Sacramento Real Estate Blog

We haven’t announced a winner (in the gets a Starbucks Gift Card sense) of our fabulous pick that sign contest, but I’m seeing the beginnings of a strong majority opinion favoring sign one.

I hate to give up the lovely crown that my wife helped me draw, so taking one of the suggestions about moving off the “Realtor(r)” logo and balancing it out with the crown I can’t bear to lose and throwing in some borders gives us:

Did I lose the simplicity you liked by throwing that in? If not, this may be considered yard sign 0.9 (beta release).

Our agents have been busy over the last few weeks taking lots of new listings, and as a result, we really need to be ordering more signs soon. Since we never really decided on a design format for our real estate signs, I propose we have a contest over the next twenty-four hours or thereabouts. I’ll randomly select someone for a Starbucks gift card from everyone who votes on one of the signs below. (To vote, scroll down to the bottom of this post and leave a comment). To see a larger picture of any of these, click on the sign. [Signs 4 and 5 were last minute entries].

Ok, I’m not a graphic artist or anything, so this might be a “least of three evils” sort of deal, but play anyway!

Tell your friends. This is the biggest media event since Brittany Spears went into rehab.

Sign 1:
 

Sign 2:
 

Sign 3:
 

Sign 4:
 

Sign 4:
 

Thanks!

I recently reported briefly on a USA Today article that claimed that short sales in Sacramento County were up to 20%. When I hear such numbers, I like to try to first verify them and dig a little deeper. As always, the MLS provides a wealth of data about the real estate market in the Sacramento area, and anyone with a bit of ingenuity can mine it.

My first task was to look at some raw numbers both for the total active units and then for the numbers of those that were in some stage of foreclosure. The three foreclosure stages reported in the Existing Financing field in the MLS are Short Sale, Foreclosure Pending, and REO, which roughly translates into pre-foreclosure, in foreclosure, and bank-owned (after foreclosure). I say roughly because first of all there may be some overlap between Short Sales and Foreclosure Pending. Secondly, one could make a case for short sales not being necessarily all pre-foreclosure, though I’ll treat them in the remainder of the article as though they are. (Elsewhere, I discuss these stages in more detail and the pros and cons of buying homes in different stages of foreclosure.)

Because of the overlap between the categories, the total number of foreclosures in any of the three categories (1283) is different from the total of each of the categories (1338). Looking at the categories and the total actives individually, we come up with the following data:

The following two charts show how the foreclosures stack up as a total percentage of Sacramento County homes currently for sale, and how much of each category makes up the total:

As you can see, homes where the seller was in some sort of financial trouble make up at least 15% of our inventory. (I say at least because in my experience agents don’t always list all the data that pertains to the home correctly). REOs make up the largest portion of these. (The optimist would say it’s because the recent foreclosures are down, but a pessimistic interpretation is that REO inventory is building up even more over time).

In future articles, I will look at how the percentage of short sales has varied over the last twelve months or more, as well as the average price differences between the short sale / REO and the rest of the market.

Several months ago, I visited the subject of being able to provide buyers and sellers with the ability to sign their documents online. Recently when I was working with Mathew and Minie, the benefit of having the abilility to do this became even more apparent, because Mathew asked the (quite reasonable) question — Why aren’t Realtors® doing this yet? Look, you can do your taxes online, why can’t you sign your real estate paperwork the same way if you want?

When I last looked into this, I decided that the time and effort involved were not worth the trouble, because the main company that supported our real estate forms software had what I thought was a fairly kludgey solution requiring you to drag and drop electronic “sign here” stickies on each page. That’s not too onerous in itself, of course, but with a minimal purchase agreement weighing in these days at some 22 pages or so with disclosures, and given the fact that the last thing we want to do is hold up a buyer who’s ready to go, the process seemed to me to be too time consuming to be worthwhile.

I am happy to report, however, that our main electronic signatures provider, DocuSign, has recently released a Beta version of some software that’s destined to make this process much easier and faster to use, so that I think we’re ready to start serious work on rolling this out and making it available. This doesn’t mean that you have to use electronic signatures, of course — if you’re more comfortable working in person or by fax, of course we’ll still do business that way as well. I strongly suspect, however, that a lot of the folks who are users of this web site are the type of people who would find the convenience of being able to do their real estate paperwork online to be a real plus. For example, we often show people homes who live out of the area and who only decide on a purchase once they’ve gone home and “slept on it.”

