California Realtors Optimistic About the Commercial Market

First of a two-part series

If you think the residential real estate market is tough, you should see what commercial Realtors are up against.

Ray Lindsey, Century 21 M&M Commercial Realtor Modesto

Ray Lindsey, Commercial Realtor Modesto 209-758-4941 email-rlindsey @c21mm.com

“The leasing market is starting to pick up a little bit,” said Ray Lindsey, a Realtor at Century 21 M&M and Associates in Modesto.  “But the sales market is lagging.”

Lindsey, a 25-year realty veteran, works a territory that covers a 150-mile radius from his Modesto base.  His assessment of the local market also matches the national scene.

Nationally, new construction is nearly nonexistent and increases in the vacancies of industrial, retail, office, apartment and warehouse has made it a tenants’ market.

Jerry Nickelsburg, senior economist for the University of California, believes recovery for the commercial market won’t take place until 2011.

“To be sure, the commercial real estate market has not turned but optimism about the future, a precursor to a turn in the market, certainly has,” wrote Nichelsburg in the 2010 “California Commercial Real Estate Survey.”

Lindsey also believes better times are ahead.

Courtesy of the California Commercial Real Estate Survey

“I think it’s going to get better, but we’ll have some more tough times before it gets better,” he said.

The better times will follow, said Lindsey, when California’s 12.4 percent unemployment rate declines and banks start making more loans to small businesses.

“It’s pretty tough to find money,” said Lindsey.  “You can put deals together if you can find financing.”

While residential loans are at record lows — less than 5 percent for a fixed, 30-year mortgage — it’s much higher for commercial financing.

“Residential rates don’t apply to commercial at all,” said Lindsey.  “It’s 7 percent for commercial and 30 percent down, using the bank’s appraisal.”

The best commercial transactions occur with owner financing, when the seller, not a lending institution, finances the sale.

“There’s a lot of that going on.  Probably 30 to 40 percent of the market,” Lindsey said about owner financing.  “That’s when you can get the deals together the easiest and quickest.”

While leasing has been stronger for Lindsey, he is working on two sales, an office in Modesto and an industrial space in Stockton.  It’s a buyers’ market, he said, as the first offer on the Stockton property was about half of the $1.4 million listing price.

“We’re in the counter-offer stage right now and I think it’ll sell for $1 million,” he said.

On the leasing side, Lindsey said newly constructed retail space is priced at $3 a square foot and previously used spaces are $1.20 a square foot.

“That’s not too far from where we were before,” said Lindsey.

DeeDee Thomas, Century 21 M&M Commercial Realtor in Turlock, CA

DeeDee Thomas, Commercial Realtor in Turlock (209)668-5002 email-dthomas @c21mm.com

Dee Dee Thomas, a Realtor at the Turlock Century 21 M&M office, specializes in commercials properties in Turlock.

“I do a lot of it,” she said.  “I do a lot of downtown Turlock including retail offices and sales of small buildings in Turlock.”

Thomas, a Realtor since 1976, rates the commercial market in Turlock as “very slow and depressed.”

A member of the board of directors of the Turlock Downtown Association, Thomas is optimistic the Turlock Downtown Property Owners Association business Incubator is helping the local rebound.

The Incubator, which helps start-up businesses with reduced rents and business guidance, had only five vacancies among the 15 available office spaces in July.

“We’re beginning to see more activity there,” said Thomas.

Turlock’s commercial market parallels other valley communities and recovery is still years away, she said.

“I don’t see it any time in the near future,’ said Thomas.  “Commercial tends to lag behind the residential market.”

NEXT FRIDAY:  The agricultural realty market

Look for this real estate blog every Friday on the http://www.c21mmblog.com website. If you are looking for property in Northern California, or for more information on buying or selling a home, visit – c21mm.com.  Please send any comments, questions or suggestions, to me at newsandviews@c21mm.com or just leave a comment below.

Face-to-Face, In the Field, Sells Real Estate in Sunnyvale CA

Amol Heda, Century 21 M&M Sunnyvale Office (408)307-3465 email-aheda@c21mm.com

Amol Heda, Sunnyvale Office (408)307-9465 email-aheda@c21mm.com

Amol Heda, a Realtor at Century 21 M&M and Associates in Sunnyvale, only spends 15 to 30 minutes a day at the office.  He believes his short office hours are the key to his success.

“As a Realtor, I’m better in the field, than in the office,” said Heda.  “I don’t even have a desk at the Sunnyvale office.”

It works for Heda.  An eight-year veteran with Century 21, he is having one of his best years ever selling real estate.  He sells residential, new homes and commercial properties.

Heda estimates he sells two or three new homes a year and typically closes a total of 12 to 15 real estate transactions annually.  Last April, he sold four deals, including $1.4 million and $1.35 million properties.

