Posts Tagged ‘ed gory’

Buyer Mentality vs. Lowball Reality

By Ed Gory | October 14th, 2010 1 Comment

Lowball offers rarely, if ever, get accepted.

There, I said it.

Almost everything you read in the news these days about the housing market points to it being a Buyer’s Market.  That is true to some extent, but not 100% of the time. There are neighborhoods out there that are exceptions to the rule, and often still get multiple offers (i.e. Palo Alto, Los Altos, parts of San Carlos & Redwood City).

But back to the notion of “lowball offers.” In my opinion, the success of a lowball offer is a bit of a myth.

From a SELLERS perspective

The current buyer mentality as a whole is fueled by what buyers read in the news, and the economic malaise in general. That mentality will not, I must repeat, will not change anytime soon.  So unless you’re selling a home in one of those rare “hot” neighborhoods, here’s the expectation you should have — buyers are going to come in and lowball you. Negotiating the best possible price is what I strive to do for my sellers every time (and I would think that nearly all listing agents have this fiduciary objective) — there’s no way I’d advise a seller to accept a lowball offer on the first round.  When buyers come into my listings and ask, “How low will they go?” my pat answer is, “Well, put something in writing and you’re sure to find out.”  Any good listing agent will not show their hand to how low their seller would go.

From a BUYER perspective

Now I’ll put my Buyer’s Agent hat on.

For a home that’s been on the market a LONG time (relatively speaking, of course), sure, the odds are that the home will sell for less than its asking price. How MUCH less really depends on the seller — since every seller’s situation is unique, I really don’t know “how low” they will go until I do a little further investigation with the sellers’ agent.  Even then, the sellers’ agent will rarely tell you exactly how low the sellers will go — that breaches his fiduciary duty to the sellers.  That agent’s duty is to get the home sold for the best possible price relative to all the other market conditions.

So, if you come in with a lowball offer (again, lowball being a relative term), the expectation you should ALWAYS have is that you’re going to get a counter-offer from the sellers.  Yes, sellers are “motivated,” but being motivated does NOT mean “desperate.”

Step 1: Make a lowball offer.   Step 2: Receive a counter offer from the seller.  It’s gonna happen, like it or not.

Look, here’s the reality: yes, buyers are generally in the driver’s seat these days, but, many sellers would rather wait it out, or take their home off the market before they accept a lowball offer.  Making a lowball offer, while it is a start to putting something in writing on the table, rarely meets with success.  Save your time and your efforts, and instead of getting your hopes up for getting “the deal of the century,” make a reasonable offer instead — the more fair/close-to-asking your offer price is, the less likely you are to get a counter-offer from the sellers.

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San Carlos’ Thorny Artificial Turf Issue

By Ed Gory | August 24th, 2010 0 Comments

There’s a polarizing issue in the Highlands Park neighborhood of San Carlos these days, and it has to do with the potential to install artificial turf at the neighboring park.

How does this affect homes and home values? Since everything under the sun has to be disclosed when selling a house, here’s a simplified after-effect of installing artificial turf in a public park:

  1. Turf on athletic fields at public park  = Year round sports instead of seasonal
  2. Year round sports = Constant soccer, baseball, basketball games going on year round
  3. Constant games going on = Lots of cars parking on streets in front of homes
  4. Lots of cars parking on streets = Impact on ‘peace and quiet’ of neighborhood
  5. No peace and quiet = Perceived value of homes goes down
  6. Home values going down = Local residents do not want artificial turf

In the SJ Merc the other day was this article.  Here are some of the salient highlights from the article:

With San Carlos poised to start installing artificial turf at Highlands Park today, a group of residents who sued to block the project say the city is taking a big risk by breaking ground before a judge has ruled on the lawsuit.

They say the city shouldn’t start the project until a San Mateo County Superior Court judge weighs in on the lawsuit filed by Save San Carlos Parks, which argues the city didn’t properly review the new field’s potential environmental effects on health and traffic. Judge Marie Weiner is expected to rule by Aug. 25.

