How's The Los Gatos Real Estate Market Doing Now?

Prices are up for Los Gatos real estate sales! (Click on link for full data from my Los Gatos Real Estate Report.)

Below please find the statistics and numbers for house sales in the town of Los Gatos (95030 and 95032) which closed in the month of February.  Month over month, movement in the market is not too surprising.  But year over year - wow - we are seeing a VERY big jump!  The median sales price was up 14% year over year and the average up 90% year over year. This despite the rise in inventory - but days on market are shrinking.  Although prices are up, the list price to sales price ratio fell - so overall, it's a cooler market. 

Trends At a Glance	Feb 2012	Previous Month	Year-over Year
Median Price	$1,442,500	$1,129,500 (+27.7%)	$1,265,000 (+14.0%)
Average Price	$2,320,030	$1,248,000 (+85.9%)	$1,217,470 (+90.6%)
No. of Sales	16	16 (0.0%)	15 (+6.7%)
Pending Properties	45	30 (+50.0%)	48 (-6.3%)
Active	74	63 (+17.5%)	57 (+29.8%)
Sale vs. List Price	94.8%	96.6% (-1.9%)	98.1% (-3.4%)
Days on Market	70	82 (-14.2%)	92 (-23.0%)

Los Gatos condominium & townhouse sales (click on link for more info)

Also some mixed numbers, but overall, a tremendous improvement in both pricing and number of sales.  A very welcome change for condo owners wanting to sell!

Trends At a Glance	Feb 2012	Previous Month	Year-over Year
Median Price	$601,000	$338,000 (+77.8%)	$480,000 (+25.2%)
Average Price	$562,675	$358,800 (+56.8%)	$490,350 (+14.7%)
No. of Sales	8	5 (+60.0%)	5 (+60.0%)
Pending Properties	22	14 (+57.1%)	16 (+37.5%)
Active	16	24 (-33.3%)	31 (-48.4%)
Sale vs. List Price	96.1%	99.0% (-2.9%)	99.4% (-3.3%)
Days on Market	63	101 (-38.0%)	54 (+15.6%)

The Los Gatos Mountains 

Big improvement over last month for number of sales & list price to sales price ratio. The mountain properties usually sell much slower, and have a softer market generally, than homes in town or on the valley floor. February's sales are still low compared to a year ago, and so's the list price to sales price ratio, but we'll take any positive trends we can get.

Trends At a Glance	Feb 2012	Previous Month	Year-over Year
Median Price	$503,000	$675,000 (-25.5%)	$682,500 (-26.3%)
Average Price	$565,857	$518,333 (+9.2%)	$756,667 (-25.2%)
No. of Sales	7	3 (+133.3%)	6 (+16.7%)
Pending Properties	11	10 (+10.0%)	14 (-21.4%)
Active	24	25 (-4.0%)	18 (+33.3%)
Sale vs. List Price	93.8%	88.7% (+5.7%)	97.0% (-3.4%)
Days on Market	112	97 (+15.5%)	212 (-47.2%)

Altos Live Charts for Los Gatos 95030 and 95032 plus Los Gatos Mountains 95033 and Monte Sereno Real Estate

Next please enjoy the live Altos charts, which are updated automatically each week - each segment is a little different than the others (and the reports would be more diverse still if we broke these down further, by price quartile - - sign up below if you want these delivered to you via email each week).

As you can see, pricing is stronger in 95030 than in 95032.  This may be due to the schools (only a little of 95030 is in the Campbell Union High School District, but a larger portion of 95032 is).  The strong Los Gatos schools are a major driver of desireability - but not the only one.  Many people want to have the "walk to town" element, even if their kids are in private schools.

How much more does it cost to buy a Los Gatos home with Los Gatos Schools?

Los Gatos home buyers often ask the question of what the ratio is for prices of houses with "Los Gatos Schools" as opposed to those with Union or Campbell Schools.  In other words, how much more costly is real estate if the property feeds to Los Gatos High School?  Although there's no tidy, easy rule of thumb that will uniformly apply, often the answer is in the 10-20% range.  It can be more or less, though.

