The DeLeon Insight - July 2015 by DeLeon Realty

The DeLeon Insight Silicon Valley Real Estate Local Specialization

Global Reach

Integrated Approach Jul y 2015

S u mm e r S p las h !

The Magic of the DeLeon Business Model

Breaking News: The DeLeon team ranked #1 in America per June 2015 Wall Street Journal! • The Downside to Live Offer Presentations

• Buying Real Estate Sight Unseen

• DeLeon Realty Expands China Initiative

• Neighborhood Spotlight -- Old Palo Alto

• Summer Splash Listings

• Agents’ Heightened Duties - DeLeon Insight July 2015 1

www.deleonrealty.com

The DeLeon Update: Market Trends

Buying Real Estate Sight Unseen

Average Sales Price 2014 & 2015 By: Michael Repka, Esq. DeLeon CEO/Managing Broker

01/2014 -6/30/2014

01/2015 - 6/17/2015

Average sales price for single-family homes from 1/2015 to 6/17/2015 compared to a similar period in 2014.

Average Price/Square Foot 2014 & 2015

01/2014 - 6/30/2014

01/2015 - 6/17/2015

Average price per square foot for single-family homes from 1/2015 to 6/17/2015 compared to a similar period in 2014. *Data gathered from the Multiple Listing Service on 6/17/2015

he world is getting smaller and technology is getting better. It is no surprise then that the Silicon Valley real estate market has seen an increase in the number of people who are buying homes without personally visiting the properties. There are two main reasons for this phenomenon. First, the heated pace of the market makes it impractical for out-of-state, or out-of-country, Buyers to personally tour every property. Second, narrated video tours, three-dimensional floorplans, and extensive online information regarding the local cities and neighborhoods provide Buyers with a lot of powerful tools for understanding the appeal of homes despite the inability to see them in person. Silicon Valley Real Estate Market Generally, the best way to market homes of broad appeal in Silicon Valley is to price them attractively and advertise them aggressively across local, regional, and international markets. This brings in the maximum number of Buyers and requires them to compete. On the other hand, homes that are of more narrow appeal, whether due to style, floorplan, or price point, may sit on the market longer. Therefore, unless an interested Buyer prefers homes that linger on the market for a while, it will behoove the Buyer to act expeditiously. However, even Buyers who would be willing to hop on a plane to see a property must realize that there is no way to guarantee they will win the bidding war. Once the bidding war starts, a competing Buyer may get caught up in the excitement and agree to pay too much. Thus, the Buyer’s best option may be to act remotely. Utilizing Technology Fortunately, there are a number of ways Buyers can investigate properties online. The days of antiquated “virtual tours” that use still pictures set to music will soon be behind us. To make a listing competitive, it needs: • A fully-narrated video with a host

to point out some of the easily overlooked features and to explain the home’s location, as well as its layout; • A 3-D tour that website visitors can navigate from room to room; and • Videos explaining surrounding cities and neighborhoods, either embedded in the home’s video, located separately on the same website, or both (when embedding neighborhood features in the home’s video, special care should be given to include footage of features near the home, such as parks, trails, shopping centers, and restaurants, to help Buyers envision themselves living in the property). Not only do these enhanced marketing techniques comfort remote Buyers, but they also help local Buyers fall in love with details that they may have missed or forgotten about. I have heard that Buyers typically refer to our home video tours multiple times, even while in the midst of a bidding war. The DeLeon team spends up to $22,000 for a single property’s video, with most videos costing between $4,200 and $7,200 (per property!), which doesn’t even include what we paid the production company for taking off-site footage of our territory. Despite the expense, we have found that

these videos (along with the separate selfdirected 3-D tours) make a material impact on our clients’ final sales prices. Some of our more sentimental Sellers and successful Buyers even use these videos as souvenirs of their homes. For a sample, check out any of the current DeLeon listings at www.DeLeonRealty.com. Professional Videos

3D Mapping Technology

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The Downside to Live Offer Presentations By: Michael Repka, Esq. DeLeon CEO/Managing Broker

n this hot Sellers’ market, multiple offers and above-asking bids are common. In fact, it is not unusual for a home to receive ten or more offers. Naturally, agents who are representing Buyers like the opportunity to present their clients’ offers directly to the Sellers so they can argue points beyond the price and terms of the offer. Like many very experienced Buyer’s agents, Ken DeLeon can recount countless transactions in which he was able to get homes for his Buyers for less than his clients were willing to pay, and occasionally, less than other offers, because he was able to present offers in person. Nevertheless, many listing agents encourage their Sellers to sit through all of the offer presentations, despite the fact that this approach can stack the deck against the Sellers in the negotiation process. While some Sellers may want to get to know the agent who is representing the Buyers, it is important that the Sellers consider the downsides to this approach before they blindly agree. The pros and cons of both approaches should be considered, and it should be up to the Sellers to decide which method is right for them. Live Offer Presentations In recent years, it has become common for listing agents to set a time for offers and to invite all interested agents to come and present their clients’ offers directly to the Sellers (the Buyers themselves rarely attend). Generally, listing agents sit in a conference room with their clients while each Buyer’s agent spends about 20 minutes telling the Sellers about their Buyers and their offer. This gives the Buyer’s agent an opportunity to ask questions of the Sellers and vice versa. The first problem with this situation is that the real estate community is relatively small and most successful agents know

