Earnest money is an important factor when you’re making an offer on a house. When you make an offer to purchase a house, the “earnest money” is the deposit that shows the seller you are serious about the purchase. The money opens the escrow and can be applied to the buyers’ down payment or closing costs.

The earnest money amount is negotiable. It typically varies depending on the price of the house and strength of the market. Generally, it’s recommended that your earnest money deposit be about three percent of your offered price. And although earnest money is not required by law in most states, it is standard practice in local real estate transactions.

When the seller accepts your offer and earnest money, the property is taken off the market. In a hot real estate market, a large deposit may impress a seller enough so they will accept your offer instead of someone else’s.  However, buyer beware…it can also put you at significant financial risk if for some reason the transaction runs into trouble not covered by a contingency in your purchase agreement.

The Standard Offer And Purchase Contract stipulates under what conditions your earnest money will be returned if the contract fails. We’re experts on this stuff; if someone you know is in the market for a home and needs competent and caring representation, please call us at 408-861-4813.

Was that you guys I saw being interviewed on the Channel 4 news recently, about the state of the local real estate market?

You betcha!  But, don’t worry; we’re not raising our rates just because we’re now famous.

Although we didn’t get paid for it, we help out when the local media needs an expert to explain things.  We were asked to comment on why homes in Sunnyvale were selling faster than any other city.

View Clip from KRON 4 News - Fastest Moving Market

Not every seller will come to the same conclusion at the same time. A     property is not worth what the seller wants, what the seller paid or what somebody else paid. A property is worth what a willing and qualified buyer will pay today, and not a penny more. The good news is sellers are starting to figure that out, one at a time.

The trick is identifying the bounce — and when to buy a specific property. This is particularly important with investment properties. As an investor looking to maximize profits, the price of a specific property is at rock bottom when the return on investment is better if you buy the property than if you leave your money where it is. Compare the real estate rental income and positive cash flow to the other investment options we all have, i.e. stocks, bonds, savings accounts, etc. As real estate prices come down, and consequently the mortgage payments and taxes come down, while at the same time the demand for rentals is growing, at some point the positive cash flow will make the investment irresistible. That is the bottom for an investor.

You must ignore everybody else and their investments. What we see now in hindsight is that many people paid too much when they invested in a seller’s market. Remember, for you to win, somebody else has to lose. Because so many people are losing so much of their equity, it makes your ability to win much easier in a buyer’s market like we’re in right now.

In a stable market, real estate prices are not driven up by investors. Home owners should be the predominant driving force. When a renter sees that their rent is higher than what they would be paying if they were to buy a similar property, the tenants tend to once again convert to homeowners. That is the bottom line for tenants. We know not all tenants have what it takes (income, savings and credit) to secure the American dream of home-ownership. Consequently, there will always be tenants and they will always need investors like us to provide them with a home.

It’s been years since we’ve seen prices low enough that we could invest in nice properties in great locations. If you’ve ever been tired of hearing, “I remember when I could” or “I should have bought them all when I had the chance.” Now you can. You have a second chance — take advantage of it!

For anyone seriously considering buying in Sunnyvale or Santa Clara County, that really is the question.  The concern is whether or not they’ll be overpaying if they purchase today. The answer is to use your common sense and go with the voice of reason: If you plan on moving again in a year or two, or even less, then no, this isn’t the time to buy. But if you intend to live in your new home for five or more years, then it’s certainly a great time to buy. Owning real estate is one of the best investments — over time — that anyone can make. Where else can you purchase a major asset, live in that asset, have it appreciate over time, AND write off many of the costs of owning that asset? As long as you buy smart, you can always make your investment work for you.

First, we applaud you;  your generosity will make a real difference in the lives of people fighting blood cancers.  Thank you so much.  It makes us feel good to have helped, and should make you feel good too.

As for the run, OK, we can say it….old man Shapiro and his young cohorts may have bitten off more than they could chew!  We can say one thing with certainty….26.2 miles is a long damn way!

We started with a pasta dinner the night before to carbo load, then arrived at the starting line with unbridled enthusiasm for the upcoming “run”.   But, starting at about the six mile mark, my left foot started to ache.  A mile later my right hip flexor was talking to me, then the ball of my right foot started saying nasty things.  And that’s how things went.  After each mile, the three of us would list the three things hurting the most at that time.  The list changed as different body parts began to fail, sometimes simultaneously!

And, we think someone was playing a trick on us those last few miles, because the mile markers seemed to get farther and farther apart.  Due to insufficient training and some serious pains, we were relegated to walking most of the second half of the race. So, while we didn’t set any speed records, we did run together, stay together, and finish together .

Thank you again.  You’re heroes to the people you have helped.

Gary, Robert, and Allison

$10,000 to help find a cure for leukemia and other blood cancers.

We will be running the “Rock n Roll” MaRaTHoN (that’s 26.2 miles… yikes!) in San Diego, CA, on June 1. We’re completing this event in honor of all individuals who are battling blood cancers.

Will you PLEASE make a donation to support our participation in this endurance event? Simply click on the link below… and forward this link to as many people as you can to encourage them to donate as well!

DONATE NOW

We hope you’ll check back often for updates on our progress!

Thank you so much for your support!

Gettin Skinny For a Good Cause,

Gary, Robert, Allison

It’s important to remember, real estate follows true principles of economic supply and demand. When supply is low, demand for each available home is increased, which pushes prices upward; when supply is high, demand for each available home is decreased, which results in lower prices.
Also remember, our local market seems to operate on a different planet than the national market.

Nationally, it’s pretty much gloom and doom in most areas. Inventory is rising close to all-time highs in many areas. Prices are declining in the vast majority of them. The number of homes heading into foreclosure, where the owners are falling behind in the mortgage payments, is increasing each month. And the number of homes being foreclosed on and auctioned off is on the rise.

