I had the good fortune in the last few weeks to have a couple of very popular listings here in Foster City, 1121 Catamaran and 18 Dory Ln, and one thing became very clear to me while chatting with folks at each of the open houses…there’s a whole lot of buyers out there either not working with local real estate agents, or not working with agents at all. Dory had about 90 people at it’s open house, Catamaran at least 200. I’m sure of that on Catamaran because I printed 90 flyers and I had 4 left at the end of the day…people mostly come in groups and, almost always, one person takes a flyer.

In the case of Dory, I handed out 14 disclosure packets to interested parties prior to looking at offers…and I received 7 of them. On Catamaran I handed out 11 disclosure packets and received 3 offers. Of those 25 packets only 9 of them were given to local agents and 5 of the 10 offers came from local agents. Interestingly…of the 10 offers 6 of them were truly outstanding (price and terms) and 5 out of 6 were from local agents. Both winning bids came from local agents.

Why, you ask? It seems so obvious to me. These local agents know the Foster City market inside and out. They know what constitutes a good offer in a multiple offer environment and they know what will be important to a seller. One of the big reasons they know that is because they have sold listings here too. They also routinely see good offers from bad ones and thus they know what they’re doing.

Just so were clear, when I say a local agent I mean an agent who actually does a fair amount of business in Foster City. There’s real good agents in San Francisco, San Jose, Fremont…etc that would be lost in the Mid Peninsula and have no clue about Foster City. Honestly, I have no clue about San Francisco as a residential market. I’ve been a realtor for 20 years, sold hundreds of homes, but I’ve never sold a property in San Francisco. I would not provide a client the kind of service they deserve working with them in San Francisco.

Especially if you’re out there trying to do this thing on your own, consider working with a local agent…it will be more than worth it to you. That also applies to sellers.

OK, maybe it’s a little more than being a little out of touch. Maybe it’s really a case of burying one’s head in the sand. I say that, in all sincerity, without judgement or malice of any kind. I’ve been guilty more times than I can count of precisely the same thing. It’s the human condition.

What am I talking about, you ask? A few days ago I had a conversation with a client of mine who’s been planning to sell sometime this spring. They’ve been in the middle of a pretty large project (for a long time) remodeling the second story of their house. When the work is done, it goes on the market. My client called to ask if I knew anything about the way foreclosures worked…because they had gotten a notice of some kind that told them they had one scheduled for next month. They were not sure exactly what the notice was or who had sent it. She went on to explain that they had been doing a loan modification and this sort of hit them out of the blue.

“Have you been missing your mortgage payments?” I asked. “Yes” She replied.

“How long has it been?” I asked. “Not quite sure” She said. “The loan mod people have been working for a long time on this thing, but communication with them is problematic…to say the least. We’re not really sure what’s going on”.

She asked me if 1) it would be possible for a foreclosure to actually be scheduled for a couple of weeks out and 2) if they made a mortgage payment or two could they delay the action until the construction work was completed and the house could be sold.

I, honestly, didn’t know the answer to either question. I suggested they call their lender and talk to them about it.  Put your cards on the table and see if they can help you work through this. She said they were worried that it would blow the loan mod opportunity and they had been afraid to make that call.

Ultimately we agreed that it was probably a better situation to blow the loan mod (if that’s even possible?) rather than have the house be foreclosed upon in a few weeks. She said she would call the lender.

It was actually a great wake up call for me. It’s so easy…and so human, to rationalize or put off potentially painful choices and decisions. So very many people have lost their homes because of embarrassment or fear of confronting the hurdles that are unavoidable. Often, an honest discussion with your lender will go a long way toward a solution.

When you buy a home you’re going to, at some point, have the inevitable conversation about the need for a Home Warranty policy. What is a Home Warranty policy you ask? It’s an insurance policy that covers lots and lots of issues that can, and will, come up after you begin your residence in your new home. The basic policy covers most appliances, electrical, plumbing, furnaces, hot water heaters, garage door openers…etc. Inevitably, right after you move into your new home something breaks. When that happens you call an 800 number given to you by the Warranty company and they send out a local professional to fix it. You pay a small service charge but the bigger portion of the repair is covered by your policy. Some items that you routinely use (and probably ones that break easiest!) are not covered under the basic policy but can be added for an extra charge. These items include washer/dryers, refrigerators, central AC, roofs, spas and swimming pools. The basic policy is under $400.00 in most cases.