Sunnyvale Real Estate Overview

Sunnyvale Real Estate Overview, go to - http://www.trulia.com/real_estate/Sunnyvale-California/

He does the paperwork for his real estate business from his a small personal computer.

“I have a really hard-working tablet PC,” said Heda.  “I can sign documents on my tablet PC.  My clients can sign too.”

Heda uses the DocuSign service that allows electronic signatures and paperless contract execution.

While he spends little time at the Century 21 office, Heda puts in the hours showing properties, face-to-face, out in the field.

Dorothy Oliver, sales manager at Century 21 in Sunnyvale, said Heda is among the 500 Realtors she oversees.  It literally takes a scorecard for her to know her staff.

Dorothy Oliver, Century 21 M&M Sales Manager Sunnyvale (408)307-3465 email-dorothyoliver@c21mm.com

Dorothy Oliver, Sales Manager Sunnyvale (408)499-8875 email-dorothyoliver @c21mm.com

“It’s really difficult,” she said about keeping track of personnel.  “I have photos and a master sheet.”

Unlike other parts of the state, the real estate market in the Santa Clara County region has been solid, she said.

“Our Sunnyvale market is great, along with the surrounding cities of Santa Clara and Cupertino,” said Oliver.

According to Trulia, a firm specializing in real estate statistics, the median sales price in Sunnyvale is $650,000, up 10.4 percent from the same period last year.  The average listing price of $461,254 is off just 0.1 percent from last year.  Through Sept. 8, total sales were 230, down 32 percent from the previous year.

The strength in the market, said Oliver, was in homes listing between $600,000 and $700,000.

“When you get to $600,000 to $700,000, you get multiple offers.  It’s really solid,” she said.  “I believe we’ll remain very strong through the rest of the year.  We’re optimistic.”

Overall sales, which are down from last year, have been impacted by holdups in financing.

“Some of our delays in our sales will be with our lenders,” said Oliver.  “Lenders are still very strict with buyers, even as rates are low.”

One bright spot in financing is the FHA single-family loan limit is now up to $729,750.  In addition, FHA has been strong for condominium purchases at qualifying complexes.

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Selling Million-Dollar Homes in Cupertino

It’s not easy selling a million-dollar home, even in Cupertino, where the averaging listing price earlier this month was $1.19 million and the media sales price was $950,000. Just ask Kim Connor.

Connor, a Realtor with Century 21 M&M and Associates in Cupertino, knows it takes attention to detail, “staging” a home and even a splash of fresh paint. The proof is the number of seven-figure homes she’s sold and acclaim she has received.

“I’m having a good year,” she said. “Last year I was Double Centurion*, and I think I’ll be there again this year.”

Kim Connor, Century 21 M&M Real Estate, (408) 807-1541 email- kconnor@c21mm.com

Kim Connor, (408) 807-1541 email- kconnor@c21mm.com

In August, she sold a six-bedroom, 3-1/2-bath home for $1.575 million and earlier this spring she closed on a $1.468 million property. Connor said in Cupertino, prices are determined by the home’s location within a top-ranked school.

Schools are rated and ranked by the Academic Performance Index established by the California Department of Education. Schools scoring in the 900 range are the most desirable. Connor said the home she sold for $1.575 million would have been worth $2.5 million if it were located just two miles closer to a top school.

“People are willing to pay up to $1 million for a 1,200-square-foot home in the right school district,” she said.

Homebuyers today do their initial shopping on the internet, said Connor. It’s essential for her listings to jump out to potential buyers.

“They’re looking at a lot of homes,” said Connor. “I believe it takes 11 seconds for them to decide if they’re going to look at your listing.”

To maximize her 11-second window of opportunity, she hires her own photographer and makes sure everything is as perfect as possible in the still photos and 360-degree virtual tour.

“I’m unique that I do all the staging myself,” said Connor. “The attention I put into detail is greater than anyone else I know.”

She shared two of her special tricks in staging, or preparing a home for sale.

“I actually add accent colors to the walls,” said Connor. “I have my own painter come in and accent the walls that I think are important for the photographs. I like to show contrast.”

A Connor staging also features something to appeal to children.

“I always do a kids’ room. Something for a young boy or girl that captures the imagination of children coming to the open house with parents,” said Connor.

One child’s room she prepared had a ballet theme, with ballet artwork, hanging toe shoes, tutu and matching bedding. “One little girl told her parents she didn’t care about the rest of the home, she wanted them to buy that room for her,” recalled Connor.

Connors said the Cupertino real estate market is strong but cautious.

“I think it’s cautious, because people aren’t going crazy about over spending,” she said. “But there’s an energy about wanting to be here.”

