February 09, 2008
What are the odds that a home in Silicon Valley
will sell right now?
Most of the homes for sale in Los Gatos, San Jose, or anywhere in Silicon Valley are not going to sell this month. In Los Gatos, there’s about a 20% chance than any given home will sell. In San Jose generally, it’s a lot worse than that – it’s about a 13% chance that a home will sell. Here’s a quick look at the numbers for these two areas of Santa Clara County:
Los Gatos Single Family Homes (95030, 95032 zip codes)
Active Listings (For Sale) = 118
Pending Sales (Under Contract) = 23
Closed in Last Month = 18
Months of inventory = 6.5
San Jose Single Family Homes (all areas)
Active Listings (For Sale) = 2921
Pending Sales (Under Contract) = 405
Closed in Last Month = 196
Months of inventory = 14.9
The months of inventory, or absorption rate, is a simple calculation of the number of active listings divided by the number of closed sales in the last month. For Los Gatos, that figure is 6.5 months. For San Jose, it’s a whopping 14.9 months. (The National Assn. of Realtors says that at 6 months or more, it’s a buyers market.)
What is also good to measure, though, is the pending sales against the listing volume. In Los Gatos, you can see that the number of pendings is a little higher than the number of closeds. But in San Jose, it’s more than double! This tells us that the market IS improving. But it’s far from being an easy time to sell. Depending on your area and price point, there’s an 80-90% chance that your home would not sell this month.
How Can A Seller Improve the Odds
of a Home Selling Now?
Prospective Los Gatos, Saratoga, and west valley sellers – what can you do to improve your chances of selling?
Here’s a short list of the most common seller mistakes, things NOT to do:
(1) Hiring an agent based on the list price he or she suggests (going with the highest number) is the biggest and perhaps most common error. A better practice: interview agents, hire someone, and then together work to establish the probable buyer’s value of the home and work out a pricing strategy from there. It’s fine to discuss pricing with the agents you interview, but do not choose your agent based on pricing, but rather on references, marketing, negotiation ability, experience, and other criteria.
(2) Related to #1 above, a common mistake among sellers is pressuring your agent to tell you what you want to hear rather than what you need to hear. Some sellers believe that if they “sell” the agent on the higher value of their home, or the current condition (which might need some changes to net you the most money), the house will sell for more, and sometimes homeowners actually push agents to state their estimated value higher than is realistic. One key job the real estate professional has is to provide you with objective input on your home, both at the time the listing is signed and as the feedback comes in and the market conditions possibly change. Ultimately, only you can assign the list price on your home. Allow your agent to provide you with objective input so that you can make a good decision.
Put another way, sellers often have an inflated view of what their own home is worth on the market (this is true of agents selling their own homes, by the way). And sellers take it personally when they believe a home is worth 10% more than the agent is telling them it’s likely worth. Sellers frequently feel as though the lower price is insulting, and a response spoken or unspoken may be “I’m not going to give away my home”. Agents occassionally do underprice a home, but 98% of the time, if there’s a pricing error, it’s on the high side.
Please remember that your agent is not the buyer on your home, and you are not negotiating a sales price with your agent. You are not on opposing sides of the table. When you hire a Realtor, you are a team and you share the same goal: getting your home sold in today’s market.
(3) Another common error among sellers is simply this: not believing that the market data applies to their home. If the market has corrected X% in the last timeframe, and all the other homes in the area have gone down in sales price, it’s also true that your home has gone down in value in the buyers’ eyes. Home prices or values are not a lot different than those of shares in the stock market. What a share of stock sold for yesterday or last year is interesting information, but it may be totally irrelevant to what that same share will sell for today. Holding on to what the home “used to be worth” is not going to assist you in getting your home into the minority pool of homes that are selling now.
(4) And finally, a very frequently seen seller mistake that causes homes not to sell is in not utilizing their agent’s skills (on pricing of course but also staging, garnering feedback, analyzing the market, etc.).
For example, often Realtors have extra training and experience in staging. Agents know that fresh paint and carpet often will get the seller the most return on the investment, and so will decluttering. Sometimes more is needed in this area too. But sellers don’t always want to hear it. The ultimate sales price of the home is tied to a number of factors, including how well it shows to potential buyers.
Another area to watch out for is feedback. If your Realtor tells you that there’s a problem with the way buyers assess your home (pet odors, cooking or smoking odors, clutter or other issues), take it seriously. You will improve your odds by taking the feedback as useful input (and not as an assault). A great system that I use is HomeFeedback.com; the seller can get both individual responses and compiled statistics of the feedback. Sometimes, sellers take it personally and get upset at their agent for the information offered, even via this type of buyer response. This makes it hard to hear what you need to hear.
Put another way, what you CAN and SHOULD do to sell your home in today’s market:
Hire carefully! (Most agents in the Santa Clara Valley have been licensed less than 5 years and have not been through a market like this. Experience is very important. Check references and be very careful here as it is your single most important decision.) Make sure it’s a full marketing plan, using both web and traditional forms of marketing.
Price carefully and realistically! With the vast majority of homes not selling, it is important to not overprice. This is not the market for “trying a price”. Price it to sell. Price it to be the best value among similar homes.
Stage it! Listen to your agent.
Take feedback seriously. Estimating prices and what needs to be offered to buyers in the way of condition, concessions or other thin
gs in falling markets can be tough. Ask your agent for feedback and take it to heart. Sometimes market conditions are a “moving target” and may require readjusting.
To sell your home in this challenging market for the most money and in the fastest time, the home needs to look great and be priced well and be accessible. Recently I was at a real estate educational seminar and it was put this way: “we’re in a beauty contest and a price war”.
And lastly, only put your home on the market if you are serious about selling. It’s a great time to buy a home in Silicon Valley, but it’s not necessarily an ideal time to sell! Rick Campbell, author of The Real Estate Report, opines that we may be “at or near the bottom of the market”. Of course, if you are “moving up”, the overall is most likely a plus even if you take a hit on the sell side of the equation. So sellers, if you want or need to sell now, make sure that you position your home so that it’s not just listed, it’s sold.
P.S. Buyers, don’t wait. This is about as good as it gets!
Mary Pope-Handy, Realtor, CRS, ABR, e-PRO, SRES, ASP, RECS, CNHS, ACRE
Helping Nice Folks to Buy & Sell Homes Since 1993
Co-Author: “Get The Best Deal When Selling Your Home In Silicon Valley”
408 204 7673