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Are We Seeing a Market Blip or a Trend?

Dear Monica:  My house is on the market and we expected a good market response and even multiple offers.  However the response has been disappointing and there has only been one offer so far and it wasn’t even full price.  Is this a temporary market change or the start of a correction?  John D.

Dear John:  What you have described is being repeated in many area cities.  It is too soon to tell if this is temporary situation or something more.  Buyers are suffering buyer fatigue and are not as apt to jump on a property as soon as it comes on the market unless it is exceptional.  Also each week there are more properties for them to choose from so they are not in a hurry to buy.

Add to this the recent rises in interest rates, the cap on deductibility of state and local taxes mandated by the tax changes of last December, and other economic factors, and the market pauses to adjust to them.  You may have to either accept a lower offer or take your home off the market until next spring, in hopes the market will be better.

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Mandatory Solar Power is Gaining Ground     

Dear Monica: I have often wondered why states like California, with limited rainfall and long periods of sunshine, haven’t required more use of solar power.  The infrastructure for solar power is simpler than building and maintaining the power grid we currently have.  Do you see a trend towards use of solar power growing?  Eric G.

 

Dear Eric:   The mandatory use of solar power in housing got a huge boost recently from the California Building Standards Commission who voted unanimously to require new single family and multi-family buildings up to three stories high to have solar panels beginning in 2020.  This should substantially help the state of California reach its goal of a  carbon-neutral energy status within 30 years.

 

While solar installation will add to the initial cost of building a new residence, the homeowner will enjoy significant savings in energy costs over their span of ownership.  A higher demand for solar should spur production and potentially lower material costs.  California is the first state to require solar but it is expected that more states will follow their lead.

 

Is Real Estate Becoming a Buyer’s Market?  

Dear Monica:  I am looking to buy a home and have noticed a shift.  There are more properties on the market than before and I am seeing some price reductions, which didn’t happen earlier in the year.  What is happening in the real estate market now?   Beverly C.

 

Dear Beverly:  There is a change in the market now from what we saw in the spring.  The peak months for real estate sales and prices this year was March/April.  Things slowed in the summer, which is not unusual, but now that it’s mid-September, we are seeing fewer multiple offers and lower bids.  The rising prices we saw in the spring cannot be sustained and so prices are leveling off and in some cases, diminishing, from what they were a few months ago.

 

Mortgage interest rates have risen to the 4.5% range, which affects what buyers can pay.   Other factors too, such as recent tax law changes, tariffs on imports, and others, have made buyers more concerned about how these changes will affect them.  If you are a buyer, this is a better market for you.  But sellers, who expect the price surges they saw last spring, are disappointed that their properties are not getting bid up as they’d hoped.   It may take time for them to realize that the market has changed.

 

Buyer’s Second Thoughts

Dear Monica: I made a non-contingent offer on a property and to my surprise, the sellers accepted it.  There were multiple offers so I didn’t think I would get it but I did.  Now I am having second thoughts about this property.  What can I do?  Lauren G.

 

Dear Lauren: You are experiencing a very common emotion referred to as “Buyer’s Remorse”.  Sellers too can have this feeling.  It is especially common in our area where the  pace of the real estate market is rapid and buyers can be swept up in the flurry that surrounds the multiple offer process.  When they succeed sometimes they hesitate and wonder if they did the right thing.

 

Know that it is normal to feel this way and once you absorb the reality that you are buying a property, you will likely have no further second thoughts about it.   Relax, take a deep breath, and you should be just fine.  And congratulations on having your offer accepted.

Think Long Term When Buying Real Estate

Dear Monica:  I am in the market to buy a rental property but real estate prices have gone up so much that I am thinking I should wait until the market cools a bit before buying.  What would you advise?  Jonathan C.

