One thing about Real Estate…it sure is cyclical. One month (or week!) it’s up…and the next it’s down. Even in the hottest market’s there’s this cyclical factor. The lulls may be less but they exist. Who know’s what the cause is today? Maybe it’s just the long 4th of July holiday, maybe it’s bad stock market news, maybe it’s the overall negative press the economy has gotten lately…heck maybe it’s the Giants losing streak or the oil spill! The fact is that it’s slowed down in Foster City.

Interestingly, there’s only been 2 single family houses sell so far in July. One of them a deeply discounted short sale and the other a listing that entered the market as a pending sale…they already had their buyer and just entered the listing for statistical purposes. As for condos/townhouses, only 4 of them have sold in July and all of those reflect aggressively deep discounts on their asking prices.

From a buyer’s standpoint, in my opinion, this is the time to buy. Rates are low and competition is clearly less. I’d venture to guess that 90% of the sellers in Foster City right now would understand their need to negotiate downward on their price. I’ve never been exactly sure why this phenomenon occurs with buyers but it has long been my opinion that buyers frequently throw away their natural leverage when they get the opportunity to have some. Buyer’s tend to engage the market at the same time and retreat from it at the same time. It’s long seemed to me that buyers would much rather compete in a multiple offer scenario than write an offer without competition. They would rather write an offer $100,000 over asking than one $50,000 under asking. The fact 0f other interested parties on any given listing makes buyers feel more comfortable buying.

It’s all alot like the stock market, smart investors buy when other’s are not and take advantage of opportunites for discounts when they present themselves. Now is that time in Foster City. There’s 25 active single family homes on the market and 30 condo/townhouses. Some of them are ripe and ready to be picked too.

Last week I was showing some property to a young couple who expressed an interest to me in buying a house in this area. What we had been looking at was primarily smaller single family homes in a price range up to about $775,000. These homes are mostly 3 bedroom, 1 bath or 2 bedroom, 1 bath homes and they all average about 1350 square feet. Some remodeled, some not, depending on the neighborhood.

On one of our exploratory appointments I suggested that we change the pace a little bit an look at a townhouse that I had seen…just for comparison sake. We drove over to a very nice 3 bedroom, 2.5 bath, 2031 sq ft place that’s all remodeled and has an absolutely breathtaking view of the bay, the Peninsula and San Francisco beyond. On top of all that, the place is priced under $750,000. These folks spent a lot of time there and really expressed some serious intent about the place too. They asked for the disclosures and studied them in earnest and sincerely considered making this place their home…instead of the single family houses that we had seen.

At the end of the day they decided against this place. Why, you ask? Because this particular project has association dues that are currently $450.00 a month. They told me that they were “worried” that these dues are certainly not etched in stone, that they could always go up and that they concluded that $450 to $500 a month was the equivalent of between $90-95,000 on a traditional mortgage at 4.75%. Ultimately they didn’t think it was wise to spend that kind of money on dues that are not tax deductible either when they could buy a pricier house, have a deduction on that mortgage interest and still have a private back yard.

Kind of hard to argue with that, isn’t it? OK, the townhouse is terrific. It’s a nice residence and I’m sure my buyers would love living there…but those high dues hurt that sale. When I look at Foster City’s condo/townhouse inventory I see much the same story. I’ve probably beat this subject to death actually, but I just can’t get over the fact that Foster City’s dues overall are exceedingly high. It’s no coincidence to me that 3/4 of the pending sales on condos/townhouses in Foster City right now have dues under $350.00 a month. It also shocks me to see that the two pending sales at Promontory Point are on units priced at $678,000 and $640,000. Both of these reflect price declines in that project of over 30% from their high. Nobody else at any project in the Mid Peninsula has had a reduction of anywhere near that in the last few years. It’s not a coincidence that their dues are $772.00 a month.

Of course, Promontory Point is an extreme example. The concept is clear however. Buyers can, and are quite willing to choose a smaller house right now over a townhouse or condo just because of their high dues. Their threat to escalate, have as well, created enough fear that the market for these homes have slowed while houses have remained stable or have grown.

I’m not sure if this is actually a new phenomenon for 2010 or if it’s been like this for awhile and I just didn’t notice it, but it sure does seem to me like there’s an incredible fascination with the concept of “new” this year. Maybe when the market was blistering hot everything sold so fast that it wasn’t noticeable. Maybe also in 2008-2009 it was so much slower that everything took it’s own sweet time to sell too. It just seems to me that, in 2010, there’s plenty of buyers, but if you’re a seller and you don’t get an offer within 2 weeks you fall completely off the radar screen for most of these buyer types around here.

