How Multiple Offers Affect Sale Price

sebfreyBlog, Charts and Statistics, Commentary, North Monterey County Real Estate, Santa Cruz Real Estate, Sellers, Silicon Valley Real Estate

It’s that time of year again! Early in the year, inventory is low – but there’s no shortage of eager buyers looking to purchase a home. While an imbalance of supply versus demand is not uncommon in the greater San Francisco Bay Area, it’s especially acute early in 2020. New inventory is trickling onto the market, and it will continue to ramp up as we get into spring. But at the moment, there’s nowhere near enough new inventory to meet demand. Sellers with well-priced homes across the region are being rewarded with multiple offers from prospective purchasers. That is of course a wonderful situation for a seller – but it’s more like a nightmare for buyers. Many of these buyers will have been looking for months, even years, before they finally put an offer in on a property…only to find out that the seller has a number of competing offers to choose from. A buyer never knows how a seller will respond in a multiple offer situation. Will they accept just one offer from the “best” buyer? Will they make counter offers to specific buyers? Will they ask all buyers to respond with their “highest and best” offer, knowing that there are multiple offers on the table? What’s more, a seller can make different counter offers to different buyers, with different prices and terms. I’m helping clients manage a few multiple-offer situations at the moment, as listing agent and as buyer’s agent. Working with buyers in a multiple offer situation is especially fraught, because of course, … Read More

How Buyers Find their Homes

Seb FreyCharts and Statistics

How Buyers found their Homes in 2013

How do home buyers find their homes they buy? According to the 2013 National Association of Realtors Profile of Home Buyers and Sellers, about 90% of buyers used the Internet to find a home. And 87% of buyers also used the services of a real estate agent. The chart below shows the various methods that buyers used to find their homes in 2013: Interestingly for sellers (especially those thinking of selling by owner), 91% of buyers used the services of a real estate agent to help them find the home they bought. 52% of buyers indicated that they used good old fashioned yard signs, and 44% of buyers attended open houses. Of increasing importance are smart phone applications and mobile-optimized web sites, with 45% of buyers utilizing them, and 43% of buyers utilized mobile-optimized search pages.

Five Worst Home Improvements for the Money

Seb FreyCommentary

Five Worst Home Improvement "Investments"

Now that more homeowners are looking to create housing wealth by way of the remodel, it bears mention that not all home improvements are created equal. True, some upgrades not only increase a home’s marketability and reduce selling time, but they return more that their cost in increased home value. These types of repairs are good in every way, and also are a great alternative for sellers who are stuck in their current living situation, and would prefer to make the best out of their circumstances by optimizing their home to fit their needs. Yet other “repairs” are more like upgrades. They are pricey, do little to increase a homeowner’s enjoyment, and to make matters worse, don’t provide any kind of return on the investment when it comes to selling. Check out this list below of the Five Worst Home Improvements for the Money: 1. Home office conversion – Average cost: $28,888 – Average percentage recouped at the time of sale: 45.8% Typically, buyers would prefer to just have a plain ‘ol bedroom. What’s more, marketing a home as having an office invokes thoughts of actually having to work, something a buyer may prefer not to consider while making their decision. 2. Sunroom addition – Average cost: $75,224 – Average percentage recouped at the time of sale: 48.6% Often times, sunrooms are “additions”, which change the footprint of the. This not only can be costly, but drastic changes such as these can deter many buyers. Given the cost, the potential value associated with a sunroom simply … Read More

Mortgages for More than just Spring Chickens

Seb FreyCommentary

Spring Chickens

As all of the housing forces come together, rather strange results surface from time to time. The newest is relatively unprecedented, with Americans of retirement-age taking out long-term mortgages. To read an interesting article about never being too old for a mortgage, CLICK HERE. It wasn’t so long ago that Americans would work to pay off their homes, sell them, and use the equity to downsize and buy a small home all-cash, with the remainder serving as the nest egg. Yet with equity levels taking such a hit over the last few years, homeowners have been forced to rethink the way they navigate their retirement. Interestingly, age is a protected category within the Equal Credit Opportunity Act, a federal credit law that bars credit discrimination based on race, color, relation, sex, etc. With that said, as of late mortgages have gone out to borrowers nearing up to 100 years old, and everybody in between. In order to qualify for a mortgage, borrowers must demonstrate they have income rolling in. This can include retirement income, social security, etc. While previously such income would never help borrowers to qualify for anything, today’s low values and low rates are allowing retirement-age borrowers to get in the game. There are some unique issues that seniors must take into consideration. For starters, loan approval is based on current income levels, which in the case of retirement income could change after the death of a spouse. If this happens, the loan stays but the payment may prove to no longer be manageable. … Read More

The Incredible Shrinking Housing Market

Seb FreySilicon Valley Real Estate

The Incredible Shrinking Housing Market

Some new housing data was released, revealing the incredible shrinking housing market. For starters, 31% of all homes sold in Q2 of this year were either short sales or bank-owned foreclosure sales, which together are collectively known as “distressed sales”. The percentage of overall market activity that was distress-driven actually went up from 26% year-over-year, even thought the total number of distressed properties sold went down. More about that in a moment. One finding that deserves a good long look is the discount at which distressed properties are purchased. According to these findings, REO sales and short sales, on average were purchased for 32% less than comparable non-distressed properties. 32% is no chump change, by any means. The fact that he number of distress sales has dropped off yet they have gained market share can only mean one thing; that fair-market sales have dropped off further. This is indeed the case, as non-distressed homeowners are refusing to list their homes. This is due on part to the hit that their equity has taken over the last few years, but that is merely one part of the story. Fair-market listings are being undercut on price at every turn, meaning that even if they are listed, in many cases they are less attractive to buyers and don’t make it to the closing table. This is important to note because fair-market sellers have a special role to play in any healthy housing market. In many cases, fair-market sellers sell their home, and buy another, more expensive home. The mid-high … Read More

