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.

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.

Last Sunday, at my open house at 1067 Hewitt Dr in San Carlos, a young guy asked me about a career in real estate. He’d been referred by one of my clients and had come especially to meet me and pick my brain a little. He works at Yahoo and had just gotten his real estate license with hopes of making a career change. He had almost all of the same pre-conceptions that I did 20 years ago about this business and it was sort of funny and fun to talk to him. Somewhere deep down he thinks 1) I can make alot of money in real estate, 2) Realtors don’t really have to work all that hard to make all that money and 3) I’m really so much smarter and so much more capable than most of those people I keep seeing holding these open houses. I know he thought these things because that’s what I thought way back when and he confirmed it when I asked him. Ultimately, he said he wants to try real estate out. Since I’ve heard that particular expression about 500 times in 20 years I gave him my standard reply…you don’t try out real estate, real estate tries you out!

I’m here to tell you…real estate is a never ending seige. It’s an incredibly hard business. That’s the truth. When I see the marketing of various discount brokers that diminish the work that “brick and mortar” agents bring to the table it makes me crazy. They really have no clue. Actually, I think they do have a clue…it’s just that their pitch cynically manipulates public misconceptions to their own end. Alas, that’s another story.

When you start in this career the biggest initial hurdle is how to get clients. It’s kind of tough to get your hands on all that money without a client or two and it’s not the easiest thing in the world to get folks to make the biggest financial decision of their lives with somebody who just got their license, has had very little training and essentially is clueless about the process. Oh yeah, how about that gravy train of cash all those realtor types are rolling in? Last year the average income of Realtors, according to the National Association of Realtors, was $36,700. In San Mateo county a year ago 65% of agents sold 2 or less homes in a year.

Here’s the thing, the vast majority of successful agents I know who do indeed make good money…have earned it!  They’ve worked their butts off too. I can’t tell you how many amazing stories of personal triumph I’ve heard among real estate agents. I know many immigrants who have come to this country with very little and who knew almost nobody and have become successful in this business. I admire them greatly. A couple of years ago an agent and friend of mine, Denise Pearson, died when an aneurysm in her brain ruptured while she was working out. I went to her memorial service…along with about 100 other agents I knew, and I was profoundly moved by the pride I felt at being a part of that group of people. They were all survivors, every agent I saw there were just terrific people, who care deeply for their families, their clients and their industry.

I’ll say it again…I’m proud of what I do and I love doing it. Here’s a link to Denise’s obituary. It pretty much says it all:

DeniseObitSFChronicle

When you write an offer on a home one of the things you do to protect yourself is to include contingencies that contractually allow you to do certain things inside the contract. Essentially these contingencies allow you to inspect the home to your satisfaction and to get a loan within a time frame. Ultimately, the contingencies are there to protect your deposit and to allow you to back out should you encounter a major problem.

In the case of inspection contingencies, they allow you to do inital or further inspections of the property that may include hiring contrators or other professionals who can help you determine what the  home presents. The contingency also gives you time to research the property’s existing disclosures and to find more if you want to…a permit check with the city comes to mind. At the end of your investigation you either create an addendum asking for a remedy to whatever you’ve found (renegotiation) or you discover you’re satisfied with the home and you remove the contingency from the contract in writing and move forward.

In the case of the loan contingency, you’ll need to have had your appraisal completed and the lender to have told you that your loan is done and in place. That’s typically when loan contingencies come off. Recently, and after hundreds of escrows, I learned something new. What routinely happens in this case is the lender sends either the rep or the mortgage broker a list of conditions…a conditional loan approval if you will, and when the rep or mortgage broker sees it he or she knows from experience that these conditions can be easily met and they give the go ahead to remove the contingency. The conditions, once acquired, are sent back to the lender who them reviews them and sends the rep or mortgage broker a commitment in return acknowledging the satisfied conditions. Again, business as usual has been, in my experience, that once the conditions are sent out it’s sort of taken on faith that they will get satisfied based upon the experience of the mortgage broker or rep and this verbal is given to remove this contingency. I have a very smart client who asked a simple question…”How do we know that the lender is OK with the conditions we sent back?” “Shouldn’t we wait to remove the contingency until we know for sure they’re satisfied?”

That’s a pretty interesting question! In fact, it really is on faith and past experience that this contingecy get’s removed. Not upon written proof that it’s etched in stone. Sellers and their agents are naturally anxious about feeling certain the loan is done so that they can complete their plans to move…etc. They want the loan contingency removed as soon as possible. Heck, for years it was common to not even have a loan contingency at all. You just risked it right from the start! I guess things have changed. It actually seems reasonable to me that a buyer in this market be comfortable removing their contingency based upon the lenders acknowledgement of their commitment. Real estate is an ever changing and evolving business.

