Sacramento Real Estate Blog

I’ve been working with several parents of Sac State students in recent months who have decided that rather than spending their money on a dormitory for their college age son or daughter, they can enjoy the short term tax benefits and long term appreciation and value of purchasing a condo near campus instead.

Fortunately there are a lot of great condo communities near Sacramento State (or CSU Sacramento, if you prefer). One group of parents came to search in December and were able to take advantage of the slow market to purchase a three bedroom condo for $195,000 which appraised at $210,000, scoring a nice little chunk of built in equity by buying smart. (That was a nice win all around, since the similar unit they originally contacted me about was listed much higher, at $219,000). Another parent is currently looking for units between $175,000 and $250,000, and I was able to send him some thirty-plus available condo units in that price range within a short two miles of Sac State.

One of the largest and closest condo communities near the Sac State campus is Woodside, (on Woodside Lane) pictured here being enjoyed by some of the local waterfowl. Woodside’s condos and Woodside East were built out during the period of 1968-1970. Near Woodside “proper” is the somewhat newer Woodside Sierra, with condos that were built in 1976.

Overall, condos sold in Woodside recently (late 2006 / early 2007) ranged in price from $165,000 for a one bedroom / one bath unit at 764 square feet, to $243,560 for a large (for a condo — 1228 square feet) unit with two bedrooms and two baths. HOA dues run about $250 to $300 per month.

The condos on Oak Terrace Court were also built in the 1970s. These are somewhat less numerous, with only one unit being sold in the last few months. That one fetched a relatively low price of $208,000 for a 3 bedroom 2 bath unit at 1066 square feet.

In the same neighborhood as Woodside Sierra and Woodside Lane are many 1980s vintage condo developments, such as Dornajo Way’s Amherst Place Condos, and the Timberlake Condos around Larkspur Lane. Amherst Place condos have Homeowner Association Dues in the low 200s per month, while Timberlake’s run almost 300 per month.

Most units in the area feature car ports and/or spaces to park, but the condos on Hood Road and North Park Drive come with garages. Hood Road’s HOA dues are currently the lower of the two, at about $260 versus $301 per month. (Note: HOA dues often vary from unit to unit, and you should check specifically on the unit you’re interested in). We can also find condo inventory on Bell Street (with rather steep HOA dues of $337 or so), and further out. Many of the buyers I’ve worked with like the area closer to the highway along La Riviera and Salmon Falls Drive. Though these are somewhat further out, they’re still within about a three mile radius. Some of these units have much lower HOA dues than the units closer in, but the prices are about the same, making the total cost of ownership much less.

Rents for a typical 2 bedroom unit run about $850-$975 at present. On a per room basis, I’m told by one of my buyers that they can rent the largest room for about $450-$500 depending on whether they include utilities, while their smallest fetches about $325 to $375.

As with most forms of home ownership, owning costs more than renting, especially in the short term, but the combination of resale value at the end plus being able to rent the extra units to offset the mortgage makes a condo near Sac State an attractive option for many Sac State parents.

I know the quantity of my posts has slacked off somewhat lately.

Once again: work cuts a hole in my whole day.

Actually, in real estate, one’s work is as likely to cut a hole well into one’s evening instead, sometimes leaving your days pretty laid back to catch up on paperwork. Last night was a personal record, I think, as I was still talking to a buyer and working on an offer at 10:45 PM.

Usually I get to knock off by 9:30 PM at the latest. Piece of cake.

This is my story and I’m sticking to it: my brain is mud not because it’s congenitally muddy, but because of the deleterious influence of work.

It’s so muddy that there are no Web 2.0 bells and whistles here. It was darned charitable of Kevin Boer to link to me and use me in an example, especially because I’m the second least likely guy I can think of to add Criteo’s Autoroll to my site. I’m still pretty much a dinosaur, albeit a rather modern one. From the late cretaceous, maybe. (I’m sure my daughter would be happy to learn I’m taking an interest.)

There’s hardly any Javascript here, if any. Much less any Ajax. When I visit a MyBlogLog enabled site, I appear there as an annonymous black head. (No, not an anonymous blackhead — that would be worse — watch those spaces).

Once in awhile I need to discuss the mud that my thinking has turned into, by way of cleansing it, turning the back porch hose back on the anonymous black head and washing it off, so to speak.