Part of the trickiness of coming up with an easy answer about the impact of the school district on home values is that there are other significant variables too. Here are a few:

• Proximity to the downtown area or other highly desireable places, such as schools, parks, shopping, restaurants or coffee shops
• Pricing tier: the easiest to compare are smaller houses on smaller lots which are about the same distance to schools, parks etc. - much harder are luxury homes because often there is a wide range of lot size, view, useability, amenities, etc.
• Home type: almost impossible to compare tract housing in the newer parts of town with the older, historic and architecturally distinctive construction in the older areas of town

Sample comparison of fairly similar home types and lot sizes in Los Gatos

All that said, today I compared sales of houses in just 95032 (since much of 95030 is close to downtown and most of 95032 is not) to remove the "walk to town" variable.  I pulled up properties that hae sold in the last 120 days that were between 1200 and 2200 square feet, on lot sizes close to 8,000 SF.  All were in east Los Gatos and pretty close to within a mile's range, straddling the border of the school district boundary - so pretty equal in distance to shops, Vasona Park etc. though those "in the schools" were a little closer.  Here's what I found for this sampling of Los Gatos properties:

The houses in the Union School District which feed to Leigh High School:

1. 3 sales
2. Average house size = 1936 SF
3. Average lot size = 7970 SF
4. Average sales price = $903,367
5. Median sales price = $870,000
6. Average price per square foot = $474

The properties in the Los Gatos Union School District which feed to Los Gatos High School:

1. 5 sales
2. Average house size = 1724 SF
3. Average lot size = 8392 SF
4. Average sales price = $1,028,000
5. Median sales price = $1,000,000
6. Average price per square foot = $592

On a price per square foot basic, buying "in the schools" is about 20% more.  The difference is less when comparing the median and average sales price (10% and 13%), but it needs to be understood that the home sizes are smaller by about 11% too - so it's not just 10-13% more expensive for this sampling of properties.

How much better are the schools in one district over the other?  If considering API scores, which I would not suggest using exclusively (but it is easily measured), the differences are not so great at the elementary and middle school levels.  Where it's pronounced is the high school level. Have a look - I pulled these numbers from the Santa Clara County API page for all schools in the county. There was no update for Union Middle School so I used the year prior (Dartmouth Middle is in the same school district and situation - the last year it recorded, the number was 900 exactly).  I did not compare all schools, just those on the border closest to those "in the schools".

The results are a little surprising - but of course where to live is about much more than just the schools.  However, since it's a main driver for consumers, it's fair to answer the question of what you get for your money, and part of that package is the schools.

Want to buy a home in Los Gatos?  Find some basic information about buying a home in Los Gatos on my popehandy.com website as well as on this blog.  Or contact me for more assistance!

Months of Inventory in Los Gatos Varies Widely Right Now

In Los Gatos 95030 and 95032 (*not the mountains, not Monte Sereno, not San Jose on the LG border) it is close to a balanced real estate market overall with about 5 months of inventory. Six months is considered balanced by the National Association of Realtors.  

But most houses don't have a market which is exactly like the "overall" market. Bank owned homes and short sales are selling best - it should be noted that there are not many of them!  Next are regular sales in entry level to moderate price ranges.  As the price climbs, so does the months of inventory or absorption rate for the Los Gatos real estate market.  Worst of all would be short sales priced at over $3,000,000 - they are not moving at all!

We could further fine tune it by lot size, school district, proximity to town etc. Often the hottest segmant of the market are the entry level homes with the best schools.  We didn't tease that out here today.... Schools are a big deal in Los Gatos, but some of it may be proximity to downtown rather than just the API scores since 1/3 of the kids in town attend private schools.  (The town of Los Gatos encompasses about 10 square miles. The farthest neighborhoods from downtown LG are about 4-5 miles and 15 or 20 minutes driving time at the worst, if one hits all red lights.)

For information on your neighborhood's market conditions, please contact me!

mary (at) popehandy.com or 408 204-7673

Blossom Hill Manor Real Estate Market

The Blossom Hill Manor (aka "the Manor" or "Blossom Manor") is a very highly sought after neighborhood with its close proximity to the highly regarded Los Gatos schools, parks, shops, grocery stores and major transit routes.  Homes there are well maintained, many streets are tree-lined and there's a good amoung of community spirit and involvement in this close-in area.

