First there is disbelief or denial. “It cannot be that bad – people are exaggerating.” That’s followed quickly by “I thought it was bad where I used to live!”
Then there may be outrage (anger is too mild a word): “Why would anyone pay that to live there?”
Next, a little bargaining: “What’s the work around? Are there any bank owned homes? How about something older – I don’t mind a 15 year old house…” (To us, that’s a young house, by the way.) “What about buying a lot and building?” Or the commute negotiation “I thought I had to be within 15 minutes, but I could go 30.” A typical commute might be 30 minutes in the morning, but 45 in the evening. Many people have worse than typical, though, as they want a bigger, nicer home, better schools, quieter location, etc.
Depression soon follows suit. This may be accompanied by “We just cannot do it” or “We are not willing to do that” (until they see that rents are $4000 for a smallish house in an only OK area and $6000 per month for a decent sized home in a good area.)
Acceptance comes at last. It may lead people to decide to go all in, bite the bullet, and buy locally. It may lead them to move way out of the immediate area and embrace an hourlong commute – or to take the Apple or Google bus to work, if applicable. It could lead them to move to Seattle, Orange County or somewhere a little less overwhelming in terms of housing costs.
Sometimes people think they are at “acceptance” as they write offers which are habitually 5-15% too low. In reality, they are actually still in the “bargaining” phase, hoping for a good deal amidst our raging seller’s market. That doesn’t usually happen, so writing a lot of unsuccessful offers frequently leads to depression (and sometimes blaming their agent for their offers not going through, even when it’s clear at closing that their offer price or terms were the issue).
How fast can you get to acceptance and write a realistic purchase offer? For people who could have bought 12 months ago but are still shopping now, that wait has cost them about 10% of their home price in many cases. For those looking 2 years, it’s easily double that, and in some cases prices are up a full 30%. That’s like setting a match to your entire down payment.
If you want to be a successful home buyer in this crazy Silicon Valley real estate market, you will need to get onboard quickly, because the longer you take to get to acceptance, the more expensive your final home will cost when the market isappreciating, as it has been for about 3 years now. Time is money and nowhere is that more true than in the San Jose, Silicon Valley, or South Bay real estate market.
Looking for more Silicon Valley real estate resources? Here are a few of my other sites, blogs, and market stats tooks:
popehandy.rereport.com – real estate statics for San Mateo County, Santa Clara County, and Santa Cruz County
popehandy.com – Silicon Valley real estate, Los Gatos real estate, info on many areas of the realty market in Santa Clara and San Mateo counties
SanJoseRealEstateLosGatosHomes.com – Santa Clara County real estate, special focus on San Jose areas of Almaden & Cambrian and also Los Gatos with info on the real estate market, neighborhoods, and more
LiveInLosGatosBlog – Los Gatos real estate, neighborhoods, events, businesses, parks. Many photos and neighborhood or subdivision profiles.
It’s an old question – should you find your Realtor first or your lender first? I would like to suggest that you find your Realtor first, and then ask your real estate agent for a list of reputable, trusted loan agents or lenders.
Because as with all professionals, lenders (and Realtors) are not created equally.
You will probably spend a LOT more time with your Realtor in viewing homes, reviewing disclosures, writing the contract, meeting inspectors, and so on – so I do suggest that you begin by very carefully choosing the right real estate licensee or broker for yourself. A good Realtor can probably give you between 3 and 10 names of trusted, reputable, reliable, knowledgeable lenders. From there you can interview and choose someone.
It is extremely important that your lender be good at what he or she does. A bad lender – and there are many of them – could cost you the sale, but definitely will create undue stress, will waste your time and ultimately cost you money. This is no exaggeration.
In our hot Silicon Valley real estate market, when there are multiple offers, many listing agents will phone the buyer’s lender to see how solid the buyers are and how decent the lender seems to be. The better loan agents will answer the phone when called – because they are anticipating the call. The lesser ones are not paying attention and don’t pick up. That small decision, one way or the other, can be critical! Just today I spoke with a high powered agent out of Saratoga who told me of this very scenario. She concluded “the lender who didn’t take my call cost the buyer the sale”. Yes, it matters that much.
A poorly organized loan agent may misplace documentation, causing you to miss work so that you can get it to him or her again in a rush (under pressure of the loan contingency removal date). I have known buyers to lose time from work due to the ineptitude of a loan agent (but not one that I suggested).
All deadlines must be agreed to by buyers and sellers in writing, no exceptions. Can you imagine what it’s like to ask your lender how many days will be needed for the loan contingency, only to have to extend it not once, but a few times, because it’s just not done yet? A lousy lender will make this happen. Sometimes they are submitting loan packages based on old guidelines rather than current ones. You and I won’t be involved at that microscopic level – but if the lender messes up, we’ll hear about it later.
