SHOPPING FOR A HOME IN SILICON VALLEY? HERE ARE THE TOP 5 TERMS YOU NEED TO KNOW Here are five terms that will help you navigate the sometimes dicey, but never boring, waters of the Silicon Valley real estate market: CMA (Comparative Market Analysis): Perhaps the most important tool to help you understand the ever-fluctuating value of a home in any given market, this analysis is a document which includes three to five homes that are comparable to the one you are thinking of buying. Once you decide to make an offer on a home, your agent should provide you with a CMA. The comparable homes included must be located in the surrounding area and should have sold within the last three months. They should also generally possess similar characteristics (even though no two houses are exactly alike). A CMA can help you decide how to price your initial offer and also will give you an idea of how much the home will sell for. It’s especially important that your agent know the area well because a home that’s on the same street, for example, might be located in a flood zone or different school zone, which could dramatically alter the price of the home. List–to–Sale Price Ratio: You’ll see this ratio everywhere in Silicon Valley. That’s because homes here rarely sell for the initial list price. Every home sale has a bidding war, meaning many people submit competitive offers on the same home. This drives up the price of a home sometimes by as much as 10 percent or more. Knowing the average list-to-sale price ratio of comparable homes can help you determine how to make a more competitive offer. This information will also give you a better idea of what you can expect a home to sell for because the list price is not an accurate measure of the final cost in this market. Disclosures: One important thing to know about buying in Silicon Valley is that most homes are purchased as is.That means you can’t expect to negotiate with the seller about making changes to the home before closing. Because the demand for homes is so high and sellers have so much control, buyers may have to make some concessions when purchasing a home. As a result, all disclosures about a home are provided upfront. It’s extremely important that you read all the disclosures very carefully before submitting an offer. Your agent can help you understand which disclosures are major red flags and which ones might seem frightening but shouldn’t scare you off. For example, if you see “seismic zone”, fret not because basically every home in the Valley is in one! A flood zone, on the other hand, may be more problematic. Contingencies: In Silicon Valley, a majority of transactions are non-contingent. This means that there is no way to back out and get your deposit back after the contract is ratified. Essentially this means that all risk of the deal falling through is transferred to the buyer. Here are the most common contingencies that buyers waive to make their offer more attractive to the seller: · Financing Contingency: Typically if you’ve made an offer you’ve included a preapproval for financing. However, your documentation still has to go through underwriting, which involves a much deeper vetting of your rental and financial history. For example, during underwriting, you may be asked to write a letter explaining why you were late paying your student loan in 1997. Be sure that you are confident with your credit and financial history before waiving this contingency. · Appraisal Contingency: When taking out a traditional loan, the bank cannot lend you more than 80percent of what the house is worth. This means you must be prepared to put down at least 20 percent of the value of the home you plan to purchase. If there is a gap between what you are putting down and what the house is appraised for, you must be prepared to pay the difference. You can’t go non-contingent on this if you aren’t prepared to pay the difference. · Property Condition Contingency: One norm in Silicon Valley is for the sellers to do the inspection upfront because they expect a non-contingent offer. You’ve read through the inspection report and all disclosures have been provided to you. The only way to get out of your contract after waiving this contingency is if something comes to light that the owners failed to disclose that is material to the property condition. This triggers the right to re-disclosure, which enables you to back out of the contract with your deposit intact. API Score: Academic Performance Index is the gold standard in ranking how good a school is and it really drives the market in Silicon Valley. Homebuyers tend to be less concerned with an area and more concerned with the reputation of the schools in said area. Most people shopping for a home want to be in a school zone where the school has an API score above 900 (the scale being 1-1,000).
Posted on: Mon, 11 Nov 2013 21:42:08 +0000
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