Quick Question: List price and cash offers? (San Jose, Palo Alto: sales, real estate)

[Moving More]

Hello all,

We're a family who is relocating to the South Bay area due to a job in Silicon Valley. (I know, I know a story you've heard before.)

Just two quick questions about the current housing market: I know that this is certainly a seller's market. I'm wondering about 1. Are bids all going over the asking price and 2. Is it so crazy that only cash offers are being accepted. ie: Is the market so crazy that needing to deal with a loan takes you out of the game?

Thanks in advance.

[ccm123]

From what I read lately, most homes are going for over asking. It depends on the area, how much over asking.

[Lanienguyen]

Here is an example in Berryessa. listed as $735K. Sold at 900K for 43 yrs old house with 1393 sq. I get shocked too for 165K over asking price. It depend on your family. Do you need good school for your kid? If you don't have kid or your kids all grow up, you don't have to get into prime school area. So you can get a house with less competition with other offers.
[SIZE=4]3040 Crater LN, SAN JOSE, CA 95132 ( Recently Sold ) - MLSListings, Inc. | MLSListings.[/SIZE]
[SIZE=4][/SIZE]

[botticelli]

Originally Posted by Lanienguyen

Here is an example in Berryessa. listed as $735K. Sold at 900K for 43 yrs old house with 1393 sq. I get shocked too for 165K over asking price. It depend on your family. Do you need good school for your kid? If you don't have kid or your kids all grow up, you don't have to get into prime school area. So you can get a house with less competition with other offers.
[SIZE=4]3040 Crater LN, SAN JOSE, CA 95132 ( Recently Sold ) - MLSListings, Inc. | MLSListings.[/SIZE]
[SIZE=4][/SIZE]

If you are shocked by 165k, how about 567k over asking?

Vancouver house sells for $567K over listed price - British Columbia - CBC News

[jk88cal]

1. Are bids all going over the asking price.

Majority of house are going over asking. But there is nothing magical about this. This is mainly due to most homes listing below market value to get multiple offers and bidding war. So typically, houses are listed 10-30% below market value. Then the ending price might be 10%+ above market value. Or you can argue that whatever it sells for is indeed the market value.

2. Is it so crazy that only cash offers are being accepted. ie: Is the market so crazy that needing to deal with a loan takes you out of the game?

No, only around 1/3 of sales are cash offers. This is a rough estimate and based on limited data. Just by talking to people, reading real estate forums, and also looking at the closing date. Cash offers typically close within 14 days, whereas loans take up to around 28 days.

So there are plenty of opportunities for non-cash offers. But there are other issues you have to deal with:
- Multiple bids and bidding war, so you have to make offer on possibly 5-10 homes before your bid is accepted. And at the end of the day, your price must beat others.
- Waive contingency. You will most likely have to waive inspection, loan contingencies.
- Downpayment. Your downpayment needs to be 30 to 40% of offer.

Because you want to sweeten the offer to beat cash buyers and other multiple offers, the only way is to waive contingency, increase your offer price, or some rent back offer. Everyone is waiving contingency, so that doesn't help you. Rent back depends on sellers' situation. The one you have control over is the offer price.

Catch 22. The more you increase your offer price, the more likely the appraisal will come in short. If appraisal is short of your offer price, bank will loan you 80% of the appraisal value. You need to make the up difference. So your downpayment needs to be: Offer - 80% * Appraisal.

Example: You offered $1.1M on house, which appraised for $1M. So you basically offered 10% premium over "market". Bank will loan you $800k. So you need to put $300k downpayment, which is 27% of $1.1M.

Basically, the seller knows that at minimum, they want 30% downpayment (or you can show proof of cash for this downpayment), otherwise there is high chance you won't be able to complete the loan. But they also know that in this market, they want to get as much sale price as possible. Therefore, they are expecting to potentially get a sale price that is 10%+ over market, maybe 15% or 20% or 25%, sky is the limit. The crazier the bidding war, the more downpayment is required.

[Fiona8484]

Originally Posted by Moving More

Hello all,

We're a family who is relocating to the South Bay area due to a job in Silicon Valley. (I know, I know a story you've heard before.)

Just two quick questions about the current housing market: I know that this is certainly a seller's market. I'm wondering about 1. Are bids all going over the asking price and 2. Is it so crazy that only cash offers are being accepted. ie: Is the market so crazy that needing to deal with a loan takes you out of the game?

Thanks in advance.

Over the last 6 months I have read a lot online about real estate in the USA in general, but focused a lot on this area. I personally believe that a correction *MIGHT* occur in two years.

I know this article is based more on San Fran & Marin prices, but I believe we trend in a similar fashion to them (especially now). I believe this is one of the more relevant articles that I have read regarding real estate in this region. I think this link is helpful:
http://www.paragon-re.com/3_Recessio...les_and_a_Baby

Good luck, you will be playing a game I don't want to play. We are considering other low costs areas of the country, but of course there are factors that make it a process to actually go.

[Lanienguyen]

Originally Posted by botticelli

If you are shocked by 165k, how about 567k over asking?

Vancouver house sells for $567K over listed price - British Columbia - CBC News

It depends on the area. I don't get shocked if in the city of Palo Alto, 1M over asking price is the norm.
I get shocked because this area last year is around 750K.. and suddenly jumps to 900K.

[dogandcat]

We bought a small but renovated detached 3 bdr 2 bthr house in San Jose, Blossom Valley neighbourhood zip 95123 with good schools two months ago. Asking price was $685,000, selling price was 715,000.

Our offer was 20% cash in down payment. So, it is still possible to find something good for relatively reasonable money. Of course if we are talking about more pricy places than the situation is different and you often need at least 50% in cash bidding with rich buyers....

[cardinal2007]

Originally Posted by Moving More

Hello all,

We're a family who is relocating to the South Bay area due to a job in Silicon Valley. (I know, I know a story you've heard before.)

Just two quick questions about the current housing market: I know that this is certainly a seller's market. I'm wondering about 1. Are bids all going over the asking price and 2. Is it so crazy that only cash offers are being accepted. ie: Is the market so crazy that needing to deal with a loan takes you out of the game?

Thanks in advance.

Really depends on where and what you're buying. I bought my condo about 6 months ago, and everything I looked at was selling for below asking, except for those that put their condos for under market, I distinctly remember 2 condos I looked at both sold within a week for about 10-12k over asking, almost everything else ended up going through price reductions before selling a little below list. The first place I bid on was a townhouse, which eventually ended up in a bidding war and sold for about 20k over asking. My place had its price reduced and I bought it for list price.

So:

1. No
2. No (both my offers were with financing)

[butercup]

I can only speak to SFHs, but yes, the majority are going over asking, I'd say 10 percent to 20 percent over. They usually are only shown for 1-2 weeks, offers are accepted on a specific date, and I agree with JK, about a third seem to be all-cash. The more you have for a down payment, the better. You can get a house with financing, but you can't have any contingencies related to the financing, appraisal, or inspection - and you'd better have a good realtor and a great mortgage broker that can get you closed in about 3 weeks. You'd then better be willing to rent back to the owner for free for a few weeks. One excellent thing that we were not accustomed to is that most of the houses have a very thorough inspection and disclosures that are available when it is shown. A good realtor will be able to tell you if the inspector is legit and believable, and read all the gobbledy-**** for the real details.

Redfin is a godsend for comparing closed sale prices to the asking prices - I went through and made a chart to compare so I'd know what we were up against. Again, a good realtor will know what houses are overpriced - ours predicted closing prices with scary accuracy.