Last Sunday Cliff, Tristan, and I met with a college counselor my good friend, Andrea, had highly recommended, to explore Tristan's post high school options come 2015. We hadn't done this with our older son, Case, but in retrospect, probably should have. (Happily, Case will graduate from college this spring just the same.) It's just that Tristan's hoping to play college ball and as a result, may have several more options from which to choose. As it turns out, MORE choices don't always make the decision - or the journey - any easier. Let's back up just a few decades - or three . . . . My husband, Cliff, attended private school on the east coast, where the exalted "Ivy Leagues" were an attainable part of the equation, while I was the product of public education in Sacramento, where it was assumed that those moving onto higher education would be well served by the UC, state, or city college system (period). With the exception of a very few legacy families, I didn't know any kids who were heading east . . . north . . . or south, for that matter. That's not true anymore, where even the brightest and most talented seniors are all too often being turned away by the UCs of their choice and looking outside the state to other more welcoming institutions that want what our Piedmont graduates have to offer (thank you very much). It's a brave new world - and a highly anxious one (both for these kids and us doting parents). "We need a road map," I explained to Retta over coffee. "Something that outlines what we should be doing, when we should be doing it, and how to go about it." Nodding empathetically, she pulled out her yellow pad, began taking notes, and started asking pointed questions: "What's important to you, Tristan?" "Where do you see yourself going?" "Do you want a large, medium, or small experience?" "Would you prefer an urban environment or a closed campus?" "Do you want BIG sports including a football team?" "Is a Greek system part of the equation?" "How rigorously academic would you like the program to be?" And so it went . . . "I don't know. "Not sure." "It depends." "I hadn't thought about it." "Probably." "I guess." "Hmmm . . ." (Well, that narrows the field considerably!?!) "That's okay. you don't need to know the answers right now," Retta kindly explained, "but you're essentially in sales (we all are to some extent) AND at this stage of the game, HOW you sell yourself is going to be incredibly important with respect to your choices moving forward. Which means, I want you to think about your intentions from here on out." ("Now that's what I'm talking 'bout Willis!") Buyers take heed. Clarifying what you want and what you can afford are really critical to the home buying process (as is understanding what you DON'T). Where would you like to live? What can you afford to spend? What is your timeline for purchasing? Do you want or need to be near public transportation? Are good public schools part of the equation? What style of home do you prefer? And so it goes until we refine and hone your intentions. So here's my 'road map' for Buyers as you navigate the murky waters of our highly competitive marketplace . . . 1) Define your timelines, goals and expectations. 2) Speak with a Lender and get pre-approved (you'll need to circle back periodically as interest rates change).
3) Meet with an experienced LOCAL REALTOR (your cousin in San Jose isn't local unless you're planning on moving to San Jose.) 4) Visit Open Homes regularly and familiarize yourself with the different communities and neighborhoods in your price point. 5) Refine your search (style of home, neighborhood, price point, etc.) and provide detailed feedback to your Realtor on Monday mornings. 6) Track the available comps and the closed transactions in your preferred neighborhoods to better understand the going rate. 7) Request a Disclosure Package and highlight any concerns or questions you may have. 8) Pre-inspect when possible (but only with the Sellers' or Agents' permission). 9) Write a brief biography about you/your family and include a photo to have at the ready. 10) Be prepared to write an aggressive offer that can compete in the current marketplace Once in Contract:
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I probably shouldn't admit this, but you know the guest who arrives ON TIME while the hostess is still putting on her make-up, hoping no one will show for another 15 minutes or so? Well that's me. (Do you want to just cross me off your party list now?)