Email software and web browsers have long ago replaced the fax machine as the communication medium of choice for many people. It’s time that Realtors® caught up with that, it seems to me, and got ourselves out of the dark ages.

You look great in front of your new home in El Dorado Hills. It was a real treat getting to work with you! Thanks as well for holding up those marvelously self-interested riders and for giving me permission to show everyone how nice you look.

The California Association of Realtors® web site recently alerted me to USA Today’s report that claims that 20% of all homes for sale in Sacramento County are short sales. I’ve been meaning to do some research of my own into those numbers, since I’ve been seeing quite a few short sales and REOs (”Real Estate Owned” — another word for bank repo, where the bank has already obtained the home through foreclosure).

After writing my recent short piece on Sacramento’s Fabulous Forties, I began to wonder how a really desirable area like that would fare compared to what’s around it. In part, my interest was sparked by a discussion with a client about a different area, Arden Arcade, where the price differences between the available luxury homes and the rest of the environment is quite similar to East Sacramento. I’ll have more on that in a later article.

I should point out that what I’m about to show here — the “high end victorious” — is not a universal for all markets. For instance, in many of the updates I’ve done in Placer County, the showcase community of Granite Bay was often the one with the most drastic price reductions and the highest inventory.

The numbers for the fabulous forties tell a very different story from Granite Bay. In this case, the Fab Forties are a sort of time machine — an island, if you will, in the midst of East Sacramento — that seems more or less immune to the downturn around it. To get enough activity to make any kind of comparison worthwhile, I studied the whole years 2005 and 2006 for both: 1) The fabulous forties alone, 2) All of East Sacramento (95819), including the fabulous forties.

For all the metrics, the fab 40s did very well compared to East Sacramento as a whole. While East Sac’s average sold price dropped 2.1% and the average sold price per square foot dropped 1% during this period, in the forties the sold price average increased by 12.7% and the sold price per square foot increased 7.7%. Similarly, while the median price dropped 3.4% in East Sacramento from 2005 to 2006, the median price in the fab forties increased 16.1%.

But what about units sold? Yes, there too, the forties won out. The fab forties experienced a 10.3% increase, from 29 to 32 units, while East Sac as a whole saw a 2.2% decrease, from 276 units to 270. Average days on market did increase by 25.5% during the period for the fabulous forties, but compared to East Sac’s increase of 56.3% this bump was nothing to get excited about.

To be sure, when we start talking about a small area like the fab forties, it’s possible that the numbers suffer somewhat from the size of the sample. 270 sold homes gives you a lot more stastical significance than 32, for example. Nevertheless, given the clear victory in every category and the fact that we didn’t even factor out the fab forties in our East Sac results (which would have magnified the difference), I think we might comment in New York fashion that the Fabulous Forties are indeed fabulous “not for nothing.” I’m really starting to love that area. One of these spring days if things slow down a bit I may try to do a photo tour.

One of the finest and most desirable areas of Sacramento is East Sacramento’s Fabuolous Forties, an area bounded (more or less) by J Street on the North, 37th or 38th Street on the West (depending on who you ask), 47th street on the East, and Folsom Boulevard on the South. Here it is, as a Google Map.

The fabulous forties is an area of upscale custom built homes, many of which were built in the early 1900s, especially in the 20s, 30s, and 40s. The area features a variety of architectural styles, from Craftsman homes to Mediterranean Villas and Tudor style mansions. Dan Murphy’s excellent Curtis Park History site has a fascinating discussion of the impact of the architectural firm of Dean and Dean on the area. These men, the same architects who designed Sacramento’s Memorial Auditorium, were steeped in the popular Revival style of the period.

Every year since 1973, the fabulous forties have been the scene of Sacred Heart Parish School’s Christmas benefit, the Holiday Home Tour of East Sacramento. I think Elite Properties should have our Christmas party this year in conjunction with that event. I’ll bet it’s a blast. Too bad I’m having this idea in February. Someone with a good memory needs to remind me in November.

Here are some homes that are currently on the market to give you a feel for the beauty and variety of the area. (Click the homes for more photos / listing details).

Well, what do you know! It’s time for another transaction to close (at least, that’s what the contract says), and once again the dog has eaten the loan processor’s homework.

