The Emerald Hills Blog

It’s a Tough Year

As you’ll see in next week’s Emerald Hills Report Card for April, this continues to be a brutally tough year if you’re selling a home in Emerald Hills.  Without even looking at the final numbers for April, I can tell you that nothing significant happened this past month that will pull the region any closer to the sales level of previous years.  Obviously, this is not the news you want to hear if you already have a home on the market.

But what’s important to note is that this dearth of home sales also creates a secondary level of problem:  Estimating home values. Here’s why…

No Comparable Sales…

One of the common ways to establish the value of a home, whether you’re selling a home or you’re an appraiser, is to look for other homes that have recently sold in the area that are similar in size and features.   These are referred to as sales comparables, or “comps” for short.   While it’s not the only way to establish the value of a home, it’s by far the most commonly used in a normal, healthy real estate market.   The more relevant comps you can gather, the more accurate you can peg the value of a home.

But what happens when there are very few comps, just like we’re seeing now in Emerald Hills?  The process then becomes much more subjective, and a lot less accurate.  In order to find a relevant home sale, you’ll have to either

1. Search further away in proximity from the home in question, or
2. Look much further back in time to find these sales figures, or
3. Both

You can see the potential for inaccuracy when this happens.  Different neighborhoods carry different values, even within Emerald Hills.  And when you’re living in a falling market such as this one, looking back more than 3 months at homes sales data really calls the validity of this data into question.

Appraisals?

It’s obvious to see how this situation makes it difficult for a seller and their agent to price a home properly.  But another problem that’s not so obvious is getting the home appraised once it’s in contract.   With all of the extra scrutiny by the banks on every deal, appraisals are more closely watched than ever before.  Consequently, it’s quite conceivable that a home may NOT appraise at the sales price — not because it’s not worth the price, but because the appraiser can’t gather enough data to justify the price to the bank.

The New Gold Standard.

Whether it’s right or wrong, when a home finally does sell in a given area, its sales price immediately “resets the bar” for the value of all similar homes that are on the market.    While that wouldn’t necessarily be the case in a busy market, it carries much more weight now, simply because there’s no data to compare it to.  Here’s a good example:

611 Lombardy Way is a 4 bedroom, 3-bath, 3,410 square foot home on a 12,196 square foot lot that just went into contract after being reduced to $1,495,000.    Assuming for now that this transaction closes escrow at this price, this now becomes the “gold standard” for all homes that are similar in size, features, and proximity.   Comparable homes that are priced significantly above this mark (and there are a quite a few) will now have a tough time justifying a premium with savvy buyers, and quite possibly appraisers, when this new comp becomes the sole datapoint in this area.

Until the sales volume picks up again in Emerald Hills, one can probably expect to see a ton of volatility in home values.

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Shopping for a home?  If so, then you’ve already seen that daunting stack of paper that comprises what we commonly refer to as “The Disclosure Package.“   In this era of information overload, I think our attention span as a society has been forced to be shorter to absorb everything that’s thrown at us every day.  But make no mistake, this is a stack of paper that you’ll want to read from cover-to-cover if you want to protect your rights as a buyer.

While there are many documents that comprise a  typical disclosure packet, and it’s important that you read all of them,  there are 4 documents that buyers and agents typically zero in on immediately:

1. Transfer Disclosure Statement/Seller’s Supplemental Checklist…

(Commonly referred to as the TDS and the SSC).  These two forms used in conjunction with each other are designed to enable the seller to disclose anything and everything they know about the home or the neighborhood that may materially affect the value of that property.   Completion of these forms by the seller is required by law for a real estate transaction.   There are exceptions — the most common example is when a trustee is selling a home that they inherited (but never lived in) or were granted through a court proceeding.    But these two forms are the primary method for the seller to communicate as much about the home as possible.

So if they added a bedroom to the home, or the bathtub overflowed and ruined the floor back in 2003, or the neighbor’s 12-year old thinks he’s the next rock star….all of these things MUST be disclosed by the seller.   As you can imagine, issues surrounding these two forms are probably the most common cause of real estate litigation.   Read these carefully, and ask questions.  Lots of them.

2. Natural Hazards Disclosure Report

This is a report that is generated by an independent agency such as Property ID or JCP,  and it discloses known natural (and man-made) hazards that exist at this parcel site, or in the neighborhood.    If you want to know if the home is sitting on an earthquake fault, or whether it’s in a flood zone, or if there are any submerged fuel tanks nearby, this is the place you’d look.