In the worst case scenarios, a really terrible mortgage banker or broker will cause so many delays that you close escrow late, causing you, the buyer, to pay some of the seller’s coverage costs. If the rates go up during all of the delays, you may pay a higher interest rate too.
That’s the gloom and doom of it.
In my real estate practice, often about half of my clients come to me with their own lender. Although this is not ideal (it’s better if the Realtor and lender go into it with a good working relationship), often it works out OK. But sometimes it’s a train wreck. This doesn’t happen, at least not in my experience, if you get a lender I’ve already vetted. Or if you’re working with another great Silicon Valley Realtor, one that he or she has screened. I would not suggest someone incompetent or who will screw up the transaction – of that you can be sure! I want you to buy your home as much as you do, and I want it to be as smooth and hassle free as possible. A bad lender can put all of that in jeopardy, though.
What do international home buyers need to know about financing a real estate purchase in the United States?
Many of my relocation clients come to Silicon Valley from outside of the U.S. For them, financing a home purchase may be a big concern. There are many questions about down payment amounts required, moving money to the United States from abroad, purchasing without a regular credit history here, and many more.
I thought it would be helpful to get some lending and finance information to my global readers and have interviewed Allen Liang, a private mortgage banker with Wells Fargo Home Mortgage, a very experienced and knowledgeable lender who has worked extensively with global clients and can speak to these issues authoritatively. Below please find my questions and his answers.
How difficult is it for international home buyers to get financing in today’s market?
Lending to international home buyers is not as hard as many people think. Most international home buyers are well qualified buyers. Due to a lack of credit history and income verification system different than in the U.S., the lender normally does require more documents. With a thorough interview and well prepared paperwork, we can help international buyers obtain the mortgage in the U.S. However, the processing of international home buyers’ loans might take a slightly longer time to process. I highly suggest starting the paper work as early as possible, so we can get them pre-approved by the underwriter. Continue reading
If you are house hunting in Silicon Valley and new to the area, you may wonder when the usual open house times are. Unfortunately, open house times are not perfectly predictable as there is variation both from one brokerage or agent to the next and one region of the counties that comprise Silicon Valley to the next as well. As an example, in the Blossom Valley area of San Jose, condos or houses are frequently available for viewing between 1:30 and 4:30, but it’s not a rule – some listings may have a totally different schedule!
In general, most open houses will be available between 2 and 4 on weekend days if advertised as open (sometimes Saturday, sometimes Sunday, sometimes both. Open houses can run from 12-5, 2-4, 1-4, 1:30 – 4:30, 2-5 etc. If you arrive between 2 and 4 (not “at” 4), you are likely to find it open if it’s advertised as such. Some real estate agents may hold it open sooner or later, though. If a Realtor has a couple of properties that need to be held open for the public, one could be from 11-1 and the other from 3-5 or some such schedule.
The broker open house, which is usually not intended for the public to come through but occassionally is, takes place on weekday mornings between approximately 9:30am and 12:30pm. If non real estate professionals (the public) are welcome, it will be advertised on our MLS.
It is always best to check online at www.MLSListings.com for the most accurate schedule for open houses which may be during weekday mornings, twilight tours, or weekend afternoons or mornings.
Finally, do not count on all properties listed for sale in Santa Clara or San Mateo Counties to necessarily be available for viewing at an open house. Some listing agents and some sellers prefer NO open houses, believing that any qualified buyer who’s serious will be working with a buyer’s agent and can make an appointment to see it privately. (This is yet another reason why every buyer should have his or her own real estate agent rather than planning to work with the listing agent when buying their next home.)
Here are the headlines from the San Jose Mercury News in mid April 2014:
Rental article: Bay Area apartment rents set record 4/16/14
Excerpt: Bay Area apartment rents are rising at nearly double-digit annual rates and have reached record levels, according to a report released Tuesday, prompting some analysts to warn that the region’s economic boom could be choked off by the relentless rise….. Among the Bay Area’s three largest cities, San Jose had an average asking rent of $2,066 during this year’s January-March quarter, up 10.3 percent from the same period last year, RealFacts reported. Oakland had an average rental rate of $2,187, up 12.3 percent, while San Francisco posted an average of $3,057, up 9.5 percent.
Home buying article: Bay Area home prices jump year over year
Excerpt: March marked more than 20 consecutive months of year-over-year price gains for single-family homes in the East Bay, South Bay and Peninsula, according to real estate information service DataQuick, which released a report on March sales Wednesday…. The San Diego-based company said that prices were up 29.2 percent from the previous March in Alameda County to $575,000. In Contra Costa County, prices rose 22.8 percent to $425,000. Santa Clara County gained 20.3 percent to $800,000, and San Mateo County was up 13.2 percent to $860,000.
Whether you buy or rent, prices have been rising dramatically. When factoring in what housing will cost, include the trajectory of appreciation per month.
