San Jose Snapshot | By the numbers | #rewtf of the week 🦅 🌎 ⚓️
Hang with Hector Ramirez and talk about Rates, markets, Scenarios, and strategies to help home buyers and sellers.
Inventory is still Dangerously LOW
Financial Intelligence
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Everyone is, to be honest. I think Fallouts today are more common than ever. We're live. Cool. Hey Hector, how are you doing? Great. Good to see you, bud. Hey, welcome back everybody. This has been hectic for a couple weeks. A lot of life changes and a lot of changes in all sorts of things and like the market, what's going on.
And that's why I wanted to have Hector come up and talk about it. We were just talking about it before we came on live and what's going on with some of these other lenders And I think it's telling you wanna have that story. Don't, you don't have to say the thing, the who it is. Yeah, no I, think you're right.
And it's just a sign of what's going on in today's market, in today's economy, right? There's just a lot going on, and unfortunately, part of what we're seeing is we're seeing a lot of fallout, right? We're seeing a lot of homes going to contract and fall back out. We're seeing just everyone is, anxious, to get a deal, right?
Everyone wants to, help their client. When the client is all in on buying a home, they're extremely motivated because more than likely they've been unable to buy a house for some time, right? And sometimes when we're, when we want something so bad we, jump at it at, any cost.
And, so unfortunately we've seen that fall out. The story I was just talking about is about a local builder. Our, client that actually had approved about a year ago, actually a little over a year ago. And it was the timing, the market, it just wasn't, they weren't ready.
They, it just, it didn't work out. And so we kept in touch and about three, couple months ago they walked into a builder actually down here in Gilroy. And they found a home someone, else had fallen out of it. Long story short, they got into a contract, right?
They got a house right price. We're moving down the process. They're supposed to close today and they were told about 20 days ago. 14, a little less than 20 days ago, they're told, Hey, you know what? We can't do your loan. We overlook something. And mind you, they, they've had this loan for three months, right?
And so we were, fortunately, their, agent is, a good friend of mine. We were able to jump right in and find a solution, find a couple solutions, and we were able to keep their builder credit. The builder was, offering a really nice credit of about 25,000. And we were able to turn this, puppy around and we signed yesterday and we're funding today.
Right, on time. Literally probably a little over 14 days is, and a holiday and in between. And yeah. It's a tremendous success story. It's really a great couple. They're actually getting married next month and just, it's been a, obviously a stressful few weeks for them. Oh yeah.
Just being, being in limbo and, not knowing if you know where they're going to live and what they're going to do, and. And so it, it's great, right? And, every deal is not perfect for, me or for us. And, but we, definitely strive to, right? And, so it's really nice though to get a couple wins like this, especially with a builder where sometimes outside lenders, sometimes our, some, sometimes at a.
We're, just not in a leadership position there, right? There's an in-house lender, they offer incentives to stay with them and sometimes we advise clients, Hey, you know what? Stick with it, right? You're going to get so many incentives and credits that take it. Taking down the road, obviously, we can help by refinancing or finding other opportunities in the market to lower payment or make that loan better for you but, what you trade off on that is service and lack of knowledge. So they put the NBS in there, it seems every time I deal with it. And I know that this is a very polished way of doing it, but they put the new lenders in there, the new loan officers, and they're like, yeah, we could do it.
We could do it, we could do it. No problem. And, they're like, yeah. Shiny eyes and, all of a sudden they dropped the ball somewhere and they dropped the ball on us too. With, the deal that I did down there, KB and they used the intern. It was a different bank. But that, that, and We let them know day one, this is how we want it done.
And they're like, no problem. And then all of a sudden, the day before we close, oh something messed up. So you can't do that. Gosh, it's so difficult, right? Like when you're representing someone or, as a buyer, especially a lot of new bills are first-time home buyers, right? They really.
They don't know what they don't know. And my experience working with them has been a little bit of a challenge, right? Granted we've got two weeks to close this and we've gotta communicate with everyone. And to be honest they, certainly haven't made it easier. Yeah. And, it's funny in talking to industry professionals like you and other clients about the same situation.
I hear the same thing, right? Where it's, less than a positive experience. It's only because it's they really like the home or, they're offering these incentives that, the client sticks with them, but it's, not only that too, it is like I asked to set up a time.
For my inspector to go through and they buttoned up. And guys don't think that when you buy a brand new house, it's going to be perfect. We, the intention is, and I'm a layman when it comes to, I have years of experience in con contracting, construction. I know how to pick stuff out, but I don't do that as a service.
I bring in a professional home inspector. I wanted to have him come through and pick the house apart just so my clients could at least be aware of what they were buying. Straight arm, Nope. They, completely disallowed it and they're like it covers the warranty. That's not really the point. There could be some construction defects, there could be, and I got straightly armed and had nothing against kb, nothing against that the way they do business.
But it was just, I wanted a little bit of protection from my clients and they, disallow it. You gotta be careful going into those situations. I Overall, it was a pleasant thing because for us it's just we walk in, we introduce and they do all the work, right? But then, you get stuck into, oh, you gotta go to the design house.