Note that this report also has a really handy section on property taxes too.    They will spell out all of the “supplemental” tax items that will carry over with the sale of the property (School Bonds, sewer fees, library fees, etc…) so that you can calculate what your property taxes will be.    This form is a “must read” as well.

3.  Preliminary Title Report

This report is issued by a Title Insurance Company and is a preliminary look at the condition of the title of the property…or, in other words, whether the property can legally be sold by the current owner.  It’s also a declaration of the Title Company’s offer to sell a policy to insure the validity of the title.   Key things you’ll see on a title report?

1. Who is the owner of record.  Sometimes there are secondary owners on title.
2. Any liens that are recorded against the property (loans, mortgages, claims.)
3. Any past due property taxes.

The title report should also declare if there are any Conditions, Covenants, and Restrictions (CC&R’s) that apply to this property.   If there are, be sure to ask for a copy of them.

Pest and Property Reports

The sellers aren’t required to provide a property or pest inspection, but good agents will insist on getting them done before the home hits the market.  If they’re in the disclosure packet, read them thoroughly.   Even new homes aren’t perfect, so it’s critical that you know what you’re getting with a particular house.   Does this mean you don’t have get your own inspections done?  Not at all.    You have a right to get your own property and pest inspections done as well.  It’s just a bonus to already have one done.

Summary

Are there more documents than these 4 in a typical disclosure packet?  Definitely…and you should read the entire packet thoroughly if you’re considering purchasing a home.  (In fact, good agents will insist that you initial that you have received and read the document.)  But if you want to get a quick understanding on a particular home, these 4 will get you most of the way there.

Perhaps you are already aware of the Green Building Ordinance that was enacted by the San Mateo County Board of Supervisors earlier this year, but it certainly slipped under my radar.  But if you are planning to remodel a significant portion of your Emerald Hills home, or you’re looking to build a new home entirely, be aware that you will have to spend some “green” to make your new home “green.”

This Ordinance, which passed on February 12 of 2008, applies to all unincorporated areas of San Mateo County — thereby including Emerald Hills.   The idea behind this ordinance is to encourage responsible and environmentally friendly building practices for all new residential and commercial construction, as well as those remodel projects that are over “50%.”   Sounds like a great idea in theory, but there are strings attached for homeowners.  According to the Ordinance,

“Approval of any building permit for new construction or a 50% or greater remodel of a single-family dwelling, a two-family dwelling, or a low-rise multi-family residential project shall not be granted unless the applicant submits a checklist demonstrating that the project receives:

1. 50 GreenPoints or higher on the appropriate GreenPoint Rated Checklist, OR,
2. Leed Certification”

GreenPoints and Leed Certification are defined and outlined in the Ordinance, so it’s well worth reading.

What would an ordinance be without a cost?  This one is no different.   Applicants for a building permit will be required to post the following bond:

• $5,000, or $1.50/square foot for the total square footage of the building, whichever is higher.
• Compliance to the Green requirement outlined in 1) or 2) above must be verified by an inspector.  If not, the project must be brought into compliance, or the bond will be forfeited.

On top of the fees, you’re likely to cough up another $1,000 or so to get a qualified inspector to verify compliance to the aforementioned standards.  Here is a copy of the ordinance, as well as a link to the County of San Mateo Website, where you can find more information and get contact information:

SM County Green Building Ordinance

San Mateo County Green Building Program

RecycleWorks.org Site

As I mentioned before, if you have any questions on how this may impact your remodel project, you are urged to contact the San Mateo County Planning and Building Department at (650)363-4161.

So like I said, going green in San Mateo County is now going to cost some extra green…

I’m currently reading Blink, which is a very interesting book written by Malcolm Gladwell, who also wrote Tipping Point.  The whole premise behind Blink is that humans tend to make decisions subconsciously and very quickly, long before the conscious mind even realizes that a decision has been made.   Gladwell makes a strong case that these subconscious decisions that we make in a snap and with very little data are remarkably accurate.   You know this phenomenon as “gut instinct” or “first impression.”   Blink takes a very interesting look at this whole process, and draws from many real-life examples.  If you’re looking for a intriguing read, check out Blink…

So how in the world did I tie this book into the world of real estate?   Well, I also read quite a few real estate blogs and publications every day, and lately the hot topic among Realtors seems to be real estate photography…or more specifically, photographic equipment.   This initially struck me as odd — why would an agent care so much about lenses and filters and megapixels?

It then became evident to me that more and more agents are taking their own listing photos…

Why is this a big deal?  Considering that nearly 90% of home buyers start their home search on the internet,  the first impression they get of a home is a web description of the house.  And what’s the first thing that every buyer looks at when they bring up a listing on the computer?  The photos.  So if you buy into the premise of Blink, people will form instant impressions and perhaps make snap decisions on a house solely on the listing photos.   So why would an agent run the risk of taking their own pictures?

