Santa Clara Valley Living » Market Commentary

Appraisals Coming Up Short

vbrasil — Wed, 05 May 2010 14:10:43 +0000

My last two listings sold quickly and sold over asking. My clients were ecstatic with the result, but there was still some obstacles left before the sale closed, namely the buyer’s property inspection and the lender’s appraisal. During the buyer’s property inspection there is always a possibility that the buyer’s inspector may find something that the seller’s inspector overlooked but as a seller you can mitigate the likelihood of this by doing your inspections before listing the property.

I always encourage the sellers to secure their own inspections before listing the property. These are crucial to ensuring a smooth transaction and avoiding any renegotiating during the escrow. Also the inspections may uncover some physical aspects of the property that could easily be repaired and that will improve the marketability of the home.

Appraisals are different. There is little agents can do to ensure that the home appraises at sale price. What makes matters worse is that we are experiencing the fallout from the mortgage crisis where there existed rampant appraisal fraud and extremely lax appraisers and appraising practices. As a result, the appraisal industry has been shaken up and tight appraisals and unwavering appraisers have become our reality.

The most frustrating aspect of appraisals is that they are extremely subjective. On one of my past listings I had a particular property appraised three times with three different appraisers and all three values were were considerably different. One appraisal came in at the contract price, one 10% undercontract price and another 5% under contract price.

How can appraisals have so many descrepancies and be so subjective you wonder? Well, appraisals come up short for many reasons. A lack of comparables, an updated or an expanded home in an area where a majority of the homes are not similar, many dissimlar tracts within a small area, characteristics of an area which may not be consistent among all the homes in the area such as schools, unique locations, flood zones, and the use of appraisers from outside the area who are unfamiliar with the local market. To make matters worse improved homes are seldom reflected acurrately on an appraisal report and the appraiser generally does not give adequet credit for the improvements or any superior characteristics.

A good example of these is swimming pools. Appraisers generally follow generic guidelines that may not reflect what buyers may value in a particular area. For instance, swimming pools in our area are generally seen to be a negative to buyers and affect the value of a property negatively. Nonetheless, appraisers will generall give a $10K premium to a property with a swimming pool. When you are comparing a home in the same neighborhood which sold with a swimming pool and your home sold $10K more, and the appraiser thinks it should be $10k less, in the end you have a $20K discreptancy.

The biggest issue is that buyers and seller’s see appraisals in different ways. In reallity, an appraisal is a third party assesment of value requested and used by the buyer’s lender to determine what the loan to value on the subject property should be. From the standpoint of a seller a low appraisal rarely affects reflect the subject property’s true value and can be highly scrutinized especially since the buyer chooses the lender. To a buyer, the appraisal is what the lender is willing to loan on the property and therefore can affect the buyer’s ability to purchase. The problem arrises for both buyer and seller when the appraisal discreptancy is large and making up the difference is too much for the buyer. This is when the seller faces a difficult decision; delay the contract to get a second appraisal from another bank, cancel the contract and sell to a different buyer, or renegotiate the price to a level that is acceptable to all parties and the buyer can secure the loan. The second option may not be favorable to the buyer and therefore the result may just be to cancel the contract.

So as a seller you must be thinking whats the point then of going through fixing up your home to sell or staging it if the appraiser is just going to treat the home like every other generic home in the neighborhood and not give me credit for the improvements. My response is you never can be too sure what will happen when you sell. You might be fortunate and get an appraiser who is more open and reasonable to your home’s value. Also depending on the seller and the circumstances surrounding the sale of your home, your agent may be able to convince the buyer to remove their appraisal contingency.

This is not recommend to all buyers and sellers, but if the buyer is confident in the home’s value and the price he or she offered and can make up the difference than this provides some assurance to the seller, but is not a 100% guarantee but I’m won’t go into the complexities that may arrise for fear of confusing or boring you to death.

The other factor and the most powerful and effective is choosing a real estate agent who knows the area, the values and recent sales, and making sure the agent is present at the appraisal. I for instance make it a point to meet the appraiser at all my listings and sales so that I can go over comps with him that I feel reflect the true value of the property. Its never a sure thing, but as long as the appraiser is open minded and your comparables are within appraisal guidelines then it should be no problem. The main goal is to prevent a lazy or over extended appraiser from using just any comps which may negatively reflect the property’s value.

