It is important to distinguish between an appraised value and “fair market value“–the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.  An appraisal is an opinion of value that is typically done as part of the process of obtaining a loan.  The goal is to provide assurance to the lender that the property is adequate security for the loan.  Appraisers in California must be licensed and must follow accepted appraisal principles.  For example, an appraiser may only consider sold homes within one year in comparing them to arrive at a value for the subject home.  The appraiser will look at those homes that have sold in close proximity to the subject home and adjust their value by comparing their attributes and condition to the subject home.   This is called a “sales comparison analysis.”  The appraiser will also use a “cost approach” to estimate the value of the land and the cost to rebuild the home.  The appraisal generally contains both of these analyses.  Where appropriate, the appraiser may also use the income generated by the property to value it.

 A Realtor cannot appraise a property but can do a comparative or competitive market analysis.  As in the sales comparison analysis used by the appraiser, the realtor compares other homes in the area to the subject home.  A Realtor, however, does not have the stringent guidelines while govern appraisers and can consider factors like expired listings or homes which are on the market but have not sold and have been sitting on the market for a long time.

Appraisers often call upon Realtors for the details about particular homes they use in their appraisals because they have not seen the inside of the homes. 

An appraisal is really an attempt by the appraiser to support the sales price.  Contrary to the Kenneth Harney article, we as agents seldom see homes appraise for more than the sales price.  Since the purpose of the appraisal is to support the loan amount sought, there is no up side for an appraiser to exceed the sales price.  While it may make a buyer feel good, it unnecessarily subjects the appraiser to liability.

 What is an appraisal good for in deterimining the sales price of a home?  As they say in the song  War, it is good for ABSOLUTELY NOTHING.

 Elaine White 

WEEKLY MARKET WATCH

Week of September 23rd

 It is perplexing and frustrating to continue to see news reports with people who could be considered little more than “real estate pundits” talk about only one side of the current real estate story.  This week, the controversial stock market analyst Jim Cramer of Mad Money told viewers of The Today Show that “If you buy a home now, you will lose money.” He went on to add “there is no money and no programs for first time home buyers.  Down payment money is the biggest issue in the market, because young people don’t have any.” Housing is a good long-term investment – it’s not a day-trading activity.  As we witness the steep increase in foreclosures among housing boom “flippers” who secured sub-prime, adjustable rate loans with no money down, we see the folly of playing the housing market like the stock market. Homes are not stocks. Most people stay in their home for about 6 years – they buy for the long haul to create a home for their family, not to buy, then turn around and sell six months later. Owning a home isn’t just about investment, although that’s certainly important. It’s also about building community, a place of your own, and having a part of the American Dream. For people who want to buy a home to live in, this is truly a great time to buy a home.  In some areas there may be more to choose from, mortgage rates are historically low and the economy is strong.  There are some investor opportunities out there as well, but it’s important to remember that the criteria regarding these buying decisions are different between the investor and the homeowner. In our area we have seen steady appreciation in home values over the last 30 years.  Regarding the median prices in many parts of the Bay Area and Silicon Valley, most specifically in San Francisco and the Peninsula, properties are not only holding steady, but actually increasing. The case could easily be made that waiting for prices to drop may make the realization of home ownership steadily more difficult.  Signs aren’t pointing to bargain basement pricing ever becoming the norm in our markets, though price is now, as always, an important consideration. Smart buyers are buying.  Smart sellers are selling.    

Witness the number of buyers visiting our more than 600 homes held open last week.  A Berkley listing was seen by almost 100 visitors.  A Walnut Creek listing received four offers and sold for three percent over the current asking price.  In San Mateo Park, a home received five offers and the lowest down payment among them was 50 percent.  Palo Alto continues to report 100 percent multiple offers.  One San Francisco office notes that the $2 million-plus market is “on fire.”  The upper end markets are clearly not sending a negative message – in fact, quite the opposite.  Last week San Francisco Van Ness closed both sides of a $7M property in a two week long escrow, and in the same week Woodside opened a new sale for $12M, sold by a fellow CB Menlo Park-El Camino agent, and the following day Woodside opened another $13M sale.  Again, the message is quite the opposite of the doom and gloom which make headlines.