When an agent puts a new house on the market, all of the listing information is immediately picked up by scores of other real estate centric websites:  Zillow, Trulia, Redfin, Movoto, Roost, and so on… They use the exact same photos that were filed in the listing.   So whether the photos are professional or amateur, they’re replicated across the net in a flash for the world to see.   And with more agents using multimedia to promote their listings, having great property photos is essential  –  because poor photos make for poor slideshows and poor virtual tours.

Without exception, I use the services of Robert Barbutti for all of my listing photos.  Robert knows how to shoot real estate photos, plain and simple.  He’s an expert at lenses, lighting, angles, apertures….all that stuff that a pro lives by.   He also knows how and when to use software to bring out the best in the photos.  But his eye for taking the “right” shot is far more valuable than any piece of photographic equipment you can buy.  I would never consider taking my own listing photos.

Does this mean that Realtors are necessarily bad photographers?  Not at all.  There are a several agent/bloggers who are also accomplished photographers, and their work is excellent.  But they are definitely in the minority — for every good agent-based photo, there are tons of bad ones.  In fact, there’s an entire website devoted to bad real estate photography.  If you want a good laugh, check this one out:

Bad MLS Photos

Photos don’t sell homes.  But photos absolutely make the difference in whether a buyer decides to get in their car and view your home, or pass on it.   Recently, one of my clients who viewed a brand new listing called me up and said:

“If this home looks half as good as it does in the pictures, then this could be the right place for us.”

In a nutshell, this is how good photography captures the essence of a home…  And yes, they bought the house.

Technology is a wonderful thing, don’t get me wrong.   It has changed our lives immeasurably, and when applied properly, this change is positive.  But keeping up with the “latest and greatest” in technology presents an interesting paradigm.  At what point does the race to improve technology outpace the benefits that technology brings us? This is a phenomenon known as “feature creep.”

We’re constantly being implored to “upgrade” anything we own that is remotely electronic.  Whether it’s the operating system of a computer, or your mobile phone, we’re cramming more features into the things we use daily.

To give you an example, I recently upgraded my operating system because I heard that it had some great new features, which turned out to be true.  But the new OS routinely fights with old software and plug-ins that I already have installed, making for an often unpleasant experience (aka crashing..)    So am I better off for upgrading?   Hmmm, I’m not sure yet…

Here’s another example.  My old faithful coffee pot finally died an unceremonious death yesterday, so I went out and purchased a new one.   LOTS of cool features on this new one — it even uses the word “Programmability” which should have immediately made me tremble.  (Let’s not lose site of the fact that all I want is a hot cup of coffee..)

Well, after 45 minutes of reading the owner’s manual several times, I figured out how to make a cup of coffee with this baby.  And it was a good cup of coffee mind you…  but 45 minutes? And I’m an Engineer, for goodness sake!

So how does this rant relate to Real Estate and homes?   Well, our homes are being invaded by technology.  TV’s, ovens, washers and dryers, sound systems, and heating controllers all have small microprocessors running them.  Consequently, it’s irresistible for manufacturers to program lots of features into these appliances…whether we need them or not.    Some feature are definitely cool, some we wouldn’t use in a million years.

Is having all of these features good if you’re selling your home?   Not necessarily.  I was showing one of my clients a home a few weeks ago, and we made the mistake of trying to figure out how the heating system worked.  I’m pretty sure we could have altered the path of the Space Shuttle with this heater controller, but I’ll be darned if we could get the heater to go on.  Needless to say, this didn’t make a positive impression on my buyers.

The point here is that it’s very easy to try and fix what wasn’t really broken, and in the process end up making our lives more complicated, rather than less complicated.   Just today, the San Jose Mercury News announced that Google and Apple were the two highest ranking tech companies in customer (i.e. you and I) satisfaction rating.  Here’s the article:

Apple and Google Score High

Why do you think people love those products so much?   Because they’re SIMPLE, and they work.    So be sure to keep that in mind when you consider installing that rack server in your basement that controls the exterior lights, hair dryer, coffee maker, 24-track surround sound, and is web-accessible from your iPhone while you are in a business meeting.  While it may be the cool thing to do, the sheer complexity of the technology may be too intimidating for many buyers….  And that’s how “Feature Creep” can hurt real esate.