I’m not the number one producer of North America or anything, so this definitely isn’t meant to brag, but in the time I’ve been in business, it’s fair to say I’ve closed a few transactions. Some day I should get out a scratch pad and try to review the percentage of times that the escrow didn’t close on time because loan docs didn’t come in. There is a crisis in veterinary medicine, as our hapless canine companions seem to have acquired a taste for loan docs, and are breaking into banks and loan offices around the nation to stuff these delicious morsels into their maws.

Over the course of the years I’ve heard lots of different valid reasons (and lame excuses) for why we didn’t get our loan docs, including:

• This was a hard loan to do.
• The buyer didn’t send their paperwork in on time.
• The title company fouled up.
• The Realtor® fouled up. (Attention loan officers: don’t try that one on me unless I really did foul up or unless you don’t like referrals).
• A power failure corrupted our data.

Now that I’ve been in the business for some time, I’ve begun to recognize an unfortunate duty to tell my buyers at the beginning of escrow that we’ll do everything we can to close their escrow, but there are a lot of people to coordinate, and if anyone’s late we may be a few days late. My buyers are generally understanding, but I hate telling them — it’s like apologizing for inevitable defeat on behalf of the industry. “Yes, I know moving is stressful and needs to be precisely coordinated, but underwriters have these dogs, see, and these dogs…”.

There’s no way to put it correctly and politely, because it isn’t right. Attention underwriters and loan processors: grow up and do your job.

I had an inquiry today about a home in Placer County about a home listed as a short sale that turned out to be quite interesting as I dug into it.

For those not familiar with short sales, short sales are short in the sense of “short on cash”, and the term refers to any sale where the procedes from the sale won’t be enough to pay off the outstanding debt and the closing costs. So the seller, anxious to avoid the negative impact of a foreclosure, asks the lender for permission to do a short sale. In other words, the lender is being asked to take a reduced payoff on the note they’re holding.

After looking at the comparable sales, I have a feeling that the buyer may have had an interest in the home because it was priced very agressively. The home was listed at $320,000 (which worked out to $219.21 per square foot), in an area where the comparable sales showed an average pending sale price of $237.46 per square foot (list price) and an average sold price of $241.43 per square foot (sale price).

Why price it so low? When you think about it for a minute, you’ll realize that you’ll almost always see a pretty good discount on a short sale, for the following simple reason: short sales are one of the rare cases (possibly the only case except perhaps probate) where the person who’s pricing the home is different from the person who’ll decide if the offered price is high enough. You see, a short sale by definition is one where the seller makes no money, and the seller’s asking the lender to accept less than the loan amount. Because of this, the seller is inclined to price the home very agressively indeed, since it’s not the seller but the lender who’ll have final say over whether to accept the offer.

Our next step after checking the comps was to check out how much of a hit the seller is asking the lender to take. Checking the mortgage history in the tax rolls, I learned that the most recent refinance of the home had consisted of two loans taken out at the same time in 2006, one for $331,200 and the other for $82,800, for a total of $414,000. So the home was being listed for some 77% of the value of the loans on it, and the lender would receive something slightly less than that after closing costs.

The Plot Thickens

What caught my eye at this point was something really interesting — the name of the broker selling the home was the same as the name on the tax rolls. At this point I began to suspect some looming mortgage fraud conspiracy, but it turned out the broker only had one or two homes in Placer county. It could still be loan fraud, but I couldn’t easily prove it to myself based on a pattern.

At the same time, since I would be representing the buyer if I represented anyone at all, a question that was more interesting to me than the integrity / lack of integrity of the seller was whether the lender would go for the sale. What usually happens during a short sale is that the lender will order either a full appraisal or a Broker Price Opinion, and decide whether and how to negotiate based partly on that. So from a buyer’s perspective, the thing you should know (besides the fact that they take a long time) is this: unlike most sales, you can’t assume that even the asking price is one that will get you the home (let alone the discount that you’re likely to ask for because you know you’re in a buyer’s market).

In researching the issue further, I happened across a great technical bulletin (in PDF format), published by Land Title Guarantee Company, which goes into the sorts of details a lender will be looking at when deciding whether to accept a short sale. If you’re interested in getting a bargain through pursuing a short sale, this technical bulletin should be on your required reading list.

I’ve been quite busy digging into our new real estate transaction system, SettlementRoom. One of Murphy’s laws of unintended consequences is — or should have been — that the software you purchased to save everyone time is a great time saver once you get past working your fingers to the bone for the first thirty days.

