Chia Rodeski Real Estate Agent San Jose 1st time home buyer, Short Sale

San Jose real estate market update is on many people's mind lately as number of positive news surfaced in the last 2 months about the real estate market. Most recently, this includes Warren Buffet's call to "buy, baby, buy" real estate.

Here are some local San Jose statistics for the last 2 months that will help you to understand the market a little better.

1. Number of New Listings in January and February

January: 640

February: 620

2. Number of Bank Owned homes, new listings and closed (sold) sales

January: new listings - 89; closed sales - 86

February: new listings - 80; closed sales - 82

3. Number of short sale homes, new listings and closed (sold) sales

January: new listings - 208; closed sales - 203

February: new listings - 155; closed sales - 260

4. Sales price and Listing Price Median: trending upward

5. Sale price to list price ratio and months of inventory

January: SP/LP ratio - 99.2%; months of inventory - 3.8

February: SP/LP ratio - 99.2%; months of inventory - 4.5

Analysis:

1. Contrary to the misguided belief that there are "a lot" of foreclosure homes in the market, bank owned homes comprise only a small percentage of the homes for sale, about 13%. Compare that to short sale homes for sale at 32%, the number of traditional and regular sale is actually about half of the market.

2. Both median list price and sale price are trending slightly upward. This confirms that the market is picking up. This is largely due to increasing buyer demand from the historic low interest rates and the general perception of affordability.

3. Because of limited number of supply of homes & increasing buyer demand, most homes are getting very close to 100% of list price (99.2% to be exact). For buyers, this means selecting a great agent who is a strong negotiator and getting you the home; for sellers, this means selecting an agent who is strong at marketing to get you the most dollar possible.

4. Months of inventory is indicating a seller's market and this might be the biggest surprise of all. Generally speaking, more than 7 months of inventory indicates a buyer's market. 5-7 months of inventory is a balanced market; less than 5 months of inventory is a seller's market. This may be partly seasonal, meaning during the slowest time of the year, there is limited number of homes for sale. For buyers, this means to expect multiple-offers competition on a home priced correctly at market value. For sellers, this means to know how to select the right buyer who will close the transaction.

Conclusion:

How is the market? It really depends on why you are in the market - everyone's situation is different. One thing for sure is that you need a good agent to guide you through this market. Distressed home sales is still a factor to consider. Additionally, the lending requirement is a moving target that requires significant effort & knowledge to close. Finally, no matter how the market is moving, you need to evaluate your situation objectively to see what is possible for you. Feel free to contact me for a obligation-free consultation!

Many first time home buyers in San Jose CA may or may not realize that there are closing costs associated with each real estate transaction. Closing costs vary by county and are generally dictated by the local customary rules. For instance, in Santa Clara County, it's generally a seller-paid county; whereas in Alameda County, it's a buyer-paid county. However, there are still some costs to buyers if you're buying in Santa Clara County.

Generally speaking, the rule of thumb is to estimate for about 3% of the sales price to go toward closing costs. In another words, if you plan to purchase a $300,000 home, then your closing costs are approximately about $9000.

A big portion of the closing costs is your cost of obtaining the loan namely the costs to originate the loan. Depending on the types of lender you choose and how competitive the lender is, this origination fee is approximately $2800*. If you're obtaining an FHA loan, then part of your closing costs include prepaid costs such as 14 months of insurance and 2 months of property taxes. Some examples of the closing costs include: lender's title policy, appraisal, recording fee, processing fee, and all other administrative fees charged by the escrow company of performing services for the transaction.

In some cases, buyers may negotiate for the sellers to pay for some closing costs. However, in today's market, it's getting difficult to do so as inventory of listings falls and competition increases. In my opinion, it's best to save up for closing costs before entering the housing market. Another possibility is to request for closing costs assistance from first time home buyer's programs, such as the Santa Clara Housing Trust.

*Based on estimating purchase price of $300,000 with FHA loan

Please don't hesitate to contact me if you have more questions.