If Weiner decides the city must do further environmental work, it will have to pause construction and leave the park unusable and in a state of disrepair indefinitely, said Greg Harris, a member of the residents’ group. He said it’s worth waiting another two weeks for a ruling on a project that was conceived a decade ago.

City officials counter that they could take a financial hit if they don’t proceed with installing turf, which has been done without controversy in other Peninsula cities but has been one of the hottest topics in San Carlos for years.

Officials say the $1.7 million bid from Interstate Grading and Paving, which the city council accepted in February, is an exceptionally low price due to a job-hungry construction industry and an Italian turf manufacturer who is offering a discount to break into the American market.

Harris dismissed the cost argument, saying it’s possible the city could get the same bid or an even lower one if it advertises the project again after the judge’s decision.

The city plans to fence off the 3.5-acre lower athletic field at Highlands Park today for site preparation work. Excavation and grading work will start next week, said Public Works Director Robert Weil. If all goes well, the project will be finished by the end of the year.

Weil acknowledged that the park will be unusable if the city has to pause construction to do further environmental studies, which could take months, but he said officials will ensure the park doesn’t pose a hazard.

Proponents say the artificial surface will lower maintenance costs and allow the field to be used year-round. The grass fields, on the other hand, must periodically be closed so they can recover from heavy use.

But opponents have said the extra use allowed by the new surface will bring more traffic to the neighborhood. They also had objected to the use of rubber pellets between the grass blades, though the city has since decided to use an organic infill instead to address those concerns.

“We’re not going to delay a project that will benefit thousands of people because a small neighborhood group has filed a lawsuit against us,” Klein said.

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Ah, Loan Contingency Periods, aka Scrutiny on Your Bounty

By Ed Gory | August 18th, 2010 0 Comments

One of the most critical things when getting your mortgage to purchase a home is the loan contingency.  Speaking from recent experience, and understanding the new reality of overly scrutinizing lenders, here are Ed’s must-know things when it comes to loan contingencies:

Don’t Take Shortcuts

Firstly, please, please, please, work with a mortgage lender who has a proven record of being able to secure a loan.  This has got to be one of the most important to-do’s before you go out shopping for a home.  This is as important, and may even be more important than the loan rate you lock in.

Yet, with still so many choices out there – direct lenders, mortgage brokers, etc. – you may ask yourself, how do I find a good one?  The best source, I’ve found, is to get recommendations from friends, relatives, or trusted realtors.

A good lender who’s truly looking out for your best interest should ultimately be able to tell you what you can and cannot afford.  A great lender will go above and beyond to get the job done.

Do Your Homework

Where are your downpayment funds going to come from? From your own savings? Cashing out some WebVan stock? A gift from your solvent parents?  Whatever the source of your funds, you have GOT to make sure you let your mortgage lender know early on in the process.  Any  funds that are NOT coming directly from your own savings, might be subject to major scrutiny by the lender – and you may find yourself having to provide a boatload of documentation showing where the money’s coming from, or, in the case of a gift, additional scrutiny on whoever was giving you the money.  And of course, as Murphy’s Law would have it, that kind of scrutiny can very well happen at the 11th hour when you least expect it, probably right before you’re supposed to close escrow.

Final Thoughts

Be realistic about your loan contingency period. Don’t put it at 14 days if you’re not 110% positive that your lender can do it. Better to be conservative and ask for more days than you think you’ll need.

Be sure your lender knows of any red flags during the contingency period. Find this out early on in the process. Continually ask your lender what the current conditions to close (CTCs) are, and are they being met.

Remove your loan contingency as close to on time as possible. No one, particularly the sellers and the sellers’ agent, get more stressed out when loan contingencies aren’t removed on time.

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Show Me the Money — Redwood City Ranks #4 in VC Spending

By Ed Gory | June 2nd, 2010 0 Comments

Good article in the Merc last week, comparing the amount of venture capital invested in startups in the region’s municipalities in 2009.