To coin a phrase.

Do I dare to go back for thirds? Sure: as it were.

In a few days it’ll be April, so I can set loose my muddy brain to a task that won’t overload its sedimentary sensibilities: teasing out the data from March.

Meantime if any bright sparkle of intelligence filters down into the muddy deeps, I’ll be sure to share it.

I’m not greedy.

I upgraded Wordpress to version 2.x last night. The only hiccup that I know of so far involves the Spam Karma plugin I’m running not working 100% correctly. Specifically, the number of comments is no longer correctly picked up by “comments_popup_link”.  This appears to be a known issue.

I’ve installed a newer version of Spam Karma.  Let’s see if that did the trick.

A seller of mine received an offer recently with the following clause in it:

Seller to contribute 10,000 referral fee to [deleted] Financial at close of escrow.

Where do I begin? According to the attorney I spoke to (disclaimer: I am not a lawyer), believe it or not this may not be a RESPA violation according to the letter of the law, inasmuch as it’s not one settlement provider providing a kickback to another settlement provider, but one of the parties to the transaction doing the kickback. However, this certainly violates the spirit of RESPA, the intent of which was to lower consumers’ settlement costs.

As it turns out, however, the purpose of this “referral fee”, was to refund cash to the buyer. As the lawyer was nice enough to confirm for me, that pretty much unambiguously constitutes loan fraud, since money in the settlement statement going to some third party lender was actually being returned to the buyer. That’s a no-no, as you can read about here, or in even more detail here.

There’s also a possible code of ethics violation here, inasmuch as section 16.16 of the Realtor® code of ethics prevents the buyer’s agent from using the purchase agreement to negotiate a commission, which this offer effectively does. But let’s leave that aside for a moment, because the agent in this transaction was writing up the offer the buyer asked her to write. (Actually, the agent in this case struck me as pretty much an honest albeit newer agent who was being asked to do dishonest things — not as the one leading the charge over the cliff).

So, back to the loan fraud issue. Naturally, I advised the seller to counter out this part of the agreement, and we did so. This is when things really got entertaining. Through her agent, the buyer sent me a letter telling me that this “referral fee” must be included. When his agent educated him that doing business this way was illegal, the buyer’s response was — as you may have guessed from the title — “everybody does it”. We suggested a few different ways we might legally put the transaction together, but the buyer was adamant.

“Everybody does it.” Try that on the IRS when you evade your taxes. Or even better, try it on the policeman next time you’re caught doing 90 in a 65 mile per hour zone. Well, gee, officer, everybody does it.

When the agent discussed the issue with the buyer’s mortgage broker, the mortgage broker’s proposed “solution” was to have the seller just kick back the money to the buyer outside of escrow, without writing anything up. No doubt this approach was informed by the age-old ethical principle: “Murder is not a crime if you bury the bodies deeply enough so you don’t get caught.”

Interestingly, California’s Department of Real Estate, which lists for public use the license history and disciplinary actions against any licensee you may want to look up, shows for “[deleted] Financial” that one of the corporate officers had a suspension of his real estate license at one point.

Consumers, a good starting point when you’re selecting a real estate company or mortgage broker is to check the Department of Real Estate’s license information. Anyone who was crooked enough, often enough, to get the DRE’s attention probably is a bit shadier than you might feel comfortable with. Yet there are literally thousands of licensees in there who don’t have any disciplinary remarks in there.

And the reason? Everybody doesn’t do it.

Subtitle: One man’s opinion.

I’ve been wanting to get into some more detail about many of the beautiful areas / neighborhoods in and around Sacramento, along with photos, detail, and “circles and arrows and a paragraph on the back of each one explaining what each one is and to be used as evidence [in favor of it].”

Yesterday I had another chance to cruise through Sacramento’s Fabulous Forties, and was struck once again by how classically beautiful whole streets in that area are (let alone the individual homes as I’ve linked to above). It’s no wonder that the market there is resistant to the market forces elsewhere.

But of course the Fab Forties is not the only terrific neighborhood in the Sacramento area. One of the perks of this profession is getting to see all the different areas around where you live. Yesterday I dug deeper into some areas I already knew about, previewing some outstanding (and not so outstanding — that’s the point of previewing) homes throughout the Arden-Arcade area. (Don’t let the multi-million-dollar homes on the first page put you off. Subsequent pages go through all the different price ranges).

