Prices are exploding and days on market diminishing, but there are fewer houses offered for sale.
Median prices (the point at which half the houses sell for less and half for more) have never been higher in Palo Alto, Los Altos, Mountain View and Redwood City, as well as Los Altos Hills and Portola Valley. Only Atherton, Menlo Park and Woodside, which all peaked in 2008, or East Palo Alto, which soared in 2007 only to crash and burn the following few years, are still below their top median prices.
But even East Palo Alto is riding the wave: This year its median price is more than 50 percent higher than last year's.
Faced with this frenzied market, often featuring multiple offers -- many all cash -- and sales above the asking price, what's a prospective homebuyer or seller to do?
The Palo Alto Weekly contacted two dozen local real-estate agents to get their advice to potential homebuyers and sellers on succeeding in the fast-paced, fiercely competitive market.
Their responses clustered around key themes: being prepared, pricing well, marketing for maximum exposure and choosing the right Realtor. Here are highlights from those comments:
Being prepared begins with knowing exactly what you want.
Omar Kinaan, RE/MAX Distinctive Properties, Menlo Park, suggests buyers spend "the time up front, with their Realtor and loan officer, even before looking at homes, to get as prepared as possible and create a winning strategy." He suggested that buyers need to know the neighborhoods they want to live in, the size/shape/style of the homes they want to buy, how much they're willing to spend and which trade-offs they are willing to make.
Sherry Bucolo of Alain Pinel Realtors, Palo Alto, agreed.
"We need to prioritize and discuss where they are willing to make compromises," she wrote. "Is it lot size or schools? Active in town neighborhoods vs. quiet peaceful hillside?"
After reviewing four offers on a Palo Alto home in late September, Steve Bellumori of Coldwell Banker, Menlo Park, wrote that "it is so very clear to sellers which buyers, offers and agents rise to the top in multiple offer presentations.
"In a market as fast paced as this, buyers need to be ready to compete. That includes being well-informed on all sales (in the area) and fully prepared with their financing in order to remove any element of risk to a seller. Nothing short of total preparedness of the buyers and professional presentations by the agents are acceptable," he added.
Part of being prepared is a review of the disclosure packet, which highlights potential areas of concern, wrote Carol Carnevale and Nicole Aron, agents with Alain Pinel Realtors, Menlo Park. Once those risks are further researched, the buyer can decide whether or not to include contingencies before making an offer. A contingency is a contract provision in which risk is shared between the buyer and the seller, they noted.
"If you have eliminated the 'risk' in advance, then you are able to write a stronger offer from the seller's point of view," they wrote.
Billy McNair, McNair Group, Menlo Park, wrote that one of his buyers recently hired a property inspector in advance of the offer date, "so they wouldn't need a property contingency."
Not only are buyers expected to have a strong knowledge of what is happening with current transactions in terms of how many offers are being received and what the list price versus sales price has been for similar properties, noted John King of Keller Williams, Palo Alto, but "having a pre-approval from a lender is critical to a solid offer."
Erika Demma of Coldwell Banker, Woodside, echoed those thoughts.
"For buyers it is important that they are pre-approved if they are obtaining a loan and ready to go -- meaning they are educated on the market they are purchasing in and have reviewed all disclosures on the property they are making an offer on. Being educated on the market they are buying in is of the utmost importance," she wrote.
For sellers, the advice is similar:
Prepare the house so it's in "move-in" condition, advises Paul Engel of Coldwell Banker, Palo Alto. That means "painting, staging, paring down on the excess furnishings and ideally moving out, so the house can be shown at any time. ... So many buyers are buying at the upper limit of their ability that it is very reassuring to them if they know that all of the 'fix up' items have been done and that they can move into the house and occupy it comfortably until they can afford to do any remodeling that they might think is necessary."
Fixing up could include polishing the hardwood floors and perhaps replacing the roof, he added.
But he also notes that "not every house should be fixed up. For example, if the house is so old that the potential buyer might be buying it for land value. I would recommend that the minimum amount be done, to get this house ready for sale."
Even for a tear-down he suggests slapping on a coat of paint.
"Why? Because, even when a buyer is buying it to tear down, they might still place a tenant in the house while they meet with an architect to design plans for a new house. And many times, this process might take up to a year so rental income comes in handy. ... And in the total scheme of things, a coat of paint represents a minimal expense. But I would not remodel bathrooms or kitchens," he said.
Hugh Cornish, Coldwell Banker, Menlo Park, wrote: "The best advice I can give a seller is to not place their property on the market until it is completely ready to show.
"You only have one opportunity to make a first impression, so the property must be in its best condition before being exposed to the market."
Pricing well to sell
Do the research and price it right, Realtors say, because there are consequences for missing the mark.
