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Volume 5, Issue 3 Nicholas French, Broker Associate, CRS

September 1, 2010

Quarterly Review
Who Robbed the Piggy Bank: The Fed Dilemma
Now that the piggy bank has been drained what will the Fed do post tax rebates, housing credits,
bank bailouts, debt forgiveness, etc. According to Ben Bernanke they are ready to take uncon-
ventional measures. Does that scare you as much as me? I am feeling fairly positive about the
long term economy expecting plenty of speed bumps and stop signs along the way. I for one am
Nicholas French
in the camp of a rebound measured in years, so the media hype with daily market changes does-
Broker Associate, CRS
n’t tend to get me excited. The media needs to sell news daily, but this isn’t a days fix, so the
369 S. San Antonio Road
positive and negative news that changes almost daily isn’t a good indicator of the long term
Los Altos, CA 94022 health of the economy except for those looking to stay entertained. The recovery and stability is
650 773 8000 (cell) a slow steady process and that doesn’t sell papers since it isn’t exciting – the media wants fire,
650 947 2999 (office) death and destitution because unfortunately that is what sells.
650 947 3099 (fax)
Concerned about a double dip? As we move into fall we should continue to see a decline in the number of sales compared to summer, which is a common seasonal change. The slowing of transactions typically gets the attention of Sellers and Buyers and alters their behavior as they
consider whether the smallest change will be chronic or short lived. The tax credits and rebates
earlier this year definitely stimulated the housing market; now that they have expired and the
Inside this issue: shot of adrenaline has worn off the question remains: where else will they pillage for money?
This is some of the news that will most likely make my 2010 highlights. Bernanke said in a recent
interview that “the Fed would hold rates low for a longer period than is currently priced into the
Who Robbed the Piggy 1
Bank: The Fed Dilemma market”. Sounds to me like we will have low interest rates for at least a few more quarters,
which is exciting for those holding adjustable mortgages. He also continued to say the Fed could
Apples to Apples: Ana- 2 decrease bank interest rates, which caught my attention since it is practically free already. I
lyzing Differing Attrib-
utes guess the alternative is to pay banks to borrow — can I be a bank and get paid to borrow money?
Make Money from 2
Until then we can watch, wait, and be patient and prepared to make reasonable adjustments.
Your Money Overall the market has remained stable this year whether buying or selling and based on avail-
Apples to Apples: Ana- 3
able information should continue. Interest rates are at ridiculous lows, which has brought af-
lyzing Differing Attrib- fordability to record levels (I’m guessing you will see this pop up in the news in the next several
utes (continued) months) and the benefit of free money (a.ka. low interest rates) has created an environment of
How The Media Scares 3 mortgage payments on par to rent in many areas. I am watching rates and the market carefully
understanding the sensitive balancing act that will take place and how it will effect our stability.
How to Sell Real Estate 3
without Paying Capital For now inflation does not appear to be a concern, the local real estate market seems fairly sta-
Gains– Upcoming ble (but no huge growth in sight), interest rates are at ridiculous lows, real estate is transacting,
stocks are selling, and the world is spinning. It appears the glass has water which is a positive
Client Testimonial— 4
shift year over year. The faucet may have low pressure but we are getting water in the cup, we
Tao Family
just have to be patient. As always we must watch many variables to understand the local market
Newsletter Value-Add 4
and being informed will help make good decisions. If you would like more information about
Updated Neighborhood 4 what I’m seeing from a legislative standpoint, sentiment, or to discuss a strategy for you whether
to buy or sell, feel free to contact me anytime! Enjoy the season and we’ll talk soon!
Quarterly Review
Page 2

Make Money from Apples to Apples: Analyzing Differing Attributes

Your Money We are in fairly still water — do not expect big waves whether riding up or down
making it crucial to compare apples to apples. There are thousands of costly vari-
$$ ables that play a part in buying or selling real estate and if you miss the crucial
variables it can cost you dearly. It would be great to have a book with the do’s
By using the Rule and don’ts of buying or selling, but the reality is that real estate is about people
(a.k.a. emotions) and whether you are buying or selling you have to understand people, antici-
of 72 you can ap-
pate situations and know how to effectively achieve your goals.
proximate how
It is very easy to visit the many real estate websites and search for comparable sales in a
long it will take to neighborhood, get the Zestimate value or other computerized valuation tool, or see what a prop-
double your erty looks like from marketing pictures and mapping systems. At the end of the day this does
not give you the true information necessary to make buying or selling decisions. In order to
make accurate comparisons it is helpful to have first-hand knowledge of a property in question.
At least once a weekend a client asks me: 1) why don’t the online pictures look like the property,
The “rule” takes
2) why is the price estimate online different or 3) my house is better than my neighbors from the
the number 72 and brochure so why shouldn’t I get more money? These are some of the many reasons why there is
divides by a rate of no generic answer to questions on property value, home preparation, or sales price. Those
questions are answered through knowledge of the current market, knowing what is selling
return to reach the (multiple offers – under/over asking) and understanding what is currently motivating buyers and
amount of time sellers.