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Santa Clara Rivermark Home Sales

vbrasil — Mon, 13 Apr 2009 15:17:55 +0000

The last few weeks I have been writing about the market conditions around Rivermark, Santa Clara. Citing a number of short sale homes and condos, at significantly reduced prices. In the last week there has been a slight shift in the market with increased buyer activity that has resulted in some Rivermark home sales. Although sales numbers for the year are a bit down and a significant portion of the listings are short sales listings buyers have come out and put up some offers.

This past weekend I showed some properties in the Rivermark and Miraval complex, and 2 of the 7 properties that I intended to show just entered into contract, within the last 2 days. Now that buyers are recognizing that the market may not fall any further the buying opportunties are being noticed.

For a look at the sales and listings for Rivermark so far this year view the Rivermark Single Family market update.

Rivermark Home Listings and Sales

For a look at the sales and listings for Rivermark Townhomes and Miraval Condos so far this year view the market update.

Rivermark & Miraval Townhome and Condo UpdateSimilar Posts:

Santa Clara Valley Real Estate Market at the Bottom?

vbrasil — Fri, 20 Mar 2009 17:39:46 +0000

First, CNNMoney.com reported a sudden, unexpected surge in U.S. housing starts. According to the Commerce Department, housing starts rose to a seasonally adjusted annual rate of 583,000 last month, up 22% from a revised 477,000 in January. The big surprise: Economists were expecting starts to decline to 450,000, according to consensus estimates by Briefing.com.

Furthermore, applications for building permits, considered a reliable sign of future construction activity, rose 3% to a seasonally adjusted annual rate of 547,000 last month. The other big surprise: Economists were expecting permits to fall to 500,000.

Also interesting this week, retail sales figures fell much less than expected in February, and surprisingly strong January sales were revised even higher. According to CNNMoney.com, “U.S. store sales showed a smaller-than-expected decline in February after an unexpected surge in January that was bigger than originally reported…The Commerce Department said total retail sales fell 0.1% last month, compared with January’s revised increase of 1.8%. Economists surveyed by Briefing.com had been expecting a decrease of 0.5% for February.”

So, is it safe to call this a trend? Are we out of the woods yet? It’s tough to say. In all honesty, you don’t know whether or not you’ve hit bottom until you’re on your way back up but it seems some of the critical signs are starting to show signs of life which is welcome relief for our wounded economy.

Also in the news this week, the Federal Reserve announced plans to purchase up to $750 billion in mortgage-backed securities and up to $300 billion in longer term Treasury securities. Our representatives at the National Association of Realtors applauded the plans noting “This is great news for American home buyers and homeowners because mortgage interest rates will continue at historic lows.”

What this means for Americans is that a greater number of home buyers will be able to purchase a home and homeowners facing challenges will be able to refinance into better terms. As NAR noted, “We already are experiencing a great improvement in housing affordability due to historically low interest rates and the Fed’s move will push affordability conditions to the best levels in 40 years. In addition, continued low rates will lessen foreclosure pressure and help stabilize home prices sooner, as more Americans buy homes and draw down inventory.”

Along the lines of mortgage relief, the Treasury Department this week launched a new website for consumers seeking information about the Obama Administration’s Making Home Affordable loan modification and refinancing program. The site, www.MakingHomeAffordable.gov, offers features including interactive self-assessment tools that will empower borrowers to determine if they are eligible to participate and calculate the monthly mortgage payment reductions they could stand to realize under the Making Home Affordable program.

Silicon Valley—Our Coldwell Banker Cupertino De Anza office reports that activity seems to be picking up. Our Our Coldwell Banker Cupertino Stevens Creek concurs noting that we are getting great listings and are still helping buyers. The Our Coldwell Banker Los Altos office reports that the market is picking up and new listings are coming in and some are turning into sales. Our Our Coldwell Banker Los Gatos office reports that buyers continue to look for deals. Open houses are filled with lots of buyers. Many are still hesitant. There is not much movement in the high end. Our Our Coldwell Banker San Jose Almaden office reports that short sales are being approved but because of the time it takes to have them approved, buyers are backing out. Confidence is evident in investors who are paying cash for REOs with multiple offers. Higher price points remain slow while lower price points remain brisk. Blossom Valley has nearly 40% of its inventory pending while Almaden only has 15%. The San Jose Willow Glen office reports little change from last week. Open houses are quite busy and the floor calls are coming in, though they have slowed up a bit. Sellers are not getting what they want for their homes and the buyers are smart enough to know that they are in the driver’s seat.Similar Posts:

Rivermark Santa Clara- REO’s & Short Sales

vbrasil — Sun, 15 Mar 2009 18:04:39 +0000

It’s no surprise that any newer developments in the Santa Clara County as of the past 5 years are going to experience a high number of Short Sales and REO or Bank Owned properties. Rivermark in Santa Clara is no exception.