I'm the early bird who shows up on your doorstep, gift in hand, at exactly 6:30pm. (My mother valued promptness.) As it turns out, that socially ingrained habit, while not so welcome at parties, works great in the world of Real Estate where recently, the victory seems to go to the swiftest. "Do you have an opinion about preemptives offers?" one client recently asked? Why yes, I do. In what has shaped up as perhaps, the most aggressive marketplace we have seen in years, Sellers - and their agents - have figured out that they needn't necessarily wait to put in an offer. In fact, I've successfully utilized this strategy on several homes this spring to beat the competition to the punch. Huh? Let me back up a moment to give you some context, especially if you're from out of town where your home may sit on the market for weeks, if not months, before receiving an offer for less than than the list price, OR for those of you who have been on the sidelines for the last decade or two . . . Because demand far exceeds supply, here's how the scenario usually unfolds for Sellers in the Bay Area wherein a listing has two Sunday Opens and two Broker's Opens before hearing ALL offers on a set date. At which point, several offers will usually present to both the agent and the Sellers of the home. It's an opportunity to sing the praises of one's Buyers in person, and to lay the groundwork for the deal and how they (the agent and the Sellers) may expect the transaction to progress. It's typical these days to hear at least 3-4 agent presentations, not unusual to hear 5-10, and not unheard of to hear 10-20. (Wow!) "My Buyers are a wonderful family with two darling children who absolutely love your home . . . They are preapproved through their lender, have waived the appraisal contingency . . . and can close in 17 days!" (Warning Mr. Spock, you should only ever waive the appraisal contingency IF you have cash reserves on hand to make up any delta a less than stellar appraisal may create.) And so it goes until all the offers have been heard and the Sellers come to a decision. BTW- the Sellers may reject ALL the offers presented; accept the highest (Winner, winner, chicken dinner!), take one that's lower with better terms (ALL CASH), choose their favorite just because, counter one to match the best at the table, OR counter several. That's right, the Sellers may, in fact, "cherry pick" from the available offers and decide to counter the price on one, the contingencies on another, and a rent-back on the third. If all three 'willing and able' Buyers accept the counter, the Seller has the right to choose which party they prefer the most in what can feel - to the Buyers - like an unfair popularity contest. While home sales are first and foremost, a business transaction, as we all know, they tend to be highly emotional as well. "Julie, make sure to find us a lovely family who will appreciate our home," is a sentiment I've heard on more than one occasion. To bypass this difficult waiting period and the threat of multiple competition, many Buyers are willing to quickly step up upon finding a home they desire and write an offer the Sellers would be foolish to reject, in what's often referred to as the "preemptive offer." I should point out that technically, it is only a "preemptive offer" IF an offer date has been set and published in the MLS (the Multiple Listing Service); otherwise, a quick offer is just an aggressive play by the Agent and their Buyer, and why not? (I'll speak to this in a moment.) The key words here are : "write an offer the Sellers would be FOOLISH TO REJECT!" With multiple offers from which to choose on most well-priced homes, a Seller will only consider this play IF the number presented is high AND the terms are exceedingly strong (well financed, quick close, no contingencies)! "Would the Sellers accept a full price offer today?" I've naively been asked at a Sunday Open. Sorry, no, you'll have to do much better than that. In other words, an early offers has to SERIOUSLY put to rest the idea that a better offer lay in the waiting. Not everyone likes this quicker, faster, highly heated marketplace and that's their prerogative; no one is forcing a Buyer to take an offer earlier than they had anticipated. However, one shouldn't always expect that the Buyer will return two weeks down the road either. A few years back I represented a fantastic family who asked me to present an early offer that was politely declined without so much as a counter. (Fair enough.) By the time the offer date rolled around, my Buyers had moved onto another house and were firmly in contract. (Footnote, the first home didn't receive the anticipated offers and sold for substantially less than our "preemptive" price, proving to be a very costly roll of the dice for those Sellers.) So is the "bird in the hand worth two in the bush?" That's a decision only the Seller can make and one their agent should allow them to make. (It's not our risk; it's yours.) The "Why not?" is that the quick sell can leave money on the table. Certainly, you'll never know if someone else would have paid more had you waited and therein lies the most difficult part of the play; the uncertainty of the "What if?" Whatever direction you decide to employ, DO understand that the quick or "preemptive" offer may show up on your doorstep as you bring your home to market. So define a strategy with your agent -upfront - with respect to your timelines and whether or not you are willing to entertain an early bid (as my husband and I recently did when selling our own home here in town). In many cases, time won't improve the offer you'll receive today. Personally, I'm a BIG fan of the early bird and that's the "What's up?" Once again my husband, Cliff, has appointed himself the official "Commish" for March Madness. For years, he's poked fun of my unorthodox choices as I struggle to fill in my bracket -
