Roots2RealEstate

Oh Boy, Let me tell you about my last two deals!
It’s a very difficult time right now to be the agent who has to set the new unfavorable benchmark price for a neighborhood.  In both my deals the scenario was that the buyers were putting more than the typical $100,- down, and both buyers are savvy investors.   However, they both felt certain the market has already come down 40%, and offered very, very low ball offers.  Both my sellers were flat out insulted that they were hit with such a big gap in value from homes similar to theirs that sold just a short 2 months ago.   For both deals, I was able to negotiate a 20,- difference between both parties, & both  wanted to walk away from the deal. 

It’s a funny market - some people negotiate with the thought that it will, or already has, hit the dreaded economic forcasters predictions regarding a loss in home values; while others think this area of Silicon Valley will bounce back faster, economically speaking, verses over the nation, and may not go up in price but won’t lose as much value either in popular neighborhoods.  As sellers don’t want to be the ”evil one”  that brings the neighborhood down, buyers don’t want to be the “biggest losers” at buying a home that will come down in price either.  

Buyers need to remember that the only ones that have full control over neighborhood values are them.  They are the ones solely responsible for setting a fair market value with the price they are willing to pay for a home in any given neighborhood.    Therefore you’d think buyers may not want to bid so low, so that the neighborhood retains a bit of its price stickiness ceiling. 

As with doing appraisals, the last sold comparable is a key element in determining a property’s worth.  One property sale can have a domino effect in an average looking neighborhood.  One home sold way below market is all that is needed to get it started, and will set the bar down a couple of notches. 

I truly believe when it comes to deciding on what price to pay for a home one must  compare different neighborhoods and consider all factors, including those properties around the subject property, down the street from it, and up to the major streets accessing that particular neighborhood.  If the majority of the neighbors have done some big remodeling projects, lawns and landscaping is kept up, and the home is in a choice location, then it only seems fair that a home with quality upgrades deserves to retain its equity position.  However, if a neighborhood is fair and is filled with original condition homes, junky cars are on the street, and has a lot of homes that are rentals, then these neighborhoods should not be selling for $800,- and need to be brought back down to reality. 

To just blanket San Jose and say 40% drop all over in prices, makes no sense to me - determining a particular micro market for each neighborhood with some of the tips above is the key to buying a home that’s  a sound investment in any market.   

Buyers if the home has quality upgrades, in superior condition and is in a choice location, please try not to add insult to injury by giving a  low blow offer to the sellers as your first initial offer price, be reasonable and have facts that support your offer.  For example, if you are willing to buy a home listed at $870,- and your bottom line price is $830,-, don’t come in with a $780,- offer.  Sellers are offended right from the start and you have not painted a positive picture about yourself in convincing them to sell you their home.  Other sellers are emotionally wrapped up in price and are concerned of offending any longtime friends/neighbors.  That shouldn’t effect price but it is one of the emotional responses I’m hearing right now from sellers. 

It helps to use an agent who is well hearsed in negotiation, that can get a listing agent and a seller to understand why your offer is at the price it is at.  I’m tired of hearing agents quote ”because the forecast is predicting it so”!  Give concrete proof, use your offer price and the factors like repairs and neighborhood condition to explain your price stategy.   

I remember this same occurrence around 1989…. Anybody with me? Real estate moves in cycles and roughly this valley experiences two year intervals.  That will be another post for another time.