Today we'll have a quick look at what's been happening at The Manor with residential real estate listings and sales - houses and duet homes (not going into expired, canceled and withdrawn listings this time, nor covering the duplexes in the area).

1 - Overview of Blossom Hill Manor real estate sales numbers so far in 2011

An overview of active listings, pendings sales and closed sales or escrows as of Jan 1, 2011 through Nov 4, 2011 (data from MLSListings.com, crunched by Mary Pope-Handy):

Looking at the 22 sold homes so far this year gives us a pretty good idea of what it may cost to purchase a property in "The Manor" - and the diversity.  If you've seen the area you know that it's got a range of properties from totally original (almost a tear down, possibly with a buried, abandoned septic tank in back) to fully rebuilt.  The prices reflect this, too - sales prices ranged from a low of $860,000 to a high of almost $3 million.  A "typical" home, with some updating but not fully remodeled, will easily run $1.2 to $1.4 million (and it's not hard to spend more).

2 - Average sales price per month for this east Los Gatos neighborhood:

3 - New listings by price range within this area of town:

4 - Closed sales by price range  (again, many are between $1.2 and $1.4 range)

5 - Months of inventory (going back 3 years) - it is almost always a hot sellers' market there - less than 6 months - due to enduring popularity and scarcity of listings:

6 - Supply and Demand of houses for sale

Perhaps most important of all is "Supply and Demand" - what's listed and what's sold.  The closer these bars are together, the better the odds are of selling (and often the higher the price that the home seller will get for the property).

As you can see, it's gotten a little tougher to sell in August, September and October as the gap has widened between available listings and what is closing escrow.  (Some of this may be seasonal fluctuation.)

7 - Sales price to list price ratio - due to scant data some months, there are gaps in the chart  below:

Home buyers, especially first time home buyers, often want to think that they can purchase a house for 10-20% or more under list price.  This seldom happens, particularly if the house was properly priced in the market to begin with.  Here, it's clear that while at times homes have indeed sold for 10% under list, it's not the norm!

Today's article is a simple overview of some of the basic numbers for this popular Los Gatos neighborhood.  Want to buy or sell here or elsewhere in Los Gatos?  Please give me a call or shoot me an email - if we work together on your next real estate transaction, we will delve deeper into the market trends and statistics so that you are able to best pinpoint the pricing, whether buying or selling. 

mary (at) popehandy (dot) com   408 204-7673

Year to Date Real Estate Listing & Sales Activity in Los Gatos

The year is mostly done - what are the numbers like for the last 10 months in Los Gatos?  Below are the basic statistics for sales of houses and duet homes in Los Gatos 95030 and 95032 from Jan 1, 2011 - today. The data is from MLSListings.com, culled by me this morning.  Please note the huge diversity in house sizes, lot sizes and prices! (All sale types and school districts.)