"What's the school mascot?" I hopefully ask, grasping at straws. (I don't really follow basketball.) As one grown niece pointed out to her boyfriend who participated in the tournament for the first time this year; "Essentially, my uncle makes up dumb rules as the tournament progresses to manipulate the outcome." I'm not sure Cliff would agree with Karen's observation, but suffice it to say that he does takes great pleasure in this self-appointed role while the rest of the family plots a dethroning. As you might imagine, there is all kinds of misbehavior that ensues between the warring families (Gardner North and Gardner East) as the incriminating emails fly back and forth throughout the tournament until a lone and much aligned victor is left standing at the end. Here in the world of Real Estate, we are experiencing our own "March Madness" of sorts as prices move up, up, UP! It's actually the same pattern we see every year as the Spring Market takes off before it can no longer absorb the escalating appreciation and finally finds its cruising altitude. This year, the unprecedented early results have been amplified by too little inventory and tremendous pent-up Buyer demand - fielded by tremendous cash on hand! While it may seem as if there are no rules in place regarding this highly heated marketplace; there are: The most important of them has to do with DISCLOSURE. As many of you know, Cliff and I recently sold our home here in Piedmont and made an offer on a "fixer" in Crocker Highlands. I'm a girl who doesn't mind taking on these less-than-perfect properties, but throughout the transaction, I really struggled with the LACK of disclosure the Listing Agent and the Sellers provided on the other end. It's one thing to waive inspections on a property that's been thoroughly inspected, but it's quite another to take one on that hasn't. Unless you are buying a foreclosure on the courthouse steps - at a significant discount - 'disclosure' is part and parcel of the process - as it should be! "I encourage you to have a pest, home, and sewer lateral inspection" I routinely tell my Sellers, "and if those inspections identify any red flags, we will investigate further and either correct the issues or quantify them." (It's not enough to identify an old furnace, you need to put a price tag on how much it will cost to replace it, or the Buyer will!) (I'm just getting started.) "In addition, the law requires a Natural Hazards Disclosure, Seller Transfer Disclosures, a Lead Based Paint Disclosure, Water Conservation Disclosure, etc., etc., etc., AND several boiler plated disclosures, point-of-sale disclosures, and here in Piedmont: a permit history search and a sidewalk inspection as well. In the case of a condominium or townhouse sale, there are also HOA rules, CC&Rs, annual financial statements and at least twelve months of meeting minutes. (Whew!) Ultimately, the stack of disclosure is about the size of a phone book (remember those?) and a time-consuming endeavor on both our parts. "What's the point of all these seemingly redundant disclosures?" They provide the Buyer with material facts about your home so that he/she can make an informed decision about the property and its current condition, AND then submit a price based on this relevant information. Having done so, it's much less likely that the Buyer will renegotiate an accepted offer once in escrow. And while pointing out a home's defects is the last thing many Sellers want to do, it actually protects the Sellers from future lawsuits regarding items that could have, and should have, been disclosed, prior to the sale. (Hiding material facts is behavior a seller should NEVER participate in.) In the end, Cliff and I ponied up the dollars to do our own investigations and closed the transaction earlier this week. It's money well spent, in my opinion, to better understand - upfront - the property and the responsibilities we have agreed to assume. While admittedly, there is LOTS to tackle there, hopefully, we've mitigated any unwelcome surprises as we progress. As for March Madness . . . I'm going to fumble along year after year utilizing my own unconventional methods and hoping for the surprising upset along the way. (This tournament may be the only place in which the "surprising upset" is a welcome outcome.) It could happen. After all, I'm married to the "Commish" so I have friends in high places. It's a discouraging fact of life that the only place from which I seem to be losing 'padding' as I age, is the balls of my feet . . . which is why those ultra-chic high heels that I used to dance the night away in our barely manageable as I painfully sit through dinner and the theater anymore.
Dance the night away? Heck, I use to actually wait tables five nights a week in platform heels and would hit the clubs for hours afterwards! "Honey, go get the car," I'll plead with my husband, Cliff , as we leave the restaurant, "I can't walk another step!" Regrettably, high heels are becoming less and less comfortable so yesterday, I actually broke down and bought a pair of stylish FLATS on my way back to the office. "Comfort" is a concept I am bringing up earlier and and earlier with my Buyers these days, as they prepare to do battle in our current, heated marketplace. With the large majority of homes selling far ABOVE their listed price, it's frankly, rather uncomfortable for everyone involved - except for the fortunate Home Sellers who are quite likely, realizing results they never anticipated or reasonably expected. Congratulations! As Sellers, you are benefiting from fortunate market timing, historically low interest rates, pent-up buyer demand, low inventory, and more CASH than we have ever seen in the marketplace before, which accounts for the many buyers who can comfortably waive their appraisal and loan conditions in competition. Even so, it's no easy thing to waive contingencies when hard-earned money is on the table and there's no clear formula for picking the "magic number." Moreover, there's NO guarantee that the subsequent appraisal will affirm the market value a 'willing and able' Buyer has set. (It often doesn't. Remember, even if YOU have waived the appraisal contingency, the bank will still require one if a loan is in place as part of the purchase agreement.) "How do we know what to offer?" is the refrain I hear most often from my well-intentioned buyers. "We don't want to overpay." (That's understandable; nor do I want that for you.) BUT successfully competing in this marketplace isn't about overpaying; it's about recognizing the "value proposition" at play. In other words, what's really important to you and your family as you take this all important step? Is it four bedrooms up? A large backyard? A bay view? Walk to BART? Near good schools? Close to a park? At the entrance to hiking trails? Does it provide privacy and security? Room to grow? A space for visiting relatives? Natural light? Great bones? Historical integrity? Contemporary living? And so the list goes - it's as varied as you are and what YOU value; AND frankly, no one can define that but you! Ultimately, what you are willing to offer, largely has to do with your personal preferences, how long you think you will stay in the home, what you can afford to pay, and what the carrying costs will be. (The costs to OWN are actually more relevant than then the cost to BUY, given the current interest rates). If you plan to stay in the home for at