can start the New Year with a "SOLD" sign out front.

My advice for home buyers in any town around Silicon Valley is...get out and get yourself a great home at a great price.  Now is the time!  Carpe Domus!  Seize that great Black Friday home deal you've been looking for all year.  For real estate agents, don't slow down!  Engage your buyers and help them find that ideal home to start 2012 with.

East Palo Alto has a long history of providing affordable housing to low-income residents who work on the Peninsula.  In fact, they incorporated specifically to prevent Menlo Park and Palo Alto from annexing all the land thereby raising property values and housing prices beyond the reach of the existing residents.  In doing all this, the City of East Palo Alto has also spent decades violating state housing and development laws all in the name of being fair.  What the city council doesn't seem to understand is that their efforts to prevent ongoing development actually hurt the city in the long run.

I've tried to develop residential housing in East Palo Alto.  I ran development of an 8-lot subdivision in 2005 and a 3-lot subdivision in 2008.  In both cases, the city exceeded the state mandated deadlines for reviews and approvals, imposed Draconian fees to support non-existant parks/schools, and failed to inform us of critical missing infrastructure that made the cost of development substantially higher than it should have.  The general policy of the city is that builders are not welcome.  While there have been several major projects completed, they've taken many years to finish and much longer than any other city.  The view of politicians and resident advocates is that building or improving housing means higher prices that the low-income residents can't afford.

What those people don't understand is that their low tax base, a result of low housing values, doesn't generate enough income to properly fund their schools, parks, roadway improvements, and other aspects of the city.  The quality of life is lower because of their refusal to let developers build.  Sure, it could cut the number of low-income housing units but the improvements for those that do live there would be huge.  One developer owns a multi-acre lot that could have been a major shopping center with housing - ala Santana Row.  However, the city's unreasonable demands on displaced tenants makes it cost prohibitive to develop.

Read this article in this San Jose Mercury News to get an idea of the issues facing developers in the city.

A new developer and landlord is coming to East Palo Alto.  They have the experience and money needed to break cities and get them under control to allow development.  I sincerely hope this company will get East Palo Alto under control so that developers can build and the city becomes a nice compliment to the surrounding towns.

Buying a home in Silicon Valley, especially in "hot" markets such as Los Altos and Palo Alto, is a tough call for anyone trying to buy in the entry-level price ranges.  Even now, as Fall rolls on and many buyers settle down for the holidays, multiple offers still rule many transactions.  Most buyers are told that this time of year means less of these situations and many take a similar stance they did in the Spring - they don't want to compete.

On a house recently listed in Los Altos, an offer date was set for yesterday and the seller was expecting to see 5 offers.  My clients were notified Monday and asked when they'd like to get together to write an offer.  They loved the house, it was in their price range, and a good deal overall compared to overs in the area.  What's the email I get back from them...

We don't want to compete with multiple offers.  Let us know if the seller declines them and maybe we'll write.

Really?  I understand not wanting to overpay and all buyers want a deal.  Here's the rub, if the house is a "great deal" it will get a lot of attention no matter what time of year.  If you're buying in the entry-level price range of ANY market, you'll always have more competition - from buyers and investors.  So, you have to engage and strike while the opportunity exists.  Here are two reasons for why making an offer right after several others fail is a bad idea:

• The listing agent WILL call all the agents who brough those offers and let them know a new offer is in.  Any other buyer playing "the waiting game" who really wants it will come back and WHAM! you're back in a multiple offer situation.
• The seller may be annoyed at offers coming in too low or buyers playing games with their offers.  They may pull the property off the market and wait for Spring to sell into multiple buyers again.  I've seen this many times.

My advice to you is to not worry about multiple offers and write the best possible offer at the time.  The role of your agent, my role, is to make sure the seller sees your offer as the best of the bunch.  It may not always come down to price.  Your qualifications to buy, down payment, terms, and other factors are all possible advantages that come into play just as much as price.  If you really like a house, don't let it slip away - write the offer.

Mass media is always looking for a story and if you've got a good one, you'll get a few minutes of air time or a spot in the front page section to tell that story.  Would you like coverage on your local ABC, NBC, CBS station?  How about the local paper?  Engaging the media can be a huge boost for you and your listings if you know how to use them.  The trick is knowing if you have a story and then knowing who to contact about how to get it covered.  So, the first step is knowing if you have a story.