You have to go buy all this stuff. I helped the guy buy a house down in Morgan Hill a few years back, and they wound up spending about 60, $70,000 in upgrades.
You start picking things out, and the next thing you know that number's gone way up. Yeah. Yeah. All of a sudden it's I forget about my monthly payment Because it was three times more than what I thought it was going to be. Sure. Yeah. What else is going on in the industry? Do you, think the market's going to crash?
A lot is going on in our industry today. Just in the economy in general. So we. Obviously, we've been watching inflation very closely, right? We talked about this May 10th date because we remember mortgage rates, which are a huge driver in real estate following inflation, right?
And as we all know, as you've been falling along, our inflation skyrocketed last year, right? We hit 8, 8, 8 plus percent, right? And then, We've slowly been, it's slowly been coming down and in part cause of the Fed, right? Lowering interest rates, right? Slowing that economy down. And bringing down inflation rates.
We were really focused on the May 10th date because when we look at year-over-year data, we can see that in comparison of where we, where inflation is today is where it was a year ago. We know that it's coming down and that news is very positive for treasuries and bonds. May 10th hit we saw a positive reaction,, in the bond market, but since then there's been a really huge selloff.
And what that means is our interest rates have gone up quite a bit in the last two weeks. We've noticed. Yeah, we've got right back into the seven-plus percent. Honestly, up until this week, the last two days, we've been trading really strongly. But we shot up again. And it's interesting though because it takes a little bit to hit the media, right?
And it, we, it takes a little bit to see the reaction from, the market, right? Last week, for instance, applications were down. That's. Indirect public correlation with that. But I saw that chart where it's almost like a deep dive. It's the chart just com completely slashed down here, and it's like jittering, but right now, over the last couple of months.
But that's because people just stop doing the loan applications. They, obviously, there's the, refi market. Like debt, right? It's Mill. Yeah, it's nil. Now we're, probably seeing some of that come back and, here's why, because our debt is at an all-10 high, right? And what we're seeing, and here's some of the conversations we're having is that we're, we have a lot of clients that are like, oh man, I love, I got that three and three and a half percent rate.
It's great, right? But when we peel back layers and we do our end mortgage reviews. That we do for all clients and we take a holistic view of, everything they have going. We're finding that although they got that really great rate when we look at their combined interest rates with, their debt, it's super high.
It's much higher than our average rates today. And as Mortgage rates continue to come down a little bit and, as time goes on, we'll probably see more cash-out refi, right? Because it's going to be a solution to help control their any client's overall debt. So really quickly, in case somebody's watching, what's the difference between a cash-out refi and a HeLOCK rate and term or a HeLOCK?
Sure. So helos have become really popular because, so a HELOC is a home equity line of credit. So it's a second loan on your house. That kind of operates like a credit card. So you can go up to typically about 80% of the value of your home. If your, house is a million dollars and you've got a $500,000 loan, then you're, potentially able to.
To, you're potentially able to qualify for a $300,000 heloc and, that's just a, they're actually great to have. It's money that you have at your disposal that you can draw at any time. You don't have to draw the entire amount, but you can draw that out and borrow against your home. At a relatively very low rate, much lower than any other unsecured debt that you can get out there, right?
And currently, lines of credit are somewhere around seven, 8%. But again, much less than most others. Interest most another interest rate that you would pay on, Bo, just about anything else. And so it's a second loan that you can borrow. A lot of times in times like this when rates are high we often, will recommend a line of credit, right?
We've got a really great. The product that you can draw money in five days, right? So much easier to do much quicker to do. You can pull that money and take advantage of that. And then when we see interest rates go down, a lot of what we do is we'll reconsolidate until one loan, one steady fixed rate low and amortized over 30 years.
Right now, a cash-out refi, what a cash-out does is. We basically take the money that you currently owe, and we draw some additional money from your equity, right? And we give you one large, one loan. We. One fixed rate loan you, basically begin a new 30 rate fi 30 year fixed rate loan. I see.
Okay. So they, restart the entire loan on top of whatever you're borrowing. So if it's a million, you bo you borrow another 200, you reset a 1.2 loan. Starting today. Exactly. We re-amortized it over 30 years. The existing loan gets paid off. Going with your example, if you have that extra 200, then you get 200 at, the close of that refi.
And then there you are, right? You'll start payments again on, on your new home. The benefit to that over a HeLOCK is that it's fixed and it's typically a lower rate. Lower rate. So just depends on what your appetite is for risk, right? Whether HELOCs can be a little bit volatile versus obviously a fixed rate is never going to, is never going to move, right?
And so it just really depends on what the need is of the client when we recommend or suggest one over the other. Cool. Awesome. I'm sorry that I segued out of that, but let's get back to the market. Yeah, absolutely. So again, we've been seeing kind of interest rates rising over, over the last two weeks.
Moving forward I mean we, we are seeing that inflation is going down, right? We're seeing shelter costs. Shelter costs are one of the lagging indicators as part of inflation that again, lags and we're finally seeing that come down. And The experts, if you will are expecting inflation to continue to go down this year, and we're going to see mortgage rates follow that.