Wise Words to Aid Home Buyers

Seb FreySilicon Valley Real Estate

Happy Buyers

Sometimes the reporting on the world of real estate gets so caught up in the rapidly changing landscape that the elements of buying and selling real estate that are most important for the public are not given the attention they deserve. Yesterday a great article in the San Jose Mercury News came out where a series of industry professionals gave wise words to aid home buyers. Since the article is basically a series of quotes, it seems most fitting to just go ahead and list our some of the best ones, one-by-one. While they are pretty self-explanatory, they are very easy to lose sight of once buyers get into the process. Jim Walton, vice president of consumer credit with MetLife Bank in Irving, Texas “There is more to home- ownership than a housing payment. Homeownership requires a commitment to a property and to a community.” “A lender can tell you the maximum mortgage you qualify for, but financial experts recommend that you determine your own upper limit for a housing payment.” “Buyers should take a disciplined approach to saving for a down payment, and then they need to be able to continue to save after they buy, for home maintenance and emergencies.” “A rent-versus-own calculator can be a good resource, but generally these will show you the maximum mortgage you qualify for at the best rates.” “Buyers need to factor in maintenance costs which can run from 1 (percent) to 4 percent of the home value per year.” Marc Schindler, a certified financial planner in Bellaire, … Read More

Silicon Valley Bucking the Trend

Seb FreySilicon Valley Real Estate

As the gloomy reports continue for the housing industry, there is one market where both high-end employment and housing are on an uptick. Thanks in no small part to a techno-renaissance, the Silicon Valley is presently enjoying one of the strongest housing markets in the nation. To check out a recent article from the NAR about Silicon Valley housing, CLICK HERE. With growing companies such as Facebook and LinkedIn employing more and more people, there is a growing demand for luxury homes in the nearby areas, with values climbing as a result. In Palo Alto, for example, the median price of single-family homes increased 20% over a year ago to $1.63M. While in Mountain View, the median price climbed 3.1% from April to May up to $957,500. Also interesting to note is that San Jose has one of the shortest average marketing times in the nation, in spite of having one of the highest median values of any major metropolitan area. A couple of things are interesting about all of this. First off, this market performance relies almost entirely on the local employment market. The Silicon Valley is just as subject to distressed properties and shadow inventory as any other area, yet at present these factors are trumped by area buyers with money burning a hole in their pocket. So given that this market behavior is in stark contrast to a variety of unhealthy market conditions, can it last? False recovery or sustained recovery? It all depends on who you ask. Some claim that local tech … Read More

Future Value Behavior is Anyone’s Guess

Seb FreyCommentary

Uncertainty Abounds

One of CNBC’s real estate reporters recently wrote an article discussing some recent conferences she attended along with other finance experts, where the future of housing and the economy was discussed at length. The verdict: nobody is still willing to stick their necks out and claim they know what is going to happen next. As best illustrated, statisticians deal with events that repeat themselves. The housing market boom and bust of the last several years is so unprecedented that the experts are not able to rely on past experience to anticipate future behavior. Home values are also difficult to predict because they are affected by so many interlinked factors. Even though it all starts with supply and demand, those elements are subject to fluctuations based on a myriad of things. Some people say jobs are what the housing market needs, but that’s only one small piece of the puzzle. Jobs won’t keep the millions of homes in the foreclosure pipeline from entering the market and over saturating supply.  Yet as values fall, the potential buyer pool grows, which can ramp up demand. In the end, analysts are finally throwing their hands up and claiming that what the future holds is anybody’s guess. So what does this mean for buyers and sellers? First off, it is important to understand that each buyer and seller is a participant in the current market, and should base their decision making on such. What happened five years ago is irrelevant, and what will happen five years from now is impossible to … Read More

Release of Contingencies

Seb FreySanta Cruz Real Estate

Yesterday I met with a client for “The Big Day.”  In most real estate transactions I’ve been a part of, there are several big days, but for me, the biggest day is the release of contingencies date.  You see, in a standard C.A.R. (California Association of Realtors) Purchase Agreement, which we mostly use here in Santa Cruz, the buyer is given an inspection or contingency period – by default, 17 days – in which to inspect the property and make sure that it is acceptable.  During this time the buyer may, for instance, order a home inspection, termite inspection, etc. Until the 17 days are up (or however long the contract states that the inspection period shall be), the buyer is free to back out of the transaction with absolutely no risk of losing the deposit.  It’s great for a buyer, not so great for the seller.  Once the seller agrees to the purchase, the seller can’t legally back out, but the buyer can, up to the end of the inspection period.  What’s nice also is that there’s no arguing – the seller can’t say, for example, “Oh no, there’s no mold!” – the buyer can back out for any reason whatsoever (“I don’t like the way the sun hits the deck”) and really, the buyer doesn’t have to give a reason at all. When the inspection period is over, and if the buyer wishes to proceed with the purchase, there’s a document to sign called the Release of Contingencies form.  There are two sets of … Read More