Rivermark Townhome Short Sale

Rivermark is a master planned community developed in 2002 by Lennar, Centex and Shea Homes encompassing over a 1500 single family and town home units. Also around the Rivermark development is the Miraval Homes Luxury condo development and Mission Gardens single family homes, townhomes, and condo’s.

Many of these units have resold in the last few years since their initial releases, leaving some home owners at peak prices resulting in short sales and no opportunity to refinance.

Currently in the Santa Clara Rivermark location there are 14 condo short sales and 1 bank owned condo. There are no single family short sales or REOs at the moment.

Miraval Condo

A good portion of these short sales are in the Miraval Condominium Complex. Miraval is a Luxury condo complex providing nicely appointed units with great amenities in the complex. Currently there are 5 short sale units for sale in Miraval. One bedroom units starting at $280K and 2 bedroom units at $400K.

As for the Rivermark development currently there are only townhomes availables. Which says alot about Rivermark and the fact that the single family home values have not been hit too hard. Many times buyers offten ask what is a better investment a townhome or a single family home. As you can see single family homes rarer in Rivermark have held up very well so var with all the market pressures.

For a list of active short sales and bank owned properties in the Santa Clara Rivermark area follow the link below.

Rivermark Short Sale TownhomesSimilar Posts:

Economic Stimulus and Tax Credit

vbrasil — Fri, 27 Feb 2009 06:02:23 +0000

Tax Credit for Homebuyers

First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.

The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Tax Credit Versus Tax Deduction

It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!

Phaseout Examples

According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.

To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:

Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.

Homes that Qualify

The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.

Take the Credit This year

It is our understanding that you even if you bought in 2009, you can claim this on your 2008 returns. If you’ve already filed your 2008 returns, you can amend them to claim the credit (please check with your tax professional).

Higher Loan Amounts

More good news – there is an extension on the additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans will again be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard “jumbo” loan rates.

Additional Housing-Related Provisions

Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

More Help for Homeowners in the Future
Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.

According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.

While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.

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Experience in Buying an REO in Santa Clara & San Jose

vbrasil — Fri, 06 Feb 2009 15:18:12 +0000

This week I submitted two offers for REO properties for two separate clients. One was a single family 3 bedroom 2 bath home in Santa Clara that was listed at $400,000. The home was in poor condition but the price reflected it. My experience with REOs (bank owned properties) is that they are seldom i good condition, so a little extra work was no big deal for my client.

We submitted an offer at $407,000 and there were 4 other offers at that time. In this Santa Clara neighborhood alone there were 3 other bank owned properties on the market, the next lowest in price was $461,000 and needed just about the same amount of work.

The response from the seller was a highest and best counter in the form of an email. For those of you who are unfamiliar with this strategy, the seller comes back to all the interested parties and asks them to submit their highest and best offer. We responded knowing that this home was under priced and offered $420,000 as our highest and best. That was 3 days ago and are still waiting for a response from the bank.

The other property was in the San Jose East Valley. A 3 bedroom two bath home listed at $225,000. There are a number of REOs (bank owned homes) in this part of San Jose. Most need quite a bit of repair and have unpermitted additions, converted garages and all sorts of code violations. A unique characteristic about this San Jose REO is that it only had a garage conversion that could easily be converted back. Other than the garage conversion the home was very close to move in ready and was certainly the best home in that area of San Jose for the price.

This San Jose REO received a total of12 offers. We are currently awaiting response from the bank. This experience is very common as active buyers in Santa Clara County that are targeting these REO deals have slim pickings for homes that do not require too much repair. As a result, they often get quite a bit of interest when priced low and will often sell at market prices. This is not to discourage you from trying, rather to set your expectations on pursuing REOs.

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Real Estate Market Update

vbrasil — Mon, 02 Feb 2009 15:44:45 +0000

Time to take a hard look at the beginning numbers this year and see what we can tell about the market. For those of you who are not aware, inventory is a big factor in price performance and home values. As inventory increases and buyers are unable to keep up with the supply of homes entering the market, prices begin to fall, as anxious sellers feel the immanent price drops.