"Although demand still outweighs inventory and virtually every home will eventually sell, selling a home today is about price-positioning -- neither too high nor too low -- to attract the greatest number of buyers and then exposing it to the open market to obtain the highest price and best terms," Bellumori said.
Consequences of poor pricing "can result in a 'dead on arrival' listing that eventually sells for less than it would have had it been better price-positioned. Too low and the seller can leave money on the table even in a multiple offer situation," he added.
"Buyers in this area are accustomed to competing for a home when they recognize a good value," Carnevale and Nicole Aron wrote. "If a seller chooses a price perceived as 'too high' by the buyers then, more often or not, buyers will wait until the seller reduces the price before writing an offer."
Engel suggests pricing "aggressively," below a recent comparable sale.
Not all agree. "For sellers, there is always the temptation to price your home based on the most recent sale, which may be a 'premium' price based on a certain buyer's motivation," Carnevale and Aron wrote. "Pricing a home is part of setting your strategy in approaching the market."
Sellers need to price the property to generate interest from multiple parties.
"In a hot market, if the property is on the market more than 2-3 weeks, then it is overpriced," McNair added.
Even in this hot market, it matters where the house is priced, Bucolo echoed.
Marketing for maximum exposure
"For homesellers I say don't get lazy," wrote Michael Dreyfus, founder of Dreyfus Properties, Palo Alto and Menlo Park. "Just because it's easy to sell your home, it doesn't mean that you shouldn't take the same marketing and preparation steps that sellers do in a quiet market."
But make sure your home gets maximum exposure, said Michael Repka, managing broker and general counsel for DeLeon Realty, Palo Alto. For him, that includes "full-page ads in local newspapers and professionally shot and personally hosted infomercials (rather than simple virtual tours) so that the agent can point out all of the special details of the home.
"Make sure the open houses attract a large crowd -- they should be well-advertised and catered. Most important, make sure that your agent promotes your listing in the Chinese and Indian media, including newspapers and radio, in addition to all of the other mainstream places."
Demma stresses the importance of having a high-quality virtual tour.
"A buyer's first impression plays a part in their decision making. ... Research shows that over 90 percent of all buyers will look online before contacting a Realtor."
Another classic marketing technique is the open house.
"Be sure that the property is 'widely exposed,' such that everyone who might be a potential buyer has had time to view the property. This usually means holding the house open at least two weekends," Engel wrote.
Repka advises to get everything the agent tells you in writing.
"For example, ask them to give you a detailed marketing plan that shows you the size and frequency of ads. Don't let a vague promise of 'giving your home great exposure' or 'doing a great virtual tour' suffice," he wrote.
Choosing the right Realtor
It's no surprise that real-estate agents across the board recommended working with a Realtor, but they did emphasize different qualities to look for.
Many stressed strong negotiating skills, others knowing the neighborhoods and the housing inventory.
But, according to Wendy McPherson, managing broker of Coldwell Banker's Menlo Park, Woodside and Portola Valley offices: "The single easiest, safest and most cost-effective way to win in a multi-bid situation is to have an agent with the following attributes:
● They know the listing agent and have worked with the person in the past
● They take time to complete fully every document and have you do the same
● They submit a contract that paints a complete picture of you and your finances and motivation
● They are willing to meet with the listing agent (and sellers if possible) one-on-one and not ship your offer off by email
● You never hear them tell you that they are "very busy."
"This is a profession that relies heavily on human relationships -- notwithstanding our continuing rush to electronic mediums. Unfortunately, even the best agent cannot overcome the all-cash, completely risk-tolerant buyer," she added.
Repka of DeLeon Realty, which pays its agents a salary rather than commission, advises buyers to "avoid agents that are on commission. At a minimum, you should try to work out an alternate arrangement with the agent that better aligns incentives."
"When competition is high, what you know and who you know is critical," wrote Juliana Lee of Keller Williams Realty, Palo Alto. "Each purchase offer is judged not just by price but also by an evaluation of whether the terms of the offer will be quickly and completely met. ... Having a previous relationship with the other people opens up communication, both a straightforward exchange of facts and subtle exchanges of where there are problems. Writing an offer and sending it in will seldom work.
"Real estate sales is a people-oriented business. Reputation, communication and credibility are key," she added. "Getting quick accurate information is important to putting together or evaluating an offer. A buyer may despise the carpet. If the buyer can immediately get an accurate estimate of the cost of replacing the carpet, the buyer can reduce his uncertainty and make a stronger offer."
"This market is not for the faint of heart, and knowing you are where you want to be, in the home you want to be in, makes paying the premiums demanded tolerable," Dreyfus wrote.
Associate Editor Carol Blitzer can be emailed at firstname.lastname@example.org.