 

Dear Jonathan:  We have seen prices rise considerably in many Bay Area communities in the past 5+ years.  But there is still strong demand and companies are building large office spaces up and down the Peninsula.   All of those who work in the buildings want to live as close to them as possible or take public transportation if it works well for their commute.  So here is what I believe and what I tell my clients.  You don’t need to wait to buy, but if you buy,  you should have a long term plan for the property.  Quick turnovers don’t work in this market.  But a buy and hold policy does work, if you hold it at least 5 – 7 years.  Our market will fluctuate from time to time but barring a larger correction this strategy is the best plan.

 

Restrictions on Renting A Property        

Dear Monica:  I have been looking to buy a condo or townhouse but have not been able to find an affordable place in this market.  However this week I have seen a good place in my price range but the condo rules don’t allow an owner to lease the property.  I am in my 30s and have a good job but it is possible I could be transferred and if so, I would have to sell the condo because of this restriction.  What should I do?  Amy C.

 

Dear Amy:  I think the rental restriction makes this property a bad choice for you.  Some condo homeowner associations have rules that don’t allow owners to lease their properties and it affects the desirability of them.  You may not intend to lease the property but circumstances change and you may have to move.  If you can’t rent the property your only good option is to sell it.  The market might not be good but you would be forced to sell then or carry the cost of the property until you do.   It’s too bad you can’t go ahead and buy this condo but I would advise you to keep looking.

 

Getting a Final Inspection Approval      

Dear Monica:  I am in contract to buy a beautiful newly constructed house.  At the moment the Builder/Seller does not have a final approval for all the work that was done.  How would you advise me to structure my contract to allow for the fact that the final has not yet been obtained?  David G.

Dear David:  The best approach for you to take is to have a contingency that requires the seller to have a final inspection approval before you remove the contingency.  Once the final approval has been obtained, you can remove your contingency and close the transaction.  You may also want to have your own inspector inspect the property and produce a punch list of items the seller/builder needs to correct/repair.

There is a one-year warranty on new construction that covers all of the appliances, fixtures, plumbing, electrical and other things.  In addition, there is a 10-year warranty on things that are not immediately apparent but that become material problems during the 10 year period.  The limitations are spelled out in SB800, a California law that should be part of your contract.

Exclusions     

Dear Monica: I am in the process of selling my house and have excluded a few items that I don’t want to sell with the house.  I want to keep the washer and dryer, refrigerator and dining room chandelier.  My agent is advising me not to do this.  What do you advise?  Tom R.

Dear Tom:  Exclusions are often a negative in the mind of a buyer, some less than others.  If you want to keep your dining room chandelier, my advice would be to remove it now and replace it with a suitable but simple one, and then the buyer never sees the one you want to keep.  As for the washer and dryer, it is common for sellers leave these items with the house, but it is also common to exclude them.  If they are older, leave them.  If they are newer, it’s fine to take them but a buyer might appreciate having them left with the house.

As for the kitchen refrigerator, I would advise you not to exclude this.  Even if the refrigerator is not built in, it is unusual and definitely a negative for a buyer to have to replace the refrigerator as soon as they move in.  You didn’t say how much your house is listed for but with high prices in our area, buyers don’t expect to pay these prices and then have several exclusions.  If your goal is to achieve a good sale, it is best not to exclude anything.

Selling Above Asking Prices – How To Evaluate?

Dear Monica:  I see varying information about how much properties are selling relative to their list prices.  Some agents tout selling prices far in excess of the starting prices and other selling prices reflect different percentages.  How can I best evaluate this information?  James W.

 

Dear James:  The best way to understand this information is to note what the list price is.  Some agents price properties artificially low compared to their market value.  Thus when they sell substantially higher than the initial starting price it broadcasts the message that the property and the agent who sold it, must be fantastic to have achieved such a price.  One must look at the comparable sales to confirm that this scenario  of list price=amazing sales price is a result of agents pricing the property very low to begin with.

 

It’s true that selling well in this market means pricing your property within an attractive range of where comparable properties have recently sold.  Don’t price it too high but price where buyers see good value and room to bid a bit higher if there are multiple offers.  But extreme low pricing is not only misleading, it is frustrating to buyers.  It is more straight forward to price a property closer  to where it is likely to sell.

 

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