each other. When good agents present an offer, they love the opportunity to size up the competition. If other agents who are presenting offers have a reputation for sloppiness, inexperience, or—even worse— questionable ethics, then good agents will submit a lower offer knowing that the listing agent will prefer to work with them. If they don’t know who they are competing against, then their fear of losing the deal/ commission (and of their clients losing the house) will likely cause them to submit their clients’ highest offer. Additionally, there is always the fear that agents will compare notes about where their clients came in, which could hurt in the counteroffer process. Another problem arises due to the inequity of the structure. The Buyer’s agent has the opportunity to “read” the reaction and ask questions of the Sellers, yet the Buyers are rarely in attendance, so the listing agent doesn’t get the same opportunity. Again, this can be a tremendous help to the Buyer’s agent, which usually means a corresponding detriment to the Sellers. Furthermore, some Buyer’s agents try to put additional pressure on the Sellers

through their comments or by making a response “due upon receipt.” Electronic Submission of Offers The alternative is to have all agents submit their offers electronically. In addition to removing the need for the Sellers to sit in a conference room all afternoon, it also eliminates the inequities mentioned above. Once all of the offers are in, the Sellers can review all of the details with their agent and ask any relevant questions. They also have the option of inviting the top offers into the office at that point if they so choose. Given that the DeLeon team sells more Silicon Valley real estate than any other team in the nation, we have handled countless offers utilizing both the in-person and electronic submission approaches. Generally, we have found that the electronic approach results in the highest price for the Sellers. However, we are happy to discuss the pros and cons of both approaches. We will employ whichever approach the Sellers prefer, provided that the motivation for the in-person meeting is not related to a desire to discriminate based on a Buyer’s race, age, gender, sexual preference, religion, or other inappropriate factors.

DeLeon Realty Ranked #1 In America!

Ken DeLeon, Michael Repka, and the entire DeLeon team thank our wonderful clients for making us the #1 Realtor® team in America! (Per the 2014 REAL Trends, Inc. rankings released in June 2015, published in the Wall Street Journal)

- DeLeon Insight July 2015 5

Neighborhood Spotlight -- Old Palo Alto By: Ken DeLeon, Esq. DeLeon Founder

nquestionably one of the most prestigious neighborhoods in Silicon Valley, Old Palo Alto has a unique blend of spectacular architecture, large parcels, great public schools, and a central location that has made the neighborhood highly desirable to multiple generations of Silicon Valley’s most successful families. However, this area also feels like a sort of “New Palo Alto” since so many new homes are being built along its dignified avenues. This profile explores what trends are driving this neighborhood’s rapid appreciation and gentrification. The wide streets of Old Palo Alto are lined with heritage magnolia and oak trees that provide a rarefied ambience reminiscent of the trophy estates of Beverly Hills and Pacific Heights. Architectural styles here are a seamless blend of Craftsman and Mediterranean Revival homes built in the 1920s and 1930s and residences boasting the refined modern architecture that is so coveted on the Peninsula. Indeed, the understated elegance of the homes and their lush landscaping are enjoyed by lucky residents who can stroll to nearby Gamble Gardens, several local parks, and the Lucy Stern Community Center. It should come as no surprise that this neighborhood is home to many of Palo Alto’s nine billionaires! This neighborhood’s charm certainly comes at a price. Old Palo Alto homes in prime locations are approaching $2,000 per square foot of living space. An illustrative example is the recent sale of a Colonial-style home at 578 Lowell Avenue. This twostory home of 3,024 sq. ft. featured four bedrooms and three bathrooms, and was located on a 7,384 sq. ft. parcel. In April of 2015, it sold for $5,925,000, or $1,960 per sq. foot. Just three blocks away, an imposing 1916 estate on a rare 37,462 sq. ft. parcel sold last year for Palo Alto’s highest recorded sale of $19,880,000. We project that Old Palo Alto’s appreciation will outpace other high-end Palo Alto neighborhoods. Interestingly, the area has no building restrictions beyond city

building codes. Conversely, the adjoining Professorville neighborhood is a registered historic district with strict design guidelines, layered on top of the city’s building codes that necessitate design review and approval of improvements by the city’s Historic Resources Board, which precludes new construction and inhibits remodeling. Another plus of Old Palo Alto is that the entire neighborhood is out of the flood zone that impacts much of Palo Alto. Consequently, homeowners can build a basement without having to include the below-grade square footage in the restrictive floor area calculations mandated by Palo Alto building codes. In contrast, much

of Crescent Park, Palo Alto’s other top neighborhood, is in the flood zone where no basements are allowed. These restrictions inhibit new construction and result in lower appreciation in other prime neighborhoods. As a direct result, Old Palo Alto has enjoyed an incredible 95% appreciation over the last ten years, in contrast to Crescent Park’s 64% and Professorville’s 43%. Old Palo Alto’s luster will only continue to be enhanced as today’s class of tech luminaries compete for the treelined tranquility that this exceptional neighborhood provides alongside its stellar appreciation.