I don’t know, there’s something about this zany viral world we live in that never ceases to amaze me. Ultimately, it’s just flat out wacky. Things happen that were totally impossible just a few years ago and transparency has sometimes reached absurd new levels. Let’s take the obvious, facebook, for example. Here’s a couple of actual updates from my news-feed today:

“Just had my carpets and windows cleaned. Everything is spring fresh!”

“My wisdom tooth! ow, ow , ow! I think it weighs like a pound!”

“looking forward to hangin’ with John Stepanek tonight ”

“People are driving funny today…”

“Love my friends, love coffee… this morning I had coffee with friends, what a great morning.”

“Excited about the new comforter/bedding set I got yesterday. TOTALLY changing up the colors/shades of the MB.”

It’s deep stuff, huh? Where would we be in life without the knowledge gleaned from social media? We may actually have real conversations or something. Not that I’m judging or anything…I’m on facebook all the time.

Well, into this transparency fray leaps the wonderful world of Trulia Voices. Have you seen this site? Trulia is a real estate search site and when you’re there you should check out the tab “advice”. There you’ll find Voices and it’s Q & A section. Why do I mention this? Well, because this week we have an entry from a real live Foster City homeowner who takes real estate transparency to a new level. The first three words on this “Voices” entry…HAVE TO SELL.  Hmmm…the seller goes on to share that they listed the home on May 1 and took a price reduction earlier this week. The seller then asks “When should I lower my price again?” The seller even suggests a new price $10,000 lower than the recently reduced price! Don’t believe me? Check it out for yourself. Now that’s a poker face! Or not! It’s not exactly a realtor’s dream come true. Your client negotiating downward in the public domain for all the world to see.

What’s really funny to me is the answers! A bunch of folks from out of the area chime in, including one from the Chicago area. But really, you’ve got to take your hat off the the wonderful Vicki Moore of San Mateo’s Alain Pinel office who says “My suggestion is that you delete this question immediately.”

Like I said…only in the brave new virtual world! I love it! Oh, yeah…if you’re a buyer this may be a decent opportunity?

It was common knowledge as I grew up in Colorado that folks from Wyoming were just a bit different than we were. We thought they were a little more backward, rougher, certainly nowhere near as sophisticated as we were to the south of them. I once went to a college football game in Laramie and while in a local watering hole after the game I caused a bit of a stir by ordering a Corona with a lime in it. It was one of those moments where I knew instantly that I had made a serious social faux pax…silence ensued there at the bar. I was told that, no, they didn’t serve Corona there…they had Bud, Coors and Miller and if I didn’t like it I could take my sorry butt back to Denver where I belonged! 

You can laugh, but that same kind of thinking exists…in spades, right here in the Bay Area. Agents from San Francisco look down their noses at agents from…anywhere else. Agents from the West Bay tend to look down their noses at the East Bay. It’s actually more localized too. Agents from the Mid Peninsula look down their noses at Daly City, Pacifica, San Bruno…etc and agents from Palo Alto and Menlo Park look down their noses at agents from the Mid Peninsula! It’s freaking hilarious! An agent in my office teased me about a sale I had in Pacifica…he asked if I needed a passport to go over there.

Another funny aspect is the snobbishness about offices. Yesterday in my office I heard some complaining about an agent from a Century-21 office with some disparagement directed at that brand name. I often find it amusing that, in spite of the fact that my Re/Max office has been the top office in San Mateo county for the last 20 years, anytime I stray into Santa Clara county agents respond to me like I haven’t bathed in a couple of weeks. Come to think of it, sort of like my co-worker responded to the C-21 office! Honestly, it really is hilarious…the sense of disgust is almost palpable at times. Particularly in Palo Alto! Last week I called an agent to see if I could get some more information about her townhouse listing and the mood changed significantly after I identified myself as being with Re/Max. She wasn’t particularly friendly…actually she acted like I was trying to sell her canned vomit or something. I asked if she could let me have a link to the disclosures on the property in question, she told me she would only give me that link if I promised that my clients were going to write an offer.

“Umm…I’m thinking that part of their decision making process about writing an offer could very well include their inspection of the disclosure package”. I replied. I felt like I had just asked her if she had Prince Albert in cans and her silence was because she was certain that if she said yes I would blurt out…”well, let him out!” She relented and sent me an e-mail in which she agreed to give me the disclosure link…if I gave her my:

Full name, contact info, DRE# and Real Estate Company name prior to giving out the password.