I do think the effort will be worth it, however. I believe that a client who’s attracted to doing their own searching online is more or less an ideal candidate (compared to the general population) for being someone who might be interested in being able to track the status of their transaction online. So I’m sure I’ll have more to say about this as my team and I get our checklists set up and become more comfortable with the software.

In the meantime, here’s a flier (PDF) you can check out if you’re a buyer / seller and want to understand the benefits to you of having the ablity 24 x 7 to track your agent’s progress on your listing or real estate transaction. Or you can just click on the draft ad to the right, featuring Stressed-Out Sally, the Buyer who used a “B” agent instead of us.

Yesterday I got to preview several homes in the Rosemont area, 95826, for a buyer who’s flying in from Oregon. This killed two birds with one stone because it allowed me to see some of the homes competing for buyers’ attention with our 4032 Birchgrove listing. It looks like our price is quite competitive, with the homes that were in the “yeah, that’s better” category listed at $20,000 more. Once again, this home features a newer roof (less than seven or eight years old), new laminate flooring installed in 2005, newer vinyl dual pane windows, and a huge backyard with a beautiful oak shade tree. My buyers kind of tied my hands on this one, since they don’t want to see a home I have listed — perhaps I’ll offer to show it to them and get them another agent on the buyer side if they like it.

I was able to cross a few homes off the list (which is the point). 8992 Alderson I found to be pretty smoker-smelling and nondescript, so since my buyers send me this one it was a no brainer to scratch it. Also not likely to be visited again was 9066 Clendenon Way, a pleasant looking enough home from the outside which immediately revealed a bare concrete slab entryway, which the sellers have offered to fix with a carpet allowance. But what really put me off about this house was that I almost lost my life to a dangerous attack cat. That’s never happened to me before. The cat simply would not let me into the house, and once I’d made some progress in that direction, it was equally determined that I wouldn’t make it out of the house. All told I think I made it about eight steps in either direction, and was lucky to escape unscathed. The cat presumably was a cross between a tabby and a doberman pinscher. I found an illustration that conveys some of the horror. Needless to say I let the listing agent know so hopefully he can get over there with somebody equipped to handle such a beast. Now I’m really starting to mourn Steve Irwin — we could have used him.

By the way, I called Vicki to tell her my tale of the attack cat, and she later told me that on the same day during a showing in Shingle Springs, she’d managed to accidentally walk in on a naked guy in a hot tub. I guess it was just an adventure-filled weekened all around.

Meantime, back to Rosemont. 8948 Alderson Ave. was an interesting sort of mish-mash owned by an investment company. The best feature of this home is a the size for the price, some of which undoubtedly comes from what’s apparently a converted garage with a lovely bay window overlooking the driveway. This one’s on a corner lot with an interesting black and white tile kitchen and new looking carpet, but I’d want to have a whole house inspector take a look at the water heater installation — it may be fine, but I’d check it out. My buyers picked this one, and I found nothing so awful to make me scratch it anyway.

3517 Coralwood Way is one that I picked. This one would be a great home for an investor, I would think. It’s a bank repo (REO — “Real Estate Owned”) that shows well from the curb except for a few dead plants in the entryway that should be replaced with live plants in the entryway. Inside, I think this home would have sold at this price already except for the animal smells in the carpet — clean it or replace it. Other than that there’s an updated kitchen and baths, a new roof and dual pane windows. My people today aren’t investors, so I’ll leave this one to their discretion.

4224 Tallyho Drive is a very clean house currently listed at $309,900 that the broker was holding open. There are too many new features in this one to list, and the home shows really nicely. I especially liked the vaulted-ceiling living room.

8924 Rosewood Drive is a terrific little home with a new roof and nice large kitchen, for the right buyer. In this case, it’s easy to know who the right buyer is, too. The right buyer for this home loves brick. If you love brick, call me. I’ll take you out to your new home. If you hate brick, don’t bother. If you’re neutral about brick, check it out. Did I mention the brick?

3518 Rosemont Drive is clearly one of the front-runners in this area at $305,000. This home features hardwood and tile floors throughout, newer roof, crown moulding, an alarm system, and more. This was definitely among my favorites, but if there’s one thing more than anything else that working with buyers has taught me over the years, it’s this: whatever I think, it’s not up to me because I’m not the one paying for it!

Bottom line in my opinion: Rosemont is one of the leading options — perhaps the leading option along route 50 — for balancing a charming neighborhood with prices that may be in reach of a first time buyer. Again in my opinion, Antelope carries a similar honor along route 80. My buyers and I are going there today, too!