When I first started out in the business, I was primarily a buyer's agent, and in some ways, it was a default choice. It was the way to learn the business. Fast forward to today, I still enjoy working with buyers, except it is a conscious decision since early 2011 that I work primarily with first time home buyers in San Jose. There are number of reasons for this, but mainly, I just love the smiles when the first time buyers purchase their first home. I'm grateful and honored to be part of that process.

In today's more competitive San Jose real estate market where market is projected to stabilize and return to the normal 2-3% annual appreciation (best cities for home values, San Jose #1), it's EXTREMELY important for buyers to choose the right buyer's agent to represent you!

There are different school of thoughts on this topic; however, I believe there are few factors that are most relevant, especially for first time buyers in San Jose, CA:

1. How well does the agent understand and appreciate your needs?

In today's confusing market, where different types of sales can have different implications for individual buyers, it's very important that your agent understands what your goals and needs are. So many times, I see buyer's agents just rush to get prospects in the car and drive around the town; and the end of the day, it may turn out to be waste of everyone's time. For example, I'm currently working with a client whose lease is up soon, together we determine that it's best to stay away from short sales for the first few weeks of searching, because short sales generally take 60-90 days for approval.

2. What kind of system and methodology does the agent have in place that will help you achieve your goals?

In today's San Jose real estate market, homes in decent condition in the entry level pricing may get sold quickly. A competent buyer's agent needs to have system and methodology to assist clients getting to see homes in a timely fashion. Again, the traditional "let's get in the car and go see the home" may work haphazardly, but it does not work consistently. For instance, at our very first consultation with my buyer-clients, I explain how I work and the systems in place that will make home search an organized and efficient manner. Together, we are a team to get you where want be.

3. How is this agent going to negotiate and protect your best interests?

Every agent is different, however, as a buyer's agent, I firmly believe that my job is to protect my client's best interests. By understanding their goals in our initial consultation, I understand what their priorities are and can better negotiate the best price, terms, and conditions for my clients. There is a buyer's myth that working directly with a listing agent who starts out representing sellers can save money and time. The issue is that listing agent by default represent the sellers and there are only handful of experienced and ethical agents who can represent both sides well without compromising each side's interests. Generally speaking, it's wise to have a buyre's agent who understands your needs to represent you, as opposed to a random listing agent who may still has the seller's best interst at heart.

4. Is your agent more interested in the commission earned or placing your interest first?

Sadly, the general public has this image of agents being greedy and only cares about commission. Unfortunately, there are agents I encounter fit that profile, although I'm grateful that most agents in the Silicon Valley are professionals who do place their clients' interests first. Nevertheless, it's important to keep in mind of some red flags. For example, I often meet buyers who came to me after being disappointed with previous agents and the number one complaint I got was "he (she) just keeps telling me that this home is the right one for me, you know, almost like pressuring me to sign the offer right there!" Another classic one is "it seems like she (he) only shows me the homes that are higher priced"

5. Does your agent communicate? And how does the agent communicate?

This is a surprising one for me when I start noticing patterns when disgruntled buyers came to me. I get this comment repeatedly: "well, I don't know if I have an agent, because I don't hear from him/her" Communication is so important in this business, especially, when it comes to negotiation time. When interviewing for a buyer's agent, be sure to ask what is the communication channel and how often. By no means, I'm not suggesting go find an agent who is on call 24/7. In fact, my experience shows that proficient agents work effectively and therefore have time for family and other obligations. As an example, I share how I communicate. Generally, I do not work every evenings & weekends; however, I understand that clients may see a home at an open house. So I do check phone messages on regular basis. I return phone calls 12-24 hours and e-mail messages 24-36 hours, usually sooner in both cases.

Lastly, when choosing a buyer's agent, a lot of times, your intuition will tell you much faster than any "logical analysis" can. This means, if an agent gives you a weird vibe, well, it does not hurt to interview another person. You're making probably the biggest financial investment of your life, you want to be sure your agent can represent you well and help you achieve the goals of home ownership with least amount of time and hassle and hopefully with a lot of positive experience!

By the way, if you're looking in San Jose or the greater Santa Clara County area, be sure to interview me!

