$10,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$0
$8,000,000 Atherton Los Altos Los Altos Hills Menlo Park Mountain View Palo Alto Portola Valley Redwood City Sunnyvale
Average sale price for single-family homes from 1/2021 to 10/2021, compared to the period from 1/2022 to 10/2022.
$9,000,000 Atherton Los Altos Los Altos Hills Menlo Park Mountain View Palo Alto Portola Valley Redwood City Sunnyvale
1/2021 - 10/2021
1/2022 - 10/2022
Woodside $0 $500 $1,000 $1,500 $2,000 $2,500
Price per square foot ratio for single-family homes from 1/2021 to 10/2021, compared to the period from 1/2022 to 10/2022.
Woodside
1/2021 - 10/2021
1/2022 - 10/2022
DRE #01903224
Managing Broker: Michael Repka
WE ARE LOCATED AT: 1717 Embarcadero Road, Palo Alto, CA 94303 650. 543. 8500 | DELEONREALTY.com 中文服務 | 650.785.5822
By Michael Repka, Esq.
DISCLAIMER:
As prominent members of the real estate community, we respect all pre-existing listing agreements. If your home is currently under a listing contract, please do not construe this publication as a solicitation of that listing. On the other hand, if you have not yet selected an agent, we urge you to consider our team's resources and design acumen, as demonstrated in this proprietary publication, which was created completely in-house by our talented marketing team.
Contact Ken DeLeon for exceptional buying opportunities at 650.543.8501 | DRE #01342140
Contact Michael Repka to learn about our Platinum packages and incredible listing services for sellers at 650.900.7000 | DRE #01854880
Advertising. All rights reserved. DeLeon Realty is not a law firm and the publica tion of this information does not create an attorney-client relationship with this brokerage or any of its members. Likewise, the material in this publication does not constitute a solicitation and is not intended to provide legal advice. The content in this publication is informational only and may not reflect current legal developments. This publication should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your juris diction. You should always consult a suitably qualified attorney regarding any specific legal problem or matter. DeLeon Realty expressly disclaims all liability with respect to actions taken or not taken based on any or all the contents of this publication. See also deleonrealty.com for additional disclaimers.
With interest rates on the rise, a listing agent’s marketing is now more important than ever. But beyond that, a new trend has unfolded: buyers are canceling or breaching contracts in record numbers, per a recent CNBC article. Add in inflation and recession rumors, and “buyer’s remorse” becomes highly contagious. We now see buyers ask for a purchase price reduction before they even submit their earnest money deposit. Once it is time for buyers to sign their loan documents, they may no longer have the same confidence in their finances. I recently asked Stan Smith, a real estate attorney and meditator from Niven & Smith, if he has seen this same trend and he confirmed yes, he has seen a substantial uptick in buyer cancellation and deposit disputes in the past several months.
Indeed, legal acumen has emerged as a critical factor for success as a listing agent. If or when a buyer seeks to cancel a contract, it is imperative that your listing agent not only handle the situation in the seller’s best interests to attempt to save the transaction, but that they are not the reason why the buyer is able to cancel in the first place. Simon Offord from Brewer Offord & Pedersen, a local law firm specializing in real estate, tells me he has seen three to four times the number of cancellation disputes now than at the same time last year. He also sees buyers ask for a purchase price reduction, then later want to cancel. In these cases, Simon explains that “sellers need to go to an agent that knows what they are doing and does not open the door to allow a buyer to walk out.” That “door” could be anything from a listing agent’s careless reading of a contract to an ill-timed disclosure on the agent’s part.
A typical agent will have a seller complete disclosures on their own, and then outsource the agent’s disclosure duties to a transaction coordinator who usually has even less experience and concern than the agent. If a listing agent misses a required disclosure or makes an error in the contract, it can derail the entire transaction and allow a buyer to walk away with their deposit and no liability, leaving the seller in a terrible position through no fault of their own.
This begs the question: as a seller, who would you rather have help you with disclosures and contracts?
A transaction coordinator, a real estate agent, or a real estate litigation attorney?
It is a sad fact that many listing agents will tell their sellers to allow a buyer to walk away, to not question a buyer’s request to cancel, and to fully give back the buyer’s deposit. To an experienced attorney, this seems hard to believe, but some agents do this to avoid a potential lawsuit. They shy away from disputes for fear of being scrutinized themselves, as they may have let something fall through the cracks which allowed the buyer to cancel, and they do not want any part of a dispute between seller and buyer. At DeLeon Realty, we take a different approach.
