The back story behind the strong numbers.
Local home sales are as strong as at any time over the past year, despite predictions of a market slowdown or even collapse. It's still good to be a seller, at least in areas and price ranges with historically strong appeal.
These sellers bask in the glow of what may be the sunset of an epochal market. Because behind the robust numbers lies a new reality: the market is shifting slowly toward buyers.
It's not a radical shift, but it's a meaningful one. Houses still sell and prices still go up, but these days buyers are often writing purchase contracts differently. They aren't reflexively crossing out the traditional buyer protection clauses as they once did.
A homeowner selling in Spring 2005 had perhaps a four in five chance that at least one buyer was willing to buy "as is". One of the most misunderstood terms in real estate, "as is" doesn't mean "buyer beware". "As is" means that Seller fully discloses to Buyer all defects Seller knows of, but repairs none. Given the average condition of the average aging rancher that makes up most of our housing stock, "as is" can add tens of thousands of dollars to the value of an offer. Seller saves the cost of making termite repairs, replacing a leaky roof, or even fixing drippy faucets. Instead, Buyer pays for those repairs, or learns to live with drippy faucets.
Seller 1, Buyer 0.
A homeowner selling back in the halcyon days of Spring 2005 also had about a four in five chance that at least one buyer was willing to make an offer without contingencies. A "contingency" is a contractual escape hatch for Buyer, even after Seller has accepted Buyer's offer. A contingency gives Buyer X days to obtain, review and approve information that materially affects the value of the house, or at least Buyer's subjective opinion of its value. Typically that crucial information is a pest inspection, a general inspection, a loan approval, or all three. If after X days Buyer doesn't like what he or she sees—and if Buyer and Seller can't come to a meeting of the minds on the reduced value of the house to Buyer—then Buyer can walk away with impunity and with earnest money deposit in hand.
So a seller who accepts an offer with contingencies won't know for as many as X days whether the sale is really a sale, and whether the sale price is really the sale price. These aren't minor details. In the seller's market we've had for most of the past eight years, sellers could often afford a hostile attitude toward contingencies. Buyers responded by writing fewer and shorter contingencies or, particularly on the mid-Peninsula, not writing them at all.
Seller 2, Buyer 0.
But that was then, and this is now. As the market almost imperceptibly weakens, buyers sense it and begin to reclaim their traditional contractual protections. Today Seller has only about a one in two chance of getting an as-is offer or an offer with no contingencies. And if Seller isn't willing to negotiate, Buyer is more willing to walk.
So there's a new market behind the numbers. Seller 0, Buyer 2? No. Right now, the score is tied.