Selling your home
Hi South Bay sellers,
Thank you for taking the time to read this South Bay real estate market letter. To aid you in deciding what’s the best approach for you and your home, please allow me to share a few points about the current market, this sub-market, and our approach.
Current market around your home
• The Single Family Residence market in the South Bay is in survival mode at the moment. We’re still seeing multiple offer situations on quality homes that are priced competitively (which remains the best strategy for maximizing sale price in this market). Now, homes priced in the ballpark of typical south bay 3 bedroom 2 baths are typically seeing double digit offers, simply because the pool of buyers able to afford this price point is much greater than the pool of buyers able to afford your above average size South Bay home.
• Nevertheless, I feel that the market is starting to slow and would expect the market to heat back up by the time you get around to selling in the late summer/fall timeframe, depending on how the economy handles the restrictions. By the same token, the market is perceptibly slower now than it was 2-3 weeks ago. This should not come as a surprise.
• Ours is, historically, a highly seasonal market. In 2015, 2016, 2018, and 2019, the sharpest appreciation was in the first few months of the year before sanity returned in the late spring or early summer. The uptick in prices began earliest this year, with the market substantially heating up and double digit offer situations returning just after Thanksgiving. A few reasons likely account for this – enrollment deadlines for South Bay schools, bonus season for a lot of the big tech companies, techie buyers who tend to take extended vacations to their home country in the summer, etc. – but the fact remains that this trend of substantial appreciation typically happens this time of year.
• By the same token, I’d expect inventory to tick up as we get closer to the summer, especially once restrictions are removed on the economy. This, also, tends to happen in most years. Sellers see what the market is doing and want to get in on the action and throw their home on the market. I was recently talking to one of my best stagers and she noted that she’s booked solid with stagings – often 2 to 3 homes a day – for the next 3-4 weeks straight. This is but one anecdote, but I’d be surprised if inventory doesn’t rise. (That said, whatever it rises to will still be “low” by historic standards and I’d still expect this to remain a healthy market – just not a borderline-insane overly seller’s market.)
• And, of course, there’s this mess with COVID-19. Whatever your opinions on the actual severity (or lack thereof) of the virus itself, some potential buyers are getting whipped up into a frenzy and are dropping out of the active buyers pool. I have seen these with several of our clients who are, in our opinion, irrationally scared. Impossible to know how much of an impact this will have… but it’s also impossible deny that it is having – and will continue to have – some impact. This impact is being blunted to some degree by interest rates, which have never been lower, and there is still far more demand than supply in our market, but I’d be doing you a disservice if I didn’t acknowledge what I’m seeing.
Comps / valuation / appraisal strategy
• I can share the most recent relevant comparable sold properties around your home (comps), and a map of these comps, so you can gauge the extent of remodeling in these homes relative to yours.
• Depending on your location, I try to keep the footprint tight, because the market in the more remote parts of South Bay operates a little differently than that in the more urban areas. Obviously, the schools are a factor in the value as well. And with buyers focused on short commutes, nearby amenities, and proximity to big tech tend to hone their searches in the heart of Santa Clara County. For instance, at the end of the day, when the market is slower, we tend to see higher average days-on-market in the more remote areas than between the 101 and 280.
• Rather than the typical 4 months, I go back 8 months back on the comps to account for both hotter and cooler market periods. Obviously, I’d need to spend some time inside the home to provide a more granular estimate on value.
• As the virus news worsens and the market cools as temperatures warm, as I’d expect it to do for the reasons articulated above, I’d recommend we apply an appraisal strategy prior to going to market. Often we have seen this “pre-appraisal” approach influence buyers to reach for the higher offer price for a number of reasons.
• In short, once the house is ready for the market (and we’ve done any sprucing up to it, as I’ll outline below), I’d recommend we hire an appraiser and pay for our own appraisal. Unlike appraisals conducted at the behest of a bank/lender, once a property is put under contract, we tend to see higher valuations on appraisals done under these circumstances, at the behest of a homeowner. And, Ryan or I would be there to ask the appraiser to maximize the value within the range he values the property. We’d price the listing 4% to 7% below the value in the appraisal to get people in the door but would include the appraisal prominently in the home’s disclosure packet. One of the biggest fears homebuyers, particularly first-timers, have in bidding on a home well above the asking price is the fear the home appraises low. This strategy helps allay those fears, resulting in higher selling prices.