least seven to ten years, today's inflated price may be largely moot as you are very likely not only going to realize whatever "future appreciation" you paid upfront, but will more often than not, see a sizable return on your investment. Historically, it's important to note, that investing in one's home has been a very sound part of one's portfolio over time . . . Whatever your short or long-term plan, it's been my experience that when you find the home you aren't willing to lose to another Buyer, you'll step up and compete in a meaningful way. Hey, I don't just talk the talk, I walk it too. My husband and I are actually involved in a "fixer" purchase right now that very likely won't pencil out in today's world, especially once we factor in the renovation costs. That's okay; it doesn't need to. For our purposes, the house need not 'math out' for at least ten to fifteen years, when we will likely go to sell it. In the here and now, it works for our family, and we believe it is a sound opportunity. So identify what's important to you and then write an offer that achieves the goal, with the clear understanding that home investments are unlike any other; they provide security on a very different plane than retirement funds or savings bonds do; which is probably why Buyers tend to buy homes emotionally, rather than pragmatically. Admit it, it's hard to fall in love with a 401k plan, no matter how much money is socked away OR how much future security it provides. (It's no less important, but you can't bake cookies or build memories in it.) Now shoes, that's another matter entirely; those are quite easy to love! (Ouch, my feet hurt.) Have you heard? Cliff and I are officially in escrow and we close next week. More to the point, our 'home sweet home' sold in only four days and with multiple offers!
"Wow, I feel so lucky," I told my sister, Jill, "the perfect Buyers came along at exactly the right moment and totally 'got' our home . . ." "Except that it wasn't luck," Jill reminded me. "You worked really hard on your home and your property is stunning." (Thank you, we did and I'm glad it shows.) "I think you need to acknowledge that your amazing result didn't come about by accident." (I appreciate that.) It certainly didn't hurt that our listing coincided with a break in the weather, a fantastic team of dedicated professionals, excellent market timing, TECH DOLLARS, an exceedingly motivated Buyer, a value proposition, and very gifted Realtors on both sides! (Well done.) Or as one colleague remarked, "Your home is the perfect example of when 'Preparation meets Opportunity'." In fact, Cliff and I haven't just been busting our humps for the last few months preparing our property for market (although we ramped it up considerably and by "we," I mean "me") our house has been a work-in-progress for the last decade. Ten years ago my husband and I essentially fell in love with a garden and a gazebo and knew that with time and vision (and money!!) "potential" lay in the mix as well. Regrettably and in a market not unlike today's, we had spent MUCH more than we anticipated with the firm understanding that any home improvements were at least five years away. And so we waited . . . and waited . . . and WAITED. (For those of you who know me personally, you know that 'waiting;' isn't exactly my forte.) Having finally put our hearts and souls - and a sizable investment - into this exceptional home, I now leave it in the appreciative hands of the next stewards with the knowledge that we have loved it well and that they will very likely make it their own - as they should. It's my deepest wish that the new owners will find all the joy and happiness; all the love and laughter; AND all the tennis balls Buck left behind. Enjoy! And as if that weren't news enough (drum roll please . . . ) Cliff and I are now in contract on the next "fixer" with "potential." Yes, folks, we finalized the contract yesterday and call us crazy, but we will be renovating yet another home with "great bones." It's absolutely everything I SAID I wasn't going to buy this time around, but here we go again . . . (there isn't a 12-step program for this addiction, but maybe there ought to be). So, I'm proof that like most buyers, we tend to gravitate towards the same style over and over. (This will be our sixth project together, NOT counting the boys - a 'project' like no other). I suppose that when it comes down to it, Cliff and I like the 'promise' these less-than-perfect homes offer, and after nearly 25 years of projects, we've gotten quite use to the process as well. Happily, this is the first time that we won't have to live in the construction site while the work is underway. (Hey, I need a rental now! Who's got a lead?) For the record, the last few weeks have been a whirlwind of activity - both personally and professionally. I've probably never been more in tune with the current marketplace and with the emotions that my Buyers and Sellers must navigate to be successful in competition. So here's my lesson for the week, having been in the THICK of both ends of the buying and selling process in what may be the most heated real estate market the Bay Area has ever experienced to date. (Listen up for what it's worth . . . ) I started this journey with the majority of my friends asking "Where will you be going?" and the plain truth is, we didn't know. Unexpectedly, circumstances had thrown a curve ball in our plans, and the fortunate market timing seemed a golden opportunity to adjust, but that didn't mean we weren't incredibly conflicted about selling and letting go. Like anyone who sells a home they truly love, saying goodbye is never easy. "WHERE are you going?" "I'm taking a 'LEAP OF FAITH'" I told one curious friend after another until it practically became a mantra (leap of faith, leap of faith, leap of faith . . .). I said it, but I wasn't quite sure I meant it. "I find," my friend and colleague, Christian, wisely said, "that when I become willing to leap . . . a NET appears." And so we leapt . . . and so it did. Maybe life is nothing more than "potential" and what we make of it along the way. . . (A heartfelt "thank you" to everyone for their encouragement and support; AND understanding, and empathy and patience, and . . .) None of us achieves success alone. I guess it really does take a village - (and a net)! The high school baseball season is underway,so once again, everything is right with the world. Between two boys -respectively now 22 and 17 years of age - I've been watching baseball games since Case and Tris were old enough to swing a bat off a T, which makes for a LOT of years of shouting in the bleachers and driving carpools.
With the exception of a few painful moments (watching your kids strike out OR worse yet - sit out - is never easy) I've cherished the years cheering them on. Blue skies, a verdant field, the stare down of a pitcher, the crack of a bat . . . baseball hasn't earned the title of "The Great American Pastime" for no reason. It's not only the world's most beautiful game; a microcosm of life, of love, of working through slumps and overcoming challenges, of great saves and extraordinary leaps, of singular courage and team play . . . it's full of drama, last minute wins, and walk-off home runs. Baseball, has it all. As equally rewarding as what takes place over the course of nine innings (seven in high school) is the friendships I've made along the way and the camaraderie among the team parents come the spring. Admittedly, after a winter off, I'm often enjoying my time in the stands, almost as much as the action on the field. As anyone knows who's every been to a game - professional or club - there's a lot of down time between the plays, which leaves plenty of time to catch up! Which is why my husband and I RARELY sit together at a sporting event. I'm too talkative, too animated, too social for his liking. Cliff is a man who knows his sports and enjoys them with laser-like focus. He hasn't come to talk, he's come to watch. In an effort to focus my wandering attention on the field (I prefer to think of it as 'muti-tasking') my husband, bought me a score book this year (what a romantic) and last Saturday, Cliff patiently taught me how to actually score the game. I'll admit it - for the first time in 15 years, someone asked me the count, and I KNEW IT! "2-2," I smugly answered, "top of the fifth." (I hate to admit it, but I kinda love keeping score.) "That's an F-9," Cliff said. "It's a fly to the right fielder and the first out. Put a #1 in the box and circle it." "That's a sacrifice bunt . . . you score it like this . . ." "That double play is scored as a 6-4-3 and it ends the inning!" (Okay, that much I knew.) And so the lesson went, through several innings until Cliff could wander off to his preferred spot behind the backstop leaving me with my new book. I believe our relationship has reached a whole new level of intimacy! It occurs to me that "keeping score" is just as important in the world of Real Estate. Like the game of baseball, the buying and selling of real estate is full of statistics. There are winners and losers and often, we go extra innings. But perhaps the most important lesson to be learned is that you've got to swing the bat in order to get on base! And remember, even the BEST players in the world only get a hit one out of every three times. But in case you were keeping sore in what appears to not only be a fast-paced market, but a skyrocketing one, here are a few stats that might be of interest to those of you who follow Real Estate as closely as Cliff follows the box scores in the newspapers and helps explain why the housing market hasn't just stabilized, but rebounded in force! (Please note, this is a small sample size and doesn't reflect our nation as a whole, but is specific to the Bay Area. What's happening in Kansas isn't relative.)
While Piedmont, Berkeley and Rockridge weren't exactly the epicenter for "distressed" sales; nevertheless, this under water, state-wide inventory affected every communities sales statistics and median prices significantly and more importantly, the underwriting practices of Fannie and Freddie Mac and lending intuitions nationwide, making it much more difficult to qualify for loans and tougher to appraise the pending homes once in escrow. Those days seem to be well behind us . . . So what's happening closer to home? Per the MLS (Multiple Listing Service) home sales are considerably down in our fair hamlet. (No, this isn't just your imagination, there really is very little inventory.) Last year, as of March 2013, 16 homes had transferred ownership in Piedmont. This year, it's eight! Not surprisingly, the average price per square foot has increased from $591 to $635; the average sales price, from $1,692,777 to $1,863,827; and the median from $1,380,555 to $1,545,000. Days on market were reduced from 28 to just 11! So not only do you have to swing when the opportunity comes along, you'll need to out play your opponents, be swift on your feet, get on base, and then slide into home. Gosh, I hope you like baseball. Buyers will be playing a lot of it this spring! "Julie, tell us the truth," (I always do . . .). "How many homes are we going to have to bid on before we successfully get into contract?" the earnest young couple half-heartedly asked.