For us Redwood Citizens, this is good news, as Redwood City ranks #4, behind some pretty big “powerhouse” cities for startups.

The top 5 is as follows (along with the amount invested, in millions):

  1. San Francisco    1,013
  2. Sunnyvale              663
  3. Mountain View     574
  4. Redwood City       545
  5. Fremont                 528
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Is Edgewood Park’s High-End Market as Dry as a Desert?

By Ed Gory | March 11th, 2010 0 Comments

Rhetorical question, I know.

Edgewood Road — particularly between Alameda de las Pulgas & El Camino Real — boasts some of the coolest, full-of-character, historical, and BIG homes in the neighborhood (big in home size as well as lot size).  Owning a home on this slice of Edgewood Road is akin to reaching that “dee-luxe apartment, in the sky-high-high”.

But in today’s market, where are the buyers for these homes? Sure, they’re out there…somewhere.

The hard statistics to swallow for any home seller relate to how well your home is priced for THAT segment of the market, at THAT moment in time.  I’m not marginalizing at all the value of these high end homes — heck, if I had $3M+, I’d love to live in one of these mansions too.  But then again, a home’s true value is only what a buyer is willing (and able) to pay at that time of the market.

In 2009, in Redwood City, only 1 home sold above the $2.8M mark. It’s interesting to see how this compares with neighboring “high end” areas.

In 2009, here are how many homes sold that were OVER $3M in sale price:

  • Woodside:         9 homes sold over $3M
  • Portola Valley: 5 homes
  • Hillsborough:   31 homes
  • Atherton:           33 homes
  • Los Altos:           9 homes
  • Palo Alto:          14 homes

So as it stands now — looking purely at black and white market stats — we have a 3 year inventory of $3M homes in Edgewood Park.  Yes, there are still buyers willing to buy. They will only respond to properties that are aggressively priced and work with sellers who are flexible as to terms and conditions.  An even bigger surprise this year is that even more of the buyers are all cash buyers.  So, if you are a seller, price your property “to sell.”  If you are a buyer, this is the opportunity to get into the high-end at the price of a lifetime.

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The Party Might Just Be Ending for Low Interest Rates

By Ed Gory | February 12th, 2010 0 Comments

It’s safe to say that mortgage interest rates have been at historic lows since the summer of ’09, mostly around and sometimes even under 5%.  Currently, they’ve been floating around the 5 & 1/8% range.

Part of the reason for these low rates has been because the Fed has been on a buying binge of Mortgage Backed Securities (MBS).  The Fed has been buying $1.25 trillion in mortgage-backed securities in its effort to prop up the economy, but has said it will end those purchases March 31.

As I speak fairly regularly with seasoned, well-informed, and intelligent mortgage lenders and brokers, one thing they all seem to agree on is that the expectation is that, after March 31st,  rates will head upwards, and will likely be in the 6% range.

Still pretty low, historically – but, a significant impact to the buying power of home buyers out there.

Just think about it, if you’re looking at a loan amount of say $700,000, this means that a 1% increase in interest rate translates to paying $450 MORE per month on the same loan.  Or looked at another way, a 1% increase in rate just reduced the sale price you can afford by about $80,000.

Quoting some highlights from a recent WSJ article:

What happens when it (the Fed) stops buying hundreds of billions of dollars in financial assets?

In its monetary-policy statement, the Fed said it would “gradually slow the pace of these purchases in order to promote a smooth transition in markets.” Suddenly cutting to zero, presumably, could prove too much of a jolt.

But even a gradual pullback could have big repercussions. Zero interest rates and Fed purchases — financed by printing money — have played a massive role in reviving stocks and bonds and rekindling the economy.

Mortgage rates will likely move up, as private-market buyers will charge more than the Fed for bearing the risks of holding government-backed mortgage securities. Now, the Federal Reserve has said they would consider reopening its program to support the mortgage market if interest rates spiked or the economy showed new weakness.

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