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Elizabeth Weintraub
Pushing Up Values for Homes in Elk Grove
A few years ago seems so ancient when I recall how first-time home buyers back then were complaining to this Elk Grove agent that they were getting beat out by cash investors. Home buyers began to wonder if prices were moving up when prices were still pretty flat. I predicted then that the appreciation push would happen when cash buyers bid against other cash buyers. Because offers are dependent upon appraisals when there is financing involved, and the appraisers typically do not appraise a home for more based on pending sales. They look at the comparable sales. Without cash offers, the comparable sales generally won’t move upward. This is not 2005.
Sure enough, I see that happening in Elk Grove now. In fact, an agent in my office had pointed a finger at me and said one of my equity sales in Elk Grove was establishing a new record, and it was my fault. This real estate agent lives in that particular neighborhood in Elk Grove. She saw I had listed a home on a cul-de-sac that was absolutely gorgeous. This was one of those homes that when you walk into it, you automatically know that buyers will be clamoring for it. As an Elk Grove agent who sells a lot of homes in Elk Grove, I know it when I see it. This was one of those.
The sellers had purchased this home as a short sale several years ago. It had a open floor plan, was a single-story with granite counters in the kitchen. Trying to figure out the list price was difficult because although many homes had sold in that area, few were not a short sale and none matched this square footage. Based on the median sales price and adjusting for square footage, I figured it would comp about $235,000, maximum. If we got an appraisal. And given the way prices were moving in Elk Grove, coupled with the extreme desirability of this particular home, I figured we could easily shove that price another $10,000.
But I don’t choose the sales price. The seller chooses the sales price. Always. It’s their home. All I can really do is give the seller what they are paying me to give them, which is my professional opinion from almost 40 years in the business. It’s up to the seller to take this information, digest it, and decide upon a list price.
These sellers chose the list price of $245,000. I then positioned this home to receive multiple offers and began to market it. We received more than 30 offers. The highest offer was cash at $275,000. The sellers accepted the offer with a fast closing. A few days later, that buyer’s agent confessed that she had written several offers and her buyer now wanted to cancel the transaction. Her excuse for what can be considered unethical behavior was my seller had 30 offers and her buyer did not enjoy that luxury. If you’re nodding your head in agreement, you’re probably not a real estate agent and, if you are a real estate agent, that nodding head probably ought to be hung in shame.
We then chose the next 3 highest bidders in line, whom the seller would consider. The seller asked each of these buyers to make a highest and best offer. They bid against themselves, and we sold the home for $268,000 cash. It closed last month in 3 weeks. Almost 14% over market value. That’s the value of a full-service listing agent. You would think the real estate agent in my office would be happy that we’re pushing up the value of her home in that neighborhood. But this is how homes price can go up in Elk Grove. If you’re thinking about selling a home in Elk Grove, call this Elk Grove agent at 916.233.6759.
How Not to Present a Purchase Offer in Sacramento
A real estate agent I first met 5 years ago when I interviewed her for my book, The Short Sale Savior, and later she referred a relative to me whose home I sold in Sacramento, serves on an Education Committee at a REALTOR association in the Bay area. She asked if I would do a webinar for her agents to help them to get purchase offers accepted. I generally don’t agree to do webinars or seminars because I don’t like them. Who am I to tell people what to do? Seminars are ex-husbands’ gigs, not mine. But I agreed because I can’t say no to this person. She is so danged sweet!
Sweetness gets you everywhere in this life. Vinegar, not so much.
I might start with talking about what NOT to do when writing an offer to buy a home. Because I list such a huge volume of homes in the Sacramento area, I see all kinds of offers. I can estimate that I probably receive more than 1,000 offers a year, maybe even twice that amount depending on whether it’s a seller’s market in Sacramento. It’s common today to receive a minimum of 20 to 30 offers for entry-level listings.
The unspoken truth is at least half of those purchase offers are garbage. I’m being generous with that percentage. That’s the part that agents don’t talk about because nobody wants to believe that a buyer’s agent can’t write an offer, yet that’s the first problem with many offers. There is no nice way to sugar coat this. I continually find myself defending the competency of my profession to sellers who can’t believe their eyes at some of the offers we get.
In a seller’s market, a seller and her listing agent can be very selective. Sure, there are markets in which the tables are turned, but our present market in Sacramento is a seller’s market. This means a seller can be looking for the very best offer and might be examining an offer with an eye for a reason to reject it. This is a very different approach than hoping to accept an offer, which is how sellers view offers in an opposite market. Unfortunately, buyers and buyer’s agents give sellers plenty of reasons to reject an offer. If a seller is considering 2 identical offers, one offer may get accepted simply because the other was rejected.
The trick is not to set up an offer for possible rejection. Here are some things an agent and her or his buyer should try NOT to do when presenting a purchase offer:
Clerical Offer Mistakes
- Misspelling of names
- Wrong property address
- No dates
- Missing signatures / initials
- Incorrect mathematical calculations
- Outdated forms
- Missing addendums or supporting documentations
- Sending unnecessary documents / paperwork
Writing FHA or VA offers on listings that do not offer those financing terms?