Editor’s note:  This is the first in an occasional series of posts that will include tips on how to get more out of this blog, and perhaps your other favorite websites as well….CG

Blogs are definitely a peculiar breed of website.  Unlike a normal major news website (like Yahoo, CNN,) blogs aren’t usually updated every single day, although there are always some exceptions.  In fact, I can tell you from first-hand experience that I don’t post new content every day.  As you can tell from reading this blog, the pattern of what, how, and when I post an article is very irregular.  Sometimes I’ll post 3-4 articles a week at regular intervals, and other times the blog may sit idle for the better part of a week (this tends to happen when the busy season hits.)

As a reader, this makes it challenging to know when to check back in to see if the author has penned something new.   It’s time consuming and a little frustrating to thumb through your bookmarks one at a time and manually read through each of your favorite websites, only to find that it looks exactly the same as it did yesterday.    This is where subscriptions come in.

Subscribing to Websites:

Subscribing to a website is very akin to using TiVo to record your favorite programs on TV.  Program it once, and then boom…the new episodes from all of your favorite shows appear under a single menu…automatically!  TiVo (and the generic DVR) totally changed the way we watch TV.   Similarly, website subscriptions are totally changing the way we surf the ‘net.  The “Tivo-esque technology” that is used for the web subscriptions is a little technology called RSS.

RSS = Really Simple Syndication

Without going into too much detail, RSS is a method for re-publishing (or “re-syndicating” as the name implies,) the content on a given website.  Think of it as an index, or summary, of what is published on that site.   RSS packages the site’s content and makes it available as a “feed.”    A feed is very much like the stock ticker you see running across the bottom of your TV screen.  They’re both live summaries of what’s happening.  Instead of using a TV, you use a web program called a “Feed Reader” to view your feed.  If you’d like to dig deeper into the what’s and why’s of RSS, check out this very well written article on the subject:  All About RSS.

I use RSS quite extensively on my blogs.  In the left sidebar, you’ll see various feeds from the likes of the Mercury News, CNN Money, BankRate.com just to name a few.  Since they are true RSS Feeds, they are updated real-time thus giving the readers new content continuously!

How To Subscribe

Fortunately, subscribing to a blog or website is VERY easy.  The symbol you see on the left is the universal symbol for RSS — so if you see this button on your favorite site, it’s good indication that the site offers the ability to subscribe.  So click the symbol and get started!

Most subscription are offered in two different forms:  Readers and Email.   I’ll discuss both very briefly here:

• Feed Readers:  A feed reader is a custom “page” that you create by subscribing to various different feeds.  The job of the reader is to gather, or “aggregate” the feeds into one easy to read page.  That way, if you want to get the latest updates from the 10 or so sites you’re following, you only have to check ONE site — your feed reader.  Think of it as your own “custom” webpage that has only the content that you subscribe to.    All the big web companies offer feed-readers:  Google, Yahoo, and dozens of others.
• Email Updates:  The second very common method to subscribe to a site or blog is via good ‘ol fashioned email.  When you sign up for email updates, you’ll get an email with a summary of the new post.  If it’s a topic that interests you, simply click the link in the email and you’re taken right to that article on the site.   One of the nicest features about email subscriptions is that you only get an email if there’s new content.  If there’s nothing new, you don’t get an email.  I personally use this feature to keep tabs on several sites that I follow.

Subscribing to THIS Blog

I’ve made it SUPER easy to subscribe to my blogs.  In the right-sidebar at the top of the blog, you’ll notice a widget titled “Subscribe to the Blog.”  In that widget, you have the option to pick a feed reader, or simply enter your email address and start an email subscription.   If you opt for the latter, do so knowing that your email will never be used for any other reason than to deliver feed content.  So, no spam, no annoying follow-up emails!  So log-in, subscribe, and let us do all the work!

I hope you found this Blog Tip useful….  Stay tuned for other tips in upcoming posts — if you subscribe, that will be easy too 

It used to be that bigger was better when it came to building houses. For the past few decades, statistics have shown that the average size home in the United States has grown incrementally every year. But new data is showing that this trend may changing for a variety of reasons. People who wanted their 5,000 square foot home are starting to feel the pinch when the PG&E bill is thicker than the phone book. Or many of these families are looking to downsize after the kids have flown the coop.

Here’s a great article from CNN Money that discusses this phenomenon in more detail. Thanks to blog reader Greg for this find:

The Incredible Shrinking House

What does this mean for Emerald Hills, and surrounding areas? Don’t expect the demise of the large home. Folks still like their space, and are willing to pay for it. What you will see, however, is more demand for “intelligent” space — homes that are smaller in square footage, but much higher in utilization…i.e. no wasted or under-utilized space. Formal dining rooms and living rooms are prime examples of dead space.