Mei Ling, Century 21 M&M Realtor (408) 829-3994 email-mei@c21mm.com

Mei Ling, (408) 829-3994 email-mei@c21mm.com

Mei Ling, a fellow Realtor at Century 21 M&M in Cupertino, concurred the local market is solid.

“The market is doing well,” she said. “Better than last year, but a little bit slower right now for the last couple of months. But there’s still people buying.”

Ling, a six-year industry veteran, said she typically sells homes ranging from $600,000 to $1.8 million. “The $600,000 to $800,000 homes are selling faster certainly than the higher range homes,” said Ling. “A $600,000 home only takes one week to sell.”

Santa Clara home sales graph, for more inforation go to - http://www.trulia.com/real_estate/Santa_Clara-California

Most of her sales are from nearby Santa Clara, which has an average listing price of $564,845 and a median sales price of $498,558.

“I don’t sell much in Cupertino, even though my office is there,” said Ling. “I live in Santa Clara and that’s where I specialize.”

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*Double CENTURION® – an agent must close 120 – 179 units or earn $380,000 – $569,999 in Adjusted Gross commission during the calendar year.

Good News and Bad News for San Jose Home Sales

Loren Burks, San Jose Office 408-499-1860 email-Lburks@c21mm.com

Loren Burks, San Jose Office 408-499-1860 email-Lburks@c21mm.com

Loren Burks, a Realtor with Century 21 M&M and Associates in San Jose, has bad news and good news about area realty sales this year.

The bad: “It’s slow.  Without any governmental incentives, the market is somewhat stagnant,” said Burks, a 13-year industry veteran.  “I have seven listings, but I don’t have any offers yet.”

The good: “I’m having my best year ever,” she said.  “A lot of agents that were in this business have now left.  That leaves the business for more serious agents.”

Homes sales in Santa Clara County in July were down 18.5 percent from the same period in 2009.  Sales also were down 8.4 percent in July from June, according to the California Association of Realtors.

Burks said sellers listing their properties too high are a reason for slow sales.  “I’m having problems with people listing properties realistically,” said Burks.

Bay Area Home Sales, July 2010 graph, from DQNewsShe said one of her clients is “stuck in 2005,” when it comes to pricing her San Jose rental home.  The property is worth $520,000, but the client insisted on initially listing it for over $600,000 and just recently dropped the price to below the $600,000.

Homes in the $500,000 to $600,000 range are slow moving, while investors are snapping up homes priced in the $300,000 range, said Burks.

The median-priced home sold in Santa Clara County, meaning half sold for more and half sold for less, in July was $630,000, compared to $587,000 in July 2009, according to the California Association of Realtors.

Formerly employed in Silicon Valley’s high-tech industry, Burks has maintain those contacts and has clients working at such firms as Cisco, Google, Yahoo, and Oracle.

“They’re high-end buyers, but they’re looking at investment properties and renting them,” she said.  “They have a lot of cash.”

Angie Cocke, Century 21 M&M, San Jose Office

Angie Cocke, San Jose Office 408-781-8161 angiecocke @c21mm.com

Burks, who had 12 to 13 transactions last year, could double her sales this year.  “I’m going to close the year with 20 or 25 units.”

While Burks singled out sellers pricing properties too high, Realtor Angie Cocke said buyers are looking for the deal of the century.

“The buyers are just not getting it,” said Cocke, an associate at Century 21 M&M in San Jose.  “We have the best interest rates historically and they’re waiting for the prices to go down.  They’re going to miss the boat.”

As the inventory of homes for sale increases, Cocke said it was possible home prices could drop.

Cocke, who said her sales this year are keeping pace with 2009, said banks have been accelerating short sales.  “The banks have figured out that they get more for short sales than going with a foreclosure,” she said.

Sam Habib, Realtor for Century 21 M&M San Jose

Sam Habib, San Jose Office 408-234-1500 shabib @c21mm.com

Sam Habib, an eight-year realty veteran at Century 21 M&M in San Jose, said he can’t complain about how his year is going.

His niche is selling REO —Real Estate Owned — homes for Bank of America.  He said the homes range in price from $350,000 to $700,000.

Some of the homes are in acceptable condition and others need a lot of work. Habib said Bank of America would spend money to repair the homes.

“They spent $11,000 on one house — paint, new kitchen, granite and floors,” he said.  “Bank of America spends money on houses.”

As an approved real estate agent for Bank of America, Habib goes through a process that can include evicting the residents and offering “cash for keys.”  The cash is traded for the residents leaving the property undamaged.  He said it is not hard to do $10,000 in damage to a home.

Typical cash offers range from $2,000 for a homeowner to $7,000 to break a lease with a tenant.

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