I don’t know, I somehow can’t resist a photo that has a connection with food. Call me zany…I had all these trench photos and I liked this one best.

Alot of my posts are simply my observations about the local real estate market and about Foster City specifically. I really do want to identify these comments as observations rather than fact but they are, in fact, what I experience every day and what my peers are talking about too. So, I thought I’d congeal some of these thoughts into a post in it’s own right.

I think that it’s significantly harder for buyers to get loans in 2008. Nevertheless, you can get a loan if you’re qualified. I’ve seen plenty of buyers forced to wait because they simply are not ready right now. I don’t think that’s a bad thing because buyers are now going to have to afford the home that they’re buying before they buy it. It was simply crazy that folks were buying houses when their sole criteria for qualifying seemed to be “can you fog a mirror?” I think buyer’s need to create a gameplan and save a decent down payment before jumping in now.

I think there are more sellers than “serious” buyers right now. In other words I think there are plenty of buyers out there, but most are on the fence about the decision and as a result sellers are nervous. Oddly enough, there are still price ranges where there really isn’t enough inventory and multiple offers are occuring. For example, try finding a good 3 bedroom, 2 bath house in the $850,000 range…it doesn’t even exist in Foster City at all. On the westside in San Mateo, Belmont or San Carlos it’s very hard,and if something comes up you’ll see multiples.

In case you were not aware of this, there are lots of businesses that exist via the real estate industry. There’s Title companies, Home Warranty companies, direct lenders, mortgage brokers, business coaches, printers, advertisers of all types, website designers…also of all types. Almost all of them have sales people that call on my office…and thus, me. There’s alot less of them this year. A couple of weeks ago one of the big players around here, Financial Title, closed it’s doors one afternoon. Every office…all of their employees were let go immediately. I can’t tell you how many mortgage brokers I know that have either gone to work for a big bank or have changed industries. It turns out 3rd party originators aren’t too popular on the secondary mortgage market so most of the big banks won’t work with brokers like they used to.

I know lots of real estate agents who are really having a terrible year too. Many are stuggling to survive. Strangely though, I know some agents who are having their best year. For my part I’m working harder and making less money. Honestly, I’m really blessed because I’m still selling homes and making a very good living…it’s just not 2005. Buyers want to take more time making their decisions and listings tend to take longer to sell. It’s actually all just a normal cycle in my opinion…it’s happened before and it’ll happen again. The pie has gotten a little smaller and there’s less people able to feed off of it…but there’s still lots of people still doing well. Compared to almost everywhere else this area is doing fine. We had it amazingly good for a very long time…and now we get to adjust. Sometimes that can be painful.

Since I got the ball rolling musically with that Tom Petty Free Fallin post on July 31 I figured it was time for another post with musical accompaniment. I can’t think of anybody more appropriately paired for a Real Estate technology discussion than…George Thorogood! Just click the little button below to add to your reading enjoyment:

 I got a call the other day from a saleswoman working for Realtor.com who pitched me on the idea of advertising on that site. She, of course, had multiple reasons why I would be a complete idiot not to do so. Two things crossed my mind during the pitch, 1) At any of the Real Estate conventions I’ve been to Realtor.com has, by far, the largest presence. Larger than Bank of America or Wells Fargo’s presense. They might have two thousand square feet of floor space dedicated to hooking real estate agents into their program. At the last National Association of Realtors convention I went to agents were lining up to pay for a beefed up presence on Realtor.com. 2) The second thing that crossed my mind was…who uses Realtor.com? I honestly don’t think that I’ve ever had a client, even one time, mention that they search on Realtor.com. I personally never use Realtor.com…do you?

For quite a few years this area, by virtue of it’s technological sophistication, has been blessed to have MLSListings.com. Very few other regions have an actual MLS database available to the public and I know that many of my clients have used that resource over the years. Clients of mine have used my own websites to search, (and they are available via links on the bar above) Honestly, I think that most of my clients use multiple resources to search for homes.

It’s really incredible how many are out there right now! Patrick mentioned in his comment the other day how technology democratizes the process for all parties…isn’t that the truth! Except it’s sort of like the Presidential primaries in Iowa…who the heck is Mike Gravel or Tom Tancredo? Right now we have Homes.com, Homegain, Redfin, Zip, Zillow, Trulia, Movoto, Yahoo, BlueRoof, RealtyTrac, Cyberhomes, a new one called Roost…not to mention all of the individual realtors and their offices that also have search capability. Do you remember how many portals there were in 2000? Alta Vista, Excite, HotBot…the list went on and on. I can’t imagine all of these real estate search sites making it either.