And — at the risk of pre-empting the longer articles I’d like to write — there are so many more that I love for various reasons:

• Curtis Park for a mix of charm, affordability, and proximity to downtown.
• Greenback Estates for pure low price plus relatively safe area.
• Waterford in El Dorado Hills for beautiful custom homes on large lots that seem to be universally beautiful. (I’m sure there’s an ugly one in Waterford — I just haven’t seen it yet).
• The Professor and Mary Ann…

And now for the dog ate my homework part: I’ve been spending so much time in a few of these different areas recently working for clients on showings or previewing homes for showings that I haven’t had the liesure time to go through and take the obligatory photos.

Ask anyone who’s everyone: you can’t have a real estate blog without obligatory photos. That’s what makes them obligatory.

It’s the classic dilemma. Work cuts a hole in your whole day.

Oh, wait, that’s not the classic dilemma. That’s the classic worktime joke. This is the classic dilemma: working with clients detracts from snapping photos, but working with clients pays for snapping photos.

Things to do:

• Write more about the neighborhoods in and around Sacramento.
• Send business cards to photographers. (Lousy stupid dilemma ain’t getting the better of old Johnnie…)

I’ve publised our second photo tour, this time highlighting Vicki’s beautiful listing on San Jacinto in Citrus Heights.

Kaila’s recording of her rendition of Spanish Dance music appears courtesy of Kaila’s Piano Music Web Page.

Recently I had the pleasure to chat with a fellow parent of a student where my daughter goes to school about her intention to get a real estate license. I always find it fun to talk to people who are new in the business, as it reminds me of that time in my own career, and it gives me a chance to clarify for myself what I think is important about this business. She asked me about the hours, as many people do, because they’re so likely to see us working on weekends. And yes, there’s a lot of that. If you want to make any money in this business, you pretty much have a choice between working a lot of weekends and/or managing others who do. On the flip side of that, no other job is as lenient about you taking a nap at 2:30 on a Wednesday afternoon if there are no clients to meet at that time and you feel you need one.

We discussed the car issue. She needs to get a better car soon and wanted to know how important it was to have the fancy wheels that Realtors® are infamous for. I don’t have fancy wheels — I have a Honda Accord. So I told her that I’ve sold quite a few houses in a Honda Accord. That seemed to help.

We discussed what the most important traits of a Realtor® are. I said the one I care most about as a broker is honesty. Then I moved on to include optimism — whether innate or learned. Also patience. As a software developer, I had pretty complete control over outcomes — through careful work, testing, and the like. As a Realtor®, I have very little or no control over outcomes. Much of this job (all of it?) involves being able to extend oneself for another human being with no certainty of success. This is not always easy — and it certainly wasn’t natural for me early on. I had to learn it.

Then we got into some of the more everyday skills like knowing about the local market, qualifying buyers, objection handling, and the like.

None of the newcomers I’ve ever talked to has invented the time / space warp device that incorporates my biggest suggestion of all: if you can find a way to skip over your first year, do that. The first year has too much failure and uncertainty in it for my taste. Not for everyone, perhaps, but certainly for a lot of people.

One final thing occurred to me several days later — just today in fact, after a past client informed me that another agent had just bought his listing. You need to know enough basic Google skills to be able to locate the Queen Video when you need it.

Next!

We wanted to congratulate Teresa Boardman, reluctant founding mother of the newly minted Real Estate Weenie blog, on the receipt of her first blogging award, the prestigious Cheez Whiz award for outstanding achievement in the field of excellence.

I felt bad for Teresa 0n the eve of her acceptance speech because the award didn’t come with a link from the original award donor, so I thought I’d redress that here by re-awarding the award toward the awarded.

Once again, the real estate blogging community has exceeded every expectation I had for it, making it a truly reawarding thing to be apart of.

I’ve found some software that does a pretty good job of putting together a slide show for our listings, and I’ve done our first one for Bridget’s beautiful listing in Fairplay.

Don’t forget to put your speakers on so you can listen to Beethoven.

Sellers, yes we’d be happy to do one for you home as just part of our marketing campaign.

