The DeLeon Insight Septe m b e r 2014
PALO ALTO: $1,339/sq. ft.
SHANGHAI: $2,010/sq. ft.
LONDON: $4,509/sq. ft.
Around the World with DeLeon Realty Perspective on Home Prices on the Peninsula
Market Trends
Chart Title Average Sales Price - Single Family Residential
$6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 Palo Alto
Atherton
Cupertino
Los Altos
Los Altos Hills
Menlo Park
Mountain View
Woodside
Portola Valley
Sale Price Avg
Average sales price for single family residential homes from 1/2014 to 8/2014 increased when compared to the average sales price during the same period in 2013, except Portola Valley.*
Chart Title
Jan - Aug 2013 Jan - Aug 13, 2014 Average Price/Square Foot - Single Family Residential
$1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0
Jan - Aug 2013
Jan - Aug 13, 2014
Average price per square foot for single family residential homes along the Peninsula increased from 1/2014 to 8/2014 compared to the same period in 2013. *Data gathered from the Multiple Listing Service on 8/13/2014.
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Legal
Enforceability of the “As-Is” Provision in Residential Real Estate Purchase Contracts By Kristen Watson, Esq., DeLeon Buyer’s Specialist
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iven the hot housing market in Silicon Valley, buyers, in the face of multiple all-cash offers, feel pressured to make their offers as appealing as possible. Not only do these buyers make offers with no contingencies, they also take the property “As-Is.” Many people assume that by checking the “As-Is” box on the real estate purchase contract, the common law doctrine of caveat emptor, or “let the buyer beware” applies to protect the seller from any later claims by the buyer about the condition of the property. In reality, buyers may have some recourse for latent defects that the seller knew about and failed to disclose. The “Optional ‘As-Is’ Provision” in the PRDS Purchase Contract states that the Buyer is purchasing the Property in its present condition at the time of acceptance, subject to four conditions: (1) the seller discloses known information about the property; (2) the buyer retains the right to inspect the property; (3) the seller is not responsible to fix Section 1 issues identified in the pest inspection nor address other repairs requested by the buyer; and (4) contract indicates the seller is to pay for Section 1 work to remedy termite or pest infestation or to repair or correct known problems with the property. If one of the four conditions is not met, the buyer may have some form of recourse. Under California case law, buyer’s selection
of the “Optional ‘As-Is’ Provision” means the buyer is taking the property in the condition visible or observable by him or her at the time of acceptance. In other words, sellers are protected from buyers making post-sale claims of property defects that were visible or observable to them or disclosed by the seller at the time of acceptance. This coincides with the buyer’s right to inspect the property before the close of escrow. Thus, a buyer cannot later sue the seller for an inoperable automatic garage door that could have been observed by the buyer prior to acceptance of an offer if the buyer had diligently inspected the property. However, the buyer is not obligated to conduct independent inspections of the condition of the property. For instance, a buyer is not required to conduct a foundation inspection prior to purchasing the home. If the buyer later discovers major foundational issues that the seller knew about and failed to disclose, the buyer can either demand payment for repair, back out of the transaction, or if escrow has already closed, the buyer can sue for damages. For this reason, it is very important for sellers to disclose any known defects that may affect the value of the home. According to California law, to fully comply with their duty to disclose, sellers are required to fill out, at a minimum, the Transfer Disclosure Statement in good faith. The contract also requires the seller to provide the buyer with a completed Supplemental Seller Checklist, Natural Hazard Disclosure Statement, and a Lead-Based Paint Hazard
Disclosure. As an example, if a seller fails to disclose that there was a death on the property within the past three years and the buyer later discovers that fact, seller would be liable to the buyer for damages if seller knowingly or negligently withheld that information in order to get a better price for the property. In that scenario, even if the sellers filled out the required disclosure forms, they did so in bad faith because one of the questions asked in those forms is whether or not a death occurred on the property within the last three years. In essence, a written contract is not the “end all, be all.” If a party to a contract acts deceitfully, there usually is a remedy for the injured party. Thus, real estate agents go by saying, “Disclose, disclose, disclose!”
September 2014 DeLeon Report 2
Local Update
Worldwide Real Estate Impact on Silicon Valley By Ken DeLeon, Esq. Founder of DeLeon Realty “The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.” – Marcel Proust
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iscord is a better teacher than concord. Consequently, I make it a priority to travel; its unique experiences are an important component of a lifelong education. I have recently focused my travels on learning more about real estate markets around the world to bring the best practices back to DeLeon Realty. Over the last two years, my itinerary included China (plus Hong Kong and Taiwan), India, and Russia. By the end of 2014, my business partner, Michael Repka, and I will have also visited Japan, Singapore, Vietnam, and Thailand. We both have learned a great deal from our travels while connecting with top real estate agents in these markets. My latest epiphany from these travels is my new perspective on the prices of our local market. I have found how home buyers view Silicon Valley real estate prices as less of a reflection of our market and more indicative of where these buyers are coming from. My out-of-area buyers come from two groups: domestic and international. The majority of my domestic buyers come from other tech centers of America, such as Boston, Seattle, San Diego, and New York. These buyers are usually surprised by the high cost of our region. However, since they come from sophisticated, affluent urban areas with relatively high prices, these buyers are not shocked and continue with the buying process. In sharp contrast, my buyers from smaller cities or university towns, such as Austin or Ann Arbor, are always astonished at the prices of our local real estate. As any large employer or recruiter will confirm, the disparity in regional costs of living is a major barrier to relocation in the Bay Area. A common strategy for these clients is to rent for a year so they can assimilate. Understanding
the quality of life in our communities is the the buying pool expanded from rich Europeans first step to accepting and paying local prices. and a few Americans to a worldwide market, My international buyers, however, have a with particular interest from Chinese and completely different point of view: they are Russian buyers. Due to this international often surprised at how reasonable our prices demand, premium wines are achieving new appear. While our prices are amongst the record highs and appreciated 176% over the highest in America, my travels and research “International buyers...are often confirm that they are at how low by international standards. With the our prices appear.” increasing global mobility of both people and capital, last ten years (The Wealth Report, Knight international investors will continue to play Frank 2014). a growing role in the appreciation of Silicon There are a myriad of reasons why foreign Valley real estate. buyers find our market attractive, but the two The expansion of a market from a regional greatest ones are the stability and security of perspective to a worldwide one has also our market, as well as our exceptional local occurred with other high-end investments schools. As wealth in emerging markets and luxury items, such as wine and artwork. continues to increase, so too does the desire to For example, the market for exclusive first safeguard it. Silicon Valley real estate provides growth Bordeaux wines such as Château a secure investment with excellent appreciation Laffite Rothschild rapidly appreciated when potential and actual ownership of the land (as
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surprised reasonable
LONDON $4,509/sq. ft. HONG KONG $6,080/sq. ft.
SINGAPORE $3,686/sq. ft.
SHANGHAI $2,010/sq. ft.
Local Update
opposed to some countries, such as China, where you can never own the land). This gives buyers confidence and provides diversification against their other investments overseas. For confirmation of the relative stability of local real estate, see First Republic Bank’s Prestige Home Index (https://www.firstrepublic. com/resource/san-francisco-bay-area-homevalues). Since 1985, the bank has tracked real estate prices in California’s major markets. The conclusion is clear: Bay Area real estate has weathered a myriad of economic issues, recovered quickly, and continues to grow in value. The globalization of prime residential real estate markets, including Silicon Valley, is being led by Asian investors, particularly buyers from China and India. In the United States, 62% of overseas investors are from Asia. (The Wealth Report, Knight Frank 2014.) A recent study by the National Association of Realtors confirmed that California is the top destination for Asian investors due to its proximity and familiarity,
PALO ALTO $1,339/sq. ft.
and the existence of a large Asian community. Moreover, 60% of these transactions are “all cash.” These wealthy investors often come from Hong Kong, Shanghai, Beijing, and Singapore: four of the world’s ten most expensive housing markets, where prices are much higher than those in Silicon Valley. The table below shows the price per square foot for luxury properties in the world’s ten most expensive housing markets. No wonder international buyers see exceptional value in our local markets.
The following table illustrates the price per square foot for single family homes in Silicon Valley’s most desirable cities as of early August.
The average price per square foot for these cities is $1,013, slightly more than half the price per square foot of Shanghai ($2,010.89). Indeed, while Palo Alto is Silicon Valley’s most expensive city on a dollar per square foot basis, real estate here is valued at less than 25% of comparable properties in Hong Kong. One interesting corollary is that the investment by overseas purchasers will further increase the scarcity of local inventory. Traditionally, local inventory turns over every five to seven years. However, international purchasers tend to have a buy-and-hold strategy. If exchange rates do not shift drastically and their buying patterns remain unchanged, then the available supply of housing will tighten further. Truly, it is all a matter of perspective. The global view is that local real estate is a value proposition. For the period April 2013 through March 2014, the total volume of international clients purchasing in the country was estimated to be $92.2 billion, a 35% increase from the previous year. (NAR, 2014 Profile of International Home Buying Activity, June 2014.) Moreover, a significant portion of that activity is concentrated in California. My bold conclusion: Barring any major macroeconomic event, overseas investors and local tech buyers will push the price for prime real estate in North Palo Alto and West Atherton to $2,000 per square foot in the next 5 years.
September 2014 DeLeon Report 4
In Your Neighborhood
Location, Location, Location: A Study of Appreciation in Atherton, California By Rob Parish, Esq. DeLeon Atherton Specialist Ken DeLeon, Esq. DeLeon Realty Founder
A.
W
hile the citizens of this quiet town probably would have preferred to have been overlooked, Atherton, California was ranked by Forbes Magazine as the most expensive ZIP code in America in 2013. With a population of 7,060 living in 2,330 total housing units, the total number of home sales each year isn’t a large figure. However, the average sale price of a single family home has climbed rapidly over the past two years from $5,187,484 to $7,995,640. Although Atherton has several pockets of smaller homes, the catalyst for this appreciation has been the competition for the trophy homes at the very top of the market. To analyze this segment more closely, table B examines the change in the average sale price of one acre+ properties in Atherton’s various neighborhoods over the past two years. Two trends have emerged: 1. Buyers are realizing that the “West of the Alameda” neighborhood is an extraordinary value when compared to adjacent West Atherton. The reasons are three-fold: builders have rediscovered the potential of the larger lots found in this quiet neighborhood; the Las Lomitas School District has emerged as one of the area’s top public school districts; and the rolling hills can provide wonderful views and exceptional privacy. 2. A similar relationship is developing on the other side of El Camino Real, where the lack of supply in the coveted Lindenwood neighborhood has lead value-conscious buyers to the tree-lined lanes of Atherton Oaks. This dynamic environment has been especially appealing to custom home builders. A call to Atherton’s Building Department revealed that there are currently 754 active building permits in town. While many of these permits are certainly for small projects, it is impossible to drive down Atherton’s
B.
*Note: Both tables in this article were was prepared as of August 4, 2014. Occasionally, properties are withdrawn from the MLS without reporting the final selling price. A search of title records provided the selling price for the pertinent property.
wide avenues without spotting convoys of construction vehicles surrounding various properties. Indeed, a 10,000+ square feet of living space on three levels is becoming the norm for newly constructed homes. Additionally, buyers continue to desire a truly private setting. Several properties with roads bordering two sides of the parcel lingered on the market earlier this year. Not surprisingly, homes located on flag lots have done well. In a community where walled and gated parcels are the norm, a long private driveway provides yet another level of seclusion. The convergence of prestige with location also explains why foreign buyers find Atherton
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so appealing. The Wealth Report, an annual report on global prime real estate markets, Knight Frank (a global property consultancy), stated that foreign buyers are willing to pay top dollar for homes abroad, but only when the location had an established record of value. Given the global mobility of people and capital, the report concluded that highend buyers will continue to pay a premium for tangible assets in safe haven markets because of their relative financial security and the opportunity for significant appreciation. In conclusion, we believe Atherton will continue to experience strong appreciation over the next 12 months.