Several of these sites exist, or so it seems, to collect fees from realtors who then will be referred out to consumers…and if that e-harmony like scenario works out another fee will be paid to the website. I went into Homegain last night and signed up as a consumer looking for a 4 bedroom house in 94404, 94070 and 94402. So far I’ve received e-mails from 9 agents wanting to be my best friend. Seven of them are from out of the area and as far away as Alameda, San Jose and Castro Valley. One’s actually from my own office! (I’m sure we’ll be chatting) I did the same thing on Movoto…I’m supposed to get phone calls instead of e-mails from them. YIKES!  The sharks are out!

I won’t be buying advertising on Realtor.com, but I am still curious, do you ever use it? Old George Thorogood is asking the question: Who do you love? I know that whenever I search out of state listings I use Trulia…I like it. Who do you use?

 On May 15 I wrote a post called Technology For Real Estate in which I announced that I had just started a new website provided by a local company that had a product who’s property valuation technology was state of the art and was supposedly far superior to all of the others. Several other agents in my office bought into the same system and after nearly 3 months I’m here to tell you that, in all honesty, that property valuation technology pretty much stinks. In one classic story, a client of a friend of mine in my office called and was all excited because he had discovered that the house he had paid slightly over one million dollars for 18 months ago was now worth $1.2mil. He was ready to sell! My friend studied the comps and told him there was no way he was going to get anywhere near $1.2mil. 

“Who gave you the idea your house is worth $1.2mil?” She asked.

“You did!” the client replied. Her website’s property valuation technology had told him the high number!

 I’m really not trying to pick on the company I signed up with…the fact of the matter is all of these websites featuring instant home evaluations are extremely dubious. I think they’re correct only a small percentage of the time. Here’s some examples locally: 704 Cayman is in escrow with a list price of $1,598,000. Zillow has it at $1,360,000. 321 Bowfin is in escrow with a list price of $1,468,000. Zillow has it at $1,219,000. One of my recent favorites, 1410 St. Kitts is in escrow listed for $1,349,000. Zillow has it at $1,218,000. Last but not least, 897 Lurline is in escrow listed at $999,888. Zillow has it at $1,039,500. These are houses that have sold…they’re not pie in the sky listings with outlandish expectations. Secondly, the mistakes happen in both too high and too low fashion.

There are just too many variables for the valuation algorythms to pick up. In one case I know of in San Carlos an estimate shows a house I sold in 2004 to have less value than it did then. What it doesn’t realize is that the two houses that sold with low prices on that street in the last 3 months were fixer uppers with no view. It has no ability to understand comparables because “instant” is it’s highest value. I think it’s important to understand that many of these sites are “lead capture” systems and seller information is sold to Realtors…and the promise of home valuations is just bait. It always amuses me that many of the agents I see on some of these sites identified as “local experts” have in fact never even sold a home in this area. I know because I’ve checked them out in the MLS database. 

There are so many, many separate variables that add up to value in a home. It often takes alot of detailed analysis, and/or alot of experience in a very small geographic niche to comprehend a properties true worth. It just doesn’t happen with one short “click”.

“There are three kinds of lies: lies, damned lies and statistics” Mark Twain

I got so excited about this post that I really feel like it needs musical accompaniment…so before you start digging in, go ahead and click the button below first. It’ll add to the enjoyment!

On Tuesday afternoon I surfed through SFGate.com and discovered that our friends at the Chronicle had, as one of their lead stories, a piece on the real estate market that was headlined “Real Estate Market in Free Fall”. They later modified that and it morped into the more friendly “The Plunge In The Price Of Homes Gets Worse” . The story had an attached companion piece showing Bay Area Home Prices By Zip in which I was shocked to discover that Foster City(FYI: The Chronicle thinks that Foster City is in San Mateo) has dropped in value 9.9% and, incredibly, the San Mateo Zip Code 94402 has dropped a whopping 27.1%! That last number was particularly stunning since it made it worse than Daly City, South City or Pacifica. As you may have guessed…I didn’t believe these numbers.