I’ve been making some good strides in the last few days in working toward adding some additional online service offerings. Over the next few weeks and months, we should have two of these new services rolling out.

• Our transaction coordinator, Becky, has begun SettlementRoom training and our agents should all have attended within the next week or two. For an idea of what we’ll be able to offer once this goes live, see our PDF flier. Short version: both buyers and sellers will be able to track the progress of their transaction online at any time. Sellers can also view the progress on their listing, and can request (or have their agent request) feedback from other agents online, and view the responses to these requests when they become available.
• We should soon be replacing our online loan prequalification form with a system that will allow you to get an online preapproval for your loan from a partner company, GoLoans.com. Though we’ll still have links and relationships to our third party lenders, our relationship with GoLoans will allow us to offer you the convenience of “one stop shopping”, so you can deal with your Realtor® on both the loan details and the real estate details. Though naturally we and our preferred lenders will also be happy to help you directly by phone or in person, we think many of our visitors will enjoy having the convenience of being able to get a loan approval and precise rate quote online, and to have a single point of contact for all their questions as they come up. As always, however, we fully cooperate with whatever other settlement providers you choose, so you should feel free to use us on the loan side only, the real estate side only, or even just to check out our registration free MLS listings. Like our SettlementRoom system, GoLoans.com will allow you to view the progress of your loan online via a secure connection, so you always know how we’re doing and what documents we will be needing from you.

In addition to these two services, we’re also pleased to be working directly with the management team over at Docusign.com on a set of templates we can use for our clients who would like the convenience of signing their real estate paperwork online. We find that for many of our clients, working online and via email is much more convenient than having to fax paperwork back and forth. (We’ve already taken a step in this direction with our eFax systems that allow us to email you anything we’d otherwise have to fax).

All of these services are optional, but we think many buyers and sellers will want to take advantage of the convenience and hands-on control they offer.

I didn’t even know Johnny Hart was one of my readers, but it sure looks like he is.

In a recent post, we looked at the number of short sales, real estate owned (or “REOs” — bank repos), and properties with a foreclosure pending were listed in the MLS. Today I want to focus on two of those categories, short sales and REOs, and see how the sales numbers hold up to the inventory numbers, and how those numbers have changed over time. We’ll also try to explain why short sales seem to get sold less often (percentage-wise) than REOs, even though the amount they’re discounted is quite comparable.

Throughout 2005, short sales and REOs made up a fairly insignificant portion of the total residential sales reported in the MLS for Sacramento County. Indeed, only twenty-four such sales were reported in the MLS for all of 2005. Short sales accounted for .05% of the total sales volume in the first half of 2005, and .03% in the second half, while REOs accounted for .06% and .07% during the same period. In other words, added together, both categories barely managed to break the one tenth of one percent mark (i.e., about one in 1000 sales).

In 2006, the numbers of short sales and foreclosures rose steadily. During the first half of 2006, .35% of sales were REOs, and .10% of sales were short sales. During the second half, the percentages were 1.33% and .60% for REOs and short sales, respectively. So by the end of 2006 we were up to almost 2% for both categories.

In 2007, the numbers increased even more dramatically. So far for 2007, 5.15% of the homes sold are REOs, while 2.52% of the homes sold are short sales. In other words, foreclosure sales of one sort or another make up almost eight per cent of all MLS sales.

Of course, that’s less than the roughly fifteen per cent that we have in inventory. As we saw in our February article, short sales make up the largest portion of the inventory for all “foreclosure” categories. Here’s that chart again:

So REOs sell at more than double the rate of short sales, yet the discounts on these homes are quite similar. For 2007 year to date in Sacramento County, I found that REOs discounted at an average of 11.06% from non-foreclosure properties, while short sales are discounted an average of 11.09%.

Why the discrepancy? There are several possible reasons, but in my opinion the most important reason is that most Realtors® don’t like to do short sales. Selling a short sale means the lender has to approve the transaction, which means that the transaction takes longer, has more decision makers involved, and requires more effort than a traditional sale. Moreover, lenders will frequently cut the commission offered in the MLS when finally faced with an offer, and the amount of such a cut cannot be determined in advance. The upshot is that — from an agent’s point of view — short sales mean more work over a longer period of time, and less pay.