Here’s some of my observations about Home Warranties:

* They’re essential to have…you’ll use them, I promise!

* The Home Warranty company rarely sends you the policy or any information after you close escrow. At least it seems like that to me because I frequently am asked by clients for the relevant info when they discover they need it and they never seem to have the policy around.

* It’s the darnedest thing…the issue you need help with is the one thing that’s not covered under the basic policy. (Your ice maker breaks on the fridge door, the plumbing main line ruptures)

The most important thing to remember about the Home Warranty…is the fact that you have one!  I can’t tell you how many times a client has called me after a few months in the house and says something like “Hi Jim, our hot water heater ruptured a couple of days ago and so we called a plumber and had it fixed…how do we use our Home Warranty for that?” Umm…bottom line? You’re screwed. You have to call the Home Warranty’s 800 number, they have to send the plumber out.

Even with all the potential headaches accounted for these things are worth it. As a buyer, they’re usually provided for you at closing without you paying for it. Sellers are smart to provide these since they greatly minimize hassles for them after close of escrow. They last for a year after COE and you can always extend them at that time. We used ours five times in the first month we lived in our house when we bought in 2004. I love these things.

About a week ago I showed a house in Foster City to some folks who expressed some interest in the place. I called the listing agent, who I’ve known for a long time, and asked some questions. I found out two important things…1) the home was getting plenty of interest and there was a possibility of multiple offers, and 2) the listing agent was willing to look at an offer that I would write immediately. No waiting…and no competition for the buyer. Why, you ask, would that happen? Because the relationship that’s been established with that agent insures her/him that our potential transaction will be smooth.

This isn’t all about me of course, this is the story of the value to the consumer of working with an experienced agent. It’s become sort of common in the last few years for buyers to ask me if I’m willing to kick back commission the way rebating online real estate companies or other discount brokers do. These brokers have created a fantasy world where they’re selling the notion that a real estate agent’s job is a commodity. That we’re simply interchangeable parts, order takers and secretaries who merely know how to fill out forms and present them. Sometimes it works out and it’s true too! Lot’s of the rest of the time it’s not true. I think most of the time it’s not true.

There’s probably 100 reasons why experience is beneficial to a buyer or seller, yet I know that the Internet allows people to study and gain knowledge that wasn’t available to them just a few years ago. There’s certainly one way that the Internet or the rebaters can never touch and that’s in the area mentioned above…relationships. I can’t tell you how many times a client of mine has landed on a home in a multiple offer environment because of the relationship I’ve had with a listing agent. It’s also been enormously important for me as a listing agent to be able to identify an experienced agent that my seller can trust to close escrow on time. Relationships are also important in connection to lenders, title people, and inspectors as well.

Lots of this is simple human nature. You spend 20 years in one community and you get to know your coworkers and other agents. Naturally, you’re going to feel comfortable working with them. Working with somebody like this sure beats having an offer faxed by an “agent” who wasn’t in real estate just a year ago.

There’s one area of real estate that, I have to admit, really fascinates me. That’s market of For Sale By Owners that exists out there. Now, we can argue all day long the relative merits, or lack thereof, of selling by yourself and we can probably do that all day long. It also is worth mentioning that there really are several different kinds of For Sale by Owners (FSBO’s) as well. There’s the kind where the seller knows somebody who wants the property and they mutually make the deal happen. Then there’s the folks who want to save money but realize the value to them of having their home marketed on the MLS. There’s plenty of businesses that will provide that kind of service, including Help-U-Sell, Redfin…etc. These sellers essentially do the actual work of the listing, they have an umbrella that covers them when it comes to basic marketing. In my mind, the service these sellers get isn’t anywhere near as full as the kind of service that I, for one, would provide. As I said, I’m sure we could argue all day long about which is a better way to sell your home…but having said that, there’s still one more FSBO category that almost all of us can (I think!) agree on. That being the individual, sole proprietor For Sale By Owner:

I’m talking about the seller who puts a little red and white sign in the front yard…and that’s about it! I’m talking about the FSBO’s that have no Internet presence at all, much less MLS presence. I’m talking about those FSBO’s that don’t even have a flyer box out front, much less a virtual tour and certainly they won’t cooperate with a realtor who might have a buyer for their home. I’m also talking about those FSBO sellers that seem to always have a price on their places that is completely preposterous and certainly out of touch with reality.