What does it cost to buy a house in Santa Clara County? And San Mateo County? Both are home to “Silicon Valley”!
Silicon Valley is a large area, with much of it in Santa Clara County (where San Jose is the largest city with almost one million residents) and most of the rest is in San Mateo County along the San Francisco Peninsula. So what does it cost to buy a house in these areas? Today I spent some time on MLSListings.com, our local multiple listing service, and pulled the data, which I hope that newcomers will find very helpful.
Below is a chart of single family homes purchased between October 1 2013 and the end of January 2014 by price point.
Santa Clara County sales of single family homes:
As you can see, only a tiny fraction of homes sell for less than $400,000. Most people pay between quite a lot more, with many sales happening in the $600,000 to $1,000,000 range (and it’s more in the areas with best schools and short commutes, generally, so many are much higher, too). The average Santa Clara County home sales price was $1,002,119 and the average price per square foot was $526.
How about San Mateo County prices? As you may know, The Peninsula is pricier than it’s warmer neighbor to the south. But how much more will it cost you?
Santa Clara County sales of single family homes:
The average sales price was in San Mateo County for the last three months was $1,254,114 and average price per square foot was $625 (all sizes of houses and lots throughout SMC). This is about 20% than Santa Clara County.
I have been fortunate to have made 5 trips to Europe, one of them lasting 9 months, and will be returning again before the end of 2013 (this time to Belgium). It is so diverse, beautiful and compelling! Having experienced a little culture shock myself (when living in Florence, Italy, for one year of university), I’m very sympathetic about how hard an international move can be, and I understand that for Europeans moving to Silicon Valley, there can be an acute culture shock, particularly for those coming from more rural areas.
The bulk of Silicon Valley is located in Santa Clara County, which is at the southern end of the San Francisco Bay. In this county, there are approximately 1.8 million people, almost a million of them in the city of San Jose. Some areas, or districts, of San Jose have a distinctive character and are almost like towns or small cities themselves. So in this article I’ll mention both cities and towns, but also areas or districts of San Jose, which might appeal to our European transplants. Most of my comments will reference Santa Clara County or “south bay” locations, but I will also mention others on the San Francisco Peninsula and SF Bay Area too.
Architecture, Urban Centers and Charm
It is an unfortunate negative in Silicon Valley that much of our housing consists of ranch style tract homes, and truthfully, they are not exactly a work of art. New or newer homes tend to be on very tiny parcels of land (or “lots”) and for many people may simply feel too congested or crowded. But there are beautiful residential neighborhoods – you just need to know where to look! In many ways, the areas with higher charm can make our global home buyers feel more comfortable than if they were faced with only track, ranch neighborhoods.
Do you value unique, older architecture with Victorian, Craftsman, Tudor or other home styles? Then check out these areas:
- Within San Jose: the Japantown, Vendome, and Naglee Park areas of downtown San Jose. Also in central San Jose are the Rosegarden, Shasta Hanchett and Burbank neighborhoods which all boast some lovely older homes. Or, if you love classic Spanish Revival style homes with views, consider the old Alum Rock area of San Jose near the country club (golf course). The Willow Glen area of SJ (zip code 95120) is full of lovely old established neighborhoods with historic homes and tree lined streets. If your job takes you to downtown San Jose, all of these areas will be fairly close.
- If you want a rural, eclectic atmosphere, check out the “New Almaden” area of San Jose. This is actually a county pocket with a San Jose mailing address.
- Other towns or cities with older, more interesting architecture include the “downtown” ares of Los Altos, Palo Alto, Los Gatos, Campbell, Mountain View, Saratoga and Menlo Park (in San Mateo County, just north of Palo Alto).
- If work will be on The Peninsula, there are many areas nearby that may work. San Mateo has some fantastic neighborhoods! Also San Francisco, which is tiny but full of beautiful areas, may be a strong draw (I do not sell there – it’s too far for me). Warning: the weather in San Francisco is very often COLD in summer!
- Across the bay, Berkeley has some great Victorian and other homes and several really interesting pockets, as does parts of Oakland. (I do not work these areas either as they are too far for me, but I did live in Berkeley in graduate school and can connect you with a great agent there.)
- Palo Alto (very costly)
- Cupertino (less expensive for the school scores compared to other areas up to #5 on this list)
- Saratoga (very expensive)
- Los Altos & Los Altos Hills
- Los Gatos & Monte Sereno (95030 & 95032)
- Parts of San Jose in Cambrian 95124 and Almaden 95120 (very good value)
- The Los Gatos Mountains (zip code 95033)
- Parts of Fremont (Mission San Jose area)
Can you buy a home with a contingent offer, subject to selling your current home, in Silicon Valley?
