Secrets To Competing for a Home In Marin County, Part 2

How to Compete in Marin County

As we said last week, this is a tough place to buy a home, and while “spend more” might seem like the simple answer to get the home you want,  it is isn’t always that simple.

There are several tactics buyers can use at the offer stage that can push the scales in their favor when offers are close in terms of price and terms, but the focus on this entry is on the basics.

1. Get pre-approved for a loan from a recognized Marin lender. This is not a pre-qualification, it is full approval on the loan. While this still involves a loan contingency when writing an offer it removes almost all uncertainty from the approval, as it requires review of all pertinent tax documents, income verification, and credit history. Some lenders are even now promising this will constitute full approval on the loan, allowing buyers to go in without a loan contingency.

2. Get educated. Look at homes, a lot of them. Figure out what is really important to you, and what isn’t. Everyone starts out with a long wish list, but everyone needs to prioritize that list, and that only happens by getting out there and kicking tires. This is critical because when the time comes to pull the trigger and write an offer, you’ll need to jump in with both feet. You may need to spend a little more than you wanted to, or have to shorten contingency time lines, or even accept the seller’s inspections instead of doing your own. Confidence in your choice makes that decision process easier.

3. Get agressive representation. Find a good local agent to help, and one who isn’t just trying to sell you a house. A local agent can help immeasurably by providing information about the pecularities of Marin – school districts, commute times and modes (car? bus? ferry? bike?), climates, and communities, just for starters. They can also size up a house quickly, and help you understand the pluses and minuses of the home- is it in the flats? On a hillside? What’s a flood zone? Honest information and opinion from a seasoned professional will help immensely.

Here’s a good test: do they tell you what’s wrong with a house? Ever? Or is it just a chorus of “yes!”. Good agents are interested in building relationships and know their credibility depends on guiding clients to a decision they will be happy with.

4. Tighten the offer to give it every edge it can. Work with your lender to shorten all time frames as much as you can, from close date to contingency removal. Line up inspectors and find out how fast they can do the work, and tighten the inspection contingency accordingly. If they are reputable, do walk throughs with the Seller’s inspectors, they’ll often do it very quickly for you. Write a letter to the seller, explaining why your offer is so important to you. Visit the open house, introduce yourself to the listing agent, and let them know how much you like the house- they will be influential in helping the Seller decide who to work with.

That, as I said, are the basics. There are additional tactics we use with our clients as we get close to making an offer and as we go through the process to increase our success rate, but we can discuss those if we ever work together!

First Time Home Buyers: Secrets to Competing for a Home in Marin County

I love working with first time home buyers. Lots of experienced agents run in the other direction as fast as they can when working with someone who doesn’t know what a title company is or why they need one, but I have always enjoyed it. Many of the rewards of helping a young family achieve their goal and buy their first home are intangible, although of course we do get paid (by the Seller, not the Buyer!)

In fact, I was recently honored to have an article published about some of my clients in the Marin Independent Journal, and talked them about why it is so difficult. Where to start?

  1. Prices are high. Average sale price in the County YTD is $1,312,279. And the sale price is 6% higher than the list price – so that means on average, homes sell for 6% over list price. Gulp. That includes condos, by the way.
  2. Inventory is low. As I said in the article, it seems like it is always low. There are 627 homes for sale in the entire County, and only 348 of those are under $1,500,000. And 188 of those homes are already in contract. That is not a lot to choose from, for sure.
  3. Multiple variables make selection difficult. School districts, commute times, neighborhoods, weather, communities, all need to be evaluated in selecting the right area, and they are all different. It’s not easy. For example, in the middle of summer its not uncommon for it to be 55 degrees, cold and foggy at Muir Beach, or even Tam Valley. Meanwhile, in Chapman Park in Corte Madera it might be 80 degrees and sunny, the Dominican in San Rafael could be 90, and in Novato it could be pushing 100.  Commutes are all over the map: Car? Bus? Ferry? Bicycle?
  4. Homes are old. We don’t have a lot of new construction so homes tend to be older, and that means understanding the condition of the home and how it has been maintained takes on added importance.

So why buy here at all? Just because everyone else wants to? Hardly. The towns are small, the weather is spectacular, schools are excellent, commutes relatively short, and most importantly 82% of the County is preserved as open space, park land, or agricultural land. If you like the outdoors, and solitude, you can find it in Marin, just minutes from  San Francisco.

So how to compete in this difficult environment and get a home? That will be the subject of our next entry!

In The Buyers Corner: Should I Rent Or Buy?