All this scrutiny for a disclosure link? I think it must be because I’m with Re/Max? Either that or somebody informed her of my eating habits? Just to be a smart aleck I also gave her my CA drivers license number, my kids birthdays and my shoe size. I eventually got the link…but my clients decided they didn’t want the place after all. Whew!

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!

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 pitfalls about being a realtor and blogging about this business is the fear of getting into trouble by badmouthing somebody’s property or project. I really have tried hard not to do that…and sometimes that hasn’t been easy! At the outset here I want to sincerely say that I think Foster City has the best condo/townhouse projects on the Peninsula. They’re well designed, have great amenities and they’re in a town that has substance.

Here’s the problem, I’ve been concerned for a long time about the impact some of these projects association dues would have on their values. I’m really concerned what will happen when some of these projects begin to incorporate flood insurance into their monthly HOA dues. For the uninitiated, Foster City has projects like Winston Square that has dues of $175.00 a month. Treasure Isle at $255.00 a month, Shell Cove at $299.00 a month and Marina Green at $340.00 a month. There’s a bunch of others in this same category and they’re pretty normal if you ask me.

Then you have Bayfront Court at $435.00, Nantucket Cove at $488.00 and Marina Point at $483.00. You also have Meridian Bay at $546.00, The Islands at $603.00 and Promontory Point at $772.00. In 2005 a unit at Promontory Point sold for $1,551,400. No fewer than 16 units sold for more than $1,049,000 in those years. The most money spent at Promontory Point since 2007 was $880,000 in January of 2009. There’s a unit on the market there right now for $749,947.  I can’t think of a project, community or neighborhood in the Mid Peninsula that’s taken the type of pounding that Promontory Point has taken when it comes to value erosion. Call me zany…but do you suppose those dues have had a negative impact?

How does that translate in the real world? At 4.75% interest $772.00 a month is the equivalent of  $148,000 on a mortgage. It’s $116,000 for the Islands and their $603.00 a month dues. I’ve had many, many clients reject these projects when they found out about these dues. I think it’s understandable.

Again, the question is…what happens when they have to absorb mandatory flood insurance? How much will they go up? I know there are really great people living at these projects and I’m sure there are significant reasons for these dues being this high…it’s just a fact that they’re having a large impact on the project’s overall value.

“What are the odds?” That’s the fundamental question that buyers in this 2010 marketplace need to be asking themselves. Oh, there’s other important questions too, like “Can we afford it?”, “Do we have enough down payment?” and “Where do we want to live?”. When those immediate questions get answered the next one seems to be “Is it possible?”…to which the answer seems to frequently be, “Let’s try it!”

What do I mean by this, you ask? So far this year I’ve repeatedly run across a scenario like this:

A buyer who’s qualified for a purchase of $375,000 expresses to me that he wants a single family house in San Mateo, Belmont, or San Carlos. I explain that, with VERY few exceptions there really are not single family houses to be had in those towns in that price range. I suggest looking in Redwood City, San Bruno, Pacifica as well as other communities north or south of us. I also suggest condos as an alternative. Nope, is the reply…only these towns will do and only houses. See what I mean? The critical question is, what are the odds? There have in fact been houses like this come up in these towns since the first of the year and they all sold with overbids that pushed their value well over $375,000.

Here’s another one: Some buyers want to make an offer on a house listed for $1,150,000 and even though they’re aware that there are going to be 3 other offers on the home they want to offer $100,000 under the asking price. What are the odds that they’ll get it? I think a million to 1.

Just for the record, here’s a few more:

* Buyer wants minimum 3 bedroom, 2 bath, non fixer upper townhouse in Foster City for a maximum $625,000

* Buyer wants to write an offer in a multiple offer environment contingent upon the sale of their condo.

* Buyer wants a Foster City waterfront single family home under $950,000

* Buyer wants the seller on the condo he’s buying to paint their existing kitchen cabinets for him prior to close of escrow.

* Buyers want to live in a minimum 4 bedroom waterfront house in Whaler’s but can only afford $1,100,000 even though the lowest comp there in the last 5 years is $1,185,000.

To the question, “Are these things possible?” the answer would probably be yes…technically.  It’s also worth mentioning that even a blind squirrel will occasionally find a nut! The better question for buyers to ask is “What are the odds of us accomplishing this goal?”

We all see ourselves as the skinny guy on the right in that cartoon above, but what are the odds of that ever happening?