Selling approach for your home
• Should you opt to work with me, I’d be your project manager on the ground. Below are the steps I’d take to maximize whatever the market is at the time:
• The first thing I’d do would be to take exterior photographs (including some drone shots to show off the view) and begin marketing the property off-market and on Top Agent Network (TAN), a great off-MLS resource for local top agents and brokers. If we sense the market will cool again as we get closer to the height of summer, this would enable us to start doing targeted marketing of the property very quickly – perhaps while still occupied. Now, the property is still more likely to sell on the MLS, when far more eyes will see it, but we have had success off-market before, and there’s no reason to neglect this element of the overall strategy. If we get a serious agent with a serious buyer, we can give the tenant notice (or, if we’re getting a lot of interest, coordinate an invite-only off-market open house to get multiple brokers and their clients through in a compressed period of time) and coordinate a couple private showings.
• In addition to our own thorough walk-through with our interior designer, we like to do professional inspections (roof, pest/wood, and home) up front. Oftentimes, there are items in the inspection reports that we can easily fix yet which would unnecessarily spook first-time homebuyers considering the home – things like minor cracks, many section 1 call-outs, etc. (Stucco and drywall cracks are a great example – these are often due to little more than natural settlement and temperature related expansion/contraction, but we always see buyers seeing these cracks and assuming there are issues with the foundation. Better to just patch and paint them up front. Similarly, if issues are called out on the pest inspection, for instance, we can see which of these tend to spook buyers the most, abate them, and pay a small re-inspection fee for the inspectors to come back out and issue a clean(er) report.) Taking the time and spending a little bit of money to do this up front can pay off down the line in more and higher offers. I’m confident you’ll net more by letting us fix a few things up and do the before/after inspections than by simply doing one set of inspections and putting the house on the market as it currently is.
• As alluded to above, we’ll do a thorough walk-through and put together a small list of targeted improvements we can oversea. We’re not talking about a remodel here – nothing nearly that burdensome. Just basic tweaks (if even needed) to maximize the value of the property without putting in considerable time and money – for instance, painting some walls, ripping out some ratty carpet, etc. (I’m quite confident that had the owners of a nearby sold done this in a few rooms, they would’ve got more traffic through the home and likely attained a higher sale price.) Again, this is optional and we’ll know more once inside the home, but we’ve got a great painter and a great flooring guy who has helped us quickly tack on $50-100k in value to prior listings. We’ve also got a great, hungry young landscaper who can spruce up a place with a few plants and bark if need-be.
• Once this is done, we’ll get our cleaning crew in there to do a professional deep-clean of the home, including windows.
• On the heels of the cleaning, we’ll have our interior designer professionally stage the property with high-end furniture and décor. Much like the targeted cosmetic improvements mentioned above, this isn’t required… but it’ll be money well spent, will get more people in the door, and will result in a higher sale price. Just as many homebuyers can’t see past polarizing wall or floor colors, many can’t visualize the full potential of an empty, un-staged home.
• Next is professional HDR photography of the home, inside and out, including drone photography and twilight photography. Once we get the shots, we’ll order high-quality print marketing brochures, with an eye towards having them ready before open houses.
• Before going live on the MLS, we’ll take a close look at what’s going on in the neighborhood – if, for instance, there is a comparable property that’s live, we may recommend waiting a few days to afford that property time to go under contract. (If, on the other hand, your home clearly outclasses that home, we’ll likely recommend going live on the MLS quickly, as this home will make yours look even better by comparison.) At the end of the day, we like to go live on a Tuesday, to meet the broker tour deadlines and get public eyes on the listing well in advance of the weekend, when we hope to maximize the foot traffic through the home. Open houses are much bigger in our market than almost anywhere else in the country. In addition to Saturday and Sunday open houses, we’ll hold the house open on Wed, Thurs, and Fri as well. This gets more people through the home – which equates to more potential offers – and improves the chances of drawing a strong preemptive offer prior to the weekend open houses. The state of the market at the time, the amount of traffic through the home (open houses and agents taking buyers), the number of disclosure packets distributed, and the number of agents stating they intended to write offers will inform our decision on if/when to set an offer deadline.
I’m happy to jump on a call at your convenience to provide more details or answer any questions you may have. Once I get a better understanding of when you expect your home to be ready to sell, I can also send out a project calendar with the waypoints articulated above, all of which are geared towards maximizing the property’s potential on the MLS to get the highest price. If the strategy enumerated above is amenable, feel free to give me a call
(408) 857-5153 whenever the time is right for you…
Thanks, especially, for taking the time to read through this long letter.
Happy to help,
Tim and Ryan