"Where are the homes for sale in San Jose?" - a repeated question from several buyer-clients in the last 2 weeks. The clients were right - homes for sale in San Jose and in the greater Santa Clara County area have been low (detailed explanation here). To help clients understand the real estate market and also to provide a peace of mind, I launched my "Seasonal Real Estate Cycle" explanation:

There are two real estate cycles in a normal year: slow and high activity trends. The slowest time of the year, no surprise, is the holiday season that generally starts around Thanksgiving week and lasts through Super bowl. Super bowl marks the last official holiday party of the season. Then, in February, it transitions into the HIGHEST activity period in real estate, mainly during Spring time (March, April, May). This is the time when sellers are thinking about selling and those buyers who are looking to get the kids into a particular school district are most active.

Then, June is another transition month where many social activities (e.g. graduation and weddings) began to take place. The second slowest period in real estate is July and August when children are out of school and summer vacation is happening. After Labor Day weekend, as our brokerage has been tracking, there is the second highest activity period - in the fall time - through middle November, around Thanksgiving time. Then the cycles repeats again.

Homes are sold all year round; however, understanding the seasonal cycle helps clients to set up realistic expectations when things get side tracked a bit. If you're currently a buyer - don't get discouraged, there will be more homes coming on the market. By the same token, please continue to search. Fewer homes can be discouraging; however, there are also less buyers in the market, meaning less competition; therefore, you may save some money because overbidding is less likely. If you're currently a seller and not seeing a lot of showings/activities, same suggestion, don't get discouraged as there will be more people entering the market as we transition into the high activity time in Spring time.

Finally, it's important to remember that this information isn't necessarily to encourage you to "time" the market. Instead, this is to help you understand the market dynamics so you can make the best decision based on YOUR PARTICULAR needs. An experienced real estate agent will be able to help you sell a home through top notch marketing plan regardless of the time of year. Similarly, the same agent will be able to help you buy the dream home and negotiate the best deal for you any time of the year. If you are wondering how to do this, please contact me!

As a first time buyer in San Jose, CA, a high cost housing market, it's likely that you may need to consider buying a condominium (condo) or a town home instead of a single family home as your first home. Here are some factors to consider:

Let's define what each of these terms mean:

Condo: with this type of homes, legally you own the space within the four walls of a unit but not the land the unit is built on. Additionally, you owns a share of the common ground. In another words, if there are 25 units in this condo development, then you own 1/25th of the common ground. Generally, you may have up to eight neighboring units; meaning you can have neighbors above, below, next to you, depending where your unit is located.

Townhome: legally, you own both the space and the land the unit is built on. You have less neighboring units, potentially one on each side.

Both condos and townhomes are what we called attached homes - referring to sharing of the walls with neighbors.

Single family homes: these are also called detached homes referring to that each home is typically a stand-alone unit. In this type of dwelling, you have neighbors who do not share any walls.

As aforementioned, with condo and townhomes, you have less privacy since you share walls and space with your neighbors, relative to owning a single family home.

Another key difference is that condos and townhomes have what is called a home owner's association (HOA) dues. This is additional cost to your mortgage payment. In San Jose area, the HOA can range from $200-$500 depending on what the HOA covers. At first glance, first time buyers may find this cost appalling. However, the HOA dues does cover common ground maintenance, exterior maintenance (roof, walls, etc), and hazard insurance. This can mean that as a first time home owner, your responsibility for maintenance is alleviated greatly. Additionally, the HOA dues may cover amenities like swimming pool, tennis court, or gym facility.

Because the entry price to condo and town homes is a lot more affordable than a single family home, it's an option to consider for many first time home buyer. In the United States, homeowners change homes every 5-7 years due to different life events. In another words, starting out with a condo/townhome is a good option when the lifestyle fits your needs. Chances are in few years when the financial situation changes, you may be able to buy a single family home.

In case you're wondering what the prices are like for Townhomes and Condos, click here to see a sample. This may be the answer to your calling for first time home ownership!

Feel free to contact me for an obligation-free consultation to determine what types of homes best fit your needs!