Take, for example, a few local entries. In Nantucket Cove there’s a townhouse listed right now at 19 Binnacle for $778,000. I think it’s significantly overpriced. Much nicer units have sold there recently for $750,000 or less…yet there’s a mystery FSBO over there asking $869,000. WOW! Would any of you be interested in buying that place at that price? Appraisals apply to FSBO’s too! Having said that there’s another FSBO of this ilk on Turnstone listed for $898,888. This one’s a little closer to reality…but not much. It’s still too high at that price, and let’s not forget these sellers are not paying a commission to anybody…and they still want more that market price. Blog reader Michelle asked about these FSBO’s and wondered why they were on the market so long. 1) no exposure at all on the Internet, 2)no real marketing of any kind, 3) It’s not in the MLS and most importantly 4) the price is absurd.

Again, I’ll now get off of my soapbox.

When buyer makes an offer on a house it’s a fairly common thing for a seller to want to rent back for 30 days or so after close of escrow. That’s an especially useful thing when the seller hasn’t identified their next home. Typically, the seller rent’s back at the buyer’s principle, interest, taxes and insurance (PITI), which naturally tends to be higher, sometimes ALOT higher than they’re used to. Often, that’s a reasonable tradeoff since a 30 day escrow is entirely too short if you need to buy another house first and the extra time removes loads of stress. The PITI payment can easily be rationalized.

There is a caveat in all this though. When a seller rents back they need to agree to do so in writing on a standard form used commonly throughout the industry, a “seller occupancy after sale addendum”. It’s basic boilerplate, for the most part, and talks about how long the period of occupancy is, how much is paid, who maintains the property…etc,etc. It also has a clause for a security deposit. Here’s the actual verbage that’s written on this form:

Upon COE, Seller shall deposit funds with Buyer equal to twice the monthly occupancy charge, or alternatively the otherwise agreed total sum of $____(Security Deposit).

Hmmm. It doesn’t say funds are held in escrow…it says the buyer gets the deposit. It also says twice the PITI. It wouldn’t be at all uncommon for this sum to reach $10,000 or more under these guidelines. Honestly, this is something that can be easily missed in the midst of all the boilerplate that is signed while ratifying a contract.

If you’re a buyer think about this for a minute. The seller, usually, has loved the home they’re selling. Most of the time they’ve gone to a great deal of time preparing their home to sell and making it as appealing as it possibly can be…and then a buyer expects a $10,000 security deposit so they don’t recreate Animal House during the rent back? Like the sellers are going to start tapping kegs and having toga parties for those 30 days? In the 20 years I’ve been in Real Estate, I can’t think of anything that offends a seller more that a demand for a large security deposit. Most of them are offended by the suggestion of any security deposit.

If you’re selling and will be in need of a rent back, make sure you get that clause clear when it comes to a deposit and how much it will be…as well as who holds the deposit. The Title company is happy to do that.

Got this really outstanding e-mail the other day from blog reader Nancy Chang:

“Hi Jim,

Just read your blog entry on “Choosing the right path”. Sounds a lot like homes in the $600,000 to $800,000 will get offer prices over asking prices. So what do you think about 827 Vespucci lane unit that sold for $570,000 when the asking was $630,000 and the 1497 Marlin unit that sold for $630,000 and the original listing price was $699,000? It just doesn’t make sense at all. Why are they sold for so much lower while others are being bought for higher than asking price. By the way, I don’t know about the Marlin unit but I saw the Vespucci unit. It’s nice and updated and the HOA is low. What gives?”

GREAT QUESTION! There’s not an easy answer either. Why do some homes get 13 offers, go $120,000 over asking and some sit for months? The example in Nancy’s e-mail are classics too. Maybe the only explanation lies in the reality that the old, pre 1998, way of thinking about real estate has returned…being that location and type of property are of singular importance in determining value. In 2004, for example, anyproperty seemed to get multiple offers! If your house was right on Hillsdale Blvd, it got multiple offers. Small condos got 15 offers, houses right next to the train tracks did too. The properties that Nancy mentions above are all townhouses and even though they are in good locations and have reasonable HOA dues they’re still townhouses…and those have historically not been as valuable as single family homes.

 I know that I have far more requests from clients this year to find a single family house than for condos. One in particular, a young woman in her late 30’s who’s qualified up to about $385,000 is determined to find a single family house when a condo would be so much better suited for her. About 95% of the houses in her price range are in areas that she really doesn’t want t0 live in, but she’s SO very motivated to buy a house that she’s been overlooking these homes obvious location problems to reach her goal. The locations of the condo’s in her price range are much better…but that doesn’t matter. A house has more appeal.