I encourage people to get the facts from an experienced real estate professional, the person most qualified to discuss the merits of home ownership.  Not from a stock broker on television. Now more than ever, there is immense value in working with a real estate agent affiliated with a full-service brokerage, the professional who can guide clients through the financial elements of the real estate transaction from negotiating price to serving as a guide to the mortgage market.  At Coldwell Banker Residential Brokerage, we also have a strong, in-house mortgage partner in Princeton Capital who can identify appropriate financing options for customers. 

Rick Turley

President, San Francisco/Peninsula

Coldwell Banker Residential Brokerage

The San Francisco Chronicle  reported last Wednesday, September 26^th, that “Real estate slump gets deeper still.  Sales down everywhere; prices dip in most places”.  The article goes on to point out that California homes sales plunged almost 30 percent comparing August of 2006 to August of 2007.  There was discussion of increasing inventories.  While the article pointed out that some counties had a loss in prices, others had an increase in prices which it attributed to more sales at the higher end of the market.  San Mateo and Santa Clara Counties were in that second group.  The following are statistics comparing August of  2007 to August of 2006.  They are taken from ReInfolink, the local multiple listing service.  They show, by city, the number of new listings in the month, the current inventory, closed sales, average days on market, average sales price, percentage of list price received and total sales volume.  The first line for each city shows 2006; the following line shows 2007.

 City              New       Current      Closed   DOM   Avg. SP      % LP    Total  Sales Volume

                    Listings  Inventory                                 (in $)                           (in $)

Atherton         6                  38                 8       52       3,809,125     96.94      30,473,000

Atherton         7                  25                 3       70       3,776,666     92.50      11,330,000

Menlo Park    39                 81                26      52      1,413,299      99.47      36,745,781

Menlo Park    35                 65                36      30      1,359,716    101.14      48,949,808

Palo Alto        41                68                43     27      1,535,418     102.56      66,023,000

Palo Alto        29                31                39     19      1,978,861     104.18      77,175,600

Los Altos        52                74               39      30      1,721,323      99.05       67,131,600

Los Altos        39                39               28      35      1,891,663    104.29       52,966,566

While statistics can be massaged to say many things, there are a few things that are clear from these statistics but that are generally ignored by the media.  There has been decreasing inventory throughout most of these popular cities.  Houses sell in a relatively short period of time and do so very close or over the asking price.  The average price in Menlo Park and Atherton has slipped slightly in spite of the high end nature of the sales but Palo Alto and Los Altos show higher prices. 

Personally, I conclude from these statistics is that the San Francisco Peninsula is still a premier place to live and is very much in demand.  The number of homes being offered for sale has been decreasing causing price stability or increase.  I also conclude that when people are faced with the gloom and doom offered by the media, they should think, “PSYCHE!!!”

Before Vintage Oaks started, the developer conducted focus groups of local Realtors to pulse the market for the qualities buyers valued.  I received and completed one of their questionnaires answering questions like,  “Do buyers value hall coat closets?”

The Oak Leaf homes had six basic floorplans ranging in size from approximately 2600 to 3900 square feet.  There were multiple elevations for each home offering styles such as Tudor, English Country, Prairie, French Country and Farmhouse.  These homes were designed by Pacific Peninsula Architects to resemble the traditional styles found in Palo Alto’s Crescent Park and Professorville, with a focus on high tech amenities. The uniqueness of the development increased with the teaming of Sunset Magazine and Oak Leaf Associates to build Sunset’s Western Dream House at Vintage Oaks, to showcase items for the best in contemporary living.

As one of the first buyers to occupy Vintage Oaks, I had the benefit of watching the neighborhood grow up.  When we moved in, (I was told I signed the first contract as a buyer and was in the fourth house to be occupied) construction of the first phase was in various stages of completion.  The developer allowed many custom changes in the early days of the project but soon found that the flexibility was unnecessary since the homes were selling faster than they could be built.  These custom changes involved options like expansion of the house and rearranging of the room sizes. 

Vintage Oaks has been a popular choice for buyers moving from the east coast who are accustomed to the traditional styling and large homes.  The difference that they wrestle with is that the lots average around one-quarter of an acre, not the several acres that buyers in other states enjoy.