And some of the kind of earlier prognosis is that we're, we should be seeing interest rates in, the five percent again towards the end of the year. Good Right, before the economy crashes. This is the whole debt ceiling. Which, obviously there's, a bunch going on with it today, and the deadline is on the 5th of June is, really causing some volatility in the markets and some uneasiness.
And it's, really been front and center on, on what the government needs to address. And I think as that works itself out it will help things in general, I can tell you for example, There's that, our selling seasons coming to an end, right? We do March, April, and May.
Sometimes it lags into June because people are still getting outta school. Kids are still getting outta school. But I can tell you that our inventory has been so dramatically low. We're at like 60% of where we need to be to have a healthy market. And that, kind of leans into what's going on with the market.
You're going to, we're going to see. Sales dry up because right now, for June, July, and August, people will be on vacation. They're not thinking about it, they're going to be spending time with their kids, generally speaking. Interesting. Some houses are still going to sell, but the en mass is it's, over now.
We miss us, you didn't miss, I sold many houses it's just, now we're in the next part of this year when people are still going to. To buy houses, they'll pick up the stragglers. And this is a good time to find houses that have been on the market for a long time. If you've been looking like, I just picked up a new buyer, we'll be talking yesterday and it talks about how we can get you into a good house at a good price and we can command the terms.
Yeah. Versus back in March, April, and May, when the market was going crazy again. We, you didn't have that option as a buyer. Now you're going to have that, and then we're going to see it come back again September, October. It'll pick up a little bit and then it won't go again until March. That's, something important to talk about because I've been seeing the same thing.
So yeah, I feel that the consumer understands where rates are, that they've normalized, they've come to terms with. What, that payment is and, and what we're going to be seeing and expecting moving forward. And we saw a huge influx of applications and activity, right? I'll tell you the last few weeks we have been in major multiple-offer situations.
All over Northern California, and I'm talking from Lincoln to Santa Rosa, to Lara, to Hollister. And in some of these cases, we've seen upwards of 15 offers. Okay. It's been a little bit nuts. The house I just closed on Phyllis. We listed at 1.8 million.
1.88. 8 8 8 8, and it faced north and it was in original condition. Wood shingles. Oh, the only thing is that It's in West San Jose. Lynbrook School. Lynbrook Monte Vista. Okay. Cupertino Schools area. We had on Saturday, the Saturday we had open houses. We had 131 people show up. Wow. Sets of people. Sets from one to five groups in a group on Sunday.
She didn't really count. She said 60. I think it was more, I had, I don't know how many downloads I had, we had 19 offers. Wow. And we landed 35 and, okay. So we listed it at 200, 2.8 million more than the next comp that went into contract two weeks ago. Right then, that one listed at 1.6 and it was facing east and it was in original condition.
Wood shingles, the whole nine yards. So we upped it to $280,000. We still got 19 offers, and I sold it for 35% over the list price. I sold it for 1.55, my job. Amazing. Crazy. Red hot again. That we hit the market just right. We timed it just right. It was always about timing. Yeah. And I, it just, it, you use the market, you use all that, momentum.
And as a listing agent, I know how to create that tempo where I, command what's going on and I say, this needs to be done by this time. Put stress on the buyers and the agents. I understand that, but at the end of the day, it's. That's how I set it up. If I missed the beat, or if I had a seller that demands that the house should have been listed at 2.5 million, I would've had a totally different outcome.
And they didn't think we were going to get 2.5. I didn't think we were going to get 2.5, but my job is to break buyers. So if I have 9, 8 19 buyers, I'm going to break 18 of 'em. And when I say I break 'em, until they're like, I'm ah, fuck that. I don't wanna do that anymore. Sure, I'll go to the next house.
And the strategy I use wins every time. It's so important to work with the right professional, right? Because, despite where the market is, just someone who really understands that it can help you as a seller maximize what you need. And it's so going back to this buyer, that's what we're talking about, and it's the same strategy.
We're just taking advantage of the fact that the mindset of the seller held on too long or felt that the house was worth more than it was. Sure. Again, the sellers don't determine what the market is. The buyers do, right? If you have one buyer saying your house is worth 10% less than what it is, or you have 20 buyers saying your house is worth 35% more, then that's what the market is, right?
You don't have that control. So we go back to this buyer and that's the strategy we're using. Are you, do you need to go to that? Be the little league soccer player where everybody starts off playing positions and then the ball goes over here and the entire field goes over here. And they're playing the ball goes over here, everybody goes over here, and then they go over here.
That's how real estate is. And if you play smartly, you take them out of that situation and a smart buyer will listen. I have other buyers that are like, oh no, this one just came up. And I'm like, dude, you can't offer on that. Now stop. Let's go on. Let's, look at the ones that make sense. Sure.
And, that's how we're so true. Such, is so true. And I think as a whole, we were frustrated last year because if we look past over a year ago we had 20 people in line on the house and we had all our buyers that, oh, they wanted to get in there, right?