"Well . . .," I responded, "that depends entirely on your learning curve." (Sorry to be so blunt,) Regrettably, it's no joke that in this quickly escalating marketplace, both Buyers (and Agents), are finding it extremely difficult to keep pace, especially if you are from out of town, or worse yet, out of state, where Real Estate appreciation doesn't skyrocket at warp speed, AND where buying and selling something as important as a home, can take several weeks (or months) to transact, as opposed to mere days. (Wouldn't it be nice if we could just breathe a little and take some time? Yes, it would.) Welcome to the Bay Area where available housing stock is well short and demand is exceedingly high! As such, nearly every good listing (and even those that are less than perfect) is experiencing multiple offers and often, with surprising results. (Note to Sellers, if you have a home with difficult flaws to overcome, NOW is the ideal time to sell it.) Moreover, Buyers are jumping through hoops to compete and come out ahead of the pack. By way of explanation; last week I wrote two offers that both would have been hands down winners in last year's market, but came out well short in this year's. In both cases, the prospective Buyers had pre-inspected, waived the appraisal, loan, and inspection contingencies, were willing to close within seven days and were prepared to pay ALL CASH. (That's what I call committed Buyers.) But here's the thing, someone else was willing to pay far more and matched their very aggressive terms in kind. It's also worth noting (in this less-than-happy ending), that all of the other Buyers didn't get nudged out by a nose; they got beat by hundreds of thousands of dollars!!! In one instance, the house went nearly 65% over asking! (Say what?) That's fairly sobering news to digest for Buyers when they have already come in 25-30% above the asking price, AND as their agent, it's not great news from where I sit either. Aside from the fact that I truly want to deliver the home to my clients, my earnings are actually dependent upon it as well. As Realtors, we are only paid when we actually close a transaction so I'm highly motivated to craft a winning offer. However, the sad fact is that when 17 Buyers step up to bat, only one will hit a home run and the rest will be left to regroup and move on to the next viable opportunity. (Batter up!) In addition, it's noteworthy that the majority of the Bay Area's current listings have been strategically under priced as much as 25% in order to create the feeding frenzy that carries the value back UP. Whether you believe this to be disingenuous or not, it's a pricing strategy that has proven to be highly successful time and again. In other words, sharp pricing is here to stay. If you understand that this price represents the starting point and NOT the finish line, as Buyers, you'll be better positioned to adjust your expectations to meet the true "market value." What's this mean moving forward? It means that we (that's includes us agents) are going to have to recalibrate to gain a better understanding of where today's market actually lies. According to Trulia, metropolitan areas in and around "tech hubs" (Google, Apple, Facebook, Twitter . . .) average 82% higher housing costs than other large cities nationwide (with the exception of Austin, TX and Raleigh, North Carolina,; 'metros' that evidently have room to expand and keep up with the growing housing demands). What's perhaps more surprising, according to Trulia, is that much of this gap predates the Internet era, which compared current "price per square foot" to "price per square foot" statistics back in 1990. Even then, the measurable gap in these coveted areas sat at 52%! In short, it's always cost more to live in California where the sun shines (almost) year round and where flip-flops are the preferred footwear. (Bring on the rain. We so badly need it.) So why's it feel so much tougher? The gap is wider; the next house UP is a BIGGER jump. There's more real cash in the market. There's TREMENDOUS pent-up Buyer demand. There's too little inventory; housing starts have failed to keep up, and interest rates are historically low, making the affordability index, well . . . unaffordable. And finally, while it's a great time to sell, the thought of competing in this difficult marketplace as a BUYER, has kept many people firmly ensconced in their homes. My best advice to Buyers (and I'll be one soon) is to put more weight on what it costs to carry, as compared to what it costs to buy, AND then be prepared to write an offer that truly separates you from the pack. That's the way to successfully acquire your next home - or your first (since you so kindly asked). Let's play to win. "We LOVE the house," the darling young couple exclaimed. "What will we need to do to get it?" (They've recently relocated from the East Coast and surprise (!) the market operates entirely differently here.)