Locally, however, it’s a different story. We do have rising inventory, and fewer transactions, but it’s not across the board. In Santa Clara County, areas which have high performing schools, such as Los Gatos, Saratoga, Cupertino, Sunnyvale, Los Altos, Mountain View, and Palo Alto, have not had huge increases in inventory. Those areas are (and may always be) in high demand, so the listings sell before they have the chance to pile up and increase in number. This demand has also kept the prices from slipping very much.

As you head south, the story follows the national headlines. In many areas of San Jose, and further south in Morgan Hill and Gilroy, the market is VERY slow. There are large numbers of foreclosed homes coming on the market, and numerous short sales. The prices have dropped and are continuing to drop. These areas were in the prime price range for the “no qualification, no verification” loans that were so popular with first time buyers. Most of those loans were at adjustable rates, and as the adjustments kicked in, many homeowners couldn’t handle the larger, adjusted payment, and went into foreclosure. As the foreclosed homes come back on the market, the inventory naturally rises.

Associated PressAll Associated Press news

WASHINGTON (AP) - A component of the government’s tentative economic stimulus package announced Thursday would give an immediate lift to buyers and sellers in higher-priced housing markets.

The package agreed upon by Democratic and Republican members of the House would allow government-sponsored Fannie Mae and Freddie Mac to buy mortgages up to 75 percent more expensive than the current $417,000 limit. The Senate and White House still must sign off on the proposed stimulus plan, which also includes tax rebates for Americans.

Raising the limit on so-called conforming loans will allow a larger pool of borrowers to find lower rates when buying a new home or refinancing an existing mortgage…Read entire article.

President Bush recently signed into law a new measure giving tax breaks to homeowners who have mortgage debt forgiven. Under preexisting law, the debt forgiven by a lender, such as for short sales and refinances, was generally taxable to the borrower as debt discharge income. With the passage of the Mortgage Forgiveness Debt Relief Act of 2007, a taxpayer does not have to pay federal income tax on debt forgiven for a loan secured by a qualified principal residence.

This tax break applies to debts discharged from January 1, 2007 to December 31, 2009. Qualified principal residence indebtedness is debt incurred in acquiring, constructing, or substantially improving the residence (up to $2 million for refinances).

For purposes of calculating capital gains, any debts discharged excluded from income under the new law must be subtracted from the basis of the taxpayer’s principal residence (but not below zero). However, taxpayers may generally exclude from capital gains income up to $250,000 (or $500,000 for married couples filing jointly) for properties owned and used as their principal residence for at least two of the last five years.

Click here for the full copy of the Mortgage Forgiveness Debt Relief Act of 2007 .

The preceding is for informational purposes, and is not to be considered tax advice. The SV Home Team, specializing in real estate sales in Santa Clara County, and specifically in Sunnyvale, California, is simply trying to disseminate information we hear that might be beneficial for the public at large. We are not accountants, and we always advise verifying this and any information which can have tax ramifications with your tax advisor.

We STRONGLY recommend purchasing investment property; we cannot think of a better or safer way to gain wealth, in the long run, than to own more real estate! Where you should buy is the better question.

OK, so where should I buy and how do I go about it?

The first thing to decide is whether you are more interested in positive cash flow or overall appreciation. This will help in determining where you should look to make your purchase.

Buying real estate in the Sunnyvale area, or really anywhere in Santa Clara County, would be a purchase based on overall appreciation. This is because a home’s value here in Sunnyvale is very high in relation to it’s rental value; but, it can provide excellent appreciation in the long run.

For example, let’s say you buy a four-plex in Sunnyvale for a purchase price of $1,000,000. With 25% down ($250,000), your monthly payment for principal, interest, taxes, and insurance will be in the range of $5900 per month. You’d also have to add another $400 per month for expenses like water, garbage, and landscape maintenance, bringing your total cost to $6,300 per month. Since it’s local, you could likely manage it yourself, saving the property management fee.

Current rents for the four units would probably total in the range of $5,300 per month, so you’d have a NEGATIVE cash flow of about $1000 per month. To make this purchase profitable in the long run, you’d need the property to appreciate enough to overcome this negative cash flow AND provide a decent return on your investment (the down payment).

For example, if your desired return is the equivalent of 8% on your money, you’d need the property to appreciate an average of $2666 per month; the $1,000 negative cash flow PLUS $1666 per month (the return on $250,000 at 8%).

Now, contrast that with a positive cash flow investment (not really possible in Sunnyvale), for which you’d have to look out of the area.

As an example, in Cincinnati, Ohio, today you can purchase an apartment complex of 34 one-bedroom units for a purchase price of $750,000. With a 25% down payment, the total cost for the loan, utilities, taxes, property management, etc. would be in the range of $11,000 per month.

Current rents for the units would be in the range of $13,000 per month, so you’d have a POSITIVE cash flow of about $2000 per month. While the investment is not likely to increase much in value (appreciation), the return is realized on a monthly basis, through the cash flow. A return of $2000 per month on an investment of $187,500 equals a 12.8% annual return on your down payment, even if the property doesn’t appreciate. You’d of course have to factor in a vacancy rate, so the return would likely be a little less.

We welcome you to post your comments and/or questions regarding these or any other real estate investments. If you’d like to discuss them in person, or get more information about anything real estate related, please give us a call at 861-4813! We have specialized in selling residential real estate in Santa Clara County, and specifically in Sunnyvale, since 1984. We’ve successfully sold over 1200 homes in Santa Clara County; you won’t find anyone more knowledgeable about the market here!