Because everyone else was doing it. And then the LA over the last year totally cooled off and we had the absolute ability to, and we did get people houses at great value. Because of market contract terms. And, our clients were scared to jump in. Because not everyone was in.
And it's just interesting how things work. Yeah. This is the perfect segue for this discharge, which is what we usually talk about on Wednesdays. The ones in the lines in green are what we saw last year. So last year we had 106 closes this week. Wow. This week we added 67, so that's about 50% easy math.
Okay, it's 55%. Our transactions are down 63%. So last year our average sales price was 1.7. This is all of San Jose's single-family homes, right? Nothing else. So the average sales price this week was 1.528. And if you look at this That's, about the traction of where we're going down. On average, we're down $200,000 overall for San Jose.
The market has contracted, but now the market's on its way back up because if you look at the median sales price, Just in the U United States is three 3.88, right? 388,000. Yeah. 388,000. So if I open that up, you'll see the chart. You'll see this is the top of 413, which back then they called 416, 500.
So they adjusted it. And then they came back down. January was the bottom of the market. That's, we didn't know that was the bottom of the market. And now we're coming back up again. Sure. So we missed the bottom of the market. Funny how that happens, huh? You don't have to listen to me.
And last year the average sales price was a hundred. All, of you buyers out there that are waiting for the bottom, guess what? We already hit it. You missed it. Sorry, pal. Now that's, right now, right? The market could chunk up and down and do away. And all of a sudden the economy, the global economy happens.
We go into World War III or the dollar goes down. I think 1% can happen. Sure. So we don't know what's going to happen, but right now everything stays the way we are seeing, which is the status quo. The market's going to continue to go up, especially in the Valley, and it doesn't matter if you're in Nevada or Marin or Santa Rosa or San Francisco, the market's going to start going back up because there's going to be upward pressure of people buying houses again.
Because the rates have normalized. We're, seeing that, we've been seeing that almost all year. Just like you said, February, March, and April just like you saw in that median price. So we're seeing the list price average, the list price of sales price average to be 106% right now.
Let me see if I can make this bigger. See, so those of us that are blind can see it. Thank you. Yeah. And right now, last year it was 110, so we have converging numbers, right? We're seeing these things happen. We're going to see that number go back up here pretty quick. I think on average we're one 15. Is that so over-list?
Price sell. Price oversell. Price over list price, right? We're yeah. Basically, houses are selling 10% over asking. That's right. On average, is that correct? On average, for the last, since you're to date right now, we're just over a hundred percent last year overall, the entire last year that I tracked is 115%.
So we're back to, we're seeing these numbers that converge again, and that's, those numbers are really misleading for last year. And here's why. Because the first three to four months were April an insane market. Very similar to what we experienced the last few years, and then we fell off a cliff, right?
So when you look at if it wasn't for those three to four months, we probably would've been negative. Would you agree? Or flat? For 2021, we would've been flat if for 22. For 22. Yeah. If we moved everything over four months, we would've seen a flat year. It just would've been like this.
Some parts of the nation would've dropped a little bit, but like maybe a couple percentages, right? Not right. Not an extreme. I. And if you look at Santa Clara on the whole, it did drop down a little bit. Not as much as San Jose, but San Jose is a, is the difference between the haves and the have-nots, right?
If you look at all the other cities on the west side of San Jose, Cupertino, Saratoga, Palo Alto, Mountain View, and Sunnyvale, all those people will pay more to live there because they're closer to technology. Yeah. They're closer to their jobs. They're willing to pay a little bit more and have better schools and have better commute time and have whatever.
So they're willing to pay more areas. Sure. Versus living on this side of 80 of, 87. Because you have 17 and 87. 87 on versus the South side or, even East Side. East side, south San Jose. There's nothing wrong with living in Blossom Valley. It's a beautiful place, with low crime, great homes, great people, great community.
Yeah. It's just that one extra proximity exit. There's proximity to Silicon Valley. Exactly. Exactly. That's why you've always been able to get tremendous value in the San of Boston Valley area and, Yep. It's only because it's a little bit further out.
And really honestly, the people that just get priced out, end up coming down and buying more in centuries. So not, everyone works in tech, but the majority do. And so I feel like you've always been able to get tremendous value and then now we're seeing it move all the way.
Down South County. I'm doing a lot of work in Morgan Hill and Gilroy. I, it's insane. It's funny and Gilroy, Hollister you can still find affordable homes there homes that, folks can qualify for. So we've seen a bunch I think last one, close three in Hollister.
I think what we're seeing is. That's going to be the next major. Now Morgan Hill popped like seven, eight years ago and then Blossom Valley and Santa Teresa crept back up. To the values. And I think what we're going to see is because Morgan Hill invested in downtown and they're continuing to invest.
They put parking, and they update us. A lot of the buildings they restructured, the roads they've made they're, redoing this, their civil, their city center. Everything about Morgan Hill is just amazing and it's a fun place to go. There are a lot of great people there, and that downtown vibe is just so down home and relaxing, right?