Sending the offer to the wrong agent or the wrong company or in the wrong format
Not reading the confidential agent remarks / attachments nor following specific directions
Exhibiting hostility toward the listing agent or seller
- Sending the agent a copy of the MLS print-out or list of comparable sales
- Demanding concessions and other unusual terms in the offer
- Belittling the home, the seller and the home’s location
- Yelling and screaming and use of profanity
No cover letter with the offer, hoping the terms and conditions speak for themselves. Often, they do not.
Sending a generic cover letter saying the buyer loves the home. All buyers love the home or they wouldn’t be writing an offer.
Forgetting that all offers look the same. Only the numbers and names change.
The bottom line is don’t give the seller any ammunition to reject an offer. In multiple-offer situations, a buyer should not allow her offer to be automatically eliminated from the competition. Ideally, a buyer wants her offer to be the best, at the least an offer worthy of top consideration. Give it a fighting chance.
Why Did That Sacramento Home Sell for Less?
The question arose at my midtown office this week about whether all offers are presented to the seller when it seems a Sacramento home sells for less. The reason the caller questioned whether it happened is because the final sales price was so much less than the caller’s purchase offer. This buyer could not fathom any other reason why a home would sell for less than the price this buyer offered for it; therefore, this buyer concluded that there must be have been monkey business going on. It’s amusing that when a buyer doesn’t understand, the accusing finger is automatically lobbed toward the Sacramento real estate agent. It’s also sad because it tells you what some buyers really think about us but are afraid to voice.
First, all offers are always presented to the seller. I don’t know how other listing agents handle their processing, but I immediately forward offers when I receive them, and I imagine other agents follow suit. Offers are logged in my records 3 different ways to mitigate mistakes. Whether the seller reads, acknowledges or accepts which offer in which order is up to the seller. I don’t care if you write an offer on a roll of toilet paper and deliver that roll to my office, that roll of toilet paper will end up in the seller’s hands. You can offer $1.00 and write it with a bloody finger, and that offer goes to the seller. Not that I’m giving anybody any suggestions, mind you. Just making a point.
But I get asked the sell-for-less question so often that I thought it’s probably a good idea to explain some of the reasons how it can happen that an offer for more money is not accepted in favor of an offer for less. There are legitimate, behind-the-scenes reasons:
- The seller has taken a personal shine to the buyer, regardless of price.
- The offer was originally for more but the appraisal came in less.
- The offer was originally higher but the buyer negotiated a price reduction based on yada-yada.
- The home was vandalized and the seller adjusted the sales price to allow for the damage.
- The higher offer was written incorrectly and was missing pertinent documents.
- The previous offer was pending rescission and that original buyer elected to move forward.
You will notice that nowhere in those reasons is a line item that says the listing agent did not send your purchase offer to the seller. More often than not, it is the last reason, especially in a short sale situation, that is the actual reason why the home sold for less. Whenever I am faced with a buyer whose agent tells me is planning to cancel, I will put that home back on the market, with a pending rescission modifier.
I’ve had several of those lately. One last year comes to mind quite clearly because that particular buyer had been in escrow on a short sale in Elk Grove for almost a year. Why so long? It was a Bank of America HAFA, that’s why. When the buyer’s agent told me the buyer wanted to cancel, I put the home on the market at the pre-approved HAFA price, which was about $20,000 higher than the price the buyer had offered and the bank had accepted. I immediately received a handful of full-price and all-cash offers. I gave the buyer one more chance not to cancel. I explained that if the buyer wanted to cancel, he was a fool. Because a bunch of other buyers were waiting in the wings to step right into his shoes and pay $20,000 more.
That buyer saw the light and closed escrow. Sometimes, a listing agent has to show them the light. If often happens this way. Happened that way last week, too, on several transactions. Buyers tend to want what others want. A home can sit in escrow for weeks without any offers as an active listing before it turns into a pending sale, but as soon as “pending rescission” is added to the modifier, the offers roll in like crazy. If there is an existing offer pending on a listing, priority goes to that buyer. Another buyer could offer a bazillion dollars and a Lear jet, and the seller couldn’t sell to that buyer.
If you want to know why your offer wasn’t accepted for a home that may sell for less than your offer, ask your agent.
Should a Sacramento Home Buyer Cancel Escrow?
A home buyer called yesterday to ask if she could cancel her escrow, dump her buyer’s agent and become a client with the Elizabeth Weintraub Team. She was very unhappy with her present real estate agent’s performance, but I suspect that unhappiness was due more to miscommunication than inability or inexperience or monkey business. And, like many first-time home buyers in Sacramento, her escrow was a short sale. See, unless you’re a listing agent who sells hundreds of short sales — and there aren’t very many of us in Sacramento — an agent probably won’t have the answer to every single piece of drama that can pop up in a short sale. No answers = client confusion.
This buyer was concerned because HSBC had twice increased the sales price. Is this normal, you might wonder? Yes, it is. There are many reasons for a price increase during short sale negotiations. There could be several BPOs. The servicer might establish a market value that is different from the price point determined by the investor. Not to mention, prices are inching upwards in Sacramento. I closed a Roseville short sale last week that had 3 price increases during processing, and the last adjustment exceeded 10%. A short sale condo in Rancho Cordova was bumped more than 20% when a buyer balked and walked and a new buyer stepped in.
Her suspicions were aroused because the price increases were not presented to her in a formal manner — via a worksheet or letter from the bank. Instead, the listing agent had called the buyer’s agent to provide the verbal communication. The buyer felt this procedure was unprofessional. Yet, that is the procedure for most short sales. I don’t blame a buyer for being wary. I wouldn’t like it if I was simply informed that I needed to pay $10,000 more without proof from the bank nor an appraisal to justify, but that’s how short sales work.
The thing is if a buyer doesn’t want to pay it, another buyer will pay it. That’s what the bank is banking on. And the bank doesn’t care. You might think the bank cares that the home needs paint, new carpeting, the roof leaks, but I’m telling ya, the bank doesn’t give a crap.
In this particular instance, the buyer disclosed she was FHA and applying for the CHDAP program. Holy toledo, the only thing more problematic than that would be a VA buyer and, even then, it would be a tight race. In fact, a VA buyer might have an edge over a CHDAP. The basic way to close a CHDAP in a short sale is to get a short sale extension. A short sale extension is not always possible.
My advice to this buyer — after telling her I can’t give her advice because she’s in contract and under agency with another agent? My solicited advice was to stay in escrow. For heaven’s sakes, don’t cancel. She does not realize how lucky she is to be in escrow and be buying a home in Sacramento. For every buyer who wants to buy an entry-level home in Sacramento, there are 9 more who won’t be able to buy. They will get beat time and time again by cash investors or conventional buyers. Buyers would give up their eye teeth to trade places.
Welcome to our Sacramento housing market in the spring of 2013. If you’re in escrow, stay put and don’t whine.
The Highest Offer is Not Always the Best Offer
Just because a buyer offers a much higher sales price than anybody else doesn’t necessarily mean a seller should sell her home in Sacramento to that buyer. In fact, a much higher sales price can be viewed as suspicious during a multiple-offer presentation. You’ve got to ask yourself if that particular buyer is smarter, brighter, and more ambitious than everybody else or is that particular buyer holding something back? Most buyers are pretty much the same, so if a purchase offer stands apart from all of the others, the wise way to approach that kind of situation is with caution and ask questions.
My sister asked me a question yesterday to which I had no answer. She wanted to know when Canadian geese had turned into Canada geese. Don’t know. I guess I figured that I’d just been saying it wrong all of these years. I grew up in Minnesota around a lot of Canada geese. At the time, I actually thought they flew down from Canada and hung around in our parks during the day crapping everywhere and went home at night. I know golfers made jokes about using their bodies as golf clubs. I suspect people don’t think that’s so funny today.
Just like the Canada writer who writes about Canada whom I met at a convention in San Francisco. She looked like she wanted to poke out my eyes with her two fingers when I asked how it felt to write about a country nobody in the U.S. cares about or even much thinks about. See, Stephen Colbert can say that sort of stuff and get away with it. Evidently, I can’t make the same jokes. Canada is a great country and let’s not forget it sheltered those Americans in our Best Picture winner for the Oscars: Argo. I was equally pleased to see that Life of Pi picked up so many awards, as that’s a movie that really touches your heart and spins the mind. I left that movie theater with these words ringing in my head: bananas don’t float.
What that really means is the people who were analyzing the story from Pi figured out there was something wrong with his story because bananas don’t float. He talked about floating bananas in his story. That’s what I look for in a multiple-offer situation. What is wrong with that higher offer, I ask?
Sometimes, as the listing agent, I will call the buyer’s agent to discuss it. I might say that the seller is thinking about accepting their buyer’s offer, but we want some kind of assurance that the buyer won’t try to renegotiate after offer acceptance. Because you know, buyers will offer a higher price just to get into contract and they figure a few weeks in, when everybody is set to close, that’s a good time to suddenly discover a defect, or your suit was at the cleaners, an earthquake is coming, and they want to lower the price. They think they are smart. I think they are snakes in the grass.
See, the thing is though, a buyer’s agent will tell me what they think I want to hear. If they are setting up their buyer to renegotiate, they might make promises to my face that they have no intention of keeping. Sure enough, I had 2 of those situations last month. But they both eventually closed because this Sacramento real estate agent kicked them closed. And please realize, I have nothing but respect for Canada. But don’t get me started on that song by Warren Zevon about the hockey players from Canada.