It’s like the I-phone 4…when that thing comes out you’ll just have to get it because the older versions just won’t cut it anymore. If it’s new…it’ll sell quickly. This really seems to be true of Foster City’s real estate market….for the most part. As of today there’s 17 single family houses actively for sale. 9 of them have been on the market for 40 days or more and another 6 have been on less than 2 weeks. I’ll bet most of these new listing sell before they’re on the market for 3 weeks. Of course, there’s plenty of examples of homes, new or not, that have significant issues that face them…or are simply priced too high and that will effect their sale.

Between 1999 and 2007, people routinely bought houses with some kind of flaw just because they wanted to get in. Every issue was forgivable. Right now, if there’s almost any kind of flaw, get ready for a long ride if you’re a seller. Two weeks ago, 910 Laguna comes on the market and gets 9 offers in 6 days. The winner paid cash, closed in a week and let the sellers live there after close of escrow as long as they want to. The day after Laguna looked at offers, 710 Polaris comes on the market at just about the same price and is a very similar floor plan to Laguna. As of today it hasn’t sold…no offers. Who knows why? Polaris is a little busier street? It needs a little more work? The word for this market is capricious!

Actually, when I look at the listings in Foster City that have been on awhile, I too see flaws that are effecting their sale. Buyer’s seem to be convinced that if they wait the right house will come up and they don’t mind competing for it when it does…even if that means going over asking. It’s worth it to them.

What does surprise me though, are the places that are actually really wonderful that continue to sit. The townhouse at 225 Bonita in Marina Green comes to mind. The place sold right after it came on the market, the deal fell apart and there it still is on the market 60 days later. The place is gorgeous! I think it’s priced well too. Again, it’s like if a place is on the market longer than a couple of weeks an assumption is made that something must be wrong with it and people stop looking.

I’ve been doing this for 20 years and I still can’t really figure all this out! It sure is interesting to watch though.

A few weeks ago at an open house I was working, someone asked me if the bonus room downstairs was done with a permit. The sellers had converted some storage space into a little room that they watched TV in and it was actually really nicely finished although there were no windows in that room.

“No, it sure wasn’t” I said. “It’s not in the square footage in the county record either.”

She got this very worried look on her face and asked “Well, can’t the city come and force us to remove that room? It’s illegal, right?”

This conversation has happened alot in my experience and I find it to be sort of amusing. This person appears to have some fantasy that a SWAT team is going to show up out front after they buy the place, burst into the house with guns drawn and force that offending room to be returned to it’s original design! Umm…if that happens I sure have never seen it.

In Daly City and Pacifica for example, there are hundreds of houses who’s design has living space above the garage and that garage space has square footage equal to the upstairs living space. Preposterously large space down there at that! Over the course of the last 50 plus years up there, I’ll bet two thirds of those homes have added living space into that cavernous garage space down there and still keep room for a car! In my experience, a large number of those additions were done without permits. The bottom line is the unwarranted space is disclosed…and nobody cares. They actually want that living space anyway.

Having said all this, we now come to the square footage topic. I can’t tell you how many houses I’ve seen where the public record has the actual square footage of a house listed incorrectly. This happens all the time. A seller, or maybe a seller in 1968, adds a room or two to the house…with permits, yet somehow the new square footage never made into the county’s database. A 2200 sq ft house still shows on county records (and thus on Zillow…etc) as 1550 sq ft.

There’s plenty of things that need permits and I sure do want to know that they are in place. Second story additions come to mind. Anything that’s structural for that matter. Honestly though, sun room additions, bonus rooms carved out of old storage areas that folks use as a guest bedroom, and even some garage conversions don’t really bug me that much. Often these rooms actually add some real value to a house…whether they have the city’s official stamp of approval or not.

I think it’s the suits in this pic that really gets me. It’s been so long since I’ve worn one that I forgot what it’s like…the picture seems weird to me! (Sorry if you wear suits all the time!) I think if there’s any hard and fast rules about buying a house it’s that it’s never over until it’s over. Even in multiple offer scenarios there could very well still be room to negotiate should you want to do that. 

There’s an assumption that once a buyer takes a property in As Is condition that’s it. The negotiating ends and the price and terms are locked in. Many many sellers think this way. They get property and pest inspections up front in order to ensure a clean as is sale. The thing is, on many houses there are open questions that the initial inspections open up that create an environment for renegotiation. In one example I can think of recently, a house I’m in escrow on received 6 offers and went $90,000 over asking, As Is.  The house needs work and even though there were inspections done the buyers did further investigation through an engineer that uncovered some significant drainage related issues that clearly effected the home. We went back to the seller and the price got reduced by $35,000. The weight of the new disclosures that the engineer’s report brought to the transaction put the seller in a position where they had to make a decision…if they said no to the buyer’s renegotiation and the buyer walked away from the transaction they would then have to put the property back on the market and any and all future buyers would need to see the new report. They have to ask the question, “what will that report do to the value of the place now?”  Often, the impact on the future marketability of the property by the new report will be put into serious question and it’s certainly much easier and, in the long run, profitable to work the problem out with the buyer you have in hand.