"Well . . " I began, "you will need to pre-inspect the home, accept it as it is, comfortably waive your contingencies, and offer substantially MORE than the list price to beat out any other interested Buyers who also love the house . . . AND if you can close in mere days instead of weeks, so much the better." GULP! (I'm so sorry, that's not much of a Valentine, is it?) "But we can pay cash," they earnestly countered. "That's great," I responded, "but All-Cash purchases only move you to the front of the line; they don't provide a discount." According to the NAR website (The National Association of Realtors) "All Cash" sales surged after the financial downturn in 2008 from 10% to more than 30% of sales nationwide by 2012. Here in the Bay Area, that figure is much higher still, where young tech millionaires compete with everyday folk like you and me AND can easily outperform us both on price and terms ('terms' are contingencies such as insurance, appraisal, inspection and loan approvals). True, many of these "All-Cash" transactions came about through speculators and investment companies that were lapping up underwater and distressed sales for investment purposes, but even here in the Piedmont, Rockridge and Berkeley, where REO opportunities (Bank Owned Properties) are exceedingly rare, it isn't unusual to see several "All-Cash" offers at the table on any highly coveted home. (Uh, that would be almost ALL of them.) Whether it's Twitter money, an inheritance from a well-heeled uncle, or a loan from your oh-so-generous parents, prospective Buyers have a much tougher litmus test these days, which can make it very difficult for the 'Average Joe' to compete in this arena. In other words, a move UP, or even a move down, will often require us to sell our current homes first in order to have the net proceeds available to purchase later. (Yes, that requires a leap of faith.) That doesn't mean that offers with attached loans won't prevail (remember, the majority of home sales STILL involve a loan), it simply means that you are going to have to be smarter about it. The truth is, whether it's a loan or your own personal wealth, the transfer of funds from either a bank or your personal accounts is always 'ALL CASH' to the Seller at the close of escrow! So what gives? Shouldn't that level the playing field? Not quite. ALL-CASH Buyers need not bother with either appraisal or loan contingencies, which shortens their time in escrow considerably. They needn't even worry about insurability if they are foolish enough to concede this important component as well. (Warning Will Robinson! I'm not advocating you buy a home with no insurance. DO INSURE YOUR HOME!) My point is, that the heavy influx of cash, coupled with less available inventory (homeowners are now staying longer in their homes), has made purchasing a home much more contentious and competitive than it's ever been before. So if you are in heavy competition, you really love the house, and you are purchasing it with a loan (as most of us will be) you will need to be pre-approved by a local lender, be ready to jump as soon as the house hits the market, get aggressive with your terms, and offer MORE money than the All- Cash Buyer at the table. If you do that, many Sellers will be willing to wait a few extra weeks for a bigger payoff. (Wouldn't you?) AND BTW - you'll want to work with a REALTOR who is an "area specialist" and knows the players and the market well! How's that for tough love? (Don't worry, I'll be here to help you every step of the way.) "I teach a plein air art class on landscape painting," my Buyer said as we looked at the spectacular bay views,"perhaps you'd like to join us sometime?" "I would," I responded, "but I have a BIG problem." "What's that?" he politely asked. "It's a talent problem," I replied, "as in . . . I have none!" "Talent," he kindly responded, "is highly overrated . . ." (Thank you, I appreciate that.) I'm reminded of this every few years watching our Olympic athletes take center stage as they compete for gold, silver and bronze. No matter the sport, no matter their background, these young men and women have all dedicated countless hours to learning their craft, AND performing under heavy pressure when it really matters. Sure, they may have been born with excellent genes, a predisposition to high endurance, superhuman balance, and above average hand-eye coordination, but even so, they haven't found their way to Sochi by relying on raw talent alone - they've prepared for the world stage by repeating and perfecting their skills over, and over, and over. . . And so goes with any endeavor we pursue - whether we are swinging a bat, arguing in a court of law, or selling Real Estate (which sums up my family in a nutshell). It's the practice and the preparation that makes one excel above another. While it's true that the vast majority of us "simple folk" will never reach the exalted peaks of our extraordinarily gifted Olympic athletes, many of us will aspire for excellence in our own right - both professionally and personally. However (and this is the tough part for many of us to swallow) true excellence cannot be achieved WITHOUT a few tough lessons along the route. In fact, it's the challenges that create real growth and the willingness to risk that propels us forward. Sometimes, you have to just "get into action" and let the chips fall where they may . . . Much closer to home, my beautiful niece, Anna, is looking to "get into action" herself, having just graduated from the University of Washington and seeking to join the work force as a full-fledged adult. And while she's studied both here and abroad over the past several years, she really has no clue as to what it is she'd like to do from this point forward (being a grown-up is a BIG leap from sheltered student). To no one's surprise, a degree in "Art History" is largely theoretical. (Stimulating, but theoretical.) But that's to be expected; college isn't intended to be a trade school; it's about exposure to many disciplines. (Note to our kids, learn to CODE if you want job offers beating down your door upon graduation.) Nevertheless, these well-intentioned, college educated kids are anxious to join the work force and contribute. They're just not exactly sure how to do so. (I've got my own