Agents’ Heightened Duties to Clients under Saffie v. Schmeling By: Michael Repka, Esq. DeLeon CEO/Managing Broker

ast year, the California Court of Appeals handed down a decision that may have serious repercussions for the real estate broker community (Saffie v. Schmeling, Fourth Appellate District, Case No. E055716, dated March 7, 2014). In Saffie, a Buyer’s broker was held liable for simply passing along disclosures received from a listing agent without analyzing the sufficiency of the disclosures. The problem is, that is exactly what many agents are trained to do. For years, real estate agents have relied on the idea that they are “merely conduits for information.” A Buyer’s agent gets a stack of disclosures from a listing agent and passes them along to the Buyer to review and sign. Many agents are trained to do very little analysis, and most agents (outside of DeLeon Realty, of course) refuse to provide their Buyers with a written summary of key disclosure items even when requested. The continuation of this conduct may create liability for brokers everywhere, but it should be a good thing for clients. After all, agents are trained professionals who should be familiar with the sufficiency of provided documents and the general status of the applicable law. In Saffie, the plaintiff (Buyer) wanted to procure a site suitable for a new building. The Buyer’s agent identified a potential opportunity and brought it to the Buyer’s attention. In the MLS remarks, the listing broker included a statement that said, “This parcel is in an earthquake study zone but has had a Fault Hazard Investigation completed and has been declared buildable

by the investigating licensed geologist. Report available for serious Buyers.” The report, which was prominently dated May 20, 1982, was provided to the Buyer. Additionally, the Seller also provided a letter dated July 23, 1982, from the Riverside County Planning Department, which granted its “[f ]inal approval of the report.” The buyer purchased the property in 2006. Immediately thereafter, he tried to develop the property, but the Riverside County determined the Property was not “ready to build.”

Civil Code Section 1088. However, the Court held that the Buyer’s broker was liable for failing to investigate and understand the implications of the report’s date. In other words, the Court found the Buyer’s agent had a duty of more than simply acting as a conduit of information. Although some agents may argue that this standard is unreasonable, it is actually just common sense. Agents should review all disclosures and share their insight with the clients. While Sellers have an obligation to disclose all information they know about the property, they are generally not obligated to search for problems. If a report is outdated, then agents should flag that fact for the Buyers. However, it should be stressed that this case does not relieve the Seller of the duty of full and accurate disclosure. If Sellers or agents attempt to conceal known information, then they will still face significant exposure. Hopefully, cases like Saffie will encourage more agents to provide actual counsel and advice to their clients rather than just passing along information for their clients to decipher.

The problem was that the applicable zoning rules changed in the years between the time of the report (1982) and the date that the report was delivered to the Buyer (2006), due to the 1994 Northridge earthquake. The Court held the statements that the listing agents made were accurate, truthful, and in compliance with California © 2015 DeLeon Realty

- DeLeon Insight July 2015 7

DeLeon Realty Expands the China Initiative By: Kim Heng, MBA DeLeon Director of International Operations

hile still only a small part of the DeLeon team’s marketing approach, we have enjoyed tremendous success in tapping into the burgeoning Chinese buyer pool. In fact, we have become well-known to the Chinese community throughout the Bay Area through our aggressive outreach. Additionally, we have established some very strong business connections with real estate professionals in affluent cities, such as Beijing, Hangzhou, Shanghai, Guangzhou, Taipei, and Hong Kong. In light of our success, we have decided to further expand our unique Chinese Initiative in mainland China. To that end, DeLeon Realty participated in two trade shows in Beijing hosted by Juwai, as well as the city’s Luxury Property Show (LPS), which were held this past April. At these shows, our forward-thinking, serviceoriented business model of a “one-stop shop” received very positive feedback.

The ninth consecutive edition of LPS was held April 24-26, 2015, at the prestigious Legendale Hotel in Beijing. We immensely enjoyed our interaction with Chinese luxury home-buyers and brokers in this casual yet chic environment. LPS is a unique concept, specifically designed for the Chinese market. As an invitation-only event, it welcomes a highly targeted audience of Chinese luxury property Buyers, high-end investors, and wealthy individuals. Over 5,200 targeted visitors attended this year’s event. Our founder, Ken DeLeon, who leads the DeLeon buyer’s team, and our CEO, Michael Repka, who leads the DeLeon listing team, also attended LPS Beijing (this was their fourth trip to China in the past two and a half years, and Michael will be back again in December). Alongside members of our Chinese marketing team, we witnessed firsthand the tremendous interest that Chinese Buyers have in buying within the Bay Area. In fact, the result was so overwhelming, we have decided that DeLeon Realty will participate in both the Guangzhou and the Shanghai LPS shows this year. These events are great opportunities to showcase all of our

wonderful listings while meeting more eager Buyers. Because DeLeon Realty picks up the entire cost of the show and related travel expenses, we are able to send our best people and supply them with the best materials, including Chinese versions of our wellrespected city guides, buying guide, and home brochures. In addition to LPS, DeLeon Realty participated in the 2015 Beijing Spring Property Expo from April 16th to April 19th, which took place in Beijing Exhibition Center. DeLeon Realty was the only brokerage company from the Bay Area that attended the event, and we found it very rewarding. We were able to further promote our listings and establish valuable business relationships with some well-known local investment and real estate firms in China. We also developed business relationships with companies that provide a full range of services to help us market our properties to Chinese Buyers in the right language and behind China’s “Great Fire Wall.” DeLeon Opens a Beijing Office To keep us at the leading edge of international marketing, DeLeon Realty

has decided to bring on two new employees who will be based in mainland China, and who have already received formal training at the DeLeon headquarters in Palo Alto, California. We are also establishing a new subsidiary (DeLeon International Realty) to handle our expansion, and service Buyers in mainland China. As the Director of International Sales, I will continue to travel to Hong Kong and major cities in China to nurture business relationships on an ongoing basis. In 2013 alone, China created 40,000 new millionaires. Many of these are middleaged, tech-savvy buyers who have their children’s educations in mind. The Bay Area provides wonderful academic and professional opportunities, not to mention great weather and fresh air, thus forming the ideal destination for these incoming Buyers. A recent report by Knight Frank says Chinese investors have set their sights on the western world mostly because their own residential markets have cooled significantly. As a result, the value of Chinese investments in U.S. real estate grew from $600 million in 2009 to $12 billion in 2013. In addition, the poor air quality and the political situations in major Chinese cities have increased the trend of immigration more than ever. Obama’s new visa policy, which

was announced last fall, has also made it easier for Chinese Buyers to buy new homes here in the U.S. These Buyers are attracted to coastal cities, like those around the Bay Area, Los Angeles, and San Diego, and the strong appreciation of homes within the Bay