One of the thorniest issues for a potential home buyer to answer is “When should I stop renting and buy a house?” Much of that answer is driven by lifestyle, and life stage. Marriage, children, and the search for school districts are some of the big motivators for home purchasing.

Sometimes though it is also a question of allocation of financial resources. And in some cases, in some markets, in some times, it may make more sense to rent than buy because it is cheaper. That is rarely the case in Marin County, as the restricted supply of homes here means long term, appreciation in home values will almost always trump a temporarily lower cost to rent.

A great resource to show this is the New York Times Rent vs. Buy calculator. It allows you to input 21 different variables, from the price of the home to the cost of home insurance, on a very easy to use interface, and constantly updates the “magic number”, or the price at which it makes sense to rent. We ran a couple of different scenarios, and the answer was always “buy”. For example, we input the numbers of a home we recently valued for a client at $1,650,000; the number it was better to rent at was $5,432 per month. The home was rented two weeks ago at $7000 per month.

It has been that way for the last several years, although there are signs that the rental market is softening in Marin County.  But constant appreciation in value, which has been the norm for the last 60 years in almost every single year, means that buying usually makes more sense.

So as difficult as it may be, if you want to live in Marin, it still makes sense to buy instead of rent, if you can afford it.

In The Buyers Corner: Offers with no contingencies

Should I make an offer with no inspection contingency?

In entry level homes in Marin County, where the competition is red hot, we are getting this question a lot right now. And as much as we don’t like to do it, sometimes our buyers waive that contingency in order to be competitive.

However, it is only with certain conditions. Often the Seller has done critical inspections up front. If that is the case, and the inspectors are reputable, we can often get those inspectors to walk through the home for a nominal fee  and take the Buyer through the inspection points. Then the Buyer can ask questions, see the issues in person, and determine if they are comfortable moving forward and waiving the inspection contingency.  We are working through that scenario right now with buyers in Corte Madera.

If everyone feels comfortable at that point, then it is ok – the Buyer knows exactly what they are getting, and can make an informed decision. Often times the verbage in a report sounds worse than the actual condition, so seeing it and discussing it in person is remarkably helpful.

An offer with no inspection contingency is  much more compelling as the Seller now has to only worry about financing contingencies. Here, a solid pre-approval letter from a reputable lender will provide very high odds of the deal going through.

Some buyers are even waiving the financing contingencies. In any market, we consider that extremely risky. While the odds of something not going through after a good pre-approval letter is written are very low, it does happen. We still aren’t comfortable with that one, but have done it at the Buyers direction to stay competitive when they believe it is absolutely necessary.

City Inspections In Marin County:They Are All Different!

All Marin towns require a resale inspection when a house is sold. However, that inspection varies dramatically in terms of what is inspected and what it costs, depending on what town you are in. In some cases, it has become extremely controversial as well as costly for homeowners, especially in San Rafael.

This controversy has been brewing for several years, but really took off when our local Assemblyman, Marc Levine sold his house in San Rafael two years ago. The inspector noted a lot of work that had been done with out permits, and ordered it all removed or repaired prior to sale. All of which may seem fair, except that Levine purchased the home a few years earlier, and the City had done the same inspection, and cleared all of the work, which had been done by the prior owner. Levine spent a lot of money to clear the work prior to the sale, and in the process learned this was an issue for a number of other homeowners. A few months later at his request, San Rafael’s inspection process was audited by the State of California.

The audit was critical of San Rafael’s process and as a result, San Rafael held public hearings on the topic. The Marin Association of Realtors (MAR)strongly advocated  that the program be changed to the same process used by Corte Madera and Sausalito, which charge $130 and issue a one page summary of the permit history for the home. MAR’s rationale was that homes sold in Marin County are almost always thoroughly inspected, far more thoroughly than the city does, and issues such as unpermitted work and code compliance surface then. Additionally, Sellers are required on the CAR Real Estate Transfer Discclosure Statement to disclose unpermitted work, and in our experience, usually do. In our experience the resale inspection process  is often enforced in an arbitrary and inconsistent manner, and is an unecessary and redundant expense in an already expensive process.

In the process used by Corte Madera and Sausalito, it becomes the buyer’s responsibility to check what has been done on the property, and discuss discrepancies with the Seller. The most complex inspections right now are Novato and San Rafael, where an inspector walks the property, and checks for any work done without permits and highlights other issues, such as railings that are no longer to code. It is done, to some degree, at the discretion and thoroughness of the inspector, which has caused a lot of issues.

The most expensive town is Fairfax, where the cost is $350. The County does not have a resale program, nor do 90 % of the municipalities in California.