Some of the reasons a local or national media outlet will cover one of your listings includes:

• Extraordinarily high price
• Unusual or unique architecture
• First of it's kind or last of it's kind property
• Of local or national historical importance
• Famous past or current owner
• Site of a famous event (movie location, political meeting, etc)
• Exceptional location
• Sale could change local landscape, catalyst for change

If your listing meets any of these and other possible reasons, it might be worth a little time in the news.  Having a possible story is one thing.  Making a story is entirely different.  Let's assume you have a property of local historical importance.  In that case, the sale could be covered as part of a "history of the area" story.  What has happened on the property in the past?  Who has owned it?  Why is it being sold?  All those questions become the basis for a story that gets people interested in knowing more.  It might only be 1 minute of air time but that's all it takes to reach thousands of possible buyers.

With some of the other reasons shown above, crafting a story is fairly easy.  For a high priced property, compare it to other famous high priced properties and show the trend to buying or selling them around the area or country.  For a unique property, highlight the architect or builder and why it's important.  Bringing famous owners or events is easy - tell about that person or event, then talk about the property.

When you have a story concept you need to know what to saw and how to say it.  Keep the points focused on the property, the reason for the story (see above), and include your name!  When you have that, you can call your local media outlet of choice and pitch the story.  For papers you can call the real estate or lifestyles editors.  For TV stations, they always have a "story" email address, you can call specific reporters, or a show dealing with local events / lifestyle might work.  It will take time to get to the right person.

Be prepared to discuss your idea immediately and be professional.  If they like the idea of talking about your listing, they'll set up a time to meet to arrange filming, photography, interview, etc.  They should let you know when the story will air or be printed.  Make sure you link back to the online content of that story so you can leverage the exposure in marketing your listing.

The new conforming loan limit in Silicon Valley is $625,000 as of October 1, 2011.  With that in mind, do we have to worry about loan limits going lower?  Perhaps!  The last time the limits were reviewed was back in 2007 and the basis for the current limits is based on home prices from that year.  Since prices in many areas are still well below the 2007 peak, the Fed may rvised the loan limits even lower in the coming months.

How likely is this to happen?  It is possible but it's not likely to be a priority.  The Fed isn't going to make an issue of the loan limits given the fight put on to keep the old higher limits up.  They are not likely to engage on trying to reduce them further.  What is likely to happen is that the current loan limits will stand for a while to see how sales are impacted over the next 3-6 months.  If sales stay the same or improve, then the limits will likely stand.  If sales are really good, then the Fed might look at reducing them further since it would be clear that having higher limits isn't needed.  However, if the reduced loan limits look like they've had a negative impact on the market, the calls to raise them back up will get stronger and I do see a chance they'll be raised again.

I stand by my earlier assertion that higher limits don't mean much in Silicon Valley but we'll see.  If you're looking for a conforming loan, please give me a call and I'll put you in touch with mortgage brokers who have access to some of the best programs in the area.

It's a common question on the West Coast for any homeowner or buyer, do you want earthquake insurance.  The rule of thumb is that is doubles the cost of whatever policy you have.  For many California home buyers it's a cost that's not worth incurring.  They take the chance that an earthquake will do little if any damage to their home or property.  But what about the folks on the East Coast?

In reality, the chances of a quake are extremely small out there because the faults are inactive compared to those on the West Coast.  Most of the buildings, bridges, roads, etc are not built to withstand a major quake like they are here in California.  They don't need to be.  In more than a century the quakes they've had have never been as strong as the quakes are have out here.  However, because the structures are built to lesser earthquake standards or are older (17th, 18th, and 19th century homes) perhaps a smaller quake can do as much or more damage than a big one out here.

Do the folks on the East Coast need quake insurance?  I'd say no.  Although it might be worth looking at if you owned a home that had significant historical value and was old enough that it would not withstand a big quake.  Paying a small fee might be worth it.

As for West Coast folks, is it worth it for us?  In my opinion, it depends on the house.  If you're in a smaller, older home that's a single story, it's probably not worth it.  If the home is larger or has 2 stories, then I'd say probably because the value of the home is enough that a quake could do enough damage to condemn it and replacement costs are high.  Two-story homes are also at risk because the weight of the 2nd story puts the 1st story are risk of collapse.  Just a thought.