I enjoyed fifteen seconds of fame among my colleagues recently thanks to the benevolent auspices of The Tomato, real estate’s best marketing blog.

I wanted to thank everyone who put up with my heterodox ideas there, especially Jonathan Greene, author of the Tampa Real Estate Blog: Real Opinionated, who had to put up with me twice, Teresa Boardman, resident Eskimo of the frigid tundra of St. Paul, Minnesota, Ben Kakimoto, who blogs about condos in Seattle, Maureen Francis, who’s putting my production to shame in Oakland County, Jonathan Dalton, who’s got his capitalist head on straight in Phoenix, Joe Zekas, expert on Chicago neighborhoods, Marty Van Diest, who unlike Teresa services the temperate Wasilla, Alaska, just a stone’s throw north of Anchorage, assuming you can chuck a stone about fifty miles, and who also chimed in recently with some helpful advice about the transaction management software I’m considering, and I owe him a comment there.

And if I missed thanking anyone, I’m very sorry, but it’s 1:15AM here in the Big Tomato. Do you know where your buyers are?

January’s Placer County real estate market numbers show prices continuing to drop, albeit at a somewhat slower pace than we’ve seen earlier for Placer County. From January 2006 to January 2007, the average sale price dropped from $526,087 to $509,030, nominally a 3.2% decline. However, this year’s buyers found their dollars buying more as well, so the average square footage rose 7.2%, from 2038 to 2185 square feet. As a result, the average cost per square foot showed a much higher decline of 9.8%, from $265.01 in January of 2006 to $232.97 in January of 2007. Meantime the median sale price declined 5.6%, from $450,000 in January of ‘06 to $425,000 in January of ‘07.

Days on market increased but not by much, from 61 on average to 71. The expired to sold ratio also didn’t change dramatically, rising from 91.4% last January to 99.5% this January. What we’re starting to see is that we’re comparing the buyer’s market now to the buyer’s market of a year ago, so some of the indicators haven’t moved as dramatically as they did when we first started comparing them.

Inventory is moderate at 6.8 months. By the way, I’ve changed how I calculate inventory from my earlier method of comparing current actives to last month’s sales, and now compare it to the average of the last 12 months, which probably paints a more realistic picture given seasonal fluctuations.

More nerd fun: I want to thank Google for their Docs and Spreadsheets software. Rather than shell out for another copy of Office for the laptop, I thought I’d see if I could get by with Google’s free stuff while on the road. Naturally it’s a bit slower than an application running on the desktop, especially on updates, but it’s serviceable for the everyday uses I have planned for it.

A reader of mine, “Sippn”, recently asked me about the number of pending sales and what that’s telling us about the market, and expressed some optimism about the way things are going. I mentioned that I’d get back to him if I looked into the numbers, but the truth is, I don’t usually report anything on the pending sales numbers. The reason is that I can’t go back and compare it to last year, and my market update writing formula is to pick an area and compare last month’s sales to the sales a year ago last month .

Sure, I do write other things here, and try to do so early and often, but market updates are a kind of staple that I go back to often — a kind of rice under the vegetables, if you will.

Fortunately, the National Association of Realtors® pays more attention to the pending sales numbers than I do, and in one of their recent news releases, they seemed to share Sippn’s optimism, citing the biggest monthly gain in the pending sales index since March of 2004 in December. (See, they have a pending sales index, even. I told you they were paying attention).

I don’t usually say this because it stirs up the bubble bloggers to come by and rebutt me, but this is beginning to look a lot like the market is recovering, or at least, stabilizing at an equilibrium where buyers and sellers can get something done together. I find more evidence in the record-breaking numbers I’ve been seeing for visitors on my web site in January (and so far in February).

I should have a graph of that, shouldn’t I?

OK, here’s one:

Not to put to fine a point on it, here’s the graph for a slightly longer period showing the average daily search numbers for “Sacramento Real Estate” for this site.

Naturally if you’re into graphs you can probably come up with a half dozen ways to read this one. To give the bubblers their due, this does seem to show that February search numbers are leveling off, with visits still spiking from searches done in January. I’ll be interested to see how that plays out. Another thing I read from this is that the actual number of real estate searches is not record-breaking as the number of visitors is, but the spike in activity seems to be happening earlier this year than last. Whether that continues through the end of the year or into 2008 is anyone’s guess, but we’ll keep an eye on it.