For those of us in the home sales market, including buyers and sellers, this starts to change the playing field a bit. It will no longer be acceptable to base the value of a home primarily on its square footage. Homes with intelligent design and unique architecture will command a premium despite their smaller size, thus skewing the stoic “$$-per-square foot” metric.

So don’t be surprised to start seeing homes start popping up in the range north of $700/square foot, even if they’re 3,000 square feet or less. If they’re done right, they’ll be in demand and will likely fetch the price.

After all, it’s not the size of the home that matters most….it’s what’s inside that matters.

Thanks to blog reader Greg for catching this one. As some of you may be aware, there is a controversial ordinance under consideration by the County of San Mateo which is aimed to protect the watershed in Emerald Hills. Whether or not to protect the watershed is not the hotly debated topic — more so, the potential impact on existing homeowners and those who have construction plans is what has residents fighting back on this ordinance. Here’s a great article from today’s San Mateo Daily Journal with more detail: Watershed Protection

Also, according to an announcement in the Emerald Hills Homeowners Association Website, the county is hosting a meeting this week to solicit input from public on this matter. According to the website:

San Mateo County is inviting property owners in Emerald Hills to attend a meeting at Clifford School Auditorium, 225 Clifford Avenue, Redwood City, on June 5, 2008 at 7 pm to participate in the development of recommendations to address watershed protection issues in the unincorporated areas of San Mateo County, including a potential zoning ordinance.

If you own property with a 10% SLOPE OR GREATER or if your property is near ANY creek or stream, the recommendations coming out of this meeting could result in new regulations that will affect you!

Hmmm….a 10% or greater slope and/or near water pretty much defines most of Emerald Hills. Sounds like a good meeting to be at.

When I first made the jump over to real estate after 20+ years in technology sales, the biggest surprise to me was the realization of how low-tech the real estate industry is. And I’m not talking about the frightening amount of paper we still consume every time a home is sold — I’m referring to the power, or lack thereof, of Internet-based tools.

Despite the fact that the Internet was developed right in our back yard, it seems that Real Estate and the Web were never destined become close friends. One need look no further than MLSListings.com, the website that Realtors must use to enter and manage their listings, to know what I’m talking about. The user interface and data mining capabilities of this site are archaic (in Internet terms) — so manipulating data and making use of all the information contained in the MLS is frustrating and cumbersome, which in turn puts a questionable light on the accuracy of the data that comes out.

Luckily in the past few years, several companies have dialed into the fact that over 80% (and likely higher in the Bay Area) of home buyers start their home search on the Internet, and have created unique business models and powerful websites that greatly enhance the user experience and even give the consumer different options for buying and selling real estate. Sites like Zillow, Trulia, and Redfin have become the destinations of choice for many buyers and sellers — and for good reason. Even though each company approaches the market with a different goal and business model, they each have pumped millions of dollars into their websites to bring to bear much of enhanced graphical interface and interactivity that has been the promise of “Web 2.0.”

Now comes the audience participation part of the show

The question I pose to the readers of the Emerald Hills Blog is this: What is your favorite Real Estate Website, and why? Do you use Trulia, or Redfin, Zillow, or even Craigslist — or do you have another cool site that you can recommend to the readers? Simply click on the “Comments” link below and let us all know. There’s no wrong answer — everyone’s opinion is valuable, and will be treated as such.

Thanks for weighing in on this topic! Also, be sure to vote on the poll at the top of the blog.

–another new feature to the Emerald Hills Blog — Colton Daines is a Loan Consultant with Sage Financial Group in Menlo Park. He and his extended family have lived in Emerald Hills for many years. “Colton’s Corner” will be a regularly occurring series in the blog where you’ll get the latest and greatest on what’s happening in the mortgage industry. Feel free to contact Colton directly with any questions or post a comment on the blog. Either way, it will get answered promptly.

May 21, 2008

Today the ten year treasury yield went up three basis points to 3.81 at noon. The inflation fears caused by higher oil and gold prices reacted by bonds to be sold. For homeowners wanting a tip on mortgage rates, follow the ten year yield as a good indicator of rate activity. However the Fed meeting notes indicated a continuation of a weak economic environment into 2009. As for rates they remain attractive for qualified borrowers. The jumbo-conforming loan limit of $729,000 has continued to see competitive rates that benefit our high priced real estate environment. Please feel free to contact me with any questions.

Colton Daines
Loan Consultant
Sage Financial Services
724 Oak Grove Suite 140
Menlo Park, Ca. 94025
office: (650) 618-3622
cell: (650) 400-0804
Email: colton@sagetrust.com
www.coltondaines.com