We don't have that in Blossom Valley. The closest thing we have is Village Oaks. And then you get to know what Panera Chain restaurants are. Versus you go to Morgan Hill and you have great clubs, great bars, great restaurants, and good shops. So Sure. It's like Willow Glen has that, right? Campbell has that.
Los Gaddis has that, but yeah, no you're, that's a great great point. Yeah. We had dinner with a couple couples on Saturday at Brays in downtown Willow Glen. Love Willow Glen. Yeah. It's just I'm not going to pay 2 million for a house when I pay 1.5. The same thing. But I don't have to commute every day.
Yeah. It's different. My commute typically is down to Morgan Hill, Gilroy, wherever, and selling houses down there, so I am Sure. Yeah. Everyone's situation's different. And that's what a lot of times when we do our con consultations, right? Not only with finance, but just in general with, what their needs and wants are.
That's what we look at. And that's why sometimes we will turn clients onto areas and that they may be. Didn't think of the right, because they, it might just be a great fit for 'em. Yeah, that's funny. It's like I was talking to this the, I was talking to the friend that's referring me to the buyer and the buyer's coming in from Europe and we're talking about all these different areas and I go into my little presentation of each area because I know a lot of ins and outs of different areas, and that's my job, right?
Schools and areas and schools and pricing and commute times, and He lives in Blossom Valley. My friend lives in Blossom Valley, might refer e I guess, lives in Blossom Valley, right where, right down the street from me. And so he is what, could you get for 1.2 here? I'm like, you can get a house.
It's going to need a little bit of work, but. I can go to Santa Teresa, we can go to Morgan Hill. We can go to Fremont. She works in Fremont. What about Fremont? Oh, it's a little more overpriced. There are certain areas that you have to watch out for, but I can show and you just go into those different dynamics.
But that's my job. I'm a Sherpa. I'm a guide. My job is to show you the different options you make your choice. And I don't steer, I guide. Really? No, Wrong decision. It's really based on you as a consumer. Exactly. Better for you. It's the same way that we. Address the finance side of things.
Our job is to really peel back layers and give you options, right? Because there's they're, not necessarily a right or wrong answer, but there's one that might be better for you. And if I've done a great job, then I'm able to illustrate all those and show you those ahead of time.
Yep. And that's one of the things I can do, speaking with your, buyer yesterday and the day before, it's like, why would we wanna hold off on the finance part? It's the most important part of the process, right? There's nothing there's no negative to going through the process and knowing exactly where you are, rather than determining, Hey, is this house perfect for me?
And then rushing. That part of the process and, I see so many do it, it's probably my pet peeve as the lender that everyone waits until the very last moment to jump in because maybe they're afraid of a credit pool or whatever the case is. And you have to do a full credit report if, that's really a sticking point.
Yeah. And I, understand. I think it wasn't his. His fear of that. I think it was more of an excuse because I think he was just, Re going through all of his financings. There's a lot of stuff that's emerging like his son's maybe moving out and he might have to help stipend that rent and all these other issues that he didn't really want to go into with you.
So he just used that as an excuse. And I didn't over-push with it. No, you did. You did fine. And it's just you were cheerfully saying that. That's not true. Yeah. I mean that, that's not a reason to not review your finances and, Basically get approved.
But I could tell you though, I have so many people come up to me during open houses and I'm like, look, I, if you want to talk numbers, we can talk numbers, but I need to see your loan approval. I don't need loan approval and a conversation. I have other people to talk to. You just keep moving on.
Because right now, even if you do present an offer, you're at the bottom of the list because you're at bigger risk. Cause I don't know what your finances are. I need to have that conversation with the loan officer if I'm a listing agent. I want to have that conversation with them to make sure that person, I feel that person's confident and competent and knows what they're doing.
And you can smell bologna or bullshit, and that's why I work with you. Because I. You might be full of shit. No, I'm just kidding. I hide it. You hide. You hide it really well, but you get shit done and you're confident. And you're confident and you know what you're talking about. Sure.
And you know how to pick shit up. And you know what? You're an adult when you make a mistake, just like I make a mistake, we comp, we Mia culpa when we make a mistake, this is how we're going to fix it. Sure. We don't hide from that like that other. Are you getting a lot of, are you getting a lot of obviously when things get, when activity picks up, are you getting a lot of buyers that are walking up to you as a listing agent and, really trying to maybe work directly with you or, get as much intel as they can?
Obviously, it's, part, it's just a sign of the market, right? And how desperate people are for homes. So you're seeing that again quite a bit. I don't think it's a very wise choice. For multiple reasons, right? From the seller to listing agent side, if I presented an offer how, honest do you think I really am?
Do you think for one, it's impossible, right? A conflict of interest, it's a conflict of interest. Is there a 1% of possibility that I might hide another offer? So 1%, there's always going to be that seat of doubt and you're never going to say, I don't know if I got the best deal. So that's why I have a team. So I got, I had, you have a teammate that can help a buyer in that situation.