There may be other reasons why REOs tend to sell better than short sales. For example, REOs by definition are pretty much always vacant, and vacant properties are definitely easier to show. I believe they’re typically easier to sell as well, since the buyer doesn’t have to first mentally remove the seller’s furniture before mentally adding their own. On the other hand, it may also be that we’re looking at the wrong end of the pipeline, and perhaps it’s simply the case that more recently, more and more short sales have been available. In fact, since short sales are in an earlier stage of the foreclosure process, when we start to see relatively more REOs it may mean that the worst of the foreclosure period is behind us.

Remember, short sales and REOs are discounted an average of about 11% from other properties, so if you’re interested in finding out what short sales or REOs are available, just drop my team an email and ask for a list — or feel free to give me a call directly at (530) 672-9160. Just let us know which areas you’re interested in and we’ll get you the information you need.

The real estate market in West Sac in February shows a significant downturn from last year but some signs of stabilizing. This year’s average home in West Sacramento (95605 plus 95691 combined) sold for $444,146, down 8.3% from last year’s average of $462,644. At the same time, the average size of sold West Sac homes increased 6%, from 1951 square feet on average in February of 2006 to an average of 2068 square feet in February of 2007. On a price per square foot basis, therefore, the average dropped some 9.4% during the period.

Inventory was slightly into the seller’s market spectrum at seven months, but the expired to sold ratio was down quite a bit from last year’s 96.6% to only 44.8%. Unit volume is unchanged at 29 units selling in each February. Over the last year in West Sac, the average monthly sales were approximately 37 units.

Interestingly, people often ask me about West Sacramento and I get the sense that buyers are a little shy on the area. I’m not sure what the roots of that are. What I’ve found in my own work in West Sac is that the area is quite nice overall, has many great neighborhoods to recommend it, and is very competitive in terms of price.

Oh, that’s what it means.

This morning I took a look at the real estate inventory numbers for twenty-two Sacramento County communities.

It surprises me even now how cowed I’ve become by bubble bloggers and the Sacramento Bee. Why am I having such a hard time saying this? Spit it out, John! OK, here goes:

By inventory standards alone, exactly half of the twenty-two communities I looked at are in what most authors would consider a sellers’ market.

I’ll post the numbers here in a minute, but first, some explanation / definitions. First, what’s inventory? Well, it’s simply the number of months it would take to sell off the homes we have active right now, if we stopped taking listings. So it’s the number of active homes now divided by sales per month. Some authors suggest using last month’s sales as a guide, but others think using the average over the last twelve months gives a more accurate picture. (I recently shifted to the latter method, realizing that December’s slow sales or July’s peak season would tend to skew the picture too much, so using a yearly average is more accurate).

OK, so now that we know what inventory is, what’s the difference between a buyers’ market and a sellers’ market? A few weeks ago attended a real estate seminar where the speaker drew the line between a buyers’ market and sellers’ market at six months of inventory. OK, sure, that line is somewhat arbitrary, but in researching it further, it crops up surprisingly often. Roselind Hejl quotes it in her article on Pricing Your Home for Sale. My colleague in the Sacramento area and widely published real estate author Elizabeth Weintraub cites the same number in her article on Hot, Cold, and Neutral Markets. (Surprisingly, elsewhere in the article she defines a neutral market (partly) as one having between two and four months of inventory — Kathy Horvath quotes the more traditional six to eight months for “a normal market”).

Well, alright then, on to the numbers:

Now before you clap your hands together in glee and rush out to overprice your home, perhaps a few caveats are in order:

• It may be that this shift to a sellers’ market is a seasonal phenomenon. Other authors have commented that inventory is down in Winter, so we may be seeing partly an artifact of that. One way to tell would be to re-run the numbers in July or August.
• I have a listing in one of the five-point-something months communities, and it’s been a bit of a bear getting this one sold. So inventory alone doesn’t tell the whole story, and it may be that these rosey numbers are a fairly recent pheonmenon.

One thing to always remember when you look at real estate market data is how intensely local it is both in time and space. One of the most important services your Realtor® can provide is to get you current, accurate data for your community and subdivision. Because we’re trying to have more general appeal on the blog, we routinely paint with a much broader brush here than we do when running comparable sales for our clients.