The Chronicle was touting the work of “experts” S&P/Case-Shiller who had compared the numbers from May 2007 to May 2008 numbers and thus had drawn their conclusions. Honestly, I got a little nervous because I had not done a year to date analysis myself and I reasoned that since May 07 was pre-mortgage meltdown I figured it was logical to assume that there could have been a fairly significant drop. So yesterday morning I got up and crunched the actual numbers from the MLS database. I looked at 94402 because that decline was so enormous. That zip is comprised of San Mateo Park, Baywood, Aragon, Parrott Park and, atypically, Sunnybrae, which is largely a starter home neighborhood. The others are very pricey. Guess what? Turns out that in May of 2007 not a single house in Sunnybrae sold…the lowest priced house in 94402 that month went for $1,200,000. Of the 20 houses that sold then all of them were on the west side. In May of 2008 8 out of 21 houses sold were on the east side and as you might guess that has a very large effect on the averages…actually a difference of 27%!

How about Foster City? In single family homes in May of 2007 19 sold at an average price of $1,131,526. In May 2008 17 homes sold…at an average price of $1,153,287! That’s right, values on single family homes actually ROSE year to date! So why the 9.9% decline? Because S&P/Case-Shiller averaged in condos/townhouses, and in May 2007 19 of them sold…including two at Promontory Point that sold for $1,087,000 and $1,335,000. In May of 2008 only four condos/townhouses sold…the most for $750,000. The average of both single family and condos/townhouses together shows a net loss of 9.9% as a result.

This kind of reporting is preposterous folks. You can’t compare multi million dollar properties to studio condos in search of truth about real estate values. I wonder if the June or July numbers come out and show no Sunnybrae sales in 2008 but 8 or 9 in 2007…will the Chronicle report that 94402 had a 27% increase year to date? If the July 2007 numbers show several 1 bedroom condo sales at the Admiralty and the July 2008 numbers show the three single family houses that closed over $1,600,000, will they report a 200% increase in values in Foster City?

I think this reporting is unfair and stretches the truth about this area alot. The only free fallin’ going on here is done by Tom Petty. (I saw him once in concert at the University of Denver…but hey, I’m a fossil)

I saw this image online and just had to use it! I’m asked very frequently “What is a short sale?” so I thought I’d comment. Let’s say a seller has loans on their homes of $700,000, and that seller get’s behind on their payments and is forced to sell to get out from under the burden. Now let’s say that the home’s value has fallen to $600,000. The seller, and their agent, list the house for somewhere near it’s current market value or less and when they get an offer they attempt to negotiate with the seller’s lender, or lenders, to get them to accept less than the full amount of their loan payoff. I don’t think it’s quite as dire as this picture suggests…but it’s no picnic either. There’s a very common perception, that’s been true in my experience, that it can take months for a lender to decide what to do with an offer that comes in asking for them to take a loss. Often a listing agent makes several calls per day to the lender just trying to find the right person to talk to…and thereby leaving lots of messages that never get returned. It’s an extremely tedious battle and often the buyers give up and move on when frustration sets in. Sometimes it all works out too. It’s tough to make plans, spend money on inspections and appraisals…etc, when you don’t really know if you’ll get the property in question.

In Foster City there really have not been many of these sales so far this year and mostly have been confined to the lower price ranges in condos. I’m certainly not trying to discourage anybody from taking a run at a short sale, because there’s plenty of them outside of our immediate area but you should know going in that it could be a long process.

A foreclosure is a bank owned property. It is a sale that takes place after the bank takes the given property back from the seller and after the short sale fails. Typically, it’s less bureaucratic (believe it or not) to buy a foreclosure because now the bank is ready to get it off of their books. I showed a foreclosure today in Redwood City that I thought was a really good buy listed in the low $800’s. It sold a couple of years ago for $1,200,000. Foreclosures like this can be really sad. There were holes in the walls, dirt and grime all over everything, the kitchen was a mess and there was spoiled food in the sink. I really thought you could feel the sadness of the sellers who had lost their home and were, most likely, evicted. Lot’s of times sellers facing foreclosure are not as proactive as they once were about maintaining these houses…and it shows. It’s sad…and it also is an opportunity for a buyer.

My wife Lesley’s aunt Barbara lives in a little town about 30 miles north of Memphis, Tennessee called Munford. It’s sort of a bedroom community, kind of cute and quaint but kind of lacking when it comes to the truly important things in life that we’re used to…like soy latte’s and Pomegranate Jamba Juice smoothies. No 99 Ranch Markets yet in Munford either. You can get great BBQ there though! About 2 and a half years ago we were back visiting Barb and we happened to walk by this house you see above, which was for sale for $499,000. Lesley and the girls just came back from another visit…it’s still on the market. It’s $449,000 now. This house is a 4200 sq ft, 4 bedroom, 3.5 bath palace with 4 car garage on 3 acres with it’s own private lake…and it’s own dock. It also has a formal living room, 2 family rooms and a game room. I sold a house that wasn’t this nice on 1 acre in Atherton in 2006 for $5,975,000. Here’s the key feature…it’s hard to sell! Meanwhile, in Foster City, there’s a 998 sq ft 2 bedroom, 1.5 bath condo at the Admiralty on the market for $469,950…it’ll probably sell for $449,000.