San Rafael did change the law, but made the process more open and thorough. They added a checklist that homeowners can review up front to be ready for the inspection, and they also changed the time frame for correcting unpermitted work to 180 days. This enables many Sellers to push the responsibility on to the Buyer. They also raised the price – to $295.

Marin Market Report: 2016 Sales Stats, Market by Market

Everyone kept saying all throughout 2016 that inventory was low, and it was! Unit sales for homes in Marin County in 2016 actually decreased 26% vs. 2015. So the inventory shortage wasn’t just perceived, it was real. This was the lowest number of units sold since 2011, when 2,506 units were sold.

Average sale price for the County remained virtually unchanged, at $1,257,500. Within individual markets however, there were significant changes in average sale price, although the largest changes were in markets with very low numbers of sales.

The biggest trend we see is that in general more affordable markets – Fairfax, San Rafael, Corte Madera, Greenbrae – enjoyed the healthiest increases in average sale price. More expensive areas, such as Kentfield, Tiburon, and Belvedere, actually showed declines in average sale price or slight gains.  This is also consistent with the pattern exhibited through the latter half of 2016, in which entry level homes continued to be in high demand, and luxury homes ($2MM +) were technically in a Buyers Market.

One exception was Larkspur. Average sale price increased dramatically, up 22%. With its historic downtown, excellent schools, and great commute location, it continues to be high on the list of most buyers if the can afford it.

2015 Avg Price

2016 Avg Price

Change

Units Sold 2015

Units Sold 2016

Change

Marin County

$1,258,075

$1,257,500

-0.05%

3035

2641

-26.21%

Belvedere

$5,958,474

$3,541,250

-40.57%

39

30

-23.08%

Corte Madera

$1,222,058

$1,305,576

6.83%

121

105

-13.22%

Fairfax

$858,310

$954,294

11.18%

94

78

-17.02%

Greenbrae

$1,102,371

$1,173,369

6.44%

95

77

-18.95%

Kentfield

$2,648,771

$2,465,276

-6.93%

72

59

-18.06%

Larkspur

$1,492,415

$1,820,559

21.99%

61

57

-6.56%

Mill Valley

$1,617,987

$1,612,200

-0.36%

421

321

-23.75%

Novato

$747,153

$780,132

4.41%

780

704

-9.74%

Ross

$3,740,167

$3,889,963

4.01%

30

35

16.67%

San Anselmo

$1,205,012

$1,259,208

4.50%

166

153

-7.83%

San Rafael

$913,438

$943,472

3.29%

733

669

-8.73%

Sausalito

$1,333,273

$1,434,659

7.60%

131

112

-14.50%

Tiburon

$2,401,270

$2,436,943

1.49%

158

127

-19.62%

In The Buyers Corner: Why We Always Recommend Using A Local Lender.

We are big believers in using local lenders for a home purchase in Marin County, for two reasons. First, we know they meet their deadlines. Marin operates on very fast timetables, a 30 day close is standard. Second,  in a multiple offer situation, it gives the buyer an edge to have a lender who the listing agent is comfortable with.

This lesson was unfortunately driven home again in two recent transactions, where lenders who were not local nearly killed the deal because they could not meet their agreed-to deadlines. In the first, we were representing the Seller. We won’t name the large, regional bank that specializes in the West (enough of a hint for you?) – this was one of their Los Angeles offices. The deal was a disaster from day one- literally every deadline was missed. They missed the loan contingency removal by an astonishing 24 days, which has to be some kind of record. We kept the deal alive because literally almost every day, there was a remarkable new story about how we were “almost there”, it just needed “one more set of eyes”, or eventually  “there was just a minor discrepancy on the portfolio, so now we have to start the process over again.” In retropspect, we should have thrown them out and gotten a new lender earlier, but other details about the deal made it difficult. It did close, one month late. But the stress, lack of certainty, and constantly moving deadlines was very stressful for everyone.

In the second case, we were representing the Buyer. The lender had been recommended by our client’s financial advisor. On the day the appraisal contingency was due, the mortgage broker, from Massachusetts, told us that not only could we not lift the appraisal contingency, they would need at least a 10 day extension!  Predictably, the Seller was quite perturbed. After much negotiation, begging, and pain for everyone, we obtained the extension for our client. Having learned our lesson, we advised our client to apply immediately with another lender, which they did. The original lender never did deliver. The back up lender, a local one who we know well, closed in just 21 days, and the rate was 1/8 of a point better!

Local lenders deliver because they are familiar with our deadlines, but most importantly, they know they have reputations to protect. We have a stable of outstanding lenders we use regularly, let us know when you are ready to buy and we will refer them. And they are great for refinancing as well!