Status: Active (94)
		List Price	DOM	Sale Price	Beds	Baths	Yr Built	SqFt	Lot Size	Price/Sqft
	Min	$349,900	1	-	1	1		668	1	$287
	Max	$19,995,000	1199	-	6	9	2011	16,000	2,178,000	$2,571
	Avg	$2,442,173	132	-	4	4	1947	3,320	87,012	$697
	Sum	$229,564,250		-
Status: Pending w/ release (17)
		List Price	DOM	Sale Price	Beds	Baths	Yr Built	SqFt	Lot Size	Price/Sqft
	Min	$580,000	4	-	1	1	1900	829	2,178	$339
	Max	$2,700,000	463	-	5	5	2010	4,428	296,208	$1,004
	Avg	$1,234,279	89	-	3	3	1969	2,300	34,047	$565
	Sum	$20,982,737		-
Status: Pending w/o release (17)
		List Price	DOM	Sale Price	Beds	Baths	Yr Built	SqFt	Lot Size	Price/Sqft
	Min	$499,000	4	-	1	1	1890	624	2,750	$407
	Max	$3,199,000	226	-	6	5	2011	4,587	88,426	$1,185
	Avg	$1,603,815	59	-	4	3	1966	2,604	21,706	$636
	Sum	$27,264,849		-
Status: Pending, do not show (18)
		List Price	DOM	Sale Price	Beds	Baths	Yr Built	SqFt	Lot Size	Price/Sqft
	Min	$649,000	0	-	2	1	1954	612	2,798	$384
	Max	$15,400,000	128	-	6	9	2011	14,253	162,478	$1,080
	Avg	$2,369,192	53	-	4	4	1985	3,539	30,468	$602
	Sum	$42,645,452		-
Status: Sold (Closed Sale) (207)
		List Price	DOM	Sale Price	Beds	Baths	Yr Built	SqFt	Lot Size	Price/Sqft
	Min	$156,060	-1	$156,105	2	1	1895	927	435	$72
	Max	$5,999,999	631	$5,750,000	6	8	2011	9,533	2,395,800	$1,321
	Avg	$1,420,145	53	$1,369,784	4	3	1966	2,432	30,704	$575
	Sum	$293,970,028		$280,805,734
Status: All (353)
		List Price	DOM	Sale Price	Beds	Baths	Yr Built	SqFt	Lot Size	Price/Sqft
	Min	$156,060	-1	$156,105	1	1		612	1	$72
	Max	$19,995,000	1199	$5,750,000	6	9	2011	16,000	2,395,800	$2,571
	Avg	$1,740,587	76	$1,369,784	4	3	1962	2,727	45,414	$611
	Sum	$614,427,316		$280,805,734

The days on market (days to sell) and list price to sales price ratio is of interest to home owners wondering "when is the best time to sell my Los Gatos home?"

Next, listings by price range:

Next, the average sales price (at close of escrow) by month for houses & duet homes in LG.

And last of all, the "months of inventory" for Los Gatos residential real estate going back 3 years. For sellers, shorter is better and longer is worse.  As you can see, it's very clear that the hardest time to sell a house in town recently was in late 2008 through 2009, with big improvements in 2010 and 2011. A balanced market is about 6 months, less is a seller's market and more is a buyer's market.

If we switch it out by school district, price point, sale type, acreage etc. it's a little different, of course - today's post is just a broad overview of the market in these two zip codes generally.

Los Gatos Real Estate Market Trends: Are More Homes Selling "ALL CASH" Now?

At an office meeting this morning, a statistic was shared that 20% of all sales in Sana Clara County are "all cash" right now.  This year I've had two all cash transactions, which is more than is typical for me, so I thought it would be interesting to check it out a little more. 

My next stop was MLSListings.com, where I crunched a few numbers (deemed reliable, but not guaranteed yada yada yada).  I ran these numbers via what has closed within the last month (30 days), not during just October or during all of September 2011. 

It's 100% true that in Santa Clara County, 20% of all closed escrows in the last month were "all cash".  In San Jose, the number was even higher: 24%.  Teased out further, of the distressed sales in San Jose (short sales and bank owned properties), it's a full 34% (33% short sales and 37% REOs or bank owned homes). That's huge!  My hunch was that this was largely lower priced homes so I broke it out by price point also and found that of homes under $300,000 (this is houses, condominiums, townhouses and duet homes) it was a whopping 46% of sales that were all cash in the last month. 

On the other side of the coin are homes in Los Gatos and Monte Sereno, where by comparison far fewer all cash deals have happened this year. (I did close one a earlier this year at 176 Kensington Way, Los Gatos, in the high 600s, but it was a fixer upper.)

In just the last month, though, in both 95030 and 95032 (both of which serve Los Gatos and Monte Sereno) there were NO all cash real estate sales for classes 1 and 2 (houses, condos etc.).  One sale of six in the mountains was done without financing. 

In most of the west valley communities of Silicon Valley, it appears that home sales without loans are not a huge portion of the market, with one exception: Saratoga.  Last month Saratoga had 29% of its closed sales happen all cash.  I'm not sure why that's the case, which of the school districts this is, if they were all condos etc.  I could spend infinite hours picking that apart but it is an interesting anomaly.

It should be added that while we are discussing all cash in escrow, some, perhaps many, of these new home owners may later obtain some sort of financing after the sale is completed.

As always, the statistics may not apply to your particular home, area, school district, housing type etc.  If you are interested in selling or buying a Silicon Valley home, please contact me.  We can further refine the numbers that actually pertain to you and your precise situation should we work together on the purchase or sale of property.
 