college student graduating in June so I understand the drill all too well.) "Envision the perfect job," my good friend, Lois, an HR director counseled Anna over lunch a few weeks ago. "Realistically assess your strengths and weaknesses, and THEN understand that you're first position will look nothing like it . . . What you're aiming for is an entry point and the opportunity to grow from there." In other words, it's not so much about one's talent, it's about the effort we put it in to it day in and day out. (Work, work, work!) Or as another friend recently reminded me who's spouse has made quite a name for himself at Pixar in Emeryville, "Computer Animation didn't even exist when my husband graduated from college. The company came about with hard work and vision." It's never been more true: there's a world of opportunity for those who work for it. So let's get to work. (Yes, of course we had to segue into Real Estate at some point. You didn't think I'd really let you off the hook; did you?) Whether you are selling or buying this spring, I am here to help and gratefully, I am not alone. With nearly 50 years of local experience, 67 full-time agents and a team of in-house marketers, graphic designers, photographers and Brokers, you'd be hard pressed to find a firm more in step with the East Bay marketplace, or more goal oriented then The GRUBB Co. In short, when you work with one of us, you gain the collective wisdom and experience of us all. (And isn't that nice? Yes, it is.) But don't just take my word for it, we've got market share graphs to prove it and I'd be happy to send them your way. They speak more eloquently than my words ever could (just send me an email request). Hey, let's go for the Gold. (And if anybody's hiring, please let me know! I know a couple of great kids who need jobs.) What's Happening? Rates went down this week as the stock market took a hit over concerns about China's weakening growth. (We live in a global economy!) Whatever the financial news du jour, rates remain historically low meaning that NOW is a great time to buy. (But please check in with your lender, lending criteria has also changed in 2014, making it tougher to qualify.) ARMS (adjustable rate mortgages) are back in play so there are several fantastic options from which to choose, depending on your circumstances and long-range plans.
Roger Smith of LaSalle Financial offered up this timely financial red flag at The Grubb Co's Tuesday morning meeting and I thought it worth passing along as it may profoundly affect your ability to borrow funds from here on out. (No, I'm not including a pithy anecdote this week; this news flash is story enough and you should read on - especially if you are in the market to buy.)
As of January 10, 2104, as part of the "Dodd-Frank" regulations on first mortgage loans, all Lenders will be required to determine a borrower's true ATR (that's "ability to repay") BEFORE underwriting a loan. "Haven't they been doing this all along?" you appropriately wonder. Why yes, they have, but NOW the Lender is financially responsible if a defaulting borrower can prove that the lender did NOT thoroughly determine whether or not the homeowner could actually pay the loan back. (Gee, what a concept.) In other words, the bank can no longer foreclose on a house, OR the defaulting party, IF they shouldn't have made the loan in the first place! "Come again please?" The Bank is responsible for their lending practices, not the consumer. Given that the onus is now on the bank to do more due diligence prior to making a home loan, you might imagine that tougher lending requirements are likely to follow . . . and you'd be right. There are many aspects to this new regulation, but the one that will impact many potential borrowers (that's you) is the hard and fast rule that the DTI can no longer exceed 43%! "DTI?" That stands for "Debt to Income Ratio," and it is calculated by taking one's gross monthly income and dividing it into the total monthly debt. Included in "monthly debt" is total housing expenses, or "PITI" (principal, interest, taxes, insurance - and HOA fees should they apply), as well as recurring payments on consumer debt (i.e: student loans, car loans, credit card payments, etc.), AND total payments on other properties owned (vacation homes, rental properties, commercial properties - for those fortunate enough to own additional properties). In short, what are your TOTAL EXPENSES on a monthly basis? (Surprisingly, private school and college tuitions are not yet counted as part of a borrower's monthly debt, but that's likely to change, given the expense of these educational institutions - as any of us can attest to who currently have kids in college or private schools.) Whether you agree with this stricter fiscal policy or not (many will say these guidelines make practical sense, while others believe that lending requirements are already too tight) the result is that with much tougher restrictions in place, Borrowers are likely to qualify for less today than they would have this time last year. How does this play out for Buyers? If you are in the market and have a pre-approval letter dated from 2013, you will absolutely need to double back with your lender/broker to make sure you still qualify for the amount outlined in last year's understanding. (Don't be surprised if the amount has been reduced dramatically.) This is just one example of how these new regulations will impact potential borrowers, but it's not the only calculation. We haven't even touched on liquid assets vs. savings. Equity that is locked up isn't going to cut it no matter how much is sitting in your 401K or Charles Schwab accounts unless it is paying high dividends and can be counted as monthly income. Got it? If you would like further information or have any specific questions, feel free to call Roger Smith at: (510) 339-4300, or email him at: rsmith@lasallefinance.com . Thank you, Roger. That was rather timely, although not necessarily the most welcome news to date. (I know, you're just the messenger and we appreciate it.) |
AuthorJulie Gardner, has been writing The Perspective for 18 years and has published more than 750 humorous but always informative, essays on life and real estate. Categories
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