Interior Design
Getting Ready for the Fall Market everything, so keeping the outside of a home looking as well loved as the inside is important. Rake up those leaves, and sweep the sidewalk, driveway, and porch before prospective buyers view your house.
By Margie Fontanilla, DeLeon Interior Designer
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all is one of the busiest times of the year for home sales. If you are thinking of putting your home on the real estate market this fall, here are a few simple preparation suggestions that will help your home stand out from the competition.
Declutter & depersonalize your home. Before you start the showing process, make sure to declutter and organize your house. Toss or put things you don’t use in storage. While you’re at it, depersonalize your home. You want buyers to appreciate the details of your house and imagine themselves living there without being distracted by your family photos, trophies, knick-knacks, and souvenirs.
Remove autumn leaves. Colorful autumn leaves are beautiful when hanging from the trees, but not so much when they bury your yard. Landscaping helps to sell a home, but may not be noticeable when hidden underneath the fallen leaves. Plus, a home that looks beautifully maintained on the outside implies a well-maintained home on the inside, giving buyers more incentive to enter and check out the home. First impressions are
Let sunshine and light into your home. As fall approaches, the days become shorter and the sun sets earlier. When you have viewings in the afternoon, make sure you have enough lighting so the home looks bright and comfortable. Always make sure your windows are sparkling clean, and keep the blinds and curtains open to draw in the sunshine for a light and inviting atmosphere. Fall is a beautiful time of the year. Pay attention to the details that will help you effectively prepare your home for a listing. Start on these projects now to ensure a smooth and successful fall sale.
Buyers want homes to be movein ready. Sellers should take care of small improvements and repairs before showing their home. Certain inexpensive improvements could boost the value of your home. These improvements include replacing burned out light bulbs, patching dented drywall, repainting rooms, washing and/or painting the exterior of the home, landscaping your yard, reinforcing gutters and fences, and giving the home a good clean.
September 2014 DeLeon Report 6
Ligh
Tips & Tricks
Neighborhood Spotlight Condo and Townhome Living By Mei Lieang, Buyer Specialist Stylish urban living is what comes to mind when thinking of a condo or townhome lifestyle. In general, this sort of lifestyle appeals to certain buyers, including young professionals, first time homebuyers, and empty nesters because of its many appealing features. Some of these include social gatherings, recreational amenities, and easy upkeep. For example, many condo or townhome complexes encourage the development of
social and neighborly relationships among its residents; as such, the Homeowner’s Association (“HOA”) often hosts events such as barbecues and movie nights. Many complexes provide shared amenities, such as gyms, swimming pools, picnic areas, and recreational areas. These amenities create the perfect opportunity to meet, greet, and get to know your fellow neighbors. Most importantly, the HOA maintains the common areas, making condo and townhome living more carefree compared to single family residences. Imagine kissing goodbye the Sunday
morning tasks of mowing the lawn, trimming trees, or climbing slippery steps to fix leaky roofs. Hence, if you are looking for a close knit-community, a host of social events, and less upkeep, consider condo or townhome living. Increased Development Make Downtown Mountain View More Appealing Than Ever By Leanna Scott, Buyer Specialist Downtown Mountain View offers a lifestyle where home, work, dining, and community events are
all within a few minutes’ walk. You can live just a few blocks off of Castro Street in one of hundreds of new upscale homes. Castro Street features a cornucopia of restaurants, ranging from Cascal’s tapas dining, to Scott’s Seafood, Crepevine’s breakfast and lunch, and half a dozen pubs. You can stroll leisurely to the Sunday farmers’ market, and events such as Thursday Night Live Music, the Wine Walk, and the Art and Wine Festival. All of these conveniences create a quality of life that is hard to find elsewhere.
How to Furnish a Great Room By Liling Lampell, Interior Designer ASID
A
Great Room is a hot, new trend in combining the functions of the family room, the living room, and even the kitchen, into one large space. While this configuration can be open and flexible for entertaining and daily life, it can be a challenge to furnish. If you are furnishing a great room in your house, keep in mind these simple tips: Furniture Defines Functionality Furniture frames the activity in an area. For example, decide where you want your television to be, and then frame it out by arranging the long side of the sectional to face the television. Add a rug underneath the sectional to box-in all sides and complete the look.
Light Fixtures Reinforce Spaces Place a pendant light where the dining area is going to be, which will give definition to the space. Add floor lamps to areas that require more lighting; for example, the family seating areas or reading nooks. Virtual Flow After you decide where all the furniture
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pieces are going to be, make sure you tape the spaces or place cardboard boxes in those spaces to simulate furniture for a test run of whether or not the flow created suits your daily lifestyle and entertainment needs. Be creative and follow your instincts, and most of all, enjoy!
COMING SOON
510 Laurel Ave. Menlo Park Listed at $1,988,000.00 4 Bedrooms | 4 Baths 2,747 sq. ft. on a 7,000 sq. ft. lot Remodeled Traditional in The Willows
3311Alameda de las Pulgas Menlo Park Listed at $2,088,000.00 5 Bedrooms | 4 Baths 2,610 sq. ft. on a 6,031 sq. ft. lot Green construction in University Heights
280 Leland Ave. Menlo Park Listed at $2,488,000.00 3 Bedrooms | 2 Baths 2,530 sq. ft. on a 5,700 sq. ft. lot Charming Mediterranean in West Menlo
September 2014 DeLeon Report 8
COMING SOON
731 De Soto Dr. Palo Alto Listed at $2,788,000 5 Bedrooms | 3 Baths 1,941 sq. ft. on a 6,935 sq. ft. lot Remodeled Eichler in Green Gables
27400 Altamont Rd. Los Altos Hills Listed at $3,288,000 4 (Studio. GH) Bedrooms | 3.5 Baths 4,267 sq. ft. on a 1 acre lot European-style estate in Los Altos Hills
1305 Lakeview Dr. Hillsborough Listed at $3,488,000 4 Bedrooms | 3 Baths 3,400 sq. ft. on a 41,374 sq. ft. lot Luxurious beauty with breathtaking views
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COMING SOON
12085 Hilltop Dr. Los Altos Listed at $7,998,000 5 Bedrooms | 4 Baths 7,913 sq. ft. on a 1 acre lot Conveniently located new custom Contemporary
905 Espinosa Rd., Woodside
Listed at $1,598,000
3 Bedrooms | 2.5 Baths | 2,150 sq. ft. on a 1 acre lot (per county) Serene living in a charming Contemporary September 2014 DeLeon Report 10
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DeLeon Realty 2600 El Camino Real, Suite 110 Palo Alto, CA 94306
LOCAL POSTAL CUSTOMER
An Optimized Life Thursday, October 23, 2014 6:00 - 8:00 p.m. Ken DeLeon is Silicon Valley’s top Realtor, and a motivational speaker who has given keynote speeches to thousands while sharing the stage with Tony Robbins and others. At this seminar, Ken will share his three life tragedies that nearly took his life and forever changed it, and the many invaluable lessons he learned during his recoveries. Whether beating cancer, recovering from a nearly fatal accident that made national news because it was so horrific, or learning powerful lessons from his sister’s suicide, Ken has used tragedy as a springboard to greater wisdom and self-confidence to create the life he wants to live. Ken does not fear death, only mediocrity. He looks forward to sharing his inspiration and drive with the seminar audience. Ken is amazingly thankful for all that Silicon Valley has given him. In addition to donating over $100,000 to local schools this year, Ken hopes this seminar and his volunteer speaking at local schools will give back to the community he loves so much. Please come to learn more about why Ken is so driven to give back to his clients and his community. Palo Alto Hills Golf & Country Club, Grand Ballroom 3000 Alexis Drive, Palo Alto To RSVP, please contact Jessica Taylor at 650.543.8537
DeLeon Realty | www.deleonrealty.com | CalBRE #01903224