Last year I had this situation with a seller and agent in a house on the coast. The seller chose to ignore that engineers report and rejected my buyers request to pay for some necessary work. The buyers backed out and ultimately found a much better property. The first house sat for another 3 months and finally sold…for less than it would have if the seller had just taken our renegotiated price. I guess the bottom line is just be careful and don’t be afraid to get further inspections and renegotiate if need be.

After 20 years I think I’ve probably seen it all when it comes to folks coming into open houses of mine. In the first few open houses there’s plenty of neighbors, there’s also agents with clients, folks that I think of as “professional” buyers ( those buyers who basically know what they’re doing) and there’s also those folks that just think it’s sort of fun to explore a house they see when they happen to be driving by. They have no intention of buying anything, they just like looking at open houses. I’m that type myself…I drive Lesley crazy when we go on vacation someplace because I can’t resist the urge to check out a few open houses if I see directional signs. Sometimes I just want to see how the agents in them act around me.

Well there’s this other class of open house visitor. I think of them as the wet blanket. These folks appear to go in with the specific purpose of being critical. They’re usually kind of a pain to tell you the truth. Typically they have no concept of the relationship between the listed price and it’s real value. Maybe they’re all from out of state and they think all of our prices are insane. 

On the first of April I pulled a little April fools prank here by telling that story about a Pompano house that was listed for $112,000. If that situation really did exist and I was holding the place open I’ll bet you there would be one person (out of the 500 who would come to that open house!) who would walk around the house and announce to me something like “There’s marks on the paint here!” or “How old is the furnace?” A few years ago I had this great listing that was kind of aggressively priced (we got 14 offers) yet there was this one older lady who complained to me about a cracked kitchen floor tile and told me in very broken English “Price too high! You come down!” I couldn’t resist..and I replied to her “Price too low! You come up!”

One of the funny parts of these complaints is the fact that the issues being raised are almost always easy and relatively inexpensive fixes. Missing closet doors, stains on carpet, marks on the hardwood floors…etc. If you’re buying a house at a discount versus the comps in the area, and sometimes even if you’re not, who cares about this little stuff!

A long time ago, when I was still fairly new in the real estate business, I was flying back to Memphis to visit some relatives when I struck up a conversation with the guy next to me on the plane. Naturally, the conversation evolved into a discussion about residential real estate. He had bought and sold several homes and actually had more experience than I did at the time. I remember him telling me about some friends that had chosen an agent exclusively because they got a break on the commission and he recounted a horror story about their experience selling their home. That wasn’t the memorable part…the part that I never forgot was the resolution that came to him as a result. He said, “I want an agent that’s been sued a couple of times. I want somebody who has lived through their mistakes and has seen it all, because they won’t be surprised by the unexpected”.

That statement still resonates with me all these years later. Clearly, experience is a great asset to either buyers or sellers but not all of that experience comes from closing lots of houses. I’ve sold hundreds of homes and that’s blessed me with a ton of practical experience when it comes to doing it again right now…but the truth of the matter is that it’s the mistakes I’ve made that have really taught me invaluable lessons that very definitely help my clients now. The great unspoken truth is simply this, you show me an experienced real estate agent and I’ll show you somebody that’s survived some mistakes.

11 years ago I represented a buyer who bought a house on the bluff just above the Ocean over on the coast. The place had a 180 degree panoramic ocean view, a fairly well know pub was a block down the hill and a really gorgeous state park was just beyond that. We were so excited! What a location! I envisioned seeing my friend whenever we went to the coast for years to come. The area had some funny geological anomalies that were disclosed on some reports but nothing specific to this house. We had heard about problems in this area but we did inspections and everything seemed OK. A year and a half after she moved in a fracture in the earth opened up under the front right corner of that house. Turns out it was a fairly common thing in this neighborhood. Some houses got effected, some didn’t. You just didn’t know if or when it would effect your place. Every few years she needs to pour concrete into this opening fissure to stabilize the house. The foundation has cracked in that corner and she’s had problems with rodent infestation as a result of the hole that was created by this confluence of fault and foundation. I’m honestly not sure if the house can ever be sold…when the earth opens up under your house that doesn’t look real good on the disclosure.

In retrospect, I think both my client and I were way too emotional about the opportunity to get this house in this amazing location. We got blinded by that and didn’t see the negative possibilities. There’s many, many other houses nearby that don’t have any kind of issue like this…houses sell there all the time. What do you suppose I say when clients ask me about houses they saw online in that area now? That was the last transaction I ever did where I allowed my feelings about a house to override my caution about possible negative implications. What a great lesson.