Well, it’s time once again to take a look back at the month that was and compare it to the month that was a year ago. February’s numbers show modest declines from those a year ago.

February’s average home sold in Sacramento County for $391,536, down 1.6% from last February’s figure of $397,906. Sold price per square foot dropped 4.7% during the same period, from $240.57 in 2006 to $229.24 in 2007. The median price is down 1.9%, from $360,000 in February of 2006 to $353,000 in February of 2007.

The expired to sold ratio is up somewhat, from an already “buyer’s market” 66.7% last February to 82.3% this February. With 8196 units currently in inventory and average monthly sales of 1174.5 units over the last year, inventory works out to seven months.

A client of mine asked me the other day about how multi-unit properties appreciate compared to single family homes. Generally, as most readers of this blog will know, asking me a question with a boring statistical answer is like feeding a hog its dinner. The hog gets pretty excited, but the results may not be all that pretty.

In this case, the results are even a little messy from the hog’s perspective. It turns out that this is a fairly challenging question to answer, not in principle, but because the data I have at hand to answer it isn’t really up to the task. In the first place, what you’d really want to see is a long term study, but the software system our MLS uses changed in the Spring of 2003, and the old data was never imported. As a result, I’d probably have to call the intrepid but expensive folks over at Dataquick to buy the answer for anything further back than calendar 2004-2005.

Moreover, it’s more difficult in the case of multi-unit income properties to decide what to measure. Overally price per square foot is not readily available, so that’s out. That leaves average price, but average price depends in part on the makeup of the sample.

Well, enough of the caveats, as usual we’ll bite the bullet and take a look anyway.

In 2004-2005, the average price for a single family residence in Sacramento County increased 16.8%, while the average price for an income property of 4+ units rose a more modest 7.1%. In the 2005-2006 period, in contrast, the average price for a single family home increased 1.3% (made up largely of the gains in early 2005 outweighing the later losses), while the average price for an income producing property dropped 6.9%.

One way to sum this up is to say that investment properties seem to increase less at the peak of the market, and decline sooner. However, I’m inclined to think that part of the answer here is that multi-unit owners are less likely to be playing the same appreciation game that motivated investors — and owners — of single family homes. Multi-unit investment properties have a sort of built-in brake on runaway inflation in the form of their ability to generate cash flow. Let me put it another way: I’ve never had a single-family buyer ask me about what kind of cap rate they should expect, whereas multi-unit buyers love to ask that question. For those of you who don’t want to wade through the whole Wikipedia article, that’s as much to say, “How much net income will I get per year for every dollar I invest?”

Before you ask me that question, however, you should know that I can never seem to get a straight answer even from appraisers on that one. As I’ve mentioned before, it’s fairly tough to calculate this on more than one or two properties at a time, so you’re unlikely to find folks who have a license to lose quoting averages on it, unless they really have nothing to do.

Here are still more possible Elite Properties signs that a graphic artist did for us, that illustrate pretty plainly why she’s a graphic artist and I’m not. She did several. Here are the two front-runners:

We have newly updated listings for condos in Sacramento County and Sacramento County duplexes. We’ve also updated our lists of new homes in El Dorado County, Placer County, and, last but not least, Sacramento County.

We’re pleased to announce a winner in the great pick our sign contest. One of our preferred lenders, Linda Spafford, takes home first prize of a $10 Starbucks Gift Card.

This is especially fortunate because of all the zillions (seven) people who participated, I think the contestant who really most wanted to end up swigging down mochas was Linda. But she won it fair and square anyway, when my lovely wife picked her card out of the deck.

I love contests. Maybe I should write for a real estate carnival.

It turns out lots of people liked #1, and there I was all ready to order signs based on a variation on #1, when Susan’s graphic artist friend said she’d ship us a late entry in our draw a sign competition.

She’s a graphic artist, so she’d better beat me without breaking a sweat, because I’m just a hack with a copy of Fireworks.

We’ve updated the listings by neighborhood section on our Granite Bay site, http://www.granitebayrealestate.info. That feature was getting extremely long in the tooth given the changes our IDX provider made which broke some of our code, and the fact that I moved the last listings up some time during the Spanish Civil War or thereabouts.

OK, so maybe it was a little later than that.

Anyway, they’re current now, so enjoy.