Area especially whets their appetite. In summary, this is the perfect time to expand our Chinese Initiative, and our unique, full-service business model makes us the best real estate team in the U.S. to cater to Chinese Buyers’ needs.

DeLeon Market Share1 6/1/14 to 5/31/15 #1 #1 #1 #1

#2 Atherton Overall - Silicon Valley #3 Portola Valley Overall - Our Cities2 #4 Los Altos Palo Alto #5 Los Altos Hills Menlo Park #5 Mountain View

1 These rankings come directly from BrokerMetrics, an independent third party that compiles information directly from the Multiple Listing Service (“MLS”) for the period June 1, 2014 to May 31, 2015 2 Includes Palo Alto, Menlo Park, Atherton, Los Altos, Los Altos Hills, Mountain View, and Portola Valley.

- DeLeon Insight July 2015 9

DeLeon Realty Provides the Following Suite of Complimentary Services to Our Sellers • Free Staging - Including design, delivery, installation and removal, plus one month free furniture rental; • Free Property Inspection; • Free Pest Inspection;

Our Standard Marketing Package: • Inclusion of the property on the front page of the DeLeon Realty corporate website during the entire listing period; • A custom website link, which links to a custom webpage featuring the property; • A narrated custom video of the property; • A 12-page or 28-page bound color brochure; • Professional photography of the property; • A three-dimensional (3D) virtual tour of the house; • Full-page ads for the property in the Palo Alto Weekly, Mountain View Voice, and your local paper for the first week the home is on the market; • After the first week, a full-page ad in one local paper every week until the home is sold; • Paid Google and Facebook ads for the property; • Catered broker tour and open houses (first week only); • Staffed latte cart serving cappuccino, lattes and Italian sodas at the broker tour and open houses (first week only)

Marketing to the Chinese community, including: - A 5¾” x 10 ¼” page ad in the Epoch Times; - Radio commercials on Sound of Hope radio (Mandarin); - Inclusion on the DeLeon China website; - Promotion in mainland China through the Luxury Property Showcase website and other websites based in China.

The Trap of Long-Term Listing Agreements By: Michael Repka, Esq. DeLeon CEO/Managing Broker

ong-term listing agreements are great for Realtors® and bad for Sellers. Period. As a real estate attorney and real estate broker, I have encountered countless clients who felt their agent wasn’t living up to their expectations, yet the agent would not let the Sellers out of their listing agreement. Over the years, I have come to notice an inverse relationship between the quality of the listing agent and the length of the listing agreement. Weaker agents tend to ask for long listing agreements, sometimes even six months or more. Strong agents who invest in heavily marketing their listings tend to have more confidence and they generally ask for shorter binding commitments. If a home hasn’t sold, Sellers should not be held hostage by a long-term agreement. Generally 30 to 45 days should be sufficient for the Sellers to determine whether they are happy with the service they are receiving

from the person they entrusted with the sale of their home. If the Sellers are happy, then they can always extend the agreement if necessary. If an agent insists on a listing agreement of longer than 60 days, then the Sellers should insist that the listing agreement include an itemized marketing plan (which is always a good idea anyway) as an addendum. This should include reference to sample brochures, videos, 3-D tours, newspaper ads (size and frequency), international marketing, staging, and all other services discussed. That way, the Sellers will have a written standard by which they can judge the agent’s efforts. If the agent doesn’t live up to the specific commitments they make, then they will be in breach of contract, which should give the Sellers the opportunity to move on to a different agent. At DeLeon Realty, we believe in a 39day listing period, which begins on the day that the home comes on the MLS.

DeLeon’s Summer Splash By: Michael Repka, Esq. DeLeon CEO/Managing Broker

uyers often say they would like to purchase a home over the summer and settle in before the new school year starts. Nevertheless, the majority of listings are brought onto the market during two windows of time: spring and fall. In effect, the summer becomes a “dead time” in large part because of a self-fulfilling prophecy. Namely, Realtors® believe there will not be enough listings on the market to keep a Buyer’s attention, so they advise clients to wait until September to list. Generally speaking, this is good advice. The steady flow of new listings during the busy spring months of March and April and the fall months of September and October keep Buyers constantly

checking the newspapers and the MLS. As the number of listings dies down, so does the interest of buyers. As Silicon Valley’s dominant market leader, the DeLeon team has the ability to change the market to give buyers what they want—a selection of great homes that will close before the new school year begins. The DeLeon Summer Splash will last from

July 13th-26th, and it will feature some of the finest homes in the area. To make it even better, any successful Buyer of one of the Summer Splash listings will receive a free $5,000 gift certificate from Flegel’s Home Furnishings and five hours of interior designer time, compliments of DeLeon Realty. After all, we want your home to look perfect! This incentive applies irrespective of whether or not the Buyer uses a DeLeon agent to represent them in the purchase. If you are interested in buying a home this summer, make sure you check out all of our great listings that we will bring on the market during the Summer Splash weeks. You can see many of these properties in this newsletter, or on the DeLeon website, or you can ask any licensed Realtor for more information.

- DeLeon Insight July 2015 11

Ignore Your Own Taste When Prepping a Home for Sale By: Michael Repka, Esq. DeLeon CEO/Managing Broker

verybody loves their own tastes, which certainly makes sense when you think about it. However, prepping and staging a home to achieve the highest possible sales price is both an art and a science. Problems arise when Sellers allow their own style preferences to influence the decisions they make when selling a home. This can be an expensive mistake. A well-staged home will feel open and airy, not cold and sparse. It will be neutral, not boring. Attractive, not stylized. Remember that there is a fundamental difference between the way a home looks when it is staged to sell for top dollar, and the way a home looks while it is lived in. Staging is part of the marketing cost of the home, and it helps homes sell for more money. And of course, DeLeon Realty pays for the staging of all our listings so that we can achieve the highest possible sales price for the Seller. Similarly, a home should be prepped in a way that will appeal to the greatest number of Buyers. Broken items should be repaired

if not cost-prohibitive, and the home’s in the final sales price. That is why every palette should be updated to colors that are DeLeon listing engagement begins with a modern, but not overly trendy. Generally, “design appointment,” which includes our more attention should be paid to superficial interior designer, in-house contractor, video items that impact the visual appeal of scriptwriter, and me. the property, rather than to major system upgrades. The objective of home Before prep, just like staging, is to maximize return on investment and achieve the highest net sales price. DeLeon Realty’s interior designers have a keen eye for improvements that cost little, but make a huge impact. Homeowners, on the other hand, tend to select more expensive items because they look at the items in isolation, rather than as parts of the big picture. While this can add unnecessary expense, the true cost comes in the form of a lower sales price if the Sellers’ style preference results in a final product that appeals only to a small portion of the market. Home prep and staging can make a measurable difference

DELEON REALTY SUMMER SPLASH PROMOTION There will be special incentives for anyone who buys a DeLeon listing during the Summer Splash, including a $5,000 gift certificate to Flegel’s Interior Design & Home Furnishings. That’s right, DeLeon Realty will attract more BUYERS by giving them $5,000 to spend at one of Silicon Valley’s best furniture stores.

After

Disclaimer: This is a limited time offer. This promotion only applies to homes originally listed by the DeLeon Team between the dates of July 13, 2015 and July 26, 2015 as part of the Summer Splash. The home must be in contract by July 31, 2015. The transaction must close by September 1, 2015 and the Gift Certificate must be used by March 31, 2016. There is no cash value to the certificate. Lost certificates will not be replaced. The certificate will be issued in the Buyers’ names and they are non-transferable. Please check our website at www. deleonrealty.com for further details.

- DeLeon Insight July 2015 13

The Magic of the DeLeon Business Model—the Listing Side By: Michael Repka, Esq. DeLeon CEO/Managing Broker

eLeon Realty’s new business model is the talk of the real estate community. We hear regular reports of our competitors’ office managers and other agents bringing us up at their sales meetings. That is very flattering, especially given that many of the best real estate agents in the Bay Area have gravitated towards Silicon Valley. Standing out amongst this esteemed group of professionals is truly noteworthy. From what we hear, the refrain at these office meetings is often the same: “How can we convince clients to list with a traditional agent when the DeLeon team offers so much preparation assistance, staging, and marketing at no cost to the Seller?” Occasionally, we hope this question is put another way: “How can I, as an individual agent, compete against an integrated company of in-house interior designers, contractors, handymen, graphic artists, writers, attorneys, and an international marketing team, all of whom are available to clients as part of the listing?” (Generally, however, other agents don’t phrase it in a

way so flattering to us.) Answering that question is admittedly difficult and outside the scope of this article. However, I hear that there are also a lot of questions about exactly what we do and how we can do it. Rather than keeping it a mystery, we feel comfortable simply laying out our business model for the world to see. The current structure of the real estate brokerage industry, and the financial limitations facing even the most successful agents, make our model almost impossible to copy. There are really three keys to the success of our approach: (1) hiring the best people to specialize in what they are passionate about; (2) aligning incentives in a better way; and (3) leveraging economies of scale. Hiring the Best Specialists The biggest flaw in the real estate industry in California is that agents are expected to handle a remarkably wide range of tasks. The typical transaction involves many tax and legal issues, interior design choices, home repairs and enhancements, graphic design decisions, marketing plan elements, and disclosure review. It is

virtually impossible for one person to master all of these skills, especially given that many of these skills require extensive professional training and experience. I handled a higher volume of listings than any other agent or team in Silicon Valley last year (over $280 million of listings alone) yet all of that experience hasn’t given me close to the same artistic vision as our interior designers. On the other hand, my two law degrees and

three bar admissions make me a better choice to draft a contract, negotiate a deal’s structure, review disclosures, or resolve a legal dispute favorably for my clients. I won’t even address my skill level with a hammer, but I have two licensed contractors and a handyman on staff to render my lack of handiness moot. We also pay and treat our people very well because we understand they are essential to our success and our clients’ satisfaction. In addition to above-market salaries, all DeLeon Realty employees receive full health, dental, and life insurance, a

401(k) program with company matching, and well-deserved paid vacations. Those vacations are in addition to the company trips we take our employees and their significant others on during the slow season; last January, we all took a week-long cruise to Mexico, and we went to Tahoe the year before that. It is no wonder that we attract the best people in real estate. Alignment of Incentives Another flaw to the traditional model is the misalignment of incentives. On the Buyer’s side, it is hard to justify a system in which the Buyer’s agent is paid more if the Buyer overpays. Put another way, the better the Buyer’s agent is at negotiating a lower price for his or her client, the less the agent will get paid. That is why all DeLeon Buyer’s agents are area specialists who are paid a generous salary, not an occasional commission. In addition to reducing pushiness, this approach encourages collaboration. Superficially, this problem is less obvious on the listing side. After all, a higher sales price will generate a higher commission. However, there is a latent flaw that is even worse. You see, almost all of the marketing expenses come directly out of the listing agent’s pocket—long before the agent gets a commission check. The relatively low incremental increase in the agent’s commission associated with a $100,000 increase in sales price makes the large marketing expenditure seem unwise to many agents. For example, if an agent were to spend the same $15,000-$25,000 that we spend on a typical listing, the agent might see an increase in the sales price from $2.4 million to $2.5 million or $2.6 million. Even assuming a $200,000 marginal increase, which is great for the Seller, the increase to the listing agent’s side of the commission would be $6,000 or less, of which 10% or more would have to be paid to the office to which the agent chooses to be affiliated. Thus, that $20,000 investment (and added time) results in a marginal loss. Even the hope that a strong result will bring in more Sellers is muted by the public’s perception that the company, not the agent, is responsible for the result. At DeLeon Realty, all of the marketing

expenses are paid by the company, and all future listings will benefit the company. Like the DeLeon Buyer’s agents, I am paid on salary, not commission, so my marketing spending isn’t coming out of my own pocket. Economies of Scale Our high volume helps our clients in innumerable ways. In addition to unparalleled market data, we get more bang for our marketing buck than anyone else. The sheer number of transactions we do each year enables us to do the transactions right. For example, in addition to bringing in a high-end production company to shoot narrated videos for all of our listings, we sent them out to spend

days capturing and cataloging footage of various points of interest around Silicon Valley. Now, whenever I mention a horse trail in Los Altos Hills during one of our videos, we have “B-roll” of a couple riding horses along a Silicon Valley trail (see www.201mountainwood.com). The same is true when I mention the Village of Los Altos, a park in Palo Alto, or a skateboard park in Menlo Park. In fact, we probably have footage of over 400 distinct points of interest. Because we have people doing only what they do best, they have more time to do it. One of my favorite comments after a sale closes is when Sellers say they enjoyed receiving so much personal attention.

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Summer Splash Listings

Summer Splash Listings 1 2 8 4 1 L a Cr e s t a Dr i v e , L o s A l t o s H i l l s O ffe r e d a t $ 2 ,3 8 8 ,0 0 0

Striking Design Overlooks 1+ Acre Savor the lush views offered by this 3 bedroom, 2.5 bathroom home of 2,802 sq. ft. (per county) with a lot of 1.04 acres (per county). Designed by Morgan Stedman, the house displays soaring ceilings and three fireplaces. Sliding panels open off the great room into a den, and a spacious dining and family room ensemble lies nearby. The immense master suite is on the main level, while both upper-level bedrooms offer vaulted ceilings. Additional spaces include a two-car carport and a private office. A waterfall accents the front patio, while the home’s expansive decks provide astounding foothill views.

For video tour & more photos, please visit: www.12841LaCresta.com

753 Maplewood Place, Palo Alto O ffe r e d a t $ 2 ,1 9 8 ,0 0 0

Fantastic Remodel

1 3 82 4 Moon Lane, Los A l to s H i l l s O f f e re d at $ 6 , 7 88,000

Immaculate Dream Home Tucked off a private road within an exclusive enclave, this 5 bedroom, 5 full and 2 half bath dream home of 5,100 sq. ft. (per county) enjoys a lot of 1.62 acres (per county). This remodeled showstopper features a multi-level interior with floors of travertine and white oak, ceilings over 12 feet, and a Control4 home automation system. Spacious, breezy living areas offer designer finishes and incredible conveniences. The gourmet kitchen boasts a Wolf range, oversized Sub-Zero refrigerator and freezer units, and numerous concealed appliances, while the seductive master suite provides a dry bar, a fireplace, and a thermo-air massage tub.

For video tour & more photos, please visit: www.13824MoonLane.com

Unfolding around a courtyard with a solar-heated swimming pool, this remarkably remodeled 3 bedroom, 2.5 bathroom residence of 1,650 sq. ft. (per county) occupies a lot of 7,775 sq. ft. (per city). The sunsoaked interior offers hardwood floors, two fireplaces, and copper radiant heating, while featuring a sky-lit living room, an open dining room, and a window-lined family room. Displaying honed granite countertops, the dazzling open kitchen provides an array of highend appliances. The glorious master bedroom adjoins a solarium and an updated bathroom, while the shaded backyard presents a deck with a raised hot tub.

Off MLS

For video tour & more photos, please visit: www.753Maplewood.com

- DeLeon Insight July 2015 17

Summer Splash Listings

5 9 N o r a Way , Athe rto n

457 Homer Avenue, Palo Alto

O f f e red at $ 2 , 9 98,000

O ffe r e d a t $ 1 ,4 9 8 ,0 0 0

Private Setting with Guesthouse

Private Downtown Condo

Boasting private grounds with a putting green, this 4 bedroom, 4.5 bathroom home of 3,850 sq. ft. (per county) includes a guesthouse and a lush lot of 22,500 sq. ft. (per county). Gorgeous spaces include a formal dining room, a grand living room with a fireplace, and a granite-lined island kitchen opening to a family room with a breakfast area. All bedrooms are en-suite, and one bedroom may be used as a home office. The plush master suite enjoys a walk-in closet, a stone-clad bathroom, and access to the verdant grounds, which present fruit trees, a two-car garage, and a terrace with a built-in barbecue.

Nestled in a beautiful, secure complex, this 3 bedroom, 2.5 bathroom condominium offers 1,530 sq. ft. (per county) and a prized location within walking distance of exciting University Avenue. Handsomely updated, the interior displays natural hardwood floors, recessed lighting, and crown molding. The beautiful living and dining room ensemble exhibits a fireplace, and French doors lead to a large covered patio. Double doors open to the remodeled island kitchen, which shimmers with Carrara marble countertops. Spacious bedrooms include a master suite with his and her closets, and the complex provides underground garage parking.

For video tour & more photos, please visit: www.59Nora.com

For video tour & more photos, please visit: www.457Homer.com

34 5 Br y an t C ou r t, Pal o A l to

1 5 4 0 M i d d l e fi e l d R o a d , P a l o A l t o

Of f e re d at $ 2 , 4 88,000

O ffe r e d a t $ 2 ,2 9 8 ,0 0 0

Stylish Downtown Living

Fine Home for Outdoor Living

On a quiet, safe residential street in exciting downtown Palo Alto, this light-filled 3 bedroom, 2.5 bathroom home of 1,936 sq. ft. (per county) occupies a lot of 3,485 sq. ft. (per county). The chic interior displays dual-pane windows and designer bathroom fixtures, and includes a living room, an open dining area, and a delightful island kitchen with stainless-steel appliances. All bedrooms are upstairs and provide high ceilings, while the terrific master suite offers a walk-in closet and a sky-lit bathroom. This residence also includes a private side terrace and an attached garage with a workshop.

Basking on a lot of 5,625 sq. ft. (per city), an expansive, private terrace adjoins this 4 bedroom, 3.5 bath home, which includes 2,520 sq. ft. (per county) plus a lower level of 999 sq. ft. (per plans). Brazilian cherry hardwood floors, dual-pane windows, and a central vacuum system enhance the interior. The bright, upgraded kitchen provides designer appliances, three bedrooms enjoy vaulted ceilings, and the master accesses an immense walk-in closet. Other features include a wine cellar in the lower level, an upstairs patio, a two-car garage, and updated hardware and lighting fixtures throughout.

For video tour & more photos, please visit: www.345BryantCourt.com

For video tour & more photos, please visit: www.1540Middlefield.com

Off MLS

- DeLeon Insight July 2015 19

Summer Splash Listings

9 25 E l sin or e Dr ive, Pa l o A l to

1 0 3 1 S i e r r a Dr i v e , M e n l o P a r k

O f f e red at $ 1 , 9 98,000

O ffe r e d a t $ 2 ,4 9 8 ,0 0 0

Bright, Spacious Layout

Warm Interior, Fresh Amenities

Expanded and updated, this sunny 4 bedroom, 3 bathroom home of 2,216 sq. ft. (per county) stands on a lot of 0.24 acres (per county). The spacious layout provides a window-lined living room, an open dining room, an enlarged den, and a home office. Beamed ceilings, radiant floor heating, and clerestory windows enrich the interior, which is centered by a warm, open kitchen. Large, generous bedrooms include a remodeled master suite and a guest suite with outdoor access. The property also provides an attached two-car garage and large, shaded yards, including a professionally relandscaped rear lawn surrounded by mature trees.

Surrounded by the peaceful Sharon Heights neighborhood, this 4 bedroom, 2.5 bathroom home of 2,130 sq. ft. (per county) resides on a lot of 13,899 sq. ft. (per county). Sizable gathering areas feature expansive windows and natural hardwood floors, like the formal dining room and the great room with a fireplace. The sky-lit kitchen offers a breakfast bar linking to the family room, which boasts a wet bar. Gracious bedrooms include a master suite with two closets, while another bedroom presents a private entrance. The home also provides an attached two-car garage and an immense, tree-shaded backyard retreat.

For video tour & more photos, please visit: www.925Elsinore.com

For video tour & more photos, please visit: www.1031Sierra.com

2 09 8 Cedar Av enue, Menl o Pa rk

1 P o r t o l a G r e e n Ci r c l e , P o r t o l a Va l l e y

O f f e red at $ 1 , 9 88,000

O ffe r e d a t $ 3 ,9 8 8 ,0 0 0

Handsome Luxury Remodel

Enchanting European-Style Home

Extensively remodeled with luxurious details, this home of 2,190 sq. ft. (per county) offers 4 bedrooms, 3 full and 2 half bathrooms, and a lot of 5,664 sq. ft. (per county). The inviting front porch opens to an interior showcasing crown molding and nylon carpets. Generous common areas include an immense living room, a separate dining area, and an impeccable chef ’s kitchen boasting quartz countertops. On the main level lies an in-law suite, while two bedrooms upstairs include a master suite with his and her walk-in closets. Other features include a private lawn and a two-car garage with a bonus room.