And still arm, arm's length, the best representation, right? Without into Absolutely. They get the inside knowledge of what's going on. And I had five people. That wanted to represent us, and I was like, sure, we'll work with you and this is the deal we're working on. I'll show you what the top offer is and you have to beat it by $10,000.
Sure. And that, again I, break buyers. Not that I'm mean, it's just my job is to make as much money for my sellers. It's not to help you get into the house. Yeah. And. So if you're going to come at me like that, I will. I'll be honest and upfront with you, this is what you need to do. This is how it's going to be.
Take it or leave it or move on. Cause I have four other people that want me to represent them. And then I'll talk to them and I'll say, okay, at the, at this point, we're going to have. Joe writes the offer and then I have no issue if you hang on or not. Great. Yeah. And then I push everybody up to the breaking point, and if they stay around, I don't care because I don't. That's that way. The other thing, the other concern that when I hear, for instance, this, just, this listing that you just got in a contract. The other I guess thing that worries me is, appraisal value. And how, do you, like, how do you deal with that when, you're looking at offers, when you have, that's a great question.
You have a, you're already listed higher, and you obviously have a very desirable home. You've marketed it correctly. A ton of activity. And then you get an offer, you're entertaining offers that are 30 plus percent over. This is something that I think we gotta start talking about again.
And I've been talking with, clients, we've had a couple that has been under, but it's been very, it hasn't really been a big deal. But I think in, hearing this it's something that how, for instance, from your perspective, what do you do? Like, when you're looking at offers, you're talking to clients, you're talking to buyers' agents, right?
About their client even. Do you talk about this and how do you evaluate an offer to make sure that. You're not going to have a fallout and it is going to work out. Because to be honest, it's like the elephant in a room and you really need to talk about it upfront when you're going this far over asking.
So first and foremost, again, remember we had that little story before about the soccer field. The little league soccer, right? I'm telling you, if you come at me with an FHA and a VA in two days, It'd be like and, I'm a veteran, I will support veterans. But at the end of the day, I don't support, I, my job is not to help you overcome, getting into that house and hurting my, client who hired me.
Not on that, home. Potentially. Now you could I'll talk about how maybe a VA would still work for that, but. But, I'll please. You have to have, so VA first of all is 0% down, right? And then you have that appraisal contingency, and then you also have property condition contingency that you have to have because it's a VA.
Yeah. And I work with VAs. I, work VAs all the time. But when you're in the heat of the battle and you're playing Little League Soccer and everybody's coming down here and you're going to have 14 offers, I can guarantee you're not going to be as competitive. What I would say is you're com you're, you are more competitive when you look at a house that's been on the market for 30, 40 days, maybe 20, right?
Depends on the market, depends on the buyer, the seller. But if you have a house that's brand new on the market and you're working with a v va lender and a buyer's agent, You go to that open house and you say, I wanna write an offer on that, you're wasting everybody's time. That's it. Right? Hold and I hate that.
Hold on. Now what? What if that VA buyer though has 200,000 in the bank, but then you don't need to have a VA loan? Why would you have a VA loan? You could, because it may, be better terms, but absolutely could. The terms absolutely could be better. But you still have to be able to guarantee that 200,000.
Now, if you have 200,000, you don't need to necessarily show reserve. So it could be from a qualification standpoint, easily. And so, when I look at offers, I take all the personality, all the ego, all the whatever out of it, hubris, you name it. And this is an example of what I show my sellers now.
Every time I get an offer, I look at it. Send it to the seller. I tell 'em what the price is. I say I haven't scraped it yet. I wanna look through it. But the minute I see it, I send it to 'em. I respond back to the agent saying, received and forwarded. And then when I have time, I scour through the contract, and the offer, and I come up with the best scenarios.
And I tell sellers, I go, look, I'm not going to tell you which one to look at. Or to which one to choose. That's not my job. My job is to point out the highlights of every offer and make it look as good as it can possibly be. So if you notice, I don't have anybody's name there. I have the agent's name there.
So I can con go back to that, offer. And I can contact them easily, him or her easily. But it's very telling when you break down these basic variables. It, clearly shows who the top offer is. Now this one is coming up. These are from an old listing I just copied and pasted.
So those numbers, it, they're very telling. So if you look at the percent down, I could tell you that if offer one was good, the highest one out there, It had a 36% down payment. That's great that's, huge because what happens if the appraisal comes in and says it's $20,000 less or $200,000 less?
They're going to have enough money in their pocket or in their bank account to be able to pay to make that delta, right? Sure. Because an appraisal contingency has three outcomes. It's it comes in $200,000 low. The seller could pay for it. The buyer could pay the, diff the seller could lower the price and pay the difference by paying the difference.
Pay the difference by lowering the price. Or the buyer can say, Hey, the seller I'll pay for it. I have the money. Don't worry about it. Or you can go 50-50. The fourth outcome is the seller says no, and the buyer says no, and then you walk away. Because that's what a contingency is, right? It's protection for all parties.
