"Julie, I'm panicked," my girlfriend said to me, as we walked the sun-dappled Redwood trails off Joaquin Miller a few weeks ago. "We had an appraisal done on the house and it came in much lower than we expected." (Me too - I know just how you feel. . .)
That's when I switch from "girlfriend mode" to "REALTOR guru" and explain that the most important thing to remember with respect to appraisers, bankers, mortgage brokers, REALTORS, buyers, and sellers is that WE ALL MEASURE "VALUE" DIFFERENTLY!
Vigorously debating the topic of "value" with appraiser, Michael Flores, before the holiday break and explaining my friends negtive reaction, he was quick to remind me that "appraisals are only an opinion of value" (he's right - they are). In truth, "appraisals" are more art than science.
What's more, appraisers must adhere to a strict set of guidelines set forth by (who else?) the lenders AND the results must stand up to significant scrutiny as well. Which is why appraisers are loathe to go out on a limb and suggest a value that doesn't reflect market performance. The banks simply won't except the conclusion, nor process the loan, which in the end, is of little value to you. (Please don't shoot the messenger.) OR as Tom Cruise states in the movie, "A Few Good Men," "It's not what I believe, it's what I can prove."
Moreover, here in Rockridge, Berkeley, Oakland and Piedmont, our properties can be incredibly difficult to value from the get go. Each home is entirely unique and there's often little inventory and fewer sales with which to compare. While it's only human to believe that one's own home is worth more than the one that just sold down the street, experience doesn't bear that out.
All those lovely memories that add value for you (bringing home your first born, 4th of July potlucks, Christmas mornings, etc. . . .) don't register value on an appraiser's check list, which deals strictly in tangibles: high-end appliances, remodeled bathrooms, square footage etc. Nor do those "bonus" spaces that aren't a matter of the public record.
Add the impact of economical shifting sands to the mix and it's now become crystal clear to the majority of us, that value can move in BOTH directions.
And while it is alarming to acknowledge the downward trend over the past few years, value is really only relevant when you decide to sell your home (with one exception, lower appraisals DO make a difference in the "here and now" with respect to home equity lines). Or to put it another way, if you put your real estate assets into the 'long-term' column, you are apt to see more appreciation than depreciation over time. (It's all about perspective!)
For those of you planning on selling AND buying in this brave new world - remember that you are working in a "relative marketplace." If you are buying UP, you are very likely going to benefit in terms of equity gained and that's very good news for many of you. With historically low interest rates and softened values, the "affordability factor" has actually never been better.
So try to relax, breathe deeply and enjoy the hike. The tighter, stricter guidelines now used by appraisers are bound to adjust in time as the market recovers (and it IS showing signs of recovery, albeit slowly. Real estate and job creation figures are typically "lagging" indicators). In the meantime, what a view! Those of us happily ensconced in our homes are really in very good shape. (Now, if only self-appraisal were as easy to explain.)
Hup, two, three, four . . . let's pick up the pace!
It's official. The music I like best is now played on the "oldies" station. (I'll get over it.) Driving into work last week, I cranked up the radio and sang along with Diana Ross and the Supremes: "So won't you hurry, c'mon boy and see about me . . ."
Growing up in our little tract home in Sacramento, I used to play "The Best of the Supremes" album over and over on my folks hi-fi, as I danced around their gold and avocado living room (yes kids, albums predated CDs and iTunes). Dancing, singing and laughing - my sisters and I pretended we WERE the Supremes. (This little girl knew how to groove.)
Each January, I find myself seeking the groove once again as the Spring Market approaches. Phones begin to ring more insistently, emails arrive with more frequency and the bustle begins anew. "I've got you back in my arms again, right by my side . . ."
But before moving full speed ahead into 2011, I had a few loose ends to tie up with respect to 2010. Which means I spent the better part of last week composing letters and sending out HUD One statements to each of my clients who had either purchased or sold a home with me over the course of 2010 - some of whom I had to track down with a bit of sleuthing. "Baby, baby I'm aware of where you run. . ."
On the bright side, the thick stack of papers was a rather nice reminder of the productivity and volume I enjoyed last year - while many in my industry struggled just to stay afloat. As I wrote, I reflected on each transaction and what I, as an agent had learned from the playing field. More importantly, I thought about how I might improve my skills moving forward and how better to serve my clients and my community in 2011.
"Reflections of, the way life used to be . . ."
Suffice it to say, that not all deals are the same and on the heels of 2009 - a year that weathered the worst modern financial crisis our nation has experienced since the Great Depression - it should come as no surprise that many real estate transactions in 2010 were in reality, very, VERY challenging. That's to be expected. "Stop in the name of love. . ."
Buyers, by and large, responded conservatively and sellers often hoped for a minor (or a MAJOR!) miracle that just wasn't in the cards. With respect to whatever hurdles presented along the way, I hope I helped both buyers and sellers negotiate through these challenges with their integrity and their pride intact. (That's not easy when deals are as emotionally driven as home sales tend to be.)
I will be the first to admit that taking the high road is a discipline I am still mastering (and it can be a rather lonely place up there). Some transactions are inherently more successful than others and some parties are inherently more flexible than others, but each journey is groundwork for the next. With perseverance, good intentions and a desire to do the next right thing, I am constantly evolving and redefining my role as your local East Bay specialist and real estate guide. "You can't hurry love, no you just have to wait . . ."
And real estate can be a demanding teacher. Each home is different, every client has his or her own agenda, and ALL transactions require a broad base of knowledge juxtaposed against fine-tuned finessing. With opposing viewpoints between buyers and sellers, It can be nearly impossible to juggle conflicting demands, but if I listen carefully and work selflessly, I know I am most likely, on the right track.
"In you I put, all my faith and trust . . . reflections."
One thing that stands out for me after the last few years, is that the process works much better when we work openly and honestly with one another. Why travel the road any other way? Now how can I help you (or your friends) in 2011?
"Think it o-o-ver . . ."
Trivia Time: I'm hearing from several loyal readers that I haven't run a trivia contest in quite some time - so here goes. I referenced several Supreme songs above. If you can come up with three more, there's a latte and a scone with your name on it at Mulberry's Market.
"I need a tux." My son matter-of-factly said into his cell phone. "Me and the guys are going to San Francisco tonight." (TONIGHT?!?)
"Sure," I gulped, "no problem," hoping Case could fit into his father's tuxedo as I hit the gas and raced up the hill in a near panic (clearly, my son was clueless with respect to the concept of tuxedos and timing!).
As luck would have it, my husband had purchased a formal tuxedo from Nordstroms a few years back and while our elder son is slightly taller (and slightly slimmer) than his dad, I thought he might just get away with it. If only I could remember where the studs, cumberbund and cufflinks were located, before packing away the bulk of our closet contents prior to the remodel. When was the last time I had actually seen those items and where?
But first, I needed to be picked up off the floor . . .
Is this the same kid who skipped his senior prom, wore basketball shorts under his graduation gown and hadn't yet mastered the effortless flair of Khakis and a sports coat? The same kid who struggled to tie his shoe laces, who never combed his hair, and to whom the idea of tucking in one's shirt was a totally objectionable concept - even when visiting his grandmother's house? (Yes, it was.) Were we really jumping from one extreme to the other with little to NO notice? (Apparently, we were.)
Forty-five minutes later, a trip to Selix downtown (I didn't find the studs) and shaved, showered and dressed to the nines, I have to say Case looked downright handsome and more than just a little bit grown up. He'd even succumbed to my insistence that formal attire also requires one to wear stiff patent leather shoes and black (not gym) socks. And with the help of YouTube, we even had mild success tying the bow tie after only a few clunky attempts. Standing before me, tall, elegant and just slightly awkward, I had a glimpse of the man my son is bound to become.
"Is this really what everyone else will be wearing?" the man-child suspiciously inquired, surprised by his own stately appearance in the mirror.
"Yes, it is," I replied proudly, "You look absolutely great"
(and he did). "Quick, get the camera," I instructed my husband, fearing we might never see him dressed formally again.
"No way! You're not taking my picture." Ah ha! There's the boy I know and love.Good staging is like wearing a tuxedo to a fancy winter ball. One simply can't arrive at the St Francis Hotel dressed in blue jeans and a Wildcats T-shirt when the rest of the participants are in formal gowns and dinner jackets. In the world of real estate, an unstaged home is the the equivalent of underdressing.
Compared to staged properties nearby, your home is bound to look like yesterday's news - no matter how tidy you keep it. Regardless of your fabulous possessions, your antique collections and the level of your taste, it is the rare home that doesn't benefit from a trained eye, SIGNIFICANT editing and a designer's touch.
Here in the Bay Area, it's almost standard practice to stage a property - prior to selling it. Typically, you will also need to paint, prune, and purge your way to Pleasantville. You may need to replace old appliances, address the long overdue "To Do" list, blow leaves from the roof, wash the windows, clean out the closets, and spit shine your home from top to bottom. Curtains come down, photos get stowed and all traces of personal style are shelved. Prospective buyers need to envision their own family in the home - not yours.
With mixed emotions, sellers often discover that their home has never looked better than when they go to sell it. Buck up, you're not alone - everyone's does! Without a trace of mail in sight, a used cereal bowl in the sink, or an open kitchen cupboard, the house is very nearly picture perfect - as it should be when selling.
Selling a home almost always has a fair amount of theater involved in the process and smart sellers sign up for "the show." Your home should look its best when it comes to market - absent the items that make it quintessentially you. (Think Restoration Hardware catalogue and you will be on the same page as every trained Buyer shopping in today's market.)
With one opportunity to make a first impression and with 93% of prospective buyers now beginning their search on the Internet, photos have never been more important - so get it right.
Unlike my son's refusal to take a photo, there will be plenty of pictures for posterity.
The New Year is here and according to the Chinese calendar, 2011 is the Year of the Rabbit. Happily, the Year of the Rabbit is traditionally associated with home and family, artistic pursuits, diplomacy, and keeping the peace. As predicted in Chinese folklore, 2011 is very likely to be relatively calmer than 2010 - both on the world scene AND on a personal level. Hey, I'm not Chinese, but that actually works for me (billions of people can't be wrong!). I joyfully embrace the concept of family, home and peace (who doesn't?).
Whatever celebrations your family took part in, I hope they were filled with good health, good cheer and good fortune. For me, the magic of the holiday season is that it offers the rare opportunity to indulge in wishful thinking and to fondly remember the years past with rose colored glasses.
Ironically, just the opposite is true in the world of Real Estate, where wishful thinking is the quickest way to a disappointing result. In Real Estate, I encourage you to look at the market with clear and focused vision. When a prospective seller begins our conversation with, "I had an appraisal conducted in 2006 and I can tell you my house is worth x . . ." I know I am going to have an uphill climb resetting more realistic expectations. As such, I offer the following market statistics to help you with your understanding of our current marketplace and how it compares to seasons past . . .
As we wrap up 2010, Piedmont homes sales were greatly improved. As of December 20th - 97 homes closed escrow in 2o1o, and another 10 were currently pending sale. Though less impressive compared to 2006, that's a whopping 32 percent more activity than 2009, when only 73 homes tentatively transferred ownership amidst fears of a growing recession (if we include those homes that are currently "pending," the increase is closer to 41 percent).
While the number of units was UP, prices remained relatively unchanged overall. Price per square foot in 2010 averaged $516 and homes spent an average of 27 days on the market, while in 2009, price per square foot averaged $522 and average days on the market was recorded at 32. (It's a slight tick upward but not statistically significant.)
How does this compare to 2006, when Real Estate hit its peak?
In 2006, 118 homes transferred ownership in Piedmont, but the average selling price was considerably higher at $612 a square foot, which translates to approximately a 16 percent difference in selling prices overall - while average DOM factored out to 29. ("Perceived value" sells in any market.)
One caveat, higher-end homes (those above $2,000,000) corrected more than those below and often took longer to sell (48 days on average). That makes sense in light of the fact that jumbo money costs more to borrow and fewer buyers qualify for these more expensive loans to begin with. Lack of competition tends to drive prices downward.
In fact, the best buys with respect to price per square foot in 2010, were often on these "grand dames." If you were in the market for a "significant" home in 2010, you probably found a bargain (relatively speaking). Last year's best Piedmont buy came in the form of a 5544 square foot Modern on Littlewood that closed significantly below market performance at $366.34 a square foot. Originally listed for $3,495,000, it ultimately sold a year later and closed at $2,031,000.(Ouch! More expensive homes have farther to fall.)
So yes, our values have in fact, softened in all price points, but unlike many nearby communities, Piedmont has never been in free fall. With Central Valley home sales off by more than 40-50 percent, Piedmont has by comparison, experienced solid stability and continued Buyer demand.
Looking ahead to 2011, industry experts project higher numbers still, given historically low interest rates that continue to make home ownership affordable to many who were previously priced out of the marketplace. Keep in mind that greater sales may not translate into higher prices. This is about number of units sold: volume as opposed to dollars.
No one - regardless of price point - is throwing caution to the wind. Above all else, buyers are still looking for "good value" as unemployment figures remain less than favorable and job creation is slower than anticipated. Moreover, I suspect it will be several years before the market climbs back to previous highs of 2005-2006.
In light of market realities, is 2011 a good time to sell?
Absolutely - as long as your expectations are grounded in 2010/2011 market performance and not 2006! If selling your home is high on your agenda, I can assure you that there is strong market demand for your property. Adjust your numbers accordingly and you should have very good results. Whether it be the birth of a new child, a job transfer or a probate reality, there are many practical reasons for selling a home in this, or any given year.
So cheers to the New Year. Bring on the rabbit! Our fair community has much to be grateful for as we hop forward into 2011.
I'm here to help. Happy New Year!
Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.