needed. For exam- Once we have the market knowledge we want to consider like for like variables as best as possi-
ple, at 9% interest ble in our analysis. Most have heard the saying “garbage in, garbage out”, so let’s discuss some
of the important comparisons to consider:
it will take 8 years
Deciding list price: comparing sold property comparables to active listings that aren’t selling
to double your
(“my list price should be the same as my neighbor even though their house hasn’t sold”) – When
money. This is the considering a list price it is important to consider sold, pending and active properties using Ac-
power of com- tives as a gauge of what is not selling. A list price is arbitrary and both Sellers and Buyers should
recognize it as a strategic variable, dependant on many variables including setting a low list price
pounding interest. to attract buyers creating a sense of urgency — yes, this still happens in some local markets.

Extraneous variables of a home: I use this term as a way to describe the variables affecting a
property value that are not directly related to the property in question, such as competing inven-
tory, news headlines in the past week, stock market, Feng Shui and Vaastu concerns. Especially
in the current market, a bad job report or quote from Ben Bernanke can put just enough doubt
or stimulation into the market to create these external adjustments. It is important to recognize
those extraneous variables and consider whether they are unique to the subject property or if
the comparables had similar variables such as layouts, house direction, or similar news and stock
trends that week. Comparing apples to apples (as best as possible) is key to an accurate analysis
— (continued page 3)
Volume 5, Issue 3
Page 3

Apples to Apples: Analyzing Differing Attributes (cont) Sell Real Estate

Example, you visit property “A” which you do not like because of the natural light, direction of Without Paying
house and segmented floor plan, but property “B” comes on the market which looks very simi-
Capital Gains Tax?
lar on paper: square footage, lot size, neighborhood, condition and you are ready to write an
offer. Property “A” has now sold and you will use it as a comparable sale, but do you think the See how by coming to
value is the same as property “B”? You may say, but is has the same fundamental features so
an informative seminar
why shouldn’t it be the same price? Simply put, property “A” had issues that concerned you
and if they concerned you they will most likely concern another, so make value adjustments for
presented by Advanced
those variables Trustee Strategies, San-
deep Varma.
Current scenarios: have you been relocated, financial hardship or living changes – your sce-
nario may dictate your sell/buy price since you may have limited time. This is a segment of the I have attended many
market since motivation is a strong driving factor. Understanding seller or buyer motivation
of his seminars as well
can help accurately value the comparables. Some homes are unable to secure conventional
financing, so cash offers are the only option limiting the number of buyers and ability to recog-
as being a guest
nize highest price compared to comparable home sales. Adjustments should be made to have speaker providing real
an apples to apples comparison. estate market updates.

Most important component: does the property or offer work for your needs? When in doubt
His strategies provide
just ask this simple question – the right property or offer typically elevates -- and the world alternatives to the tra-
keeps spinning. I think this is an undervalued attribute that will be more recognized going for- ditional 1031 tax ex-
ward. As a child our home was a constant; there was never a thought of moving into a new
change, installment
neighborhood. Family, friends, colleagues new your home and that’s where you stayed. Many
of the sellers today in places like Saratoga, Los Altos and Palo Alto have lived in their homes for sale, etc.
thirty years or more, which seems like an eternity for those who move every five plus years
and I think going forward people will move less often creating a base camp for their family. There is an upcoming
seminar you don’t
How The Media Scares Us want to miss.
The sky is falling or the market is like a rocket ship, whatever sells news. Graphs are also a
great way to make a point with the content having little importance. I was reading an article Call the ATS Financial
the other day discussing the increase in defaults and the following day read an article which office at: 650-243-2224
stated defaults were down — that was interesting. I reviewed both articles and found one of
or register at
the writers put the information necessary to make their point and overlooked the actual statis-
tic. The lesson: be careful what you read because the media is selling news. It is true that
home sales dropped across the
county following the homebuyer tax
credits but the jump was influenced
by the credit. After you adjust for this
altered market condition it is fairly
solid. Our GDP numbers are up, un-
employment is still horrible, but local
restaurants are still crowded and I
had trouble parking at Santana Row
last week. How bad is it again?
Page 4 Nicholas French, Broker Associate, CRS

Client Testimonial Updated Neighborhood Statistics

No. of Closed % of List Median Average
City Year Qtr Avg DOM
Sales Price Price Price
Tao Family
Campbell 2010 Q2 76 100.13 689,500 713,758 45
Nick is methodical, dedi- Campbell 2010 Q1 47 99.27 690,000 699,165 50
Campbell 2009 Q4 70 96.56 671,500 721,522 63
cated, and understood very
Campbell 2009 Q2 78 96.73 675,000 703,441 83
quickly what we were look- Cupertino 2010 Q2 134 100.77 1,059,100 1,108,475 32
ing for. Looking every week- Cupertino 2010 Q1 59 99.16 1,100,000 1,115,914 64
end, Nick found that perfect Cupertino 2009 Q4 80 98.33 1,130,000 1,200,789 71
Cupertino 2009 Q2 94 95.52 1,056,000 1,121,735 58
house and walked us
Los Altos 2010 Q2 98 98.21 1,500,000 1,636,253 41
through every step of the Los Altos 2010 Q1 63 97.29 1,521,500 1,682,069 73
purchase process. As a first Los Altos 2009 Q4 80 95.64 1,510,000 1,650,578 71

time buyer, his advice and Los Altos 2009 Q2 75 94.94 1,500,000 1,598,876 54
Los Altos Hills 2010 Q2 19 94.63 2,400,000 2,618,800 115
guiding hand were very
Los Altos Hills 2010 Q1 12 93.66 2,061,000 2,229,291 121
comforting. Nick is a real Los Altos Hills 2009 Q4 26 94.76 2,391,944 2,368,124 107
estate broker you can trust! Los Altos Hills 2009 Q2 18 95.71 2,800,000 2,921,140 100
Los Gatos 2010 Q2 102 96.53 1,265,000 1,371,235 61
Los Gatos 2010 Q1 49 96.21 1,002,500 1,289,080 87
Los Gatos 2009 Q4 81 95.35 1,249,675 1,332,355 84
Los Gatos 2009 Q2 72 95.01 1,005,000 1,074,057 83
Menlo Park 2010 Q2 105 99.01 1,249,000 1,351,570 42

Does My Newsletter Menlo Park 2010 Q1 60 96.40 945,000 1,181,330 63

Menlo Park 2009 Q4 86 96.66 1,150,000 1,233,613 75
Add Value?
Menlo Park 2009 Q2 102 96.20 1,137,500 1,373,503 60
Monte Sereno 2010 Q2 13 96.73 1,755,000 2,030,129 93
If you know someone who would Monte Sereno 2010 Q1 8 85.08 2,262,500 2,553,750 171
like to receive this newsletter I Monte Sereno 2009 Q4 5 94.87 1,655,000 1,760,600 160
would like to send it to them. Monte Sereno 2009 Q2 7 95.86 1,699,000 1,883,586 86
Please either have them contact Palo Alto 2010 Q2 123 99.91 1,468,000 1,681,872 36
me or provide me their informa- Palo Alto 2010 Q1 72 98.33 1,436,785 1,564,192 65
tion and I will make contact. My Palo Alto 2009 Q4 109 99.16 1,370,000 1,547,801 47
goal is to have this newsletter add Palo Alto 2009 Q2 114 97.63 1,372,500 1,568,627 44

value and be an information Saratoga 2010 Q2 110 97.0 1,499,000 1,618,118 61

source for my clients, family and Saratoga 2010 Q1 38 95.16 1,599,900 1,805,589 95
Saratoga 2009 Q4 53 93.51 1,395,000 1,593,660 88
friends. Please do not hesitate to
Saratoga 2009 Q2 64 94.0 1,467,500 1,515,139 92
contact me if I can help you with
Sunnyvale 2010 Q2 177 100.95 851,000 815,204 43
any real estate questions, strate-
Sunnyvale 2010 Q1 96 100.33 755,000 725,973 43
gies or if you are seeking higher
Sunnyvale 2009 Q4 141 99.44 760,000 740,857 52
quality representation
Sunnyvale 2009 Q2 132 97.57 740,000 707,024 70