So I, I just think it's really important to talk about it and understand it. I have great listing agents, that ask that question Because I always call, I call every listing agent on every offer, right? Yep. And I talk to them and I give them a lot of color with, in respect to our process and our due diligence, right?
So that, if. If two things are alike if it comes down to the last two or a few offers, at least they know who we are and they really understand. Our offer. And that's something I always do. One of the biggest misconceptions is that even if your house doesn't appraise, you have to come up with the difference.
And that's not necessarily the truth. However, concerning this conversation, I think it's very important to look at, Hey, do they have the assets And, talk about and ask. I've been I, think that's a very good agent that asked me, Hey, if it doesn't appraise what, what? What are you going to do?
And I think it's really important, and it's something that. We're starting to talk with clients. A year and a half, two years ago, we spoke to every client about it, right? Because it was like, okay, how much higher are we writing an offer? How much higher than, asking, right? And, it's something that we have to talk about.
If if, the loan will permit, sometimes we can just absorb. Like for instance, we had a couple of the last month that didn't appraise, right? But check this out. The buyer didn't come in with more money. They didn't have to. The terms didn't even change. In fact, with these new LPAs, with these new lending rules 1, 1, 1 client's payment came down.
Actually, believe it or not, their mortgage insurance came down and the payment came down. Okay. Explain to me that, it didn't appraise, so let's say it's a million dollars. It came in at nine 50. Yeah, so like basically they were at 13% down. Okay. And now they went down to 10% down. Oh. Of all that changed.
And so did the loan amount change? No. The down payment amount changed. And the only thing that could affect. In this case, the only thing that it affected was the mortgage insurance a little bit. Because mortgage insurance is based on every, about 5%, it changes, right? It's highly based on credit, but it does change based on loan to value.
So how much you're putting down. And if you recall what some of these changes over the last couple of months in regards to the. Cost of loans. Remember, on lower credit scores and lower down payments, it actually got more inexpensive. It got cheaper, right? So in their case, their down payment came down and it actually lowered the mortgage insurance, which was whoa.
But. So that's common, right? And, that's sometimes a misconception that, hey, just because we it, didn't appraise that the consumer has to come in with it Now. However, in a situation like yours where you're in a really highly desirable area, a beautiful home and, you're going way above, then in that case honestly, you gotta be looking at assets and asking the question.
If it doesn't, what. What are we going to do regardless of the contingencies, right? Because you don't want a, bigger problem down the road if something does happen. And, they can't buy the home. Even if they're non-con contingent, that's a headache. That's, not a path you want to go down cause it's just prolonging you selling that home.
It's just more stressful for everybody. And that's what we try to alleviate. And look I can tell you that there's. 40% of the houses out there sell below at or below this price still. Where Is that across the country or, No, just here. What I'm tracking is San Jose, San Santa Clara County.
I haven't really been tracking other places but I can tell you that there There are houses that are going to sell really quick, whether it's location, condition, or whatever, right? There are also going to be houses that don't sell, and they're going to be on the market. Here's the thing, save yourself distress.
If you're a buyer and you have a low down payment, you don't have that kind of stuff. I tell people, look, and I work with these people all the time, I go, look, here's what you need to do. Look for houses that have been on the market for a while. If your dream house is a 3,500-square-foot house in, Cupertino, that's really close to my Apple office and, you can only afford $2 million you're not going to get anything in Cupertino.
You're going to go to. Almaden, maybe Los Gatos or if you have to, go to, Blossom Valley, so you, have to give up on certain things, right? Sure. As much as we can help. Give you what you want. We can't give you the goal pot of gold at the end of the rainbow. It just doesn't, it doesn't work out.
Sometimes that's just as a buyer, especially a first-time home buyer. What you gotta understand, it's the type You don't typically buy, you rarely buy your forever home in the first goal round, right? Yep. It's an opportunity to get your foot in the door and, start building equity and, just become a homeowner.
On average people don't last more than seven years in their first home, somewhere between five and seven years. And but I, see sometimes that buyers get so hung up on that, where it's like they gotta have everything. And I go, look you, don't necessarily have to, your lifestyle's going to change it.
Everyone does. And. And so it's important to obviously make a list and have your must-haves, right? Yeah. But then also just be realistic with what you can afford and what your payment is and what suits you now and, into the next several years. Yeah. I've lived in this house for 20 years, I think, close somewhere.
I don't know, somewhere around that. And my lifestyle has changed. I don't like going up and down stairs anymore. My old knees and hips just don't like it. They're living in the office now in a co It's a foldable futon, but it's true because things change and I'm at the end of mine.
My chapter of this life is where my, son is in college. My girls are juniors as of the end of this week, right? They're sophomores, but they'll graduate to hopefully to juniors. And then I have two years left and right now my mindset is where am I going to move? I like living here. I love this place. I love the weather.
I love the people. I love going to Morgan Hill and Willow Glen and, hiking and camping, and the beach is everything is so central and the food, but I need to change. I want to go live on a little deserted island somewhere and just chill out. Yeah, no, absolutely. That's the last phase, right? Or no, it's my next phase.