When a buyer first shows signs of wanting to cancel, we engage our Law Offices1 to represent the seller in a dispute. Earlier this month, we did so when a buyer wanted to cancel the day after their offer was accepted because their mortgage payment would be higher than expected. We sent a demand letter to the buyer that explained the consequences of breaching the contract and the buyer then submitted their deposit. The buyer later asked the listing agent for a purchase price reduction because their stock portfolio declined in value. When the agent told the buyer they would need to contact our Law Offices, the buyer chose to instead proceed with closing. This quick attorney action was critical in saving the deal. The transition to attorney representation is seamless for our sellers. We know the property, we know the disclosures, we know the facts, and we are involved at the first sign of trouble.
If you are selling a property, we highly recommend you have your listing agent commit to paying for the initial cost of an attorney to represent you in a dispute with a buyer. This should be written into the listing agreement before a seller signs.
In the past, buyers could withstand a less than perfect transaction, and maybe even tolerate undisclosed issues or unexpected expenses. That is no longer the case in this more volatile market. Sellers need a listing agent they can trust to prevent a buyer from walking away, especially in this market.
1. The Law Offices are engaged only after a conflict check and upon seller signing an engagement letter that complies with California Rules of Professional Conduct, specifically Rules 1.7 and 1.8.1, regarding its affiliation with DeLeon Realty.
One of the most significant advantages to having listed more than 900 homes over the years is a visibility into market trends and seller proclivities that is unavailable to lower-volume agents or small teams.
When it comes to preparing a home for sale, we have come to notice sellers often fall into one of two camps: Those that want to spend too much on presale renovations, and those that want to spend too little.
It takes a significant amount of experience and design acumen to know which improvements will be costeffective and meaningful to a potential buyer, and which ones will go unnoticed.
Generally, inexpensive or superficial repairs tend to pay a large return; however, some contractors over-diagnose the problem and miss easy solutions. For example, we start off many of our listings by having our in-house team wipe down the walls with a special solvent to remove scuffs, marks, and other imperfections. It is remarkable how often this simple process reveals that many of the rooms, and much of the trim, can go without costly repainting. Similarly, the right staging can neutralize colors that may seem too bold at first glance.
On the other hand, it is understandable that a professional painter preparing an estimate might simply add all of these extra rooms or walls to their proposal. After all, the greater the scope of work, the more significant the profit on the project.
Another example of a low-cost item that is often overlooked is damage to woodwork. An experienced person with the appropriate wood stains and fillers can touch up nicks on cabinets, balustrades, and woodwork in only a few hours and at no cost to the sellers. We have experienced personnel on staff to take care of these types of improvements.
Traditionally, in real estate, there is no qualified liaison
between the contractors and the potential seller. Real estate agents will reach out to a painter or handyman and ask them to walk through the house and generate a proposal. The problem is that the more items on this proposal, the more the contractor makes. Most agents do not have years of experience as an interior designer or handyman, so the agents find themselves relying upon the contractor to define the scope of work. In fairness, I would be in the same boat if I did not have experienced interior designers and handymen on staff to oversee the entire design process.
The DeLeon Design Team does not charge anything extra for its services or make any money on the work that it does, nor does it charge any sort of markup on work done by outside vendors. This results in a more refined list of work that is directly tied to those items that will move the needle on the selling price.
Further, our design team remains integrally involved in the process to make sure that the work is done right, on budget, and on time. If there is work that is not done during the prep process, we provide an attorney to help the sellers ensure that their disclosures properly reflect the condition of the property. Again, there is no extra charge for legal or tax advice that we provide to our sellers, which is handled through the Law Offices of Michael Repka if it exceeds the limitations that apply to real estate agents who are not attorneys.
Some sellers do not want to spend much, if any, money on the preparation of their home for sale — after all, they are moving out. Unfortunately, this could also result in leaving money on the table. Some home prep items can be accomplished at little or no cost to the sellers, which can result in a tremendous improvement to the home’s curb appeal and the buyer’s overall feeling when visiting the home.
At DeLeon Realty, we have the trucks, vans, equipment, personnel, and experience to make the home preparation process easy and often far less expensive than one might imagine.
The meteoric rise of Silicon Valley prices over the past decades has resulted in significant “builtin capital gains” for many Silicon Valley property owners, which may make an outright sale of their property painful from a tax perspective.
However, the changing real estate market in Silicon Valley, coupled with the headache of being a residential landlord, has resulted in some of these real estate investors yearning to diversify out of state and into real estate assets that are much less “hands-on.”
Most real estate investors know that they can sell real estate that is used for investment or business purposes and defer the capital gains tax by reinvesting the proceeds into other real estate, provided they comply with all of the IRS § 1031 rules and timelines.
In light of recent real estate trends and market conditions, some property owners worry about the long-term strains on the Silicon Valley market
and would like to move some of their real estate investments to other areas or states. However, the day-to-day management of residential real estate property makes this impractical.
Fortunately, there are two options available that result in a deferral of capital gains taxes under the Section 1031 rules and a significant reduction in the owner’s management duties.
The § 1031 rules require the seller of real property to identify replacement “like-kind” property within 45 days and close on the transaction within 180 days. The US Treasury Department defines “like-kind” property very broadly. A taxpayer selling residential investment property can reinvest the money in another residential property, commercial property, retail property, or industrial property, provided the replacement property is in the United States and also used for investment or business purposes.
Additionally, unlike residential property, most commercial property is rented out on a longer-term basis and with the tenant bearing the responsibility for typical maintenance expenses and other costs (this is often referred to as a “Triple-Net” lease). Thus, when a toilet leaks or a tree dies the tenant will call a plumber or landscaper rather than the landlord.
For taxpayers that want even less managerial responsibility, coupled with the opportunity to invest in larger projects, a Delaware Statutory Trust (“DST”) may be something of interest.
This structure gives the taxpayer an investment in a large project that might otherwise be out of their reach, along with professional management, and the ability to identify and close quickly.
Revenue Ruling 2004–86 provides clear guidance as to the operating rules and structure of a DST. Thus, unlike some other real estate investment vehicles out there, the taxpayer can move forward with a greater level of security that the instrument should qualify for the § 1031 deferral.
On the other hand, there are some disadvantages related to DSTs, such as a lack of liquidity and managerial control. Additionally, DSTs are usually only open to accredited investors — generally people with a net worth over $1 million (excluding their personal residence) or an average annual income in excess of $300,000 for a married couple filing jointly. Needless to say, this is not a very high bar for many people in Silicon Valley.
Tax rules in general, and § 1031 transactions into a DST in particular, can be very complex and costly if done incorrectly. If you are thinking about selling a residential property in our area, I would be happy to discuss these topics with you in person.
At the risk of oversimplification, a DST is a trust established by a sponsor that analyzes larger institutional-quality assets, acquires these assets, and then sells equity investments in smaller pieces. Fortunately, the Treasury Department treats these investments in DSTs as "like-kind" investments in real estate, thus qualifying for the § 1031 tax deferral.
Michael Repka is the CEO, Managing Broker, and General Counsel of DeLeon Realty and offers an extensive background in real estate and tax law. He holds two law degrees, including an advanced law degree in taxation (LL.M) from NYU School of Law, the #1 tax program in the nation.
DeLeon Realty, Inc. DRE #01903224
As market dynamics change and economic tailwinds turn to headwinds, so too are real estate consumer preferences changing. During periods of market volatility and transition, good deals and opportunities abound as the best time to purchase a home is when there is less competition. Locking in an excellent value also perpetuates a low property tax for the entirety of your time owning the home, so the good deal carries forward.
Buyers have gotten pickier and their tastes and expectations have changed as market conditions and overall economic conditions have deteriorated. These changing tastes create market opportunities where savvy buyers will seek to get a good value on what is presently out of favor.
While the market has cooled and demand dropped, it has not done so uniformly. With the balance of power now with buyers, they have become less forgiving of any work that a home requires. Consequently, as the
market has continued to weaken over the second half of the year, buyers have become unforgiving of homes that require remodeling.
New Homes vs. Tear-Downs
Even in this market, new homes or turnkey remodeled homes are often generating multiple offers. A Los Altos property located at 845 Mora was tastefully updated and a buyer could move in without having to do a thing. This turnkey home received multiple, all-cash offers and it recently jumped more than $800,000 above list price and went from $6.99M to over $7.82M.
Conversely, homes that need remodeling are viewed as too much work and buyers are only proceeding when the value is clearly reflected in the price. The greatest discount and drop in past sale prices from earlier this year to now is for tear-down lots. Covid had a negative impact upon construction, increasing costs of both materials and labor while also greatly increasing time for completion as many cities’ planning departments
inefficiently worked remotely. A tangible illustration of the discount for tear-downs is that earlier this year, a tear-down in Atherton’s Lindenwood neighborhood sold for $7.15M, whereas a larger lot just closed for $6.3M, a drop of nearly 12%.
Savvy buyers should use this down market to purchase a lot upon which to build their dream home. Tear-downs are ideal to purchase in a weaker market as housing recessions generally last only 1-2 years. Once the home is complete, the market should have recovered. Building costs should also be lower when building during a recession.
Before the pandemic, the strongest markets were neighborhoods that allowed for walkability to a downtown or park. The former premium buyers would pay for walkability was particularly high for the many restaurants and shops in vibrant downtowns such as Palo Alto or Mountain View. However, the pandemic redefined much of society and our view towards housing.
During the pandemic, buyers no longer sought centrality and walkability, but instead started seeking a large space that provides privacy and a compound feel so that children could be watched and protected. Public playgrounds went out of favor over expansive backyards.
These revised valuations fundamentally flipped Silicon Valley’s demand, and downtown neighborhoods have suffered the greatest declines whereas formerly slower moving markets like the hillside communities of Los Altos Hills, Portola Valley, and Woodside are more sought after than ever before.
As the pandemic ends and we return to our former values, I project that the premium formerly ascribed to walkability will return and now is a good time to get these types of properties at a discount. Sophisticated buyers are using this short-term dip to make some very good long-term investments.
263 Yale Road, Menlo Park Multiple offers & Sold in 9 days! Sold for $3,900,000 all cash.
One thing that can be said about Ken DeLeon is that he always pushes himself to higher and higher levels. His decision to immerse himself in a strenuous master’s program at Stanford‘s world-renowned Graduate School of Business (“GSB”) is just another example of this personal attribute.
His quest for challenge and knowledge is nothing new. After graduating from Berkeley Law School (f.k.a. Boalt Hall), one of the top 10 law schools in the nation, Ken was selected by the venerable Silicon Valley law firm, Wilson, Sonsini, Goodrich & Rosati.
Although Ken enjoyed the practice of law, he soon realized that his true passion was real estate. He left Wilson Sonsini and embarked on a new career as a real estate broker. He started by helping other agents write ad copy, putting out open house signs, and reading everything he could about the real estate industry and Silicon Valley’s neighborhoods and history.
In less than 10 years, Ken rose from a brand-new agent to the number one agent in the United States, according to the RealTrends rankings as published in the Wall Street Journal in June of 2012 — the only Silicon Valley agent ever to reach this remarkable achievement.
Despite being at the pinnacle of real estate, Ken was ready for a new challenge. That was when he and I began discussing the launch of DeLeon Realty, utilizing a completely new and innovative business model.
After an amazing first 10 years in business, Ken decided that it was time for yet another challenge. That is when he enrolled in a master’s program at Stanford‘s Graduate School of Business.
This world-class program honed Ken's skills in management, negotiation, critical thinking, marketing, and numerous other areas that he knew would benefit his future buyers. It also inspired him in some unexpected ways. For example, when asked what Ken liked most about the program, he commented that “[he] was inspired by the drive and brilliance of everyone in the program, both faculty and student alike.” This makes sense given the strength of the faculty and the extremely selective admissions process for students. Plus, in addition to stellar academic credentials and a high score on the entrance exam, all applicants were required to have proven themselves with over at least eight years of practical managerial work experience.
Everyone at DeLeon Realty is proud to congratulate Ken for graduating this past June and earning this prestigious degree. We also appreciate the inspiration for all of us to strive to be the very best that we can be every day.
Atherton Inventory # of New Listings
Los Altos Hills Inventory # of New Listings
$0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000
Menlo Park
Median Sales Price & Price/Sq. Ft. Ratio
$0 $500 $1,000 $1,500 $2,000 $2,500
0 10 20 30 40 50
Menlo Park Inventory # of New Listings
Price/SqFt
Mountain View Median Sales Price & Price/Sq. Ft. Ratio
Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 $0
$1,500
$1,000
$500
$2,000 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000
Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22
Price/SqFt
Palo Alto
Median Sales Price & Price/Sq. Ft. Ratio
$1,600 $1,700 $1,800 $1,900 $2,000 $2,100 $2,200 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000
Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22
Price/SqFt Ratio
0 10 20 30 40 50 60 70
Mountain View Inventory # of New Listings
Nov-21 Dec-21 Jan-22 Feb-22Mar-22 Apr-22May-22Jun-22 Jul-22Aug-22Sep-22Oct-22 0 10 20 30 40 50
Nov-21Dec-21 Jan-22Feb-22Mar-22 Apr-22May-22Jun-22 Jul-22Aug-22Sep-22Oct-22
Palo Alto Inventory # of New Listings
Nov-21 Dec-21 Jan-22Feb-22Mar-22 Apr-22May-22Jun-22 Jul-22Aug-22Sep-22Oct-22
SUNNYVALE
Portola Valley Median Sales Price & Price/Sq. Ft. Ratio Price/SqFt
Portola Valley Inventory # of New Listings
$1,500
$1,000
Sunnyvale Inventory # of New Listings Sunnyvale Median Sales Price & Price/Sq. Ft. Ratio $0
$2,000 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 $0 $500 $1,000 $1,500 $2,000 $2,500 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22
$500
Woodside Inventory # of New Listings Woodside
15
10
0 20 40 60 80 100 Nov-21Dec-21 Jan-22Feb-22Mar-22 Apr-22May-22Jun-22 Jul-22Aug-22Sep-22Oct-22 0
20 Nov-21 Dec-21 Jan-22 Feb-22Mar-22 Apr-22May-22Jun-22 Jul-22Aug-22Sep-22Oct-22
5