When I think about the current trend of discount brokers offering rebates to buyers and simply showing up to write offers I cringe! Many of these “agents” don’t even actually see the home in question, much less have any clue about how to interpret what’s in the disclosures or know nuances of particular neighborhoods. Like wise, the Internet is never going to answer all of these questions either. Experienced agents, who have learned from their mistakes, are really a valuable commodity

The most common question that I hear while holding an open house has got to be “Why are they selling?” There is, of course, multiple possible ways to answer that question. One of those ways is because of the death of a homeowner. Since I’ve been around the issue has gotten to be a fairly important one from a disclosure standpoint. Many many people want to know if there has been a death in the property.

One of the two main disclosures that sellers are responsible to fill out asks this question:

“Are you aware of any death, natural or otherwise, having occurred on the property within the last 3 years?”

At any trust sale listing that I’ve had, the question comes up all the time at the open houses. Some folks are not comfortable if the answer to that question is yes. It often has a bearing on the ultimate value of a home. I sold a buyer a fixer upper in Pacifica recently that was a trust sale and the buyer is getting an FHA loan. One of the criteria in an FHA appraisal is whether or not someones recently died on the property.

Believe it or not, sometimes it’s not a bad thing from marketing perspective. I’ve had more than one trust sale listing where the seller passed away of natural causes in the house at or near 100 years of age. In both cases we got multiple offers…the house was perceived as lucky.

What’s not perceived as lucky is the home where a violent crime has taken place with a death as a result. A murder took place at a waterfront house in Foster City a few years ago and the house took a very long time to sell and went for significantly less than it’s natural value because of that crime. Currently, there’s a 2639 sq ft, 4 bedroom house in San Mateo that’s in foreclosure and priced at an incredibly low $889,000 because of a murder that took place there late in 2008.

For what it’s worth, none of this I’m making light of. No matter how you look at it, if you’re buying it’s a good thing to know all of the facts. There may be a reason for that great deal you’ve found. The question will be, are you comfortable with the details?

Not sure if you’ve spotted the latest trend in marketing homes lately, but in the last month or so I’ve seen listing agents with problematic houses (that have been taking a long time to sell) reduce their prices to comically silly levels in an attempt to get multiple offers. One in Burlingame that had been listed for $1,880,000 suddenly reduced to $999,000 and another one in Los Altos that went from $2,199,000 down to $799,000. Needless to say, they got multiples and the price went way over asking! We’ll see how much when they close.

Well, this phenomenon went to a really extreme level right here in Foster City yesterday when this house came on the market as a new listing at the incredible price of $112,000. I couldn’t believe it myself when I saw it…I thought it must be a typo and it should have been $1,112,000, so I called the listing agent, Anna Dupont with Re/Max Today and asked her what was up? 

Turns out the elderly seller has plenty of money, the house is pure ownership and she doesn’t really care about receiving market value for the house. She wants it to go to a young family who she can help get started much the way she did 40 years ago. $112,000 is the actual price for this place at 382 Pompano. Overall the place is in really good shape too. Both Anna and the seller aren’t interested in a bidding war or overbids…they’ll look at offers at anytime and the first family with a really good story gets the house.

Pretty amazing, huh! Who knows…this might be your lucky day!

April Fools!

One of the reasons the Foster City real estate market has been hot so far this year has been the low amount of inventory here in town. We hovered around 10 active single family listings for most of the first quarter and as a result multiple offers have been common. Well, that’s starting to change as 9 new listings have come up in the last 11 days here in town. It’s going to be very interesting to see if the momentum continues and we still have multiple offer scenarios around here in the coming months. Here’s a few of the new ones that are worth a look:

851 Grenada Lane listed by Sue Dickey of Alain Pinel for $1,498,000. This is one gorgeous house. 4 bedrooms, 2.5 baths on the water in Plum Isle. Remodeled everywhere and it has a nice backyard too.

701 Baffin listed by Joan Wachter of Coldwell Banker for $1,229,000. Interesting 4 bedroom, 2.5 bath house in Sea Colony. Good size backyard here too. It’s going to be interesting to see if this place gets this price.

52 Williams Lane listed by Joe Benvenuto of Alain Pinel for $888,000. This used to be a 2 bedroom floorplan at Williams Landing but the sellers completely remodeled it, added into what was once attic space and created a grand staircase to get there too. It’s now 4 bedrooms and 3 baths…and completely unique. It’s a nice property too.

See all this new inventory is like reading a mystery…will they sell? Will there be overbids? Is more coming on the market that will slow the pace? We’ll see…