Looking at the Cupertino home market this time last year we see big changes in active inventory. Currently Cupertino has 2 times the inventory that it had in the preceding year. You would hope to see that pending sales for the week increasing, but it appears that they are in line with last year’s figures. This may indicate that sellers are holding firm at their prices and buyers are sitting tight waiting for price reductions. If this continues on we can expect the Cupertino home market so see some further price decreases.

Looking at the Santa Clara home market we actually experienced a decline in inventory from last year’s levels. We also see that pending sales for the week are higher than 2008. Santa Clara has seen some significant price drops in 2008, about 10%-15% overall. If this trend continues we can expect to see some stabilization in the home prices in that market.

Looking at the Sunnyvale home market we see some increases in inventory over last year’s levels. We also see that pending sales have also increased. Sunnyvale is a unique market due to the different areas and price ranges. Sunnyvale real estate has low-end markets and markets that reach up into the 1.4 million dollar price range. A more accurate approach would be to see how these submarkets are performing to get a real picture of what is happening in Sunnyvale.

Moving on to the higher-end in Los Altos we see a much larger and more drastic change from last year. Inventory has more than doubled, and sales have dropped more than half. Another indication that sellers are holding firm and prices have not come down enough to reflect real values. We can certainly expect some drops in the Los Altos home market.

Los Gatos is a mixture of high-end and upper middle class housing. Inventory is certainly higher but not double in number over last year’s figures. Also sales for the month have not increased over last year’s levels. This is another market were you should look inside to be able to tell the real story of whats going on in the different submarkets. Either way with inventory increasing and sales staying roughly the same, expect more price drops in Los Gatos.

It’s already starting out to be a busy year in real estate based on the number. Sales are up overall as buyers are cashing in on good deals. Stay tuned for the next update.

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Pending Sales Santa Clara County – Real Estate Market Indicator

vbrasil — Sat, 17 Jan 2009 17:02:28 +0000

I always review the Santa Clara County home sales at the end of the week by checking the pending sales. This is a good way of checking the strength of the market in terms of buying activity. I usually compare from the previous year’s figures to gauge performance. It appears that 2009 has started out very positively, well at least better than 2008.

Santa Clara sales for the week are up 50%, Cupertino also higher, Sunnyvale as well with over 50%, Mountain View also an increase. When we view the higher end Markets of Los Gatos, Saratoga, and Los Altos, they experienced decreases this year. Part of that I think we can attribute to price gains that these areas experienced in 2008 and have just recently felt the slow down. Price adjustments may have to be made in these high cost areas in order for sales to increase.

The next item to keep an eye out for will be inventory. The combination of housing (supply) and sales (demand) will determine really market performance for the valley. As inventory starts to increase we will see increased sales, whether or not those increased sales will keep up with the pace of inventory will determine price performance, and that’s everyone big question this year, how will prices perform. If you are curious about market performance there is no better way than to subscribe to my Altos Reports for your specific Zip Code. You can do so on the side bar. These reports and show you indicators on where the market is heading.

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Challenging 2009 – Whats the Word on the Street?

vbrasil — Wed, 14 Jan 2009 17:19:43 +0000

Between all the news hype about foreclosures, government bail out, TARP, Henry Paulson, bankrupt auto industry, how is this really effecting the real estate industry in the Santa Clara Valley. Now I understand that layoffs are imminent. Some tech insiders, past clients, have told me that their firms are down sizing and some have already gone through rounds of layoffs. I even had a gentleman come through my open house one weekend and tell me that he thinks that the layoffs are going to be so widespread across the valley affecting executives and workers and therefore eventually bringing down real estate values in the untouchable Los Altos, Saratoga, and Los Gatos markets to 1980′s values.

Well that’s a bold statement, one I don’t think many people want to see in this valley. But today looking at the performance of these three areas, a couple of things are for certain these markets have slowed and prices have drop. Erasing gains that they made in 2007 and 2008. While layoffs start to hit these home owners, some of whom may have purchased 5 years ago on adjustable rate loans, will we see a high rate of foreclosures in this area, or significant price drops. Most likely significant price drops but foreclosures probably not to many. Many still have equity in their homes and can either sell or refinance. Also if they lose their job they will received 6 to 12 months of unemployment which should carry them through to next year where we hope the job market will start to recover. Either way you look at it its a challenging time for home owners in the valley.

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