For further reading on the topic of all cash real estate sales in Silicon Valley:

Cash offers: what do you need to know if buying “all cash”?

Q & A: Making an Offer

What’s My Silicon Valley Home Worth? Estimating the Probable Buyer’s Value  (financing impacts market value)

Corner lot landscaping ordinance - line of sight is important for vehicle safety

Neighborhood traffic issues have been a topic of much discussion over in the Belwood neighborhood and elsewhere in Los Gatos. Residents are upset about speeding, ignoring or rolling through stop signs, cutting through residentail areas rather than taking major roads and, of course, zipping around corners dangerously.

Perhaps part of the problem with corners is that many corner lots have been heavily landscaped such that there is no "line of sight" over the top of the yard.  The idea is that if you are turning right on a corner, for instance, there should not be a tall hedge or fence which prevents you from seeing if a car is parked there, a child is playing in the street (not allowed but a fairly common practice) or some other obstruction is unseen.  Maybe you were aware that corner lots cannot have a tall fence all the way around (there's a "fence sight triangle" or "corner sight triangle" of visibility required), but the same principle applies to bushes, shrubs and trees also, and for the same reason: safety.

Did you know that the town of Los Gatos has an ordinance or municiple code which addresses this topic? 

Sec. 26.10.065. - Obstructions at corners of intersecting streets.

The owner or occupant of any corner lot or premises in the Town shall keep trees, hedges and growth at the corners of intersecting streets, whether between the curb line and the private lot line, or within the private lot or premises, so trimmed that the height of the same shall not exceed three (3) feet above the curb level for a distance of thirty (30) feet measured horizontally in any direction from the point of intersection of the property lines at street corners; provided, that trees whose main trunks are exposed to a height of seven and one-half (7½) feet above the curb need not be so trimmed or cut.

(Code 1968, § 31-15)

Elsewhere, it's made clear that fences are included in this visual clearance area for corner lots:

In residential zones, fences, hedges, and walls not over six (6) feet high are allowed on or within all property lines, except that no owner or occupant of any corner lot or premises in the Town shall erect or maintain upon such lot or premises any fence, hedge or wall higher than three (3) feet above the curb in a traffic view area unless a permit is secured from the Town Engineer. A traffic view area is the area which is within fifteen (15) feet of a public street and within two hundred (200) feet of the right-of-way line of an intersection.

A couple of months back I saw the part about 6' limit on hedges generally and noticed that our front yard hedge was more than that so got our gardeners to bring it down and into compliance. (I'd like to get rid of it entirely, actually - but need to have a plan to relandscape the whole yard before Jim will let me selectively remove stuff). 

This visual below is probably more helpful than the wording on the town's website (though this came from the section on fences, it seems to apply to landscaping as well):

I'm sure that many Los Gatos homeowners and residents aren't aware of this at all. (I wasn't until this week when a neighbor mentioned it to me.) Perhaps, with our other traffic calming and safety improvment measures, we could address the lack of visibility due to thick hedges, bushes and trees at many of these corner lots.  It will no doubt be unpopular to raise awareness of this issue as often this landscaping was very beautifully planned and serves a purpose of providing privacy, a noise and headlight buffer and more for those who live in the corner houses.  But safety should be a first priority.

Finally, while having neighbors with overgrown or heavily landscaped corner lots probably does not have a direct, negative impact on real estate values, having speeding and other traffic safety issues certainly does.  When I bring my realty clients out to view homes and they see cars ignoring stop signs, screeting around corners or otherwise misbehaving, it makes them less inclined to want to buy a house or condo in that area. In the long run, whatever contributes to traffic and safety problems also contributes to a lessening of desireability to likely home buyers too.  And that, of course, pulls real estate sales prices and values down.

How Is the Condo and Townhome Market Doing in Los Gatos?

How Is the Condo and Townhouse Market in Los Gatos Now?

The August stats reveal that condo & townhouse prices are slipping a little in Los Gatos from July, though still up from a year ago. Here are the quick statistics and real estate market trends for condominiums and townhomes in Los Gatos:

The Los Gatos condo market has been tough for the last few years, as mentioned (click on the link above for detailed real estate statistics for condominiums or townhomes in 95030 and 95032 on my Real Estate Report).  