In many parts of the United States, it is not uncommon to write a purchase offer on a property which is contingent upon, or subject to, selling the buyer’s current home. Contingent offers are not very common in Silicon Valley, generally. They are unlikely to be successful if the property has been on the market only a week or two, but if the offer is otherwise really strong, home sellers may consider it. We see a few of them happen here and there, so it’s not impossible to be successful with this kind of real estate contract, but it does pose a few extra challenges. Let’s see what might improve the odds of success with one of these.
What could make a contingent offer strong?
One thing, of course, is cash. Right now in Silicon Valley, anywhere from 30-35% of all sales are without a mortgage or loan, they are all cash deals. So if the sale will mean that once the buyer’s house or condo sells and closes, the purchase can happen without a loan, that’s good – no loan means less risk that it won’t close. Even if the resulting sale isn’t 100% cash, if the sale will bring more than 20% loan to value into the next transaction, it will help.
Terms can really impact whether or not a contingent offer will go through. Some offer terms can be appealing to San Jose area home sellers too, such as a flexible close of escrow date or the option to rent back (at cost or for free).
Many other issues must be factored in, of course. How strong is the market for the property that needs to be sold? This plays into the issue of risk. If it’s an area in high demand, and the home is priced aggressively, or if it is already sale pending, this may lessen the concern that it won’t sell at all. It’s important to share market conditions with the listing agents and sellers so that they have a good understanding of the situation.
Finally, it should be noted that Silicon Valley is composed of many, many niche or micro markets. While some areas are “on fire” – Palo Alto, Menlo Park, Mountain View, Sunnyvale, Cupertino – others are simply good (Silver Creek, Los Gatos, Almaden) and certain areas and price points (think luxury market) are close to balanced. Depending on where and what you hope to buy, a contingent offer may be more or less likely to be successful.
If you want to buy a Silicon Valley home and you’re coming from outside of the area, a few things are done differently here. Rather than give a lengthy explanation, I’ll just provide a quick list of things which are different from other parts of California, the U.S. or perhaps the world.
- The escrow account, where money is held and disbursed by a neutral third party, is ordinarily with a title company in Silicon Valley and the San Francisco Bay Area generally. In CA it’s legal for real estate brokers to have the escrow account, but that is not the custom here. By contrast, in southern Calif., there are separate companies which often do the escrow work or a real estate broker may handle the funds, called trust funds.
- Santa Clara County is a “seller pay county” by tradition when it comes to the escrow fee and who pays the owner’s policy of title insurance. (Most of California is either buyer pay or split 50/50. Also, SCC is where San Jose and much of Silicon Valley is located.)
- Because it’s a “seller pay” county, the seller or the listing agent (the seller’s real estate agent) normally chooses the title company. Most of the time, the home owners do not have a preference and don’t know anyone working at the nearby title companies, so usually the listing agent suggests which one to utilize. If you purchase the property with a loan, you will need to buy lender’s insurance, too – and that’s a buyer cost.
- While in many east coast states an attorney is involved with the home buying and selling process, here lawyers are seldom involved with real estate sales – unless there is a big problem.
- Surveys are not usually part of the transaction here, with exceptions if there are serious doubts about the property boundaries.
- Buyers are provided information on natural hazards, and usually also known environmental hazards and area tax liabilities, in most cases via a professional disclosure company such as JCP Disclosures. Things such as 100 year flood plains, liquifaction zones, earthquake fault lines, underground water contamination will be revealed, if known, in most cases.
- In some parts of the world, buyers do not have their own real estate professionals for guidance and advocacy, but here they do. Most of the time, in the San Jose and Peninsula area buyers have their own real estate agent working on their behalf. Usually the buyers’ agents are paid by the sellers – but they do not represent the sellers. Dual agency is legal in California as long as it is disclosed (and dual agency can mean either the same person or brokerage).
- In recent years, it has become the norm to get pre-approved with a lender or bank prior to writing a purchase offer on a house, condo or other home. (If you meet with a Realtor, getting you set up with a reputable lender will be one of the first things he or she asks you to do.) Also it’s pretty normal to have to provide “proof of funds” to demonstrate that you have the down payment available. Sometimes our international clients are surprised at the documentation required here, so it’s good if you are aware of it upfront.
- It usually takes 30-45 days to close escrow on a property here (from the time the sellers accept your contract to the time you actually own it).
- Finally, it should be noted that the cost of housing in Silicon Valley is truly exorbitant. Most people know that Silicon Valley houses are very expensive, but until they get out and see what things cost, they really don’t understand how extreme it is. Often I tell people to expect to pay twice as much and to get half as much. Unless you are coming from a pricey locale, such as London, Tokyo, Paris, Manhattan or Boston, you may still find yourself in “sticker shock”. A half million dollars buys a fairly small, modest home here, in an average area. A million dollars is better – you can get into a better area and better house. The “luxury market” starts somewhere between 1.5 and 2.5 million, depending on which area you’re considering.