Maybe we’re just in a normal market…or maybe the desire to live in the Mid Peninsula is so stable and solid that we’ll see mutiples on all categories again soon. We’ll see…

Have you ever watched the HGTV show “Real Estate Intervention”? Here’s an episode above…I find this show to be really interesting and true to life. The show uses an agent, by the name of Mike Aubrey, who “intervenes” with sellers that are seemingly in denial about either the value of their home or what it’s going to take to get that home sold.

The clip above is a classic scenario. The sellers here need to move a family member in with them…and hope to sell their existing place and buy a bigger one. They have an offer on another house contingent upon the  sale of their own…and their house is overpriced. HGTV has a nifty advantage that the rest of us don’t. They call up the new owners of recently sold homes and take the subject sellers over to these homes so that everyone can see the comparison/contrasts. As you can guess, the sold comp is bigger, nicer, better than the seller’s place…and sold for significantly less than the seller’s place is listed for. These small facts leave the seller unmoved. The psychology of it all is fascinating…and very true to life!

Rule number 1 for sellers…you have to be objective!! Great show!!

Multiple offers are sort of common again in the Mid Peninsula and last week I had some clients who wrote an offer on a 3 bedroom house on Exeter in San Carlos that was listed for $749,000. We came in at $750,000 and lost it…the house ended up selling for $780,000. You know what? The scenario of large overbids is really rare in my experience. I’ve been involved in 18 multiple offer events, with either a buyer or seller, in 2009 and with the exception of five offers made on incredibly discounted REO’s all the rest sold right around the asking price. The overbids were at most a few thousand dollars. My listing at 900 Flying Fish got 8 offers…and only one came in over asking. It went over at total of $888.00. One offer came in $150,000 under asking (a hilarious waste of time!).

At least for the time being, this is the new normal in Peninsula home sales. In 2009 161 homes have sold in Foster City…both single family and condo/townhouses. Of those, only 4 single family and 18 condo/townhouses sold at or over their asking prices. 72 single family homes and 81 condo/townhouses closed.

I did a little study the other day and discovered that in the price range over $1,150,000 in Foster City in 2009 the average sale came down in price an average of 11% so far this year.

Clearly, there are situations whereby a large overbid is entirely appropriate and necessary. If there’s 22 offers on the property you want, you’re not going to get the place with an offer at asking. That auction at 857 Canis springs to mind that came on the market at $300,000 for a 3 bedroom, 2.5 bath townhouse at Isle Cove. It sold for $564,500…and probably should have. Nobody else has dared to price a home that aggressively but there have certainly been other discounts that have prompted multiple offers…and overbids. It’s certainly not the norm, however.

This is clearly not the time to go crazy with an overbid. If you lose a home to somebody that does…that’s OK. There will be others and the odds are greatly in your favor that you’ll get a home, at worst, around the asking price.

I’m not at all sure if it’s like this for buyers and sellers right now (I think it is!) but nothing is producing as much stress and nervousness in this market as is the seemingly long waits that are occurring around appraisals. Sure, there are those deals that slide through and the appraisal is done in the first week…but a whole lot of them are taking much longer. Often it takes a couple of weeks just to get an appraiser to set an appointment and since criteria is so much more rigid we worry that it won’t come in to value…and then what?

As I’ve said before here, Realtors and even the reps at the banks have no ability anymore to speak to the appraiser. If it doesn’t come in there’s no arguing the point. If an appraiser is inexperienced you could be in for a problem. If the appraisal comes in lower than your purchase price somebody has to make up the difference if it’s to close.

I have a transaction currently in El Granada whereby the appraiser was sent via the HVCC system. After about 3 weeks in escrow I get a call from a young guy who asks me to open the listing for him the next day. I notice he’s calling me from the 209 area code. I ask where he is…Stockton. He tells me he’d like to meet me at 10:30AM the next day and also shares with me that he has a 9:30AM appointment in Oakland and will just zip on over after that job. Oakland to El Granada in a half hour to 45 minutes? 

“Do you think it’ll take longer than that” He asks.

“Have you been to El Granada before” I reply.

“No” he says. “And where exactly is El Granada? Isn’t it in Half Moon Bay?”

This dialog didn’t get me all warm and fuzzy about this appraisal to tell you the truth. As of this morning we’re still waiting for it to come back in…it was done last Friday!

2009 is a strange and different world in Real Estate…it really is.