Silicon Valley Short Sale Snapshot

September 18, 2008

Today’s Merc headlines were the most depressing economically that we’ve seen in years with the highlights being the crash on Wall Street, the rise of foreclosures in many San Jose zip codes, and the state of California’s budget crisis.

The piece on foreclosed homes, written by Sue McAllister, focused on the zip codes in San Jose where foreclosures are between about 1% and 2.6% and on the issue of blight in vacant homes. Lenders can’t keep up with their paperwork on these distressed properties, let alone worry about watering and mowing lawns and keeping homes from being vandalized. As might be expected, the areas hardest hit with these problems are those with the lowest income. Cambrian Park, Willow Glen, The Rosegarden, West San Jose and Almaden Valley did not rank among the areas with high levels of foreclosures. The Mercury News article did not cover just short sales, but homes in any stage of foreclosure.

Short sales are usually the first step in the foreclosure process, as many homeowners who’ve been served a Notice of Default and know or believe that they cannot save their home will try to get out from under the mortgage burden with as little credit damage as possible, and thus turn their efforts to the hope and opportunity that a short sale may provide.

[Some agents are trying to help homeowners to not just cut their losses when they lose their homes, but instead to cut their debt pressure and keep their homes. A friend of mine in Tuscon, Frances Flynn Thorsen, has a forum to help homeowners keep their homes. (You can read about it here.)]

Back to the issue of distressed Silicon Valley properties:  I’ve been tracking short sales for about six months in selected areas of Silicon Valley. The parts I’ve been tracking are largely along the west and northwest part of Santa Clara County, where there is more wealth and stability generally in this market. There is not a shocking rise of short sales in these areas overall. Have a look at the snapshot of short sales among single family homes, condos and townhomes in Silicon Valley:

  3/26/2008 5/18/2008 7/19/2008 9/18/2008
Los Gatos 5 8 7 9
Monte Sereno 1 0 0 1
Saratoga 0 1 4 3
Los Gatos Mtns 3 2 3 0
Cambrian Park 59 63 68 49
Santa Clara 56 63 69 75
Campbell 13 19 23 20
Cupertino 1 1 0 1
Los Altos 0 2 1 0
Sunnyvale 50 58 51 48
Blossom Valley 196 217 190 177
San Jose (all) 1534 1777 1708 1578



Blossom Valley, which made the Merc’s list, has actually improved on short sales (but perhaps gotten worse with the number which are now bank owned?). Los Gatos is worse. Cambrian Park is better. The total number of San Jose short sales is lower than it was in July or May. (This may be a statistical blip as some homeowners may be getting an extra window of time before feeling pressured to sell.)


So what can be said from this for the Silicon Valley real estate market? We have had a bifurcated market for a couple of years already in which the wealthier areas have been fairly stable and the poorer areas have been badly impacted by the mortgage crisis and the general state of the economy. We are not yet seeing the end of the tunnel in terms of the foreclosures in Santa Clara County – more are to come as adjustable loans are reset and an oversupply of cheap, bank owned housing puts downward pressure on pricing in many districts.

At the same time, turnkey, fully remodeled homes in areas with excellent schools and aggressive pricing are still selling – and at times with multiple offers. Buyers are being picky, because they can be picky with so much selection available.

Buyers with large cash downpayments are calling the shots generally, but sellers with “like new”, high quality homes in areas where the schools have API scores over 900 are running their own show too. How’s the market? It completely depends on where you’re looking.

Taking a Pulse of the Silicon Valley Short Sale Situation

July 19, 2008

What’s happening with the number of short sales in Silicon Valley? Are they rising or falling? How does this impact the real estate market in various parts of Santa Clara County?

Let’s have a look at the numbers over the last few months in selected areas of Silicon Valley. Below, please find the number of active (for sale) short sale listings of single family homes and condominiums or townhomes in Los Gatos, Monte Sereno, Saratoga, and other parts of the San Jose area.


3/26/2008 5/18/2008 7/19/2008
Los Gatos 5 8 7
Monte Sereno 1 0 0
Saratoga 0 1 4
Los Gatos Mtns 3 2 3
Cambrian Park 59 63 68
Santa Clara 56 63 69
Campbell 13 19 23
Cupertino 1 1 0
Los Altos 0 2 1
Sunnyvale 50 58 51
Blossom Valley 196 217 190
San Jose (all) 1534 1777 1708

While there’s a noticeable rise from late March to late May, the numbers are backing down a bit now.

Can we infer anything from this? Yes and no.

Buying a distressed property can be an adventure.First of all, we do not see a worsening of the market overall – the doom and gloomers would like us to think that the sky is falling on the local real estate market, but looking through this lens, it doesn’t appear to be the case. If the numbers of short sales were swelling, it would portend lower prices because short sales themselves tend to sell for less, and most short sales eventually turn into foreclosures – and they also sell for far less than homes which are lived in and loved.

On the other hand, we are not done seeing loans reset. That is, a lot of folks took out mortgages a few years ago with adjustable rate loans that would be level for 3, 5, 7, or 10 years. As some of these get reset, there may well be more people in trouble who scramble to sell with a short payoff to the bank or who otherwise cannot make the new, higher payments. So we may be getting new waves of homes in the short sale pool.

Whenever I do a post on foreclosures, short sales, and bank auctioned homes, I get emails and calls about how to buy one of these homes at a steal of a price. So I’m going to quickly recap my input on what to do if you are a bargain hunting buyer

  1. The biggest problem with short sales is that although the seller wants to sell, the buyer wants to buy, and the agents want to help their respective clients, the success of the transaction depends on the lending institution approving the sale. In my experience, this is where the problem is – most often, the banks either do not respond (at all, ever), or they take so long to respond that the home’s no longer worth what the buyer inititally offered. Worse, some lenders use a servicing company to handle payments, and some of them would rather service a loan through foreclosure than facilitate a short sale. I spent a lot of time in early 2008 putting short sale transactions together, only to have the bank ignore the offers. My advice: save yourself time and effort and buy a home that you can actually close on. (I am not working on short sales any more in this market.)
  2. When short sales fail to produce a closed transaction, the property continues through the foreclosure process. The next step is the auction by the bank. There is no role for the real estate agent here, so we Realtors can’t help you with this stage. With the auction, you’ll need a large percentage of cash on hand and you have NO right of recission – no ability to investigate the property and later change your mind. No congingencies – which I think is very, very dangerous.
  3. Bank owned properties have gone all the way through the foreclosure process. They are usually vacant (in some cases, the bank allows the former owner to stay on as a tenant so that the house is not vacant and vandalized). The bank wants to sell and will permit you to do inspections and to have a reasonable contingency period. The main risk here is that the house may have been beat up by the former owners on their way out. That doesn’t always happen, but it’s certainly a possibility. Bank owned homes are usually offered on the MLS, and a Realtor or other real estate licensee can assist you in purchasing one of these. Agents are not afraid of “working these” because they know that the bank needs and wants to close escrow – so there’s a chance for a happy ending here (unlike with most short sales).

Whether you want to buy a distressed property in Silicon Valley or just want to know how these sales impact your home buying, home selling, or home value, the data is important for understanding how the real estate market is faring here. I’ll continue to keep you updated in the coming weeks and months.

Best regards,


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 (Cell) (
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For more posts on short sales and bank owned properties in Los Gatos (and nearby) please see: