Sacramento Real Estate Blog

October has been a better month for real estate in Carmichael overall. Consider the fact that prices have RISEN (Yes, you read that right!) since September. The increase, albeit a small one - from $175.55 a square foot to $179.19 and an increase in average sales price from $304,816 in September to $331,229 in October - should be heartening in a home sale environment of more foreclosures and distress sales than non-distressed. Foreclosures make up 44.6% of all sales and short sales make up 16.1% of sales. This led to overall home sales doubling over last October, but non-distressed home sales falling 4.3%.

Non-distressed sales now only make up 39.3% of all sales in Carmichael.

The increase in price over September is especially nice to see after the drop over last October. Year over year prices have fallen 15.6%. From last October’s high of $392,410 for an average house in Carmichael, we are now at $331,229. Median sale price also fell for the same period from $335,000 to $299,500 - a drop of 10.6%.

Inventory in Carmichael, based on the last 12 months of sales is at 6.4 months and based on the last 6 months of sales is at 5 months. We are beginning to see, as in most markets, foreclosure inventory contract to about 2 - 3 months. (2.8 and 2.1 months, respectively, in Carmichael.)

Related links:

Home sales have almost doubled in El Dorado Hills over last October. There must be something drawing these buyers! I know, I know! It’s the prices. Sold price per square foot has fallen 17.5% over last October - from $223.83 to today’s $184.60. And that brings the average sales price for a home in El Dorado Hills to $570,388 - not a bargain by a long shot, unless you take into consideration the fact that last October, the same home would have sold for $673,656. Gasp! That’s a 15.3% drop in prices.

So what’s driving the fallen prices? The foreclosures, of course. While non-distressed homes still make up the majority of home sales in this area, foreclosures have quintupled since last October. We even saw six short sales close escrow this October, making distress sales about 36% of all sales in El Dorado Hills. Surprisingly, non-distressed sales also saw an increase over last October by about 28.1%.

The median price also recorded a drop over last October, from $587,000 to $520,000. That’s a gap of 11.4%. Based on 12 months of prior sales, inventory in El Dorado Hills is at 7.9 months and based on 6 months of prior sales inventory is at 6.4 months. Foreclosure inventory however is at 2.6 and 2.2 months respectively. Potential home buyers in El Dorado Hills, this is something to think about!

Related links:

The life of an offer really begins when a home buyer says, mostly to him or her self, “I want that house.” The next thought usually is, “Oh no, now I’m really in deep.” When the home buyer recovers, his Realtor® is standing there usually ready with approximately a dozen pages and a pen in her hand. (These days, it’s more a laptop and some printed sheets, but what the heck. The old fashioned pen in hand is a better metaphor.) The home buyer regains some co-ordination control, signs, hands the Realtor® a check and begins to pray.

But then what happens? Most home buyers, after waiting nervously by the phone for three days, hear back from their Realtor®. It’s either a “yes” or a “no” but mostly a “maybe.” So how do these responses come about? What is the process by which an offer either grows up and becomes an adult escrow or meets an untimely and sad death?

Love me or Change me!

Offers make pretty good adolescents. They are written in the youthful hope of getting accepted just as they are - one-sided and all. Full of idealism, they are created by the home buyers in the wish that the seller will settle to sell the house to them for 25% less than asking and wait patiently while the loan process works itself out. Maybe the home buyers could move in early and get a feel for the place. Maybe the seller could even repaint the house for them. That color in the master bedroom just doesn’t do it. (I know, I exaggerate. Most home buyers are not this hopeful.)

Anyway, whatever it is that the home buyer wants gets written in and signed. The Realtor® then calls the listing agent and lets him know that an offer is on its way. Most of us now like our home faxes. “Send it over!” the listing agent says excitedly, secretly hoping the buyers love the home, have paid over asking price and are ready to pay cash and move in within ten days. (Hey, no one said there aren’t crazy expectations on both sides!)

The Painful Growth

The reality of course is that the offer falls somewhere in between what both parties want. The sellers usually like the down payment but not the offer price. The buyers love the house but know that it will take a little work to get it looking like something they own and can adore. Adjustments are hard. The seller’s Realtor® (the listing agent) looks at it critically and takes it over to the sellers. While it is not the dream they were hoping for, the sellers do realize this is nonetheless a serious offer and one they can work with. They decide to counter it.

Is this the End?

Technically, when you “counter” an offer or write a counter-offer, the first one is considered dead. Which means the sellers cannot now go back and say they would like to take the original offer to escrow. However, I like to think of a counter as the maturing of an offer. The counter heads on over to the buyer’s agent over the fax again and the home buyers are finally glad to hear back from their Realtor®. They were getting tired of being excited each time the phone rang. “We have a counter,” she says. “The sellers like everything but…”

The “Everything, But…”

The counter is usually the “everything, but…” offer. And I like that, most people do, because it identifies problem areas, deal breakers, and usually the counter offers are really where escrows are made. They are the sticky areas but also general and specific things buyers and sellers eventually concede. Counters are the peacemakers, as opposed to first offers. It’s unlikely there are more than two counter offers in an escrow. I once had an almost-escrow with four counter offers, the last one asked for $500 more. At that point, you can tell no property is exchanging hands. Most reasonable home buyers and sellers will reach a conclusion with one or two counter offers.

Yes, we have a Deal!

Eventually, the “everything but” clause is worked out and both parties reach an agreement. The offer has matured and it makes a wonderful escrow. Both parties sign all documents and the offer, ready to meet the world and hold its own, is sent to a title company where every word in it is pored over and followed. The offer is now a legal document and any changes to it require the approval of both parties.

The 30 - 60 day life of an offer, albeit short, is an important one. It marks the transition between home buyer and homeowner (and a homeowner to beach / golf course retiree, perhaps?) And it shows, in however small a way, that sometimes two parties can agree for the greater good of both. And isn’t that what all business is about anyway?

Investors love Citrus Heights. Especially in today’s market when real estate prices have fallen 27.3% over last October. The average price per square foot in Citrus Heights (zip codes 95610 and 95621) is now $132.71 - down from last October’s $182.43, a huge bargain for those looking to buy investment property or first homes.

The main reason prices have fallen so low is the foreclosures and short sales. There are currently 214 short sales on the market in Citrus Heights - a much larger number than I have seen in most other neighborhoods of Sacramento county. While we were beginning to see foreclosures in this area last October, the number has since tripled and distress sales now make up the majority of home sales - 68.1% are foreclosures and 15.9% are short sales. Non-distressed sales make up only 15.9% of all home sales - an interesting number when you think about the fact that total sales have gone up by 46.8% this October over the last.

The average sales price for a house in Citrus Heights is now $194,768 - down 29.8% over last October’s high of $277,310. Median sales price is also down 32.4% from $275,000 to $186,000 for the same period.

Inventory is at 5.3 months based on the last 12 months of sales and 4.1 months based on the last 6 months of sales.

Related links:

Here’s a real estate trivia question: what happens in a well established community which usually commands higher than average sales prices in real estate when the market contracts and foreclosures abound all around it? Answer: Home sellers quit selling. That’s exactly what has happened in Fair Oaks. In fact sold inventory dropped a whopping 38.7% over last October for the same time period and non-distressed sales dropped 63.6%.

Foreclosures always cause downward pressure on prices, so the 11 foreclosures that sold in October caused sale prices to drop even further. Sold price per square foot is down 17.1% over last year for the same period - from $201.32 to $166.83. Like I’ve said before, this is perhaps the most important measure in knowing price differences because the average house sold this October is 14% smaller than last October and average sale price and median sale price doesn’t tell the whole story.

However, here are the details for the curious minds: Average sales price has dropped 28.7% from last October’s high of $409,550 to rest at $291,828. Median sales price has dropped 22.2% over last October’s $405,000. It is now $315,000. Short sales have begun to poke their head through active inventory. Based on the last 12 months of sales, inventory is at 6.1 months and based on the last 6 months of sales, inventory is at 5.2 months.

Related links:

The Land Park real estate landscape has changed over the last year. And this is a textbook case on how foreclosures can affect house prices, so it’s well worth noting, even if you have no interest in buying a home any time soon and / or do not live in Land Park.

Last October saw no foreclosures in this well established community and no short sales. 100% of the houses sold in this area were non-distressed. Today, while the majority of houses sold are still non-distressed, it is a small majority: 54.5% of all home sales. The rest are foreclosures (27.3%) and short sales (18.2%)

And when almost half the homes sold in a community are foreclosures, prices reflect that reality. Price per square foot in Land Park have dropped 25.9% from $338.42 last October to $250.87 this month. The average home in Land Park sold for 26.1% lower this year - for $346,250. Last October, the same home would have sold for $468.750. Median sales price has also dropped from $412,500 to $318,000 for the same period - a drop of 22.9%

There are, unfortunately, 13 short sales on the market in Land Park, so we might see some pain just yet in this community. Overall inventory based on 12 months of sales is at 5 months and based on 6 months of prior sales is at 5.5 months.

Related links:

Welcome to the conclusion of this three part series on getting your offer accepted! The basics we have covered so far if you are a home buyer making an offer on a bank-owned property are to come across as a “normal” buyer, increase your good faith deposit, let the seller decide which title company to use, increase your down payment, get preapproved with a direct lender, offer over asking price, shorten timelines, clear contingencies as soon as is reasonably possible and not to ask for repairs. These are the specifics. There are other general conditions that help get your offer accepted and I will be going over them today.

Don’t get Greedy

The real estate market can be a lot like the stock market at times in that it is constantly driven by greed and / or fear. If you base your decision not on those two feelings but instead concentrate on inherent value and your own pocketbook, you will do just fine in your purchase. What do I mean by that? Greed runs buyers in a buyer’s market just as it did sellers a few years ago at the top of the real estate market. Fear also runs rampant in buyer’s markets as well as seller’s markets, except it’s quashed pretty easily. Don’t be one guided by panic or folly. (I know, I know - easier said than done.)

But more specifically, don’t offer an amount ridiculously low with the wildly optimistic hope that the bank will take it, because, hey, they have to get rid of the house anyway! Also, many home buyers like to get closing costs rolled into the loan so they don’t have to pay them out of pocket. In this case, don’t guess at the amount and ask for a ton of money back to close. If the cash back to close is not supported by the appraisal and the final HUD-1, both lenders (seller and your own lender) will be unwilling to give it to you. So, at all times, keep your cool.

Respond Quickly

Here’s a time when it pays to be opportunistic. If you find the right home and you think the price works for you, make an offer. When you hear back and the counter seems fine, sign it and send it over. It might be a good idea to sleep on it for a while, but if you take too long to decide, the house might very well belong to someone else by the time you get back to the bank. I know what you’re thinking: isn’t this a buyer’s market? Absolutely. But that’s why you’re seeing homes selling for so little! And even if you don’t see the value in some of these houses, I can guarantee that other home buyers are. Sales have been up for a while now - a sure sign that demand is beginning to catch up with supply. Wait too long, let fear overcome you and your window of opportunity might be lost. So make up your mind before you make the offer; think hard and long before, but when it’s time to act, well… act!

Be Prepared!

Of course, to be able to perform, you must be well-prepared. And preparation is more than saying, “I’m going to buy a house this year,” or listening to a relative talk about his real estate fortunes made when he bought homes in the 70s. While both these can be great incentives to your buying a home, you should have at the very least (1) done the math to know if you can buy a home and how much it’s going to cost you every month and (2) figured out a way to get the money to buy a house - whether it is begging, borrowing or stealing. Just kidding. Keep the stealing out of it.

I feel the need to reiterate this because I once met a client ready and willing to buy a house - she even wrote an offer on it and then realized she had jumped the gun. Why? The money she was going to use to buy the second home had to come from a refinance of the first one. She had waited to refinance because she was afraid to keep money lying around, lest she get tempted to go shopping with it. Do you know the conclusion to the story? Everything fell apart - the entire plan. Waiting to refinance the first home had been the mistake. Prices had fallen further and her first home now didn’t appraise for the amount she needed out of it. So, to use a cliche, get your ducks in a row before you sign the contract!

Get Good People on your Side

This should go without saying, but I feel the need to spell it out because, I’ll admit it, there are too many people out there who think they can make a good deal with a bad person. If you are not comfortable with your real estate agent or lender and you get a sense of not being able to fully trust that they have your interests at heart or that they are otherwise - well, shady - find honest ones. There are plenty of honest, hardworking Realtors® out there (ahem, notice the toll free number at the top right corner? There’s a hint!) with their circle of hand-picked good lenders they can refer you to. There’s no reason to stay in an untrustworthy relationship. Also, ensure that besides being nice and honest, the professionals working for you are also competent. No sense in having an honest lender who can’t perform at a critical time!

I hope this series has been helpful to the home buyers out there. Feel free to send it your questions through our contact form and if it’s something we have not addressed, I’ll be glad to answer on this blog!

Welcome back! This post is the second in a series of three posts regarding how to get your offer accepted by a bank if you are buying a foreclosure or REO property. So, besides coming across as a “normal” buyer with all intentions of really buying the house, increasing your good faith deposit, getting preapproved with a direct lender and offering over asking price, what more can you do?

Don’t Ask for Repairs

Nine times out of ten, banks will not make repairs or pay for repairs to a property listed as an REO. Actually, make that 9.9 times, a bank will not make or pay for repairs. It is so rare that if the bank is willing to do such a thing that fact will be spelled out in the marketing and become a selling point. This is why the property you are buying is priced so low. This does not preclude the fact that you will know about the repairs (some banks will already have a pest report for you to take a look at) but if you think the required repairs are a negotiating point, remember that the lenders have taken them into consideration when they listed the house. Also, if you ask the bank to make repairs, chances are your offer will likely get rejected in a multiple offer situation. That being said, do keep in mind that sometimes the banks are not right in pricing the home. Get your inspections done and weigh the repairs against the price. If you think the asking price is not worth the work, move on. There are plenty of homes to view.

Increase your Down Payment

With today’s FHA loans, it is possible for a home buyer to put just 3.5% down (with closing costs paid by the seller) and buy a house. However, if you can afford to pay your own closing costs, maybe take care of escrow costs by yourself or increase your down payment, your offer is sure to stand out from the rest. Some home buyers will even succesfully get their offer accepted at asking pricesimply by increasing their down payment. Or you can get your closing costs paid by the seller and use your cash as additional down. It’s up to you. Bottom line: see if you can find any more cash to use as down payment to bolster your offer and it will be taken more seriously by a bank.

Let the Bank Pick a Title Company

This is a small one, but it does cut out extra paperwork. Chances are the listing agent selling the REO has a preferred title company and that particular title company is well set up with all the details of dealing with that particular bank. If you pick your own title company (and, of course, that is your prerogative), you might get a counteroffer and you will need to rewrite your good faith check. It is sometimes simply easier to let the title company be the seller’s choice and make your good faith deposit out to a generic “Title Company.”

Shorten Escrow Time

This might not always be in your control, but it does help your offer if you can close the loan in 45 days or less. Timelines have gotten a little stretched lately since paperwork review has become more thorough in the lending industry, but anything over 45 minutes will probably merit a counter offer from the bank. Be careful, however. Writing a short timeline which you know to be unrealistic just to get the offer accepted could cost you. Most banks will have a counter that levies a pretty hefty fine on every day beyond agreed upon days to close - something like $50 per day or more. So make sure your lender is ready to perform on your shortened days in escrow.

Shorten or Clear Contigencies

The default contingency period on the California Purchase Agreement is 17 days. This means that if you do not write in a shorter contingency period for approving all documents and completing all inspections, you will have said that you want 17 days to do them. The bank will usually try to shorten these to 7 or 10 days. Why? Well, if the buyer does decide to walk away during the contingency period, the house has wasted less days on market. A good idea for a buyer at this point is to know that the bank will want to do that and shorten the contingency period himself. Better yet, it’s a good idea for the home buyer to get at least the home and roof inspection done before making an offer. However, be advised that if competition is stiff, this can get pretty expensive, (Home inspections cost approximately $350 - $500, pest inspections cost about $100 - $200 and roof inspections are usually free, certification and repairs on roofs cost money depending on how much work is involved) so only get inspections done before making an offer if you’re absolutely sure you are in love with the home.

If you keep these tips in mind when making an offer on an REO, you should be in pretty good shape. These are specific pointers to follow to get your offer accepted. For more general ideas, check back tomorrow for our last post in this series.

Last week, we received this query from a home buyer:

Thank you for the Sacramento Real Estate Blog and the time you
take in putting out this information. It’s been really informative and
helpful to read through the blog, especially in the current Sacramento
market. Anyhow, I’m a first time buyer with a question about offers on REO
homes. In the current market, I’ve noticed REO listings typically elicit a
multiple offer scenario. Aside from offering over list price, what can a
buyer do to make their offer stronger in the eyes of a bank? Are there
certain things that a bank will view more favorably (e.g. larger down
payment)?

I think this is a very good question and one repeated by many first time homebuyers. Buying a home is stressful enough. Add to that the fact that you are a first time home buyer and also are dealing with a lender / bank directly to buy a house and the discounted price almost doesn’t seem worth it.

However, notice I said “almost.” There are a few things you can do to make your offer stand out when a bank is looking at it. I will give you the inside details on that in this series. This is a three part series and I will discuss what you can do to have your offer stand out from the multiple offers a bank (usually) receives if the house is priced right.

To understand what your offer needs to be like, you have to understand the bank’s point of view. Imagine this: you have an object which needs maintenance, which you have never seen and have no idea how to take care of. Now place the object far away from you - miles away in fact. The person you loaned money to who promised to care for it refuses to pay you back, so you have to take the object back. But it is heavy, so instead you have to keep the defaulting person away from the object. Mind you, the object is still miles away from you. All you’re thinking is, I need to get rid of this object. I need to salvage some money here. But I have to get rid of it!

Get the idea? Then these tips will help!

Give all impressions of being a “normal” buyer

Banks typically don’t like offers that are not straightforward. (Now, you can argue that the banks themselves play all sorts of games with loans and so forth and are not straightforward themselves, but remember your goal at all times. If your goal is to buy the home, you must be direct.) What do I mean by “direct?” This would mean that you are an individual buyer or write your offer as an individual buyer (not a business entity like a corporation, typically). Do not even try to use the games most so-called real estate investing books recommend. For example, do not write something like “and/or assignee/s” after your name on the offer. Most loans are not assignable and since it is the first line on the California purchase contract, chances your offer won’t get very far at all. Of course, this is just an example. If you haven’t read any game-y real estate investing books, keep it that way. Listen to the advice of your Realtor® and come across as a normal buyer. Don’t do anything that would be grounds for immediate rejection.

Get Preapproved

Today, most listing agents require a preapproval (not a prequalification) letter from a lender (not a broker.) This means that you have met with either your own bank or credit union and have an approved loan or you have been to a mortgage broker and he has submitted your information and has received a loan approval for you. This is the most basic requirement for writing an offer and most REO banks will not take your offer seriously unless you attach a preapproval letter with it. Also, it would be a good idea to have a copy of your credit report because some banks still require that even if you have a preapproval letter, you get approval from their lender. It’s an extra step, but necessary. Sometimes, you can send the bank’s lender your credit report to expedite the process.

Increase your Good Faith Deposit

This is the oldest trick in the book, except it’s not a trick. Again, think of this from the point of view of the seller. If he has two offers to consider and one is offering $100 that he would lose if he walks away from the transaction and the other offers $2000 that he would lose, which one would you consider to be more serious about buying the property? Remember the bank wants to ensure that once the house is in escrow that is stays that way and ends in the buyer buying it. Ensure that you have between 1% - 3% of the offer price to put as a good faith deposit. This money will be deposited in an escrow account after the offer is accepted. You can get this amount back if you find a problem during the contingency period and cancel escrow. You only lose it if you cancel escrow after the end of the contingency period. So make sure you schedule inspections immediately after the bank accepts your offer. More on this later.

Offer an amount over asking price

Banks will typically underprice a property, especially if it shows well or has been built in the last five to ten years. Why? It’s a sales technique to get home buyers into the home and create a sense of urgency. Also, the price attracts more buyers which ultimately leads to multiple offers and sends the price up. If you don’t have a substantial down payment or a decent good faith deposit, offering over asking price might be the best way to get your offer accepted. But be careful - don’t offer more than you think the house is worth. At this point, it would be a good idea to ask your Realtor® to get you a market analysis and make an offer on the high side of the market, but not over the top. Besides having buyer’s remorse if you pay too much, you might have trouble during escrow if the house does not appraise for the offered amount.

That’s it for today! Come back tomorrow for more tips on getting your offer accepted! There are many REOs out there. If you’re interested in buying one of them, search here or call us. We’ll be happy to help!

I might be jumping the gun on this, but Antelope seems to be done bottoming out in terms of price. After a strong month of sales in September, this October saw the average sales price actually stop falling. While there is of course no guarantee that this means the falling prices are over, we must take our good news where we get it.

Yesterday, I spoke about El Dorado county’s median sales price rise over last month’s numbers and while Antelope has nothing to in common with El Dorado county, except the occasional common deer (ha, ha - let it go, first cup of coffee today!), we are beginning to see a few places here and there that seem to be bright spots in the otherwise bleak numbers in Sacramento and California, overall.

One such good piece of news is Antelope. Consider this: Average sales price in September for residential listings in Antelope was $219,705. October’s sales price was $216,864. When compared with prices over last October, the price is 21.7% lower, but when compared to last month, the sales price has fallen only 1.29%.

Nondistressed home sellers in Antelope also seem to be holding their breath and waiting for all the foreclosures to be lapped up and gone. While last month was the best month for foreclosure sales, this month (October) wasn’t bad either. 35 foreclosures sold in the month of October along with 11 short sales and only 6 non-distressed homes. This means distress sales make up the majority of sales currently in Antelope.

Inventory based on the last 12 months of sales is at 4.4 months and based on the last 6 months of sales is at 6.7 months. Price per square foot is at $130.01.

Homes - and people, I assume - in El Dorado county are in no hurry. I get the sense, owning real estate myself in this part of California that things are a little more laid back here. The same goes for the real estate in El Dorado. After last month’s slow drop in prices and increase in sales, nothing much has really changed. But there are always more statistics to report, aren’t there? So here we go!

September was just such a strong month for sales that October would have had to be on wheels to beat it. Well, it wasn’t. Only 109 homes sold in October in El Dorado county, lower than the 161 sold in the month of September. While the majority were still non-distressed sales (67 - or 61.5%), foreclosure sales (34 or 31.2%) seem to gain momentum. 8 short sales also sold, which took up the remainder of the sales pie.

Price per square foot fell 16% over last October for the same period to $183.65. The average sale price fell 6.9% (Don’t we just love single digit falls?) from $473,560 from last October to $440,754. Median sales price actually ROSE by 3.9% from last October! It went from $390,000 to $405,000. Of course, you should keep in mind that the price per square foot tells the real story because hidden in the average and the median numbers is the fact that homes that sold this October were larger by 10.9% over last October. The average square feet of a home this October were 2399 over last October’s 2164 square feet.

Based on the last 12 months of sales, inventory is at 12.2 months and based on the last 6 months of sales, inventory sits at 10.6 months.

Related links:

Home owners in Folsom have a lot to cheer about. While Folsom has been the last vestige of hope for Sacramento county’s falling prices, it has still seen price declines. They just haven’t been as severe and as deep as the rest of Sacramento. October brings better news. After a long time, we are beginning to see price declines in the single digits.

Consider this: The sold price per square foot saw a month over month increase to $197.22 from last month’s $190.47, but it is still a decline of 9% from last October’s $216.62. The average sales price is down 4.8% from last October’s $436,943 to $416,141. The median price is also down - 6% - falling for the first time this year under the $400,000 mark - to $389,500 from last October’s $414,500.

Nondistressed sales still make up the majority of all home sales in Folsom, albeit a smaller majority - 64.3% - as compared with last October’s 82.7%. Based on 12 months of prior sales, inventory is at 5.3 months and based on the last 6 months of sales, inventory is at 4.8 months.

The banks finally seem to be getting the picture; at least in Elk Grove, that seems to be a reality. As a case in point, one has only to look at the short sales. Where last October a mere 4 houses sold as short sales, this October we see 26, a 550% increase! Foreclosures now make up almost three quarters of all sales, up from last October’s 50%. There has also been an overall increase of 55% over last October’s sales in all. (That includes both distressed and non-distressed sales.)

Sold price per square foot is now at $129.92 on average, a drop of 25.1% over last October, but a slight increase over last month’s $126.72. The average home sales price also seems to have recovered a little over last month. In September, the average home had sold for $265,701. This month the average home sold for $268,546. The numbers are obviously not great enough to rejoice yet, but seem to be bouncing around the bottom. The average sales price is still a drop of 25.8% over last October.

Inventory in Elk Grove (zip codes 95624, 95757 and 95758) based on the last 12 months of sales is at 5 months and based on the last 6 months of sales is at 4.1 months.

Related links:

After I wrote the recent post on how you should react to offers as a home seller in today’s market, a few clients asked me to follow that up with what a home seller could do now to get their homes sold. Are there any other tips a seller can use to compete with the bank-owned homes? As we’ve seen, foreclosure sales have almost tripled in Sacramento county from last October to this October. While that might seem like a dead end to many sellers in this market, it is important to remember that some buyers are still interested only in homes that are not bank owned. How can you reach these buyers? Here are some ideas.

It’s Still About Price, But…

You cannot avoid the fact that price is on everyone’s mind these days. Even if your home is not bank owned, you will be competing against homes that are either short sales or REOs. Not to mention the reality of depressed prices in your neighborhood due to less expensive homes selling before all others. Banks can afford to drop their prices to get rid of inventory. Maybe you can’t drop your asking price to rock bottom, but you must price the home as close to an REO as you can handle. Leave some room for negotiation (because there will be some!) but I don’t have to tell you that overpricing your home in this market is essentially like not listing it at all.

That being said, be aware that just because the REO next door to you sells for say, thirty thousand dollars less than where you are priced, that it’s all over for you. Appraisers do have to take into consideration that your home is not a distress sale. Chances are also that REOs have deferred maintenance, thus reducing their value. Ask your Realtor® if you can see the pictures inside the homes listed around yours - that should give you a pretty good idea of where your house should be priced.

Accessibility is Important

Besides just price, bank owned homes have another thing going for them: accessibility. Almost all of them are easy to show. Buyer’s agents love showing REOs because there are never appointments to make and all of them have lockboxes and are vacant. While it might not be possible for you to move out (and sometimes a vacant home can be negative, because buyers don’t get an idea of furniture placement), it is a good idea to have your Realtor® use his lockbox on your door and indicate in the showing instructions that just a message on the phone is enough notice to show the home. This is called “Call 1st lockbox” and is easier on most buyer’s agents and the buyers than making an appointment with you or waiting for a call back. Remember, the home buyers are not in love with your home yet! You have to let them into the home first.

It is also a good idea to leave the house when the Realtor® and the potential buyers come by. Take a walk around the block, go to the store, take the dog for a walk. Give the buyers room. Definitely do not sit and stare at them as they look around the house. That will ensure they run out in within two minutes. And buyers that leave in less than five minutes almost never write offers!

Language & Negotiation

I covered this in detail in the previous post about how to deal with a purchase offer, but it bears repeating: ensure that your Realtor® is telling every buyer inquiry that all reasonable offers will be considered. When you do receive an offer, read it carefully and don’t rush to answer. Chances are it will be low. Learn to negotiate with it. Read this before you do anything. Also, another thing worth mentioning here. Don’t take too long to consider an offer. Your competition, banks, take anywhere from 72 hours to a week and are getting quicker. The best already have a counter offer written and they take very little time in getting it out. Sleep on the offer you receive, but don’t be caught snoozing. The home buyers don’t want to wait forever - there’s a lot to look at!

Ensure Clearances

This is arguably the best advantage you have over REOs and short sales. You have money. I know, it sounds crazy, but hear me out. You, as a homeowner, have lived in the home and chances are you have made repairs where they were necessary. You have taken care of the house. REOs are priced at wholesale prices because they have not been kept up. The people who had their homes foreclosed on definitely did not fix leaky faucets, torn roofs and the banks will not offer clearances for pest work, roof certifications or fix anything else that’s broken. In fact the first line in any bank owned home sale counter offer is, Property sold as-is, where-is.

You will not do that. In addition to making your home look pristine, inviting and warm, in addition to pricing it right, you can get pest inspections and clearances done ahead of time. In other words, your home is turn-key. In spite of what you see around you, there are buyers for turn key homes. Not everyone wants to add their own sweat equity; some people are just fine paying others to do so.

Sweeteners

No, I’m not talking about Splenda. Sweeteners have been largely forgotten in the strong seller’s market we had and could come back in a big way today. These include letting buyers customize their preferences in carpet, paint and so on. If you are considering painting anyway, let the potential home buyers know that they can pick the paint color. Same for replacing the carpet - let them pick it. Most home buyers will change some aspect of the home to suit their personalities anyway and your buyers might appreciate the opportunity to be able to move in without changing anything.

I hear often that to sell a house in this market you must think like a bank. I disagree. I think distinguishing yourself from the rest might be the key. Good luck!

It’s that time again! And this time, it seems like the real estate numbers seem to agree with most people’s predictions. (Hey, maybe next we can predict the Presidential Election results!) The overwhelmingly common opinion I hear from most clients is that we are around the bottom of the housing market. And I believe they are right.

Here are the numbers: total sales are up from last October! Sacramento county saw 1369 homes sell this October as compared with 884 last October. So the statistics are finally catching up with anecdotal data. As I have mentioned somewhere before, I see many investors and first time home buyers now entering the market. I hear things like, “I don’t want to miss out on this market!” Until now, this was just personal experience. Finally, we are beginning to see it carried out in the overall market numbers.

Since last October, the ratio of the number of distressed to non-distressed sales has completely reversed. Whereas last year, we had 61.3% of all sales as non-distressed homes, foreclosures and short sales made up 71.9% of sales this October. The number of short sales sold have also almost tripled from 33 to 138 this year over last October, suggesting that the push, even on lender’s minds is to get the inventory sold as soon as possible. Less than a fifth of the total market (18%) is now comprised of non-distressed sales.

Now let’s go to the real meat of the story and what all of us really care about: real estate prices! Average price per square foot fell 30.3% from last October to rest at $131.50 but we actually saw an increase when it was compared with last month’s price per square foot of $130.50. I know, I know, it’s only a dollar increase, but anything that is not a decline offers most home owners hope!

We are seeing similar hopeful numbers in the average home prices. The average sale price for a house in Sacramento county is down 34.7% over last October. It is now $211,916. But if you followed the market update last month, you will see that is actually an increase from September 2008’s average of $208,212. The median price has also seen a slight increase from last month’s $185,800 to $190,000 in October 2008, even though it is a decline of 36.7% over last October’s median sales price of $299,999.

Based on 12 months of prior sales, inventory in Sacramento county is at 5.7 months and based on 6 months of prior sales, inventory sits at 4.5 months.

Related links:

After I wrote the post on Home Buyers and Purchase Offers, a few people have asked me what the seller is supposed to do when an offer comes his way. In other words, in addition to the efforts of the two real estate agents to get the buyer to write a fair price offer, is there anything the seller can do to encourage the potential home buyer to come up with a price everyone can agree on and lead to a successful transaction that leaves everyone happy? The answer of course is yes.

Firstly, Encourage an Offer

If you are a seller in this market, I don’t have to tell you that it is tough out there. As a seller you are competing against short sales and bank owned properties. The most important thing you can do today is to distinguish your house from the REOs and short sales. I will deal with this aspect of selling a home in another post, but for now remember that you must price your home right. It might seem a little like you are gifting your home to a buyer, but you cannot argue with the market. Obviously, you wouldn’t be selling right now if you didn’t have to, so do everything you can to encourage an offer. Ensure that your Realtor® is letting every buyer inquiry know that all reasonable offers will be considered.

Now that the basic assumption is out of the way, let’s see what you can do with the various offers that might come your way:

The Lowball Offer

Don’t be too disappointed if you get a lowball offer. As I said in the post regarding buyers and the offers they write, you might see more low offers in this market than you will be prepared for. Most sellers think they are ready for the home selling process until they see two or three lowball offers. This might be hard, but try not to take it personally. Sometimes, all the home buyer is trying to do is get an idea of the seller’s rock bottom price. This is the buyer’s market’s counter point to the multiple offers of the seller’s market. So play along. Counter the buyer’s lowball offer with what you’re willing to accept and send it off. If the home buyers really liked the home and were serious enough, they might come back with a more reasonable offer. If they were merely tire kickers, hoping to buy the home for a song, you will never hear from them again. Either way, you’ll know. What you absolutely do not want to do is get offended and never get back to them. While you might be upset by the offer, remember it is ultimately a business transaction. Everyone is trying to get the best deal that works for them and getting angry could cost you a home buyer, albeit a clueless one.

The Asking Price Offer

Before you hurry to sign it - in case the buyers change their mind - be sure to go over all the eight pages with your Realtor®. In particular, you want to check how long the escrow will be (anything over 60 days merits a counter to reduce the amount of days), if the buyers need any money back for closing costs since that will reduce your net amount and how the escrow costs are divided. That being said, in today’s market, if you do receive an offer at asking price, remember that the buyers will expect you to pick up some or all of the escrow and closing costs. This is a reasonable expectation, no matter how many price reductions you have had. If you do wish to make any changes to this, be sure to have a verbal agreement before you send out a written counter. While verbal agreements are not dependable and definitely cannot be used instead of written contracts, it does seem to send out a message of wanting to work it out and fair negotiation.

The Over Asking Price Offer

Before you do anything, try not to faint when your Realtor® announces that your house has received an over asking price offer. Chances are, you have done a great job pricing the home and it shows extremely well. The potential home buyers have made an over asking price offer because they are concerned there are other offers on the table or they are coming. When you receive an over asking price offer, be sure to go over with your Realtor® - in addition to the points discussed above - if the home buyer has asked for any cash back for closing costs. That is common with offers over asking because the loan amount is increased by that amount. Remember that appraisals are tougher in today’s market and offers over asking might not always be a boon. Also ensure that closing costs above 5% of the purchase price are approved by the buyer’s lender.

And With All Offers…

Make sure the home buyers have a letter of preapproval for the entire amount of the purchase. Have your Realtor® talk to the lender before you sign the offer. This is perhaps the most important part. Follow all these rules and you should be just fine!

Happy Halloween everyone! And if you’re wondering what’s the scariest thing on most home buyers’ minds today, you’ve come to the right place for an answer. Although most buyers are excited about the opportunities REOs (foreclosures - REO stands for Real Estate Owned by a bank, for the uninitiated) present in today’s real estate market, especially in the greater Sacramento area, I find that many are also concerned about buying a home that can have many unseen problems which may not show up until long after escrow closes. Today, I am here to address some of their concerns. Boo!

How a Home becomes an REO
As explained earlier, an REO is a foreclosure. When you buy a home in California, unless you pay cash for it, chances are you will have to finance the purchase. A home is financed in much the same way a car is financed - you sign legal documents called “a note” for a loan. The lender gives you the money which you agree to pay back with interest over a term of (usually) 30 years. If you default on the loan, the lender can then take the home back and sell it to someone else. The legal process of taking the home back for default on a note is called foreclosure. Although the process in California includes a trustee who is given the note and who is notified by the lender to begin foreclosure proceedings in the event of non-payment the basic idea remains the same: default on the mortgage and lose the home.

The lender is required by law to send a homebuyer who has defaulted on the loan a Notice of Default. This notice is recorded at the county clerk recorder’s office in the county where the property is located and is a document of public record. This means that anyone with an interest in the property may see it. The notice states when the lender is planning on foreclosing, ie. the date of the trustee’s sale and the outstanding amount the homeowner can pay to cure the default and stop the trustee’s sale.

Usually, as you can imagine, the default is not cured and the trustee auctions the property to anyone who will buy it. If there are no buyers at the trustee’s sale, the house becomes a foreclosure and is referred to as an REO - real estate owned by the lender.

What you should Know about an REO as a Homebuyer

Most lenders are not in the business of real estate; they are in the business of finance. And so, the house acquired by a bank through a foreclosure is usually put back on the open market. To come up for a sales price for the property, the bank hires a Realtor® and asks for a BPO - a Broker Price Opinion. The Realtor® appraises the property based on similar properties also known as “comps” and offers to list it. Since most foreclosures are fixers, they are usually placed on the market for a substantially discounted price.

As a home buyer of a bank owned home, your concerns are justified. An REO is usually a fixer. The most obvious reason for this being the family that was foreclosed upon was low on finances. If they didn’t have enough to make their mortgage payments, chances are there are quite a few things about the house that went unrepaired. This is also called deferred maintenance. Deferred maintanence can be a small problem, like a leaky faucet, or can hide bigger problems, like a leaky faucet that rotted the bathroom sub-floor.

You should also be aware that as a purchaser of an REO, you don’t receive full disclosure about the house. The bank is not required to provide you with a Transfer Disclosure Statement, partially because the lenders have never been in the home and are unaware of what exactly is wrong with it. They are also unaware of other problems a property may have, like boundary line disputes, and are unable to let you know if, say, there has been a death on the property.

How to Resolve your Concerns

Does this mean you are left completely at the mercy of Chance when you decide to buy a foreclosure? Sure, the price is deeply discounted, but does that make up for everything else? While that may be a question only you and your pocketbook might be able to answer, here is the most important pointer to take the sting out of potential problems: Always, always, always get the inspections!

Brokers recommend a variety of inspections, including pest, roof, septic system and a complete home inspection. Disregarding any of these inspections can be a big mistake on the part of a homebuyer. While most banks will not repair any items listed as potential or real problems during these inspections, you can get an idea of how much work is involved in making the home as habitable as you want it and decide if the asking price is worth the risk and work involved. The price you pay for the inspections (approximately $1000 for all included) is well worth its weight in gold.

You, The Smart Homebuyer

Okay, great! So you got the inspections done! The home seems structurally sound, but it looks like the roof can’t be certified. Can you knock off $10,000 from the asking price because the lender won’t put a new roof on? Not so fast! You should take into account the fact that the lender has already figured deferred maintenance into the price of the house. While there is no overt harm in making a lowball offer, you should also apply the comps in the neighborhood and balance them against your own timeline and budget for a house. Also remember that escrows today take longer (45 to 60 days as opposed to the 30 days from a while ago) because lenders are more careful about checking documentation.

With so many bargains out there in foreclosures, if you are serious about buying a home at a deeply discounted price, chances are you will find what you are looking for. So, go ahead. Get the facts, look hard and deep and don’t be scared to make an offer when you find the right one!

Residents of Sacramento have reached a new level of understanding about the real estate market, I think. While conversations during the real estate boom revolved mainly around how much their home had appreciated, now the talk is mainly around how much the market has been affected by the recent foreclosures. They seem to take a macrocosmic view of real estate as it is as opposed to the simplistic microcosm they were living in just about five years ago.

But the statement I hear most often is, “I wish I had some money right now. I would buy the entire street!” And while many are concerned that the market might continue to fall further, many others have taken the leap. We’ve seen the numbers rise for sales over the last year in every neighborhood and Sacramento county as a whole. Clearly, there isn’t as much anxiety over prices falling further today as there was a year ago.

Or is there?

Investors see this in the stock market every time - the tendency of most people is to think they are going to swoop in when the market is low, buy up everything and then make a ton of money by selling high. The reality is that most people feel confident buying a stock that has already performed well and then end up selling it when it is obvious it will not go any higher (at best) or when the price falls (at worst).

We see the same thing in the real estate market. When the prices of homes were headed up, homeowners were reluctant to sell and people felt more comfortable buying. There was not enough inventory for all the buyers. A home saw multiple offers on the first day it was listed and sellers couldn’t believe their luck. We see the opposite today. While many swear they want to buy a house at the bottom of the market (or close to) they are now holding off. The old adage of “Sellers sell in a seller’s market, but buyers don’t buy in a buyer’s market” is holding true, at least anecdotally. The overall numbers however are telling a different story. Clearly, some people are buying. These will probably be the same people selling when the time is right.

It’s time to review the numbers. It’s time to see what you can afford and head out there and start investing in the future.

Sales of existing homes have doubled in Orangevale since last September, with foreclosures and short sales making up the bulk of all sales. While no short sales sold last September, this month we have 6 short sales. And foreclosure sales have almost quintupled from a mere 4 last September to as many as 19 in September of 2008.

Clearly, there have been bargains to be found in this little community of Orangevale - the 95662 area code of Sacramento county. The sold price per square foot has fallen 18.8% from $215.13 to $174.69. And the average sale price has fallen 23.9% over last September to rest at $270,590.

Based on the last 12 months of sales inventory is at 5.6 months and based on the last 6 months of sales, inventory is at 4.2 months. Again, we see short sales making up the bulk of active listings in the area at 15.5 months and 11.8 months respectively.

Related links:

Not much has happened in the Land Park area of Sacramento and that might be a good thing. While a year ago at the same time, there had been no foreclosures for sale and only one short sale, this year we see two foreclosures sold and no short sales. This is a good thing. Calm and quiet in a certain neighborhood - in terms of real estate, especially - might be just what we need for prices to stabilize.

Unfortunately for Land Park residents, the neighborhood is not completely immune to the rest of Sacramento county. Although the majority of properties that sell here are non-distressed (85.7%) the price per square foot has still fallen 18.7% over last September. It now stands at $284.63 per square foot. The average sales price is now $382,786 - a drop of 17.8% over last September’s average.

There might be some real opportunties for buyers looking for a bargain in Land Park in the short sale category if lenders are willing to work with the sellers. In a relatively stable neighborhood such as this, there are currently 12 short sales and 2 foreclosures listed. Inventory for all sales currently sits at 5 months.

Related links:

Hardly anyone is happy about the events of the past few weeks.  To be sure, there are a few dubious winners.  Those for whom predictions of economic doomsday is a hobby have had the satisfaction of saying "I told you so".  Meantime, the executives at Goldman Sachs and other financial firms are reaping the tasty harvest of their well bought Congressmen.

For the majority of us — who find plenty to enjoy in the misery that actually visits us without savoring the anticipation of future misery — the economic crisis and the financial bailout have a tough time.

In real estate, our own fears for our future business are compounded by the fact that we know that other’s fears about their future can be a self fulfilling prophecy.  People who are afraid cut back on their spending, and for most of us the largest share of our budget is housing. 

A symptom of the overall terror is that a lot of my friends in the industry are looking to the security of other part time or full time jobs, with varying degrees of success.

What Happened When The News Broke?

As Congress was using the time honored mugger technique –  threatening you with great harm that handing over your money will forestall — anecdotally it seemed like the sky fell.  The phones just stopped ringing for about a week or two, and email inquiries trickled off to just about nothing.

That was pretty scary, though fortunately we’re starting to see people starting to look at homes again.

Even though on the face of it we thought our business destroyed, the weird thing about the awful news of the last few weeks is that it’s hard to prove (in a numerical way) how much of an impact this bad news really had.  Sales this month have continued strong.  With 1,369 sales in Sacramento County to date in October, we’re already 54.9% of the total volume for October of 2007, and although divining month end numbers is more of an art than a science, we’re looking at probably 1,600 to 2,200 sales for the month, with 2,020 being my best guess.  This is in line with what we’ve been seeing in the last several months.

What About the Immediate Future?   The Story of Sac County Pending Sales

Of course, the real story is in the pending sale numbers, since these tell the tale of homes going into escrow since the crisis.  Here again, it’s hard to find a pattern that shows people are so scared that they’ve stopped buying homes altogether. 

There are about 4005 homes that are pending sale (in escrow) in the MLS in Sacramento County.  Absent an economic disaster, the pattern we expect to see is that the more recently you look, the greater the relative percentage of pending sales you’ll see.  This is because as time goes on, those pending sales either fall out of escrow or close escrow. 

In the presence of an economic disaster, you’d expect to find this pattern violated, but we really don’t.  Of the 4,005 pending sales in Sac County, 2,013 went pending since October 1.  As I write this on October 25th, 597 homes have gone pending in the last 5 days (since the 20th), and 1318 have gone pending in the last two fifteen days.  Assuming 50% of all pending sales in the last fifteen days would close escrow (I think the actual numbers are higher but I don’t have the real "average close rate" to use), we’d be looking at about 1,318 sales for November — better volume numbers for November, 2008 than November, 2004’s 1,094 sales and almost as good as November, 2005’s figure of 1,446 sales. 

Sure, that’s not as good as recent months, but it’s still much better than last November’s pathetic total of 809 sales.  And in general, we’d expect it to be down somewhat from August through October, because sales almost always trend downward in November and December.  And to be sure, those November numbers are projections — not real numbers.

Price (Not Consumer Confidence) Is King

If Elvis is "The King" in rock and roll terms, traditional wisdom in real estate is that price is king.  What we’re seeing at least so far in October is that this is true even in a down market (assuming of course that a lack of credit is a mugger’s ploy and not a reality).  With mortgage rates down since August and prices continuing to fall, on one level we’re all running from our own shadows, but meantime, back in the real world, the buyers are still out there — at least for now.

With that I’m sure someone will accuse me of being unduly optimistic — again! — which actually is a funny position to find oneself in given my systemic pessimism.  Shhh… don’t give away my secret.

Related links:

While I was having my early morning cappuccino today, made with a rather indulgent birthday gift I gave my husband, this impassioned email sent to us by someone who had been to our website caught my eye:

“Their loss is your gain” Very tacky marketing! We loved that home & left it in great condition. We worked with your representive [sic], I actually that [sic] about sending her a thank you note. Were [sic] is your empathy! I truly hope someone can purchase the home that I designed & finish it right. I hope that you are happy that your posting sent me & my family into tears again. OUR LOSS? Yes we did have a loss I am sure you do not care about exactly what our loss was/is. Did it occor [sic] to to [sic] that terminal illness could have played a roll [sic]? You should think again before marketing a foreclosed home in such a ruthless way.

I hurried off a reply explaining that the marketing was not ours. We never use tacky terms like that and are hugely empathetic to sellers in this market, especially ones that have ended up in a foreclosure / short sale situation through no fault of their own and genuine financial hardship. Unfortunately, there are so many others that simply want out of their homes because they are so called “upside down” in them that even the banks are having a hard time distinguishing between the genuine cases and the ones that just sick of falling house values.

So let me reiterate: this post is for those with genuine financial hardship. Here are some of the steps you can take before you decide to walk away from your home.

Determine if there is Genuine Hardship: As I mentioned earlier, some people in this market simply want out of their homes and the mortgage agreement because they see the value depreciating. Depreciating value in itself is not a reason for the bank to accept a short sale. You must prove genuine financial hardship. Remember that the mortgage agreement you signed when you bought the home is a contract and letting someone out of a contract requires a strong reason. Depreciating value of an asset is in itself not a good enough reason.

Get on the Phone: The single biggest mistake people make when they are beginning to have trouble making payments is to avoid all phone calls. As a landlord, if the rent doesn’t get to me in the specified time and the tenant does not call, it is my first red flag. I can tolerate the rent being late for a long time if there is communication. Your mortgage holders have the same thinking. They really don’t want to foreclose. They just want the payment. So, your first response to a difficult financial situation should be to call your creditors. That would include your credit card companies, the IRS, your mortgage holders and so on. You might be able to get your mortgage holders to rewrite the loan (and have a different monthly payment and terms) and stay in your home.

Keep in mind also that a home is a secured debt, which means it is secured by your house. If you stop making payments, the mortgage holder can take your home. Your credit cards are unsecured debt. If you stop making payments on those, the credit card companies cannot technically come after your home. If you have the stomach for it, you can keep your home and see about negotiating with other creditors.

Begin Building a Case: A banking job is very paperwork-heavy. Remember the thick stack of documents you signed as a home buyer? Well, to get out of it, the stack will be just as thick. Start collecting any and all documentation of your hardship. Collect bank statements for the last entire year, tax returns for the last five years, pay stubs for the last year and all other documentation you have which shows and documents the reasons for your hardship. This may include a letter from your employer if you have lost your job, a medical letter if you have a disability or illness, medical bills, IRS bills - anything to establish in the eyes of the negotiator that you are not someone who simply wants out. A paper trail is very important to a successful short sale.

Start Looking for an Apartment or Rental Home: Do not plan on living in the house until the date of the foreclosure. While this might seem like a good idea on the surface because you are not making mortgage payments and getting free rent, remember that every month of a missed mortgage payment hurts your credit score - something most landlords check when you apply for a place to live in. Even if the short sale does not go through, you will have to leave and need a replacement place to stay. There is no doubt about that. Your credit is going to be in a downward spin. The smartest thing you can do now is get a place to live and explain to the landlord that you are losing your home.

Try to get an Approval or a Dollar Amount: This is unfortunately the toughest part of a short sale. Before you call a Realtor®, send in the paperwork to the bank and try to get an idea of what price they will accept. Lenders are notorious for not telling you their price and having you wait for an offer before they send someone out for a broker price opinion. The problem with this approach is that the buyers tend to get tired of waiting and walk away. If you can get the bank to send someone out before an offer comes in, it saves time (lesser time also means your credit will be hurt less) and you are more likely to get a home buyer to make an offer. This does require that your paperwork be complete however, so make sure to get that sent into the bank and follow up with them.

Call a Realtor®: At this point, all a Realtor® has to do is advertise your house as an approved short sale, be open to an offer and send it over to the bank for final approval. Approved short sales can close in less than sixty days. Also remember that you do not have to pay either Realtor®, as would be the case in a traditional sale where the seller pays the Realtors® involved. In this case, the lender would be the one making the payment for services rendered. That is why the lender will often ask for a net sheet from a title company before the final approval is issued.

Don’t Forget your Accountant! Your short sale or foreclosure may have tax ramifications and perhaps legal ones as well. Be sure to talk with your tax preparer and attorney regarding these. Deciding to walk away from your home is a difficult and painful process - one that we hope you never have to do. But if it is inevitable, I hope the tips in this post help.

The number of foreclosures sold in Antelope this September has almost quadrupled since last September. While only 16 foreclosures sold in the 95843 zip code then, this September saw 63 foreclosures sell. A strong rental market in Antelope is probably responsible for investors jumping in and picking up properties priced extremely well, resulting in the Antelope stampede John spoke about a few months ago.

Apparenty, the stampede isn’t over yet.

Interestingly enough, short sales in Antelope seem to have finally started catching up with the rest of the sales. Consider this fact: While a year ago, houses that sold in Antelope were almost equally divided between distressed sales (foreclosures and short sales) and non-distressed sales (private sellers), today the balance is completely off. Most sales this September were foreclosures (67%) and short sales (19.1%) while private sellers accounted for only 13.8% of the sold units.

As you can probably predict, this imbalance between distressed and non-distressed sales has not helped prices rise or stabilize. The average sales price this September dropped 23.1% over last September’s average to rest at $219,705.

The pocket area of Sacramento (95831) is a relatively stable market, perhaps the most stable in Sacramento county. (I say that with some disbelief at this point, after the East Sacramento market update. However, do keep in mind that the 95817 zip code of East Sacramento includes Curtis Park as well as Oak Park and the market swings wildly between the two neighborhoods. Curtis Park is mostly owner-occupied and Oak Park mainly investment properties.)

And if bad loans and foreclosures are to blame for the recent downturn, Pocket area residents must be managing their finances well. As a pretty hot market in the real estate boom, its average sales price has dropped a mere 14.6% over last September to $298,663. I know, I know… I said “a mere 14.6%” but if you compare it with the rest of Sacramento, you’ll see what I mean.

Price per square foot has fallen to $172.31 - a drop of almost 20% since last September and that seems to have inspired home buyers to acquire on average a home approximately 100 square feet bigger than last year at the same time.

Non-distressed properties still make up most of the sales - approximately 63% which might account for some of the stability. However, they are still lower than last September’s numbers where 85% of homes sold were non-distressed. September 2008 saw 8 foreclosures sold as compared with 2 last September.

Related links:

Perhaps the hardest thing for home buyers, whether this is their first home or whether they have bought many others before, is deciding what the home is worth and the price to offer the seller. Buyers are usually caught wondering if they should offer full price, or over asking price, if they should try a lowball offer or actually listen to the advice of their Realtor® and send in a reasonable offer which allows room for negotiation and ensures both parties some wiggle room on the negotiation table. Since this question comes up pretty regularly, let’s discuss the pros and cons of each.

The Full Price Offer

Drumroll, please! Of course, this is one of the offers that is the most liked by the seller, unless it’s over asking, but that comes with its own set of problems we’ll discuss in a minute. A full price offer is usually made by buyers in stable markets for a house they really love. Usually, there are no other offers on the table.

What happens? If everything goes according to plan and the buyers are not overstretched on their budget, the seller accepts and everything moves on slowly but surely. An incredibly boring escrow closes and leaves everyone happy. The sellers walk away getting what they wanted, the buyers wonder if they paid too much, but soon get caught up in decorating and enjoying their new home and forget their buyer’s remorse.

The Over Asking Price Offer

Writing an offer over the seller’s asking price shows nervousness on the buyer’s side. It is usually made in a market where prices are headed up or when the listing is priced extremely low to encourage multiple offers. The sellers in this case are aware that they have the upper hand and can command a good price. In the recent real estate boom in Sacramento, most homes appreciated by the time escrow closed and buyers came out richer just a month after making an offer, so sellers felt the need to earn some of that future appreciation by pricing the home pretty aggressively.

However, there is a problem with such a strategy. When the real estate market is headed up, there are usually few or no comps available for an appraiser to ascertain value. The difference then has to be made up with cash from the buyer or the price has to be readjusted to reflect the value of the home as determined by comparable properties. (By the way, when the market is headed down, there is a whole set of other problems with comps appraisers have to provide. Nervous lenders usually request more than the usual number to ensure some level of stability in house values.)

The Lowball Offer

Lately, these are the most commonly found offers. So you can probably guess that these offers dominate a buyer’s market, when supply is high and demand is low. Prices are usually headed down or seem to be headed down and foreclosures abound.

On the surface, the lowball offer seems like a good idea. Home buyers often make these offers to sellers in the hopes that they are in a win-win situation. They think that either the seller will accept and they will have purchased a house at a rock bottom price or the seller will come back with a price closer to what they have offered.

The reality, however, is quite different. With so many lowball offers floating around (most from unqualified buyers and other frivolous tire-kickers) the sellers lump even the most qualified home buyer into the to-be-ignored file and never get back to them. As a result, there is no negotiating, the sellers feel insulted and what could have been a reasonable purchase dissolves into nothing but a bad taste in the mouths of both parties involved.

The Right Offer

If you ask me, the right offer is always dependant on a variety of factors. Mainly, how much does a homebuyer like the home? Are there other houses like this one available? What do the comps look like in terms of price per square foot? Does the home buyer know his options when it comes to financing the home and does he really understand his mortgage? How many other offers are the sellers considering? What is the strategy behind pricing the home at the listing price? How soon and why are the sellers moving? All these questions would help determine the right offer price.

That being said however, I think serious home buyers in today’s Sacramento real estate market would do well to make every effort to come across to sellers as reasonable and ready and willing to make the home purchase with a little negotiating. I think if they are armed with a letter of preapproval, a decent good faith amount and an offer that is not too wild, chances are sellers will discount the price. Get off on the wrong foot however and none of this happens. Going in with unreasonable demands or a “my-way-or-the-highway” attitude only results in wasted time and effort by the potential home buyer, the buyer’s agent, the seller and the listing agent.

What would I do? I’d be sure to get the right Realtor®, ask the right questions and then make the right offer. I would take the advice of my Realtor®.

This is pretty depressing - throughout the recent fall in home prices, Realtors® and some homeowners have taken heart in the East Sacramento market. Unfortunately, East Sacramento (zip codes 95817 and 95819) seems to have faced some bad weather in September along with the rest of Sacramento county.

It’s easy to tell where the storm is coming from: foreclosures. Compared to last year in September when only 2 foreclosures sold, this September 21 closed escrow. This September also tipped the scale toward the foreclosures in that most sold listings (53%) were foreclosures. To offer a contrast with last September, we have only to know that 91.3% of all units sold then were non-distressed sales.

The sold price per square foot dropped 35.9% over last September to $190.40 - average sales price dropped a whopping 48.4% over last September to end at $214,285.

In the more interesting news: the average sold listing was 1125 sq. ft. this September as compared with 1395 sq. ft. last year, suggesting perhaps that people are buying smaller homes - about 300 feet smaller.

Sacramento’s Elder Creek and Fruitridge areas include the zip codes 95820 and 95824.  Since last year two things have happened, and one of them implies the other.  First, prices have fallen — a lot.  Secondly, demand has increased — also a lot.  This common "demand curve" pattern is one we see demonstrated over and over again, and September’s numbers for Elder Creek and Fruitridge are as good an example of it as we’ve seen anywhere.

Unit volume has quadrupled in this area from year to year.  Last September, only 25 homes sold in the Elder Creek and Fruitridge area, whereas this year there were 106 sales.  The vast majority (80.2%) of the new sales were foreclosures, 2.8% were short sales, and 17% were non-distressed.

At the same time, sold price per square foot has been cut almost in half.   Last year the average sold price per square foot was $178.31, while this year the average was down to $91.25, a decrease of 48.8%.  Over the same time, the median sale price dropped 52.9%, from $188,000 in September of 2007 to $88,500 in September of 2008.  This year the average home sold for $105,586 in Elder Creek & Fruitridge, down 47.4% from last year’s average of $200,679.

Inventory in Elder Creek Fruitridge is at 7.1 months (based on one year of sales) or 5.1 months (based on the last six months).

A few buyers have asked me why certain real estate brokers will not show them property or even put them in their car without first signing a buyer - broker agreement with them. In fact, when I was working at one of the bigger brokerages, I was expressly warned that unless I got a client to sign one of these very serious contracts, I was not to take them inside a home listed for sale at all. “At the very least,” one manager said at a sales meeting, “Get the Agency signed.”

It was easy for us green agents at the time to lap all this up as bringing us one step closer to being great real estate salespeople - soon on our way to making our first $100,000 in commissions (ha!) but now I believe the manager may have had other motives besides giving us confidence in real estate sales. Today, let’s look at what this contract is.

The Buyer Broker Agreement
Actually, the title should probably say the buyer broker agreements. There are three: the exclusive buyer representation agreement, the non-exclusive representation and one that calls itself simply the buyer representation agreement. They all say The essential difference between the three is simply the amount of commitment expected by the broker on the buyer’s part. They vary from the buyer hiring one broker exclusively (named, uncreatively enough, the buyer representation agreement - exclusive) to the broker agreeing to be simply one of the agents the client can hire (the buyer representation agreement - nonexclusive). The third leaves all the above negotiable.

How the Buyer Agreement Benefits You
I know most clients are afraid when it comes to signing anything before the offer is written or they have found the house they want. They fear that they will be tied to one broker or have to pay the Realtor® even if they don’t find their dream home. While this is a legitimate concern and will be discussed in a minute, buyers should remember that most real estate contracts are written to protect the buyer in many cases. The verbiage of the buyer representation agreement binds the broker to look for a house for the client as much as it binds the client to the broker. In other words, the commitment works both ways. If the broker isn’t doing his job, the buyer should be able to fire him.

What you Should Look For if you Sign These
So along those lines, here are a few things you should consider before you sign one of these agreements. (By the way, you should know that I actually had to go looking for these in my forms because I haven’t used one for years, but some real estate agents swear by them and so do some home buyers, so I feel the need to tell you about them.)

1. Is this exclusive? First off, if you trust your Realtor® and believe her to be the only one you will look for homes with, you should get an exclusive agreement. If not, sign a non exclusive contract.

2. The timeline: Check how long the Realtor® is committed to showing you homes and if that matches your timeline for finding a house.

3. Compensation: If you wish to pay your broker out of pocket (may happen if the price of the property is extremely low, as in the case of some mobile homes) the amount will need to be agreed upon and included. If not, most brokers get paid by sharing the commission with the seller’s agent and this line should say “as noted in MLS.” It is important that this line not put a percentage like “3% of sales price” because if the seller has only agreed to 2.5% of the sales price, you as the buyer will be responsible for the difference.

A Powerful Tool
One of the best things about the buyer representation contract is that it gives us as Realtors® permission to go prospecting for the right home for our homebuyers. If you don’t find the home you want, we can then legally advertise the fact that we have a home buyer who wants a certain home. It gives us permission to knock on someone’s door and broadcast a definite need. To me, that is the best use of this agreement and can be a powerful tool for any home buyer. So don’t immediately get on the defensive when a Realtor® offers you this 4 page contract. Read it over and see if you can negotiate it to help & protect your needs as much as you think it protects those of the broker.

With prices falling in Carmichael and throughout the rest of Sacramento County, buyers took advantage of bargains this year and generally purchased more homes this year than last.  In Carmichael, volume was up 26.3% over last year, with 48 homes selling in September versus 38 last September.

The average sold price per square foot in Carmichael fell 21.9% from year to year, from $224.79 in September of 2007 to $175.55 in 2008.  This is about $45.00 per square foot more than the county-wide average.  The average home sold for $304,816 in September, down 19.1% from last September’s average of $377,007.  The median home selling price fell 23.1%, from $357,500 in September of 2007 to $275,000 in September of 2008.

37.5% of the sales in Carmichael in September were non-distressed sales.  Another 47.9% were foreclosures, and 14.6% were short sales.  That 14.6% figure is another good example of how the number of short sales getting approved seems to have increased somewhat lately, perhaps as banks begin to get a feel for just how much money they can lose by going all the way to foreclosure.

Related links:

Buyers continued to pay a substantial premium for a Downtown Sacramento address in September, with average prices more than double the county-wide average.  Although the average sold price per square foot was down 20.1% from September to September, this year’s value of $277.34 was up slightly from the previous month, when the average sold price per square foot downtown was $259.48.

The average selling price downtown in September was $399,364, down 10.3% from last year’s average of $421,924.  The median selling price in Downtown Sacramento was $375,000, up 1.7% from last year’s median selling price of $368,750.

Even though it comprises the two zip codes of 95814 and 95816, Downtown Sacramento is very small in terms of the number of homes that sell every month, averaging only about 13 homes per month over the last year.  September’s volume was low at only eleven homes, broken down as exactly one foreclosure, one short sale, and nine non-distressed homes.

There are 87 homes in inventory downtown, which works out to be about six months of inventory.  Twelve of these are short sales, but there are no foreclosures currently active.  At 86% of all available homes, non-distressed sales make up the lion’s share of the inventory.

Related links: