2009 has been quite a year for Silicon Valley real estate. Santa Clara County finally saw the tsunami which hit the rest of the U.S. in 2007/2008. Yet, even with the valley’s broad drop in home values, some select cities, such as Cupertino, CA; Los Altos, and Mountain View, escaped the wave of foreclosures and short sales.
At the start of 2009, mortgages, particularly jumbo mortgages (over $729,750) were virtually impossible to qualify for, but as time passed the banks slowly opened their purse strings. As home prices dropped we saw the re-introduction of FHA and VA loans (government guaranteed loans where buyers only have to put 3.5% down). In years past, the latter loan types didn’t make sense in the valley as our home prices exceeded the loan thresholds for these products.
As “Bank” Real Estate Owned (REO) properties started to show up in Santa Clara, most sellers and even many agents didn’t know how to accommodate this new competition. At first sellers tried to ignore REOs as they thought their home was immune to the effect that bank sales would have on home values. San Jose, North Santa Clara, Gilroy and Morgan Hill saw values drop as much as 30%.
At the start of 2009, buyers were reluctant to move forward with a purchase - they were concerned about the economy at large and more specifically if they would have a job in 2009. Buyers also were much more knowledgeable of market trends. They did their homework by consulting the major web portals: MLSlistings.com; Realtor.com; Zillow; and even Redfin. Lastly, buyers also became more pragmatic about the amount of money they wanted to spend. As a sign of the times, all the buyers I worked with this year all put down at least 30%, and two clients purchased properties with cash.
In August, the Home Valuation Code of Conduct (HVCC) was introduced to the real community. In a “knee jerk” effort to reduce abuse by appraisers, Fannie Mae & Freddie Mac rolled out HVCC. The net effect of this new policy is that lenders could no longer talk directly to appraisers. A new middle man – an appraisal aggregator – took the order from the bank and assigned it to an appraiser. Unfortunately we were not dealing with appraisers with local knowledge. Appraisal aggregators hired appraisers who would bill at half local fees to keep costs down. It was not unusual to see appraisers as far away as Bakersfield respond to appraisal order in the valley. As such, the appraisers didn’t have the local understanding that is such an important part of home valuation.
While no one questions the good intentions to stop abuses in the appraisal process, the unintended consequences have made appraisals completely unpredictable. Twice this year I had homes that sold with multiple offers, yet did not appraise for the sale price because the appraiser did not understand the value of being in Cupertino School District or give any value for a finished basement and attic.
This year buyers and sellers, more than ever, asked for referrals to experienced agents. We also saw the impact of social network sites – Facebook, Yelp, and to some degree Twitter are being used as a way to find quality real estate agents. The clients who found me on the internet felt they had a clear idea of my experience and qualifications so once we started working together the home buying process went very quickly. I had three clients in contract within two weeks of working together. In fact, one client closed escrow 19 days after our first meeting.
With all the turmoil, several of my Seller clients did very well in a supposedly down market. Three of my clients who sold homes in Cupertino, saw very brisk sales with multiple offers all at or above the asking price. To some degree this was an anomaly to the majority of home sales in Santa Clara County. What made the difference?
· Location, location, location – These homes were all mapped to Cupertino’s best schools.
· These homes were dressed to sell – updated kitchens and baths, freshly painted and staged.
· Leveraging the internet with multiple photos, virtual tours and property specific websites. www.1149Hunterston.com, www.21295Rumford.com, and www.10551Madera.com to advertise these properties.
· Pricing these homes at 98% of recent sales to assure the home would receive a positive appraisal.
With all the changes in 2009, I found this year to be both challenging and very rewarding. The days of the easy real estate transaction are behind us. Buyers and sellers are both finding the current real estate environment challenging to the point of frustration. The buyers that want to buy often can’t because they’re losing out in a multiple offer situation. Sellers have to think twice about accepting the highest offer because the home may not appraise due to HVCC guidelines. More than years past, clients see value of working with a competent REALTOR®.
The days of putting a stick in the ground with a “For Sale” sign are behind us. I say “Yippee!” Now it’s time for the “REAL” professionals to step up and show their stuff. Will the future be easy? No. In fact, I believe many of today’s successful agents will not make the cut going forward. It’s clear the internet and social networking platforms will become the new measurement of who makes the cut. Who gets the call saying “I want to work with you?”
The old techniques of mailing out postcards, door knocking, and cold calling will be as antique as the MLS book. We are quickly moving to a permission based society where “I’ll call you, don’t call me”. What will work hasn’t changed. You have to show value. Real estate agents more than ever need to be excellent communicators, with the ability to multi-task constantly. They have to know how to market themselves. Lastly, REALTORS need to become master negotiators.
In closing, I want to say a big “thank you” to the clients, customers, agents, lenders, inspectors and escrow officers I worked with this year. I learned a little more from each transaction this year. You pushed me beyond what I thought my team and I could accomplish. I know I’m a better agent from this year’s experience, and look forward to even more in 2010.