There’s an online transaction management system that I’ve been thinking about using, SettlementRoom. One of my agents used to be a transaction coordinator early on and mentioned it to me. It allows a buyer or seller to securely track the progress of their transaction (or the feedback from agents on their listing) online. One of the complaints that sellers often have about their agent is that they failed to provide feedback from property showings from the buyers and other agents. Once you’re in escrow, it allows you to have all the paperwork in one central place, and allows us to provide you with a CD record of the whole transaction when it is done.

I know my colleagues read these blogs pretty heavily, but on the off chance that a potential client does as well, I’d love to hear you chime in and let me know if you think that would add value to our real estate service. The cost is certainly not prohibitive unless it just turns out to be a needless bunch of bells and whistles.

I’ve been meaning to start taking a closer look at multi-unit investment properties in our area and working on getting a better understanding of the numbers. I got a call from a buyer recently who was interested in an eightplex in Cameron Park, within walking distance to my house, so I thought this was the opportunity I’d been looking for. One of the first things I wanted to understand was the ratio of income that a rental property in our area generates to its price. There are at least two ways to get at this, one easy and pretty brain dead, the other requiring a little more leg work but worth the trip if you find a property worth investigating further. The two measures are:

• Gross Rent Multiplier
• Market Capitalization Rate (or “cap rate”)

The first number is the more “brain-dead rule of thumb number”, and tells you the ratio (multiplier) of the “gross rent” (go figure) to the sale price or listing price of a property. Of course, using the listing price gives you the gross rent multiplier that the seller has in mind for the property, whereas if you’re looking at comparable sales you’ll generally want to zero in on this value using the sale price. The other number, the Market Capitalization Rate, is the ratio of the Net Operating Income to the sale price or list price. We’ll forego a discussion of Net Operating Income for the time being, but suffice it to say that you need more data points to calculate net operating income and therefore cap rate, but the advantage is that you get a more realistic picture of the value of the property because you’re also taking your operating expenses into account.

The additional data that you need to calculate the cap rate — when coupled with the fact that many listing agents will only enter the bare minimum of data about a property — means that cap rate is not an easy number to determine for a large group of properties (six months worth of comparable sales, for example, or “all the eightplexes available now”). In the case of the Gross Rent Multiplier, you only concern yourselves with two data points and you simply divide. Most listing agents can be prevailed upon to enter the gross rent in MLS, and the price as you’d expect is a required field. (Sadly, however, even in the case of gross rent, many agents will cheat and enter a zero, presumably because they can’t be bothered to do even a minimum of work on behalf of their seller. But let us continue.)

I have more to do in this area and would eventually like to incoporate some of this data either into my duplex listings page or some other new pages in my investment properties section. But meantime I was able to get a rough idea for my buyer of whether a GRM of 14 (quite high on the face of it) was appropriate to Cameron Park. It turns out it is reasonable, though we only have one comp to justify it. On the other hand, a more general area wide number for greater Sacramento for residential income properties sold in the last six months with five or more units would be about 12.26% or thereabouts (see this PDF printout of recent multi-unit sales). That Cameron Park, a generally more desirable / expensive area than some parts of Sacramento, should have a higher gross rent multiplier than the average is not surprising. The authors at the Advantage Software site point make a similar point in their excellent GRM Article. (I’m not endorsing their software — I haven’t used it. But I can endorse Frank Gallinelli’s beautifully lucid introductory book on real estate investment analysis, which is a good deal more inexpensive into the bargain. In fact, if you want to take up the net operating income / cap rate thread, that’s as good a place as any to do it.)

Since GRM is an easy number to calculate, one of the neat things you can do with it is create a list of properties that are ordered from “best investment” to “worst”. I’ve done such a list for five units or more — please pardon the obvious typo. You’ll want to keep in mind as you look at this that you also need to understand location, the vacancy rate, and the operating expenses on the property to make a detailed comparison.

It’s tax time.

Yuck.

My clients’ records are more organized than mine are.

Oh well, one to three days of secretarial work and we should have it over and done with.

I’ve been seriously behind the times as far as portable devices go, but I’m making up for it today by posting my first entry from my new Toshiba laptop, while sitting in my lazy boy in the living room, with the new wireless router ensconced safely in the study.

I could get used to this.

My daugher inherited my barely wireless old Dell, which lately has also been barely not on fire. We’ll have to fix that or replace it soon.