I read alot of other real estate blogs because it really gives me great ideas but also because it gives me greater perspective. Do you realize that in Reno over 50% of the transactions done are short sales and foreclosures right now? That the average days on the market in large parts of Denver are around 200? I heard a realtor from Modesto tell a story about how she had talked to a person about selling their home and the place had almost $800,000 in loans on it…and she figured it’s value to be around $375,000.

I read another blog post about a home in St. Paul, Minnesota that had been on the market 6 months…and during that time had only gotten 2 showings! That’s amazing to me folks, especially since I had over 100 people at my last open house. There’s just no getting around the fact that we live in an incredibly special place. As I said in my podcast, we live in a place where values have only fallen less than 2% this year. I’m sure if you’re a buyer that’s not what you want to hear…because you’re hoping to buy that house in the picture above for $449,000 somewhere on the Peninsula. I’m sorry, but it’s simply not going to happen. We live in an area where, by and large, values are protected by the incredible vibrancy of the innovation economy here…and what better reason could there be to invest in this area.

Here’s a true confession…when I got into the business in 1990 I really didn’t know diddly. I took a correspondence course, because we lived in Denver at the time, and then took the state test to get my license. The state test was full of useless information…defining “avulsion” and “accretion”, subdividing acreage, lots of math questions that I needed a calculator for. At the test that day I met several people who were taking it for the 4th or 5th time. Fortunately, I passed the first time and soon thereafter moved here and joined my first office. On my first day I was warmly greeted and introduced around the office, shown my desk and told where the coffee, bathrooms and copier was. It was very friendly. On the second day they wanted to know when I was going to sell a house…and I was encouraged to do so. Outside of some video tapes they had, there was no training. They gave me a phone directory and encouraged me to start cold calling. I learned the secret really quick…being a Realtor is sink or swim.

In a market very much like this one, I devised a system to market myself toward expired listings, that is homes that somebody else couldn’t sell. There were, of course, reasons why these places didn’t sell…I just didn’t care about them. I wanted a listing after all, and having a listing was better than not having a listing. I ended up with five of them…and I was proud of myself! The problem was I had no clue what to do with them! I couldn’t sell them either and they ultimately expired again…after I had spent a bundle on advertising them. It became very clear to me very quickly how important experience was and I realized that I didn’t even know how much I didn’t know! Here’s what I now know…if I had those listings today I could sell them in my sleep.

Most consumers don’t realize that it’s not the company an agent works for that matters, it’s the individual agent who does all the work. His of her abilities and experience make all the difference. I also don’t think most consumers know how much turnover there is in our industry. I share an office at Re/Max Today with another agent and since I’ve been there (1999) I’ve had 7 office mates. With the current exception, all the rest have gotten out of the business. It’s a tough business, highly competitive and very expensive.

I don’t think it takes 20 years to be a great agent, but I do think that an experienced agent has more value than an agent selling their first or second home. When interviewing agents, ask them how many homes they’ve sold.

The concept of an appraisal works like this…when a buyer purchases a home and gets a loan, their lender sends out an appraiser to verify the home’s value and make it safe for them to lend you money. In the very hot market we’ve just departed from, it seemed like homes appraised for whatever amount the buyer wanted to pay. For a long time, homes appraised well over comparable sales value. In 2004 I had a listing in San Mateo that we priced at $650,000, and at the time that represented the most money ever paid for a 2 bedroom, 1 bath house in that neighborhood. After receiving multiple offers we ratified with an offer of $778,000. I was secretly worried that these buyers would not be able to get an appraiser to bring that value in…but one did!

Well, that’s no longer the case. A seller can set a price and even if the buyer agrees to it the buyer’s lender will only finance the appraised price…and that may be lower than what was agreed too. What that means is the buyer will need to bring more money to the table or the seller needs to accept a lower offer. If the buyer has a contingency for that appraisal they can cancel the deal and get their money back if the seller won’t agree to negotiate downward.