Surrender to the fairytale charm of this 4 bedroom, 4.5 bath home of 4,654 sq. ft. (per appraisal) on a lot of 18,295 sq. ft. (per appraisal). A three-car garage, an expansive motor court, and verdant natural landscaping accent the distinguished Tudor-style residence. Topped with an A-frame ceiling, the rustic island kitchen includes a woodburning fireplace, stainless-steel appliances, and a breakfast nook. A rear gallery opens to the paved terrace hosting a hot tub with slate surround, while the master suite provides a dazzling bathroom.

For video tour & more photos, please visit: www.2098Cedar.com

For video tour & more photos, please visit: www.1PortolaGreen.com

- DeLeon Insight July 2015 21

Summer Splash Listings

2 01 Mou n t ain Wood La ne, Wood si d e

5 8 8 7 A r b o r e t u m Dr i v e , L o s A l t o s

O f f e r ed at $ 3 9 ,900,000

O ffe r e d a t $ 4 ,9 8 8 ,0 0 0

Premier Opportunity to Build Equestrian Estate

Welcoming Residence Enjoys Astonishing Views

Tucked away in prestigious Woodside, a private road leads to the gates of two adjacent parcels, offering a combination of over 11 oak-lined acres (per entitlements summary) that spread amidst some of the country’s most illustrious properties. Pre-approved plans will accompany the purchase of this property. Despite the rustic environment of this country retreat, you will be less than three minutes from the center of Woodside, one of the most charming and affluent towns in the world.

Infused with French Country charm, this upgraded 3 bedroom, 3.5 bathroom home has an additional 1 bedroom, 1 bathroom cottage and offers a total of 6,293 sq. ft. (per county) on an oak-shaded lot of almost an acre (per county). Presenting breathtaking views from almost every room, the home boasts modern updates like multi-zone heating and cooling and builtin speakers, while featuring a gorgeously remodeled kitchen, a lower-level wine room, and a three-car garage. Ideal for entertaining, this home also includes an attached two-story cottage featuring a free-flowing family space with a wet bar, while generous rear terraces provide astonishing views of Silicon Valley.

For video tour & more photos, please visit: www.201MountainWood.com

For video tour & more photos, please visit: www.5887Arboretum.com

2 61 81 Moody Roa d , Los A l to s H i l l s

1 1 5 E l e a n o r Dr i v e , W o o d s i d e

O f f e r ed at $ 5 , 488,000

O ffe r e d a t $ 5 ,9 8 8 ,0 0 0

Custom Villa, Palatial Amenities

Beautiful Estate Draped in Luxuries

Surrounded by foothills, this extravagant 4 bedroom, 5.5 bath villa of 5,991 sq. ft. (per plans) boasts a walkout lower level and sits on a lot of 1.72 acres (per county). Built with a uniquely insulated structure that provides an energy-efficient interior, the home also enjoys travertine and Brazilian rosewood floors and back-lit recessed ceilings. A two-story foyer branches into elegantly appointed living areas and the majestic gourmet kitchen, while a floating staircase leads to the stately master suite. Downstairs lies a wet bar, a home theater, and a lounge.

Luxuriate in the quiet splendor of this exquisite 5 bedroom, 4.5 bath home of 3,935 sq. ft. (per county) with a 1,060 sq. ft. walk-out lower level (per plans) on a lot of 1.12 acres (per county). The two-story great room offers a fireplace and a mezzanine with bookshelves. The breathtaking gourmet kitchen brandishes a massive island, marble countertops, two sinks, intricate cabinetry, and a walk-in pantry. The upstairs master suite offers a private balcony, dramatic ceilings, and a sumptuous bathroom. Additional features include a home office, a detached three-car garage, terraced gardens, and sensational bay views.

For video tour & more photos, please visit: www.26181Moody.com

For video tour & more photos, please visit: www.115Eleanor.com

- DeLeon Insight July 2015 23

DeLeon Market Conditions Atherton Snapshot

Cupertino Snapshot

Los Altos Snapshot

DeLeon Market Conditions Los Altos Hills Snapshot

Menlo Park Snapshot

Mountain View Snapshot

- DeLeon Insight July 2015 25

DeLeon Market Conditions Palo Alto Snapshot

Portola Valley Snapshot

Sunnyvale Snapshot

DeLeon Market Conditions Redwood City Snapshot

Woodside Snapshot

Condos/Townhouse Snapshot

- DeLeon Insight July 2015 27

PRSRT STD ECRWSS U. S. Postage Paid Palo Alto, CA Permit No. 1

DeLeon Realty 2600 El Camino Real, Suite 110 Palo Alto, CA 94306

LOCAL POSTAL CUSTOMER

How to Prepare & Market Your Home to Achieve the Maximum Sales Price Thursday, August 13th, 2015 6:00 - 8:00 p.m. Please join DeLeon Realty at our August Seminar. Gain insight from Michael Repka, the Managing Broker and General Counsel of DeLeon Realty, into how you can best prepare and market your home to achieve the maximum sales price. Also, hear the latest market updates from Ken DeLeon, the most successful real estate broker in Silicon Valley.

To RSVP, please contact Lena Nguyen at 650.543.8500 or by email: Lena@deleonrealty.com

Venue: Palo Alto Hills Golf & Country Club, Grand Ballroom 3000 Alexis Drive, Palo Alto

650.543.8500 | www.deleonrealty.com | CalBRE #01903224