Within a week or two, once the mild sticker shock from this purchase has worn off, I’ll probably go and pick up an HP portable printer to go with this thing, so I can write up real estate purchase agreements, either at Starbucks or at real coffee shops. This is actually a price tradeoff from what I thought was really cool, a tablet PC.

Quite incidentally, this PC is running Windows Vista. Vista has not been failing left and right, but neither has it been overly impressive. It’s a memory hog, so count on a gig or more of memory to run it. I counted some 432 Mb in use just to sit there — your mileage may vary.

Just now I finally got around to making a little progress on our upcoming “Sacramento Buyer’s Seminar”, which is scheduled to launch February 28th if I can keep making forward progress on it. The third article in the series will be about searching for a home. Although eventually I’ll beef this up to include later steps you might take such as asking you Realtor® to do a customized search for you, and a worksheet you can use on tour, what I have so far nevertheless stands on its own as a fairly decent tutorial to our basic search page.

Searching for a Home

In our first two emails we talked about how to order your free credit report and analysis, and the steps to getting preapproved for a loan. As you learned, many people skip this important step only to find themselves overextended later on, so it’s important to have the numbers in mind before you shop.

Once you have an idea of what you can afford and what your comfort level is, you’ll want to begin by shopping for a home. For many of us, online search tools are a convenient way to browse through the available inventory at our leisure, often several weeks or months before we actually want to meet with an agent. The purpose of this email is to point out some of the different search tools that are available and to inform you about your options.

Getting Started

By far the search page that our buyers (and web site logs) tell us is most popular is our simple, basic search page. This page lets you search for homes by city name or by zip code — often in Sacramento we find it’s a particular zip code that folks want to drill down into — Rosemont, for example, Land Park or Midtown.

In addition to geographic location, you can control how many bedrooms and baths, the minimum size, and of course, a price range. With this search tool, you can search for all the listings in the Sacramento Area MLS (Multiple Listing Service).

This brings us to an important point about Internet search tools. Sometimes consumers will go from site to site looking to
see what agents have what listings. This is not so much a mistake as it is a waste of time, because the MLS is not a company or agent specific database, it’s a database that the vast majority of Realtors® use to list all the homes they sell. If you see a site like ours that seems to have hundreds and hundreds of listings available, chances are you’re looking at MLS data, so you have access to practically all the homes in inventory (with the exception of for-sale-by-owner listings and a few other special cases).

Our Internet search tools are fed by MLS data, and are updated six times per week so they’re very current. In fact, they are updated more often than the national real estate web site, Realtor.com.

To see a simple search in action, try entering a city name and then clicking “search” with the default price range. You’ll get a page with ten listings displayed and links to many more, that may look something like this:

This thumbnail view tells you the price, address, and other details. Note that it shows the listing office for each listing. Because you are looking at MLS data, not just our own listings, we’re showing you all the homes you can look at when you tour with us — whether we are the listing agent or not. (We’ll have more to say about that when we talk about agency in a later e-mail). As you can see on the right, each listing is provided by MetroList, the name of the company that maintains our Sacramento area regional Multiple Listing Service.

Drilling Down to More Details

At this point you have several choices. If you’ve signed up for a Property Organizer account, you can save the listings that interest you so you can return to them later. Alternately, you can click on the Photo Tour link to see all the photos we have available for this home, or you can click on the address or the house to get to a summary page containing more information about the house.

If you click to get to the summary page, you’ll see the main photo again along with several buttons on the top. It will look
something like this (shown here condensed somewhat):

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If you scroll down, you’ll also see a group of links below the price. Between the top buttons and the links on the bottom, some of the selections you can make are:

• Request More Information
  This link lets you send an email to a Realtor® to get more information about the home. You should fill out the comments section carefully with any details you’re especially interested in, and please leave a number where we can reach you in case you want to ask us specific questions.

 

• More Details
  This link takes you to a page that has very complete listing information. Most of what a Realtor® would have available is displayed here (with the exception of days on market, the showing instructions, and a few other fields).

 

• Schedule a Showing
  Ready to see more? This link lets you request a showing with a Realtor® This link is appropriate if you’re not already working with an agent and want us to show you the home and (if you wish) perhaps work with you on other homes. If you
  already have an agent, you should not use this link, but call your agent for a showing.

 

• Save This Property
  Saves the Property to your Property Organizer Account so you can look at it later.