Truly, it was crazy before and and I’m sure there was quite a bit of pressure placed upon appraisers in the past to bring values in on some of these crazy overbids. I remember in 2000 there were several sales in Palo Alto that came in $1,000,000 over asking…let’s hope they all paid cash! Can you imagine trying to appraise those? I think the return to sanity in the market we’re in is a good thing.

How about these before and after shots! Frequently, I’ll hear clients tell me that they would like a house that needs some work. They’ve heard, acurately, that buying a fixer upper is a great path toward building equity and thus maximizing their investment. The clients of mine that have bought and fixed up homes have made the most money of any of the people that I’ve ever worked with. Take the case of the house in these photos. This young man bought his first house in San Mateo Village in 2002 for $485,000…it was a fixer. He, along with his family, fixed it in stunning fashion and sold it in 2004 (with 26 offers!) for $778,000. He then bought this house in Hayward Park for $551,000…and did a whole bunch of work. We’re talking lot’s of work, roof, plumbing, electrical…you name it. I wish I could show all of the interior photos too! He sold it in 2006 for $1,288,000…and bought a fixer in Hillsborough where he lives now. From a 2 bedroom, 1 bath starter home fixer upper in San Mateo Village to Hillsborough in 4 years!

I have several other stories similar to this…and they all have one thing in common. Each individual had some degree of skill or other with being able to fix these homes up themselves. Lots of the folks that ask me about buying fixer uppers have no skill at all with repair. They would need to contract out everything. Keep in mind that there are fixers…and there are FIXERS! I’m not talking about a house with original kitchens and bathrooms that need updating, I’m talking about houses that need everything! One of these houses came up in San Carlos last week on the west side priced at $675,000 and some clients of mine got pretty excited about it’s possibilities. The problem is that what they would pay $100,000 for, a buyer who’s a contractor or other skilled person could do themselves for $30,000…plus they would be trying to live there in the midst of the work. A fixer is also not an ideal situation if you’ve got little kids either.

It’s something you really have to balance. I do think you can get some really good buys on homes that are cosmetically challenged as well…and you can live through a kitchen remodel. It might not be easy, but it’s do-able. In Foster City, recently, there was a 4 bedroom fixer on Chrysopolis that closed escrow at $838,750. I really thought that was a good buy, it’ll be interesting to see if they turn it in a few years.

You’ve spent a ton of time getting ready for this big step. Hours and hours scouring the 1001 internet sites pertaining to Real Estate and home buying. You’ve been to Borders and bought books. You’ve talked about this with friends, co workers and your parents until you’re blue in the face. You search multiple online listing sites like MLSlistings, Trulia and Zip just to make sure you’re not really missing anything and what’s really amazing…you’ve entered into a relationship with a Realtor! After months of looking and several sleepless nights the time has come, you’ve made an offer and you’ve ratified! You did it…you bought your first home!!

Now comes the really scary part…bringing your family over to see it! Naturally they want too…after all, they’re helping with the down payment. It’s just that…you know they’ll be critical! Even if your parents are out of state you still don’t get a break, in fact, it may be worse! When we bought our first house in 1999 my Mom gave us $10,000 toward our down payment and she lived in Colorado. Here’s the way the conversation went:

Me: Hi Mom, well we finally did it, we bought a house! It’s a really adorable little 2 bedroom, 1 bath place with a terrific view…I think you’ll love it!

Mom: That’s great, honey…how much was it?

Me: Well…we got it for $412,000. I think we did really well.

Mom: (dead silence)

Me: Mom…are you there?

Mom: $412,000!!! Why, do you know that you could buy the Governor’s Mansion here for $412,000? It’s got how many bedrooms?

Here’s the concept…Even though (in her mind) every body else was paying $65,000 for their 2 bedroom, 1 bath houses, she figured I went ahead and paid $412,000…just cause I’m impulsive or something. Needless to say, we worked things out…and she loved the house.

I’ve lost count of how many parent/family visits I’ve been a part of. 99% of them have turned out fine. For parents I think it’s very important to remember that buying a home is comparison shopping. If they’re not kept in the loop, when they see the house for the first time they don’t have the ability to compare it to all of the other places their kids have seen and sometimes get nervous about the inevitable flaws that exist in every house. For buyers, I think it’s a very important thing to keep the families close to the process, send them links to the homes that look interesting and discuss pertinent disclosure info with them. Often, family members really do have the ability to see things that the kids overlook.

Honestly, I’m serious about the title of this post. I do believe that the home buying process can, and should be fun for the entire family. When everyone works together as a team…that’s exactly what happens.