Three weeks ago I took a very close look at the sales of these multifamily homes in town by sales type and saw a big discrepancy on the odds of selling based on the seller's situation (regular vs distressed sales).

Most difficult to sell in the Los Gatos area are the regular sales.  This is even more true in neighboring Saratoga, California, where it's even harder to sell a non-distressed condo. Here are the basic sales statistics for condominiums and townhouses in LG for July sales (we'll have the August numbers soon!) - it is much improved from a year ago, so we seem to be well past "the bottom of the market" now:

Advice for Buyers and Sellers of Condos and Townhomes in Los Gatos

Buyers, this is an excellent time to buy a condo or townhome in Los Gatos. One caveat: please be sure to check the HOA for the number or percentage of delinquencies.  Home owners with financial difficulties will usually default on their monthly HOA dues before they default on their mortgage, and it is important for you to know how financially healthy the association is so that you don't later get saddled with a special assessment to help make up the difference!

Sellers, if you want or need to sell, it is important to realize that most condominiums and townhouses in Los Gatos are NOT SELLING and that the odds are very much against your being able to sell. How can you get your home to be the one that buyers pick? It has to be in the best condition and the best price out there. Be the "shiny penny" that they cannot resist. If it's not the best deal or best value on the market, it will get passed by.  

Condominiums and Townhomes in Los Gatos: General Information on Pricing & HOA Dues

The landscape for Los Gatos condos and townhouses is varied and truly runs the gamut from simple shelter close to freeway walls, high voltage power lines and train tracks to newer or fully remodeled luxury homes with gorgeous views of Lake Vasona, the coastal mountains or Silicon Valley. 

Disclaimers made, what's the spectrum of list prices?  Prices range from possibly as low as $200,000 - $250,000 to well over $1,000,000. (In recent years, some newer places at the old Villa Felice location were much, much higher than that - over $1.5 mil!)  At this writing, one townhome is being offered for just under $1.28 million.  The average list price of a condominium or townhouse is about $500,000 to $600,000 for about 1400 to 1500 square feet of living area. HOA dues average $300 to $400 per month but can be as high as $875!

Some of these condominiums and townhomes are "in the schools", meaning in the Los Gatos Union School District. Others are in Campbell Schools (Rinconada Hills, Los Gatos Woods) or Union Schools (Los Gatos Village). Schools always factor heavily in home valuations.

The issue of location makes a huge difference in pricing and marketability. Whenever there's a "walk to town" or "walk to schools" type location (whether you bike, take a car or go on foot - the idea is close proximity), it adds great value that will matter to consumers no matter what the market. Likewise, some communities are built up directly against undesireable things like freeways, grocery stores, schools, or less desireable commercial properties, and those will always be an issue, but even more so in a buyers' market like we've been seeing since late 2007.

If you are looking to purchase a townhome or condominium in Los Gatos, here are a few of the communities you might consider in the 95030 and 95032 zip codes:

Rancho de Los Gatos - Overlook Road area (close to downtown)
Rinconada Hills - off Pollard near Quito (gated)
Espana Oaks - off Los Gatos Almaden near Los Gatos Blvd
Los Gatos Village - off Los Gatos Almaden Road & Camino del Cerro
Charter Oaks - off Lark, near Los Gatos Creek Trail
Courtside - off Winchester
Courtstyle - off Winchester
Los Gatos Woods - off Pollard
Los Gatos Estates - off Pollard
Pueblo de Los Gatos - seniors community, Alberto Way area off Hwy 9 near 17
Vasona Terrace - off Winchester

There are many smaller communities as well, including some a very short distance to schools (such as along Roberts Road).
 

Please call or email me for a confidential meeting to discuss your real estate wants and needs.

Can a Real Estate Agent Help You to Buy a Distressed Home or Pre-Foreclosure in Los Gatos?