 The children of Vintage Oaks enjoy the park that the developer donated to the city as part of the development.  The formal name of the park is Seminary Oaks Park but children in the neighborhood often refer to it as “purple slide park”.  The annual Halloween parade is also a favorite, and is just one more thing that helps to give Vintage Oaks its true neighborhood feeling.

Clients call me regularly with questions about construction.  Each week, I will be posting information about building to answer those often asked questions.  Green building has become a mainstream topic as we all seek to improve our environment.    The question is,  what shade of green suits you? Elaine White 

No longer an overpriced style known for its limited aesthetics, green design + build is becoming increasingly favored by homeowners as a smart, healthy, and ever more luxurious alternative to conventional building practices.

Early on, Harrell Remodeling recognized a growing demand for sustainable homes. A few years ago, we responded by certifying more than 30 designers and builders as Green Building Professionals—currently the most of any company or organization in the Bay Area.

Today, our experienced design + build team is well equipped to provide homeowners with green remodeling practices and products that support both the health of the environment and that of the homeowners.

Green: Defined

We increase a home’s sustainability by conserving natural resources, such as wood, water, and fuel, which are otherwise continuously depleted under conventional building methods. We also employ energy efficient design and elements— such as energy efficient appliances—to conserve energy, reduce bills, and increase the value of the home.

Indoor air quality is a significant issue in green living. The EPA reports that the air inside new homes can be 10 times more polluted than outside air due to volatile organic compounds (VOCs) and other chemicals used in product manufacturing.  Contrarily, Harrell Remodeling offers building materials that emit few or no toxins into the air, such as low- or no-VOC paints, as well as cabinetry and flooring options that do not off-gas chemicals. By reducing vapors and particulates released by materials used in standard construction projects, we enable homeowners—and particularly sufferers of asthma and allergies—to enjoy the air they breathe in and live in.

From air quality to energy efficiency, Harrell Remodeling covers the spectrum of green design + build. But each homeowner has a different shade of green. While some clients would like a complete green remodel, others prefer just a touch. Whatever our clients’ needs— whether it’s FSC-certified wood, bamboo cabinetry, or energy efficient insulation—we are ready to meet them.

World Changes

Green living is among today’s hottest trends because, in essence, our world is changing. Awareness surrounding rising energy costs and depleting natural resources is at an all-time high. People are responding by making environmentally sound living a priority.

Green building also indicates that fewer natural resources are required during construction. According to the U.S. Department of Energy’s Center for Sustainable Development, buildings consume 40 percent of the world’s total energy, 25 percent of its wood harvest, and 16 percent of its water. Compared to traditional construction, a green-built home takes some of this pressure off the environment.  Acknowledging this, builders, designers, contractors, and homeowners (among others) are taking advantage of the benefits of sustainable building and remodeling. Industry professionals are discovering the economic benefits and competitive advantages of green design + build, while homeowners are discovering the ease with which they can incorporate green design and materials into their homes.

Iris Harrell, president of Harrell Remodeling

Rick Turley

President, San Francisco/Peninsula

Coldwell Banker Residential Brokerage

Yesterday, I returned from a great ten day cruise from San Francisco to Alaska and back to San Francisco. Since the ship was round trip San Francisco, the bulk of the almost 2000 passengers were from Northern California, many from the Bay Area. While enjoying the incredible scenery, 27 meals a day and searching for whales, bears and moose, the talk from many of the passengers focused around residential real estate.

I was standing in a long line waiting to get back on the ship from touring Ketchikan. The typical first question asked of fellow passengers is, “where ya from?” The couple behind me were retired from Intel and moved to Folsom. I mentioned that many of my clients have retired to that area. They grimaced and said that all the young people seeking 4000 square foot mansions had driven up the prices in their area. The older woman next to them lived in San Francisco and was complaining that everyone should go back to where they came from so that houses there would not be so expensive and the City wouldn’t be so crowded. She chimed in, “who needs such a big house?” The young man in front of me smiled and said he was from Walnut Creek and used to be from Danville but got more house for the money in Walnut Creek. Where he really would like to live, however, is the Peninsula, where the weather and lifestyle he felt were best but the prices prohibitive. By the end of the discussion every one was grumbling and looking forward to getting on the ship for lunch. After all, it had been a couple of hours since they had last eaten!