 

• Map Location
  Well, you know what they say, “Location, Location, Location”.

 

• Mortgage Information
  A basic mortgage calculator. Fair warning: this does not include tax and insurance. For a better estimate, talk to your lender or Realtor®

 

• School Information
  This link takes you instantly to information about the schools in the area of the home you’re looking at. (Another resource you definitely be familiar with if schools are a concern to you is GreatSchools.net. Greatschools is probably better for general research, but the beauty of our property schools link is that you can check out what may be available right near the home you’re looking at. Please note, however, that later on when you decide to make an offer, you should double check this information with the school district office.

 

If you think our expired listings are a little overpriced here in Sacramento County, check out the situation in El Dorado County.

And by the way, a hat tip to my lovely wife, without whom I would have left my column headings mixed up on the Sacramento County article, proving the exact opposite of what I was trying to!

A few days ago I wrote a post that Jeff Brown liked, wherein I took a brutally honest look at what to do if your home isn’t selling. Jeff Brown is a very nice guy and always has a kind word for me, and he writes about real estate investment.

Anyway, when I was finished with that post, and as I was looking at this month’s market numbers, it ocurred to me that I hadn’t proved “It’s the Price, Sweetheart” to anyone’s satisfaction. So I thought it would be fun to show the average list price of homes that sold versus the average list price of homes that expired for some period — oh, I don’t know, six months or so. As I’m writing this post, I haven’t yet looked the numbers up, but let me guess that in each and every month in the last six, the first number will be substantially lower than the second.

Those of you who are saying to yourself, “well DUH!” have never gone on a real estate listing appointment. Trust me on this.

So stand by while I prepare the numbers….

Well, I decided to go for broke and check out the last 13 months instead of the last six. So I’ve included all of 2006 plus January of 2007. The following table shows the numbers, and, on average over the whole period, homes that expired were listed at 6.4% higher than homes that sold, at the time they expired. I emphasize this because there may have already been a list price reduction before the listing expired, and we’re also not showing final sold price, here, which typically runs about 2-4% underneath list in this market. Between those two elements, it’s probably a fair guess to say that when a listing expires it probably started out about 10% higher than where it should have been.

Here are the numbers for homes sold in Sacramento County during this period, according to Metrolist MLS, barring any typos on my part. In each case, we show the percent difference as how much higher the expired price average was than the sold price.

The numbers are in, and sure enough, it’s another “red ink” month for Sacramento County real estate, at least from a seller’s perspective. Prices were down slightly on paper, but my favorite indicator, price per square foot, was down more dramatically. Interestingly, all this was happening at a time when my web site traffic is easily the best it’s been in twelve months, so I have a feeling that home buyers are getting very interested in the bargains that this downswing is creating. (The other hypothesis, that more and more ladies have been falling in love with my picture as time goes by, is probably not even worth entertaining.)

This January’s average Sacramento County home was 1698 square feet, and sold for $348,000, down 3.7% from last year’s average of $392,363. However, since this year’s home was 6.2% bigger than last year’s average of 1599 square feet, the net effect was to drop the price per square foot some 9.3%. Those numbers were $245.38 in January of 2006, versus $222.47 in January of 2007.

Also as predicted, unit volume was down, from a total of 1010 units sold in January of 2006 to 730 units sold in January of 2007, a 27.7% drop. Because the number of expireds rose eight per cent during the same period, the effect on the expired to sold ratio was to push it over 100%. This ratio, which is simply the number of listings that sold in a given month divided by the number that expired, was 88.1% in 2006 and 131.6% in 2007.

Sellers, what that means is that your home is more likely to not sell in it’s listing period (often 90 to 180 days, though it’s not fixed by law), than it is to sell. In a future article, we’ll take a look at how well / poorly priced those expired listings were versus the ones that sold.

Naturally, in such a market, average days on market even for homes that did sell has increased, from 49 in 01/2006 to 72 in 01/2007.

Yeah, that’s right, it’s February, and we’re due for another round of real estate market statistics. Here’s what I predict:

Days on market, up.
Prices, down.
Unit volume, down.
Expired to sold ratio, up.

I’m having a bit of a tough time getting into the groove today, partly because my keyboarding muscles are starting to ache a bit — a sure sign that I’ve been getting adequate nerd exercise. However, that’s certainly not your problem. I promise to have numbers to flesh out the predictions above within a little while. New month, new numbers. Rock and roll!