Lately, in my practice as a Silicon Valley Realtor, I've been showing a lot of short sale houses and a few bank owned properties (known as REOs or "real estate owned" by the lender). They have been in entry level, single family homes close to $500,000 in Blossom Valley, Santa Teresa and south San Jose. In fact, the majority of homes that I've been showing there consists of distressed sales. Since that is the case, it is pulling prices down in those areas very dramatically. Prices are way down from the height of the market.

Los Gatos has very few short sales and bank owned properties, by comparison.

There are a few pre-foreclosures here, a few going to auction, and a few that are bank owned. (Those are the three main stages.)  Can a real estate agent, preferably a Realtor, help you to buy one of them?

If you are planning to buy and live at the residence (a 1-4 place such as a duplex, triplex, fourplex, condo, townhome, patio home, or house), then an agent can assist you with either a pre-foreclosure purchase OR a bank owned sale. There is really no role for a Realtor in helping you buy at auction.

Let's talk about the three main stages:

(1) Pre-foreclosure: the homeowner is unable to continue making payments to the bank or lending institution. This may be due to illness, job loss, divorce, or other problems. The owner may or may not have had a "Notice of Default" filed. If the NOD has been filed, the clock is ticking and a "trustee" at the bank has begun foreclosure proceedings. If not, you only have to worry about the loss mitigation department. The two divisions may or may not be talking to each other, so it gets trickier after the NOD has been filed, (If there is a NOD, it is recorded and may show up on a preliminary title report or property profile.)

If a seller wants to sell during this time, a real estate agent can help by listing the home at a realistic price and procuring a buyer. Hopefully, the home can sell, the debt can be paid in full, and the owner's credit is not harmed.

Often sellers will contact an agent to sell the home, but sometimes they don't. For whatever reason, most owners in trouble never call the lender at all (big mistake, the lender could potentially wait for a few payments, called forbearance, or modify the loan, but without placing that call, it will surely go from bad to worse). But a large portion of sellers in trouble do list their homes and they can be found on the regular multiple listing service, or MLS.

Sometimes, sellers need to unload a property but the market will not bear enough to pay the bank off. That's what I've been running into in parts of San Jose. In those cases, the home goes on the market as a "short sale" and the agent tries to assist the owner in obtaining permission from the bank to sell and tranfer home without the bank being paid off in full. This is a short sale (and it does damage the seller's credit, but not as much as a foreclosure).

About half of all short sales do not go to closing, but proceed to foreclosure (this is an improvement from a few years ago!). The reasons are enough to fill a book, but sometimes because the homes are overpriced and sometimes because the bank does not respond fast enough. Some lending institutions are better than others. In one case I heard about in 2008, a listing agent obtained an offer just 1% below list price, but the lender took 3 months to respond. By that time, prices had dropped between 5 and 10% in that neighborhood, so the buyers no longer wished to pay the amount they originally offered. The list price was then dropped by about 8% and the agent had to obtain offers all over again. Who lost? The bank lost more than anyone else: a straight 10% cost for dawdling. (In fairness, they were massively understaffed and overworked at that time.  Most banks have hired many more people since then so the situation has improved but is far from good.)

So a Realtor could help a buyer in this short sale scenario - to a degree. A buyers agent cannot make the bank hurry up and respond. The buyers agent cannot even talk to the bank. The listing agent may do so only after the seller has signed an authorization form. So there's some frustration and a sense of being out of control that goes with the territory.

Many listing agents don't know how to do short sales. I cut my teeth on a few in the early 90s and they weren't a lot of fun. But now there are huge numbers of them so it's a different game. In response to this crisis, a new business has emerged: short sale intermediaries. These folks have created a niche market of doing the go-between from the agent to the bank. They are the ones who stay on hold half the day, who specialize in knowing what the lenders need and require before someone actually verbalizes it. Because they specialize in this, their closing ratios are far higher (but still not guaranteed). (Call or email me if you would like more information on this.)

(2) Auction: if a home doesn't sell in pre-foreclosure or as a short sale, then the foreclosure process moves forward and the home will be offered for sale at auction. An agent can't help you here. If you wish to purchase a home at auction, realize that it will be offered at a price to cover all leins or debts, and it is often placed at a price the regular market will not bear. The auction situation presents special difficulties too. First, you cannot inspect it - you may look from the outside, but that is it. Second, unlike with the first or third scenarios (pre-foreclosure or bank owned), there is no contingency period in which you can change your mind and back out of the deal. Third, you need cash!  And fourth, if you buy it and it is still occupied by the former owner or tenants, you will be responsible for the eviction process. For all these reasons, homes rarely sell at auction. They usually move on to REO, and are back on the market, placed on the multiple listing.