What about the cost of housing in Alaska? Here we were in Skagway, known in the early 1900’s as the “Gateway to the Klondike.” This town of 825 people with an area measured in blocks (most of which contain jewelry and gift stores for the approximately 900,000 visitors that come during the summer) contains quite modest looking homes on small lots which one would expect to carry a similarly modest value. However, the tour guide was quick to point out that the U.S. government owned the land and homes averaged $250,000-$300,000 in price. The U.S. Park Service leases the commercial space in the historic district where the shops maintain their original façade. Who would have expected an area with an average summer temperatures from 45-67 degrees and winter temperatures from 18-37 degrees to demand such a high price tag?

Victoria, British Columbia, was the last stop on the return before San Francisco. Surely, this lovely city of stately British buildings with totem poles in front and with condos under construction everywhere you look, must be a more affordable place to live. Not so, according to the tour guide, who pointed out that the average home price exceeded $500,000. We passed a nice brick condo building with a beautiful water view. There, for a mere $4 million one could purchase a 4000 square foot penthouse. But there was the pesky floatplane noise that all the condo owners kept complaining about!

Well, I guess after all is said and done, there is no place like home!

Elaine White

The basic question was, “If you represent me as a buyer’s agent will it save me money on the price?” My answer was a resounding “I don’t double end—that is, I don’t represent the buyer and the seller in the same transaction.”

To understand the rationale for my answer, it is helpful to understand the underlying law. California agency law allows a realtor to act as a “dual agent”, meaning an agent representing both the buyer and the seller. Technically (for legal purposes), the agent is the broker, so all my clients are represented by Coldwell Banker as their agent. It follows that when any other Coldwell Banker agent represents the other party, it is a dual agency, meaning an agent representing both the buyer and the seller. The presence of the other agent, while technically a dual agency (as they are also from Coldwell Banker), from a practical standpoint means that each client has an advocate for their interests. In contrast, while perfectly legal and while done by most agents, a single agent can rarely serve both parties and get them both the best result. In an ideal world, the buyer wants to pay the least, have the most contingencies (legal excuses out of the contract), get access to the property immediately and have the seller pay as many expenses as possible. In that same world, the seller wants no contingencies, as much money as he can get, a short close and often as much time in the house for free after escrow closes. Clearly, neither of these positions is consistent with the other. Instead of having two people advocating these separate interests, one person is forced to negotiate against himself–truly not a negotiation. Where the agent only is paid if a deal results, clients often second guess the agent when the tranaction is done. Under the guise of saving a few dollars of commission, buyers and sellers leave much more money on the table. Buyers and sellers need to look at the bottom line in their pocket and let that be their guide!

Elaine White

Thanks to tax laws that limit the financial incentives to owning rental property (www.irs.gov see publication 527 (2006)) and homes that are so expensive that landlords cannot operate rentals profitably, there is a real shortage of rental homes in the Silicon Valley. Landlords who are in the best financial position to rent are those who have owned their properties for several years and therefore enjoy lower mortgage payments and lower taxes.

Craigslist seems to be the best bet for finding a rental in the Bay Area. Landlords appreciate its low cost (free) and its wide use. But the rentals go at a fast and furious pace. If you have special requirements like particular schools you want your child to attend, a landlord who will accept Rover or Fluffy, or you are a smoker, the task is even more daunting. Local newspapers feature on line ads which allow for more up to the minute information. SFGate and PaloAltoOnline are the San Francisco Chronicle’s and Palo Alto Weekly’s sites.

If you find yourself without a rental and you need short term housing, don’t forget the local “suites type” of hotels. These include Marriott’s Residence Inns, Embassy Suites, and Summerfield Suites. Many offer reduced rates for longer term rentals. Check with your favorite hotel in the area you are moving to; they may surprise you. If you are intending to enroll your child in school in a particular district, choose a hotel in that district but be sure to check with the district on their registration requirements. Many will require a lease of some sort. While this may seem a high cost option, it provides maximum flexibility while you find that perfect rental or decide to take the plunge and buy a house. With high rental rates in the Silicon Valley, those rates might not be so high—plus there’s that bonus of a clean room every day!

Elaine White