Don't make me that old. The last phase, it could be, it could get wiped out by a tsunami or something. There you go. That's one way to go out. Just like that Woody Harrelson and that it wasn't Oh, tsunami though. That was something else. Was it Tom Hanks? No. I want to say it was one of those Armageddon movies.
It was Randy Quaid, not Randy. Yeah, it was Randy Quaid. And he was on top of a hill and he gets me some of a, or maybe it was Woody Boyd. Woody Harrelson. I don't know. What do I know? Anyway, it's been 49 minutes. Dude, we've been talking way too long. We gotta do this every week. I know. I agree.
Manam, let's do it. I would love to have you as a guest every week just to chill out. Yes. Let's do one. Just set a day and then we can do it that way. Cause I love being on, I love chatting with you. I can probably talk to you all day. But it is nice to share, hey, what we're seeing, what's happening no matter what side, whether you own a home, whether you're looking to buy a home, sell a home it's all relevant information.
It's good to know, especially if you're in the Northern California area. Maybe what we should do is bring in all those other people that we're talking about, the financial intelligence group, right? S Yamamoto and John and all those other people, experts in finance and insurance, and Yeah.
Other rounds. Yeah. And get their point of view of what's going on and how to structure your life and get shit moving and, get focused. Yeah. That's what we're going to do. We're you and I are going to host something like that, we'll just bring 'em in and have. That's great. It's like a, it's like a local spotlight on a business, on an industry expert that can give us their perspective on, what's happening and help identify maybe good opportunities or threats for the everyday consumer.
Yeah. Yamamoto, he's healthcare insurance. Sales guy, right? And, he's I don't talk to individual people to sell them anything because I work on talking to the business owner and then I help the individual employees understand their program and how to work through it. And I can absolutely do that.
And that's, it's a huge value. How many people have questions about their insurance programs? And who understands all that stuff, not my Moto dude. That's brilliant. I'm telling that's the one thing I don't want one of many things that I don't want to put in my brain housing group.
I'm horrible. I'm horrible at that stuff. Fortunately, I've got my wife that helps me a lot and I've got a really good friend who's an HR director. And the shell, she's always willing to annually jump on a call and just say, Hey, you're, this is good. This is good. You can adjust this. Perfect. I bring her on board, man.
Let's, invite her to talk. Before we go, I, it's exactly the reason why I think travel agents should be regarded as these amazing people because, I'm trying to get my mom out from Knoxville, Tennessee to San Jose to Las Vegas. Go see her,, my sister, and her daughter, and then back home.
And it's just such a freaking stressful just getting flights such a pain in the ass. I just don't even wanna think about it. You had someone that can just do, that for you. Yeah. I got somebody, but I'm, I still am, I'm trying to figure out when I, have 10 people involved in this, travel thing.
My mom's coming out, my dad has to know what's going on. But my sister, my kids, they all have camp and this and all this other stuff going on in the summer and we're trying to figure out how many days they're coming out, where are they going to, what day, and then Is she going to stay with you for some time at a hotel?
I have no rent. They don't. It's probably better for everyone that way, right? Yeah. Yeah. No, I love my mom. Prob about. Two hours and then that's it. Not kidding. Solve for the kids. Su for the kids. Kidding? Not kidding. But yeah. No, it's, easier that way. Yeah, dude, I'm telling you, my sister is putting her up in her house, which is totally fine.
I don't have a problem with that. Is that in Vegas? Is that in Vegas? Yeah, she lives in Henderson. She's actually a real estate agent in, Vegas. She's a great person to know there. But I think I'm going to put my mom up at the prune yard. In, I think it's, I looked at it yesterday and it's Campbell.
Yeah, right at the prune yard. So we'll have dinner there. Get her drunk and take a couple, yeah, there's one there. I can't remember which one it is, but there's one that like literally right there by my old office that's actually really nice there. It's called. It's Double Tree now.
Yeah. Double Tree by Hilton Campbell Pruneyard Plaza. It's literally right next to the Yeah, the brew house. It's right behind rock bottom. Yeah. Rock bottom. You can actually, they have a cool little patio. Cool. Little happier. And you can actually walk right through and get to anywhere in the prune yard the, Mexican restaurant there, kind the whole area.
What's that? Luna? Luna? Yeah. Do you like that? Oh, man. That place is awesome. It's a great place during the summer. They have an awesome patio. They have cooler drinks. It gets busy there. Yeah. It is a waiting period. So you go to rock bottom, have a beer, and then Exactly. And there's one of several places there where you can have a cold drink to hold you over, yeah. I think that's what we're going to do. So I'm, looking at the prices and the trip is, it's not cheap, but. It was her 80th birthday. I think I'm going to fire the player in our first class. That's awesome. I'll definitely make that cross-country trip a lot easier. She'll be showing up, mimosa, and head.
Let's go party. All right, dude, I gotta go cause I, appreciate it. Good to see you, man. We'll be in touch. Let's connect again next week. Alright. We'll see you on Wednesday. Awesome. Cheers. Have a good one. Bye.
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