(3) Bank owned properties offer the opportunity to inspect but do not provide most disclosures since the bank is not a seller who's lived at the property. When a property is REO, an agent will handle it very much like a regular listing and it will be available to view. Banks are highly motivated to unload these properties but like any seller, will not go for an offer half the value of the property. Homes are virtually always sold "As Is".

Update to the Los Gatos residential realty market

The "hot" markets closer to Palo Alto (Los Altos, Cupertino) and IPO-land generally are not being experienced in most of Los Gatos just yet. Here are the numbers for July's closed sales for houses and duet homes:

Trends At a Glance	Jul 2011	Previous Month	Year-over Year
Median Price	$1,300,000	$1,377,500 (-5.6%)	$1,230,000 (+5.7%)
Average Price	$1,464,200	$1,393,450 (+5.1%)	$1,332,280 (+9.9%)
No. of Sales	17	32 (-46.9%)	33 (-48.5%)
Pending Properties	49	44 (+11.4%)	53 (-7.5%)
Active	129	140 (-7.9%)	157 (-17.8%)
Sale vs. List Price	97.0%	97.3% (-0.3%)	98.8% (-1.9%)
Days on Market	35	71 (-50.4%)	36 (-2.9%)

In July there were half as many sales as in June and the list price to sales price ratio slipped a little - but look at what happened to the days on market - it is half of last month (and close to a year ago).  So once again we have some mixed signals.

For the Los Gatos condo market (and townhouses, of course):

Trends At a Glance	Jul 2011	Previous Month	Year-over Year
Median Price	$664,500	$445,000 (+49.3%)	$582,000 (+14.2%)
Average Price	$627,654	$448,565 (+39.9%)	$615,345 (+2.0%)
No. of Sales	12	13 (-7.7%)	10 (+20.0%)
Pending Properties	13	16 (-18.8%)	5 (+160.0%)
Active	48	39 (+23.1%)	50 (-4.0%)
Sale vs. List Price	97.2%	95.1% (+2.2%)	96.0% (+1.2%)
Days on Market	47	108 (-55.9%)	80 (-40.8%)

The real estate market for condominiums and townhomes has been far tougher (and more volatile) than that of the single family homes.  Part of this, at least in Los Gatos, is due to the fact that there are not so many properties for sale or under contract - so having a few low or very high price tags go through can sway how the market appears.  Generally, though, it has been harder to sell these homes due to the lower prices of houses and concerns over HOA delinquincies due to owner defaults (they often default on the HOA dues before they ever miss a mortgage payment).

What about the Los Gatos Mountains?

While much of Santa Clara County has been a "seller's market" for awhile, this is not the case in the Los Gatos Mountains (zip code 95033).  Even in the best of times, it is much more challenging to sell a house in these communities (Aldercroft Heights, Redwood Estates, Chemeketa Park, and even along Skyline Blvd).   Here we have a deep buyer's market.  If you are a home buyer looking for more "house for your money" with great schools, this is an excellent time to consider buying one of these properties as the market is very much in your favor.  Here are the numbers:

Trends At a Glance	Jul 2011	Previous Month	Year-over Year
Median Price	$427,500	$782,500 (-45.4%)	$670,000 (-36.2%)
Average Price	$427,500	$786,800 (-45.7%)	$670,000 (-36.2%)
No. of Sales	2	10 (-80.0%)	2 (0.0%)
Pending Properties	11	8 (+37.5%)	11 (0.0%)
Active	43	46 (-6.5%)	55 (-21.8%)
Sale vs. List Price	93.4%	97.3% (-4.0%)	100.0% (-6.6%)
Days on Market	308	80 (+284.4%)	16 (+1,821.9%)

 As you can see, the "days on market" for the 95033 areas is a staggering 308 and only 2 sales in July.  Sellers with their homes on the market now are most likely very serious and would welcome all reasonable offers.