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Elizabeth Weintraub
Selling a Rental Home With a Tenant
Selling a rental home with a tenant is often a PITA. It’s not that I am anti-tenant because many of my short sale clients in Sacramento have turned into temporary tenants. In fact, I myself, in my own crazy life, was many years ago, a tenant. It’s that I am pro-Sacramento real estate ownership. Which is not all that together surprising given the fact that I am a Sacramento real estate broker whose living depends on buying and selling homes, which are mostly occupied by owners. It’s why the National Association of REALTORS is so deadset against the banks bundling truckloads of once owner-occupied homes and selling them in bulk to investors. It dilutes home ownership in neighborhoods. When blocks of owner occupied homes turn into rentals, pride of ownership dissipates and property values tend to diminish.
Still, that doesn’t stop some tenants from behaving as though the home they occupy belongs to them and not to the landlord. I’ve got a Sacramento listing in which the tenants have pretty much trashed the home. It looks like a teenager lives there. Crap from one end to the other. They have also acquired a couple of pets, which are not allowed in their lease. See, this is yet another reason that I am not a landlord. I would hate to tell a person they could not enjoy the company of a pet if he or she wanted to adopt.
The seller is pretty close to closing escrow and we received short sale approval from the bank. This means it’s time for the buyer to do a home inspection. Somehow, the tenants believe they can choose the date and, because the home inspection time period falls outside of a time that the tenants deem to be convenient, that it is the tenant’s right to louse up the seller’s transaction. They don’t want to give the landlord access to the home. They are talking about changing the locks. They accused the owner of purposely putting the home on the market at the wrong time for the tenants. They say they do not trust the landlord to enter her own home. Wha? See? You can’t make this stuff up.
I offer yet another valid reason why many real estate agents are in favor of selling a rental home as a vacant home. The government, in its infinite wisdom, has offered the tenants $3,000 in this HAFA short sale to cooperate. That doesn’t ensure cooperation, though. The fact the new owner will become their landlord doesn’t seem to mean much, either.
Fortunately, not all tenants behave in this manner. I just closed a short sale in the Pocket that was occupied by one of the loveliest tenants I have ever had the pleasure to meet. Robin was polite and sweet. She kept the home immaculate, cooperated with showings and cleaned the home from top to bottom when she moved. Everybody in that transaction would have moved heaven and earth to accommodate Robin’s wishes.
Rest assured, however, that if you need to evict, your Sacramento real estate agent will wait for you. No future sale is that urgent. Think about this before you put your home on the market. If your future buyer will be an investor, selling a home with a tenant in place can be advantageous, but it’s not if the tenant is the tenant from hell. If your future buyer is an owner occupant — and remember that home owners tend to pay more than an investor will pay — a tenant in place is probably not your best move.
Sex, Real Estate Agents and Exclamation Points
I woke up late this morning because my cats let me sleep in. See, no exclamation point at the end of that sentence. Even though sleeping in was a very unusual thing to happen to me, even on a Sunday. I’m always up by 5 AM and writing. Except for the days I am not. I didn’t use an exclamation point in that sentence because it didn’t deserve an exclamation point. It was a bit profound but not profound enough to warrant an exclamation point.
I read a blog this morning on an agent website all about how real estate agents should use as many exclamation points as they possibly can because, because, I dunno, because they are completely unable to use words? Or, maybe it’s because they are incredibly lazy? Hard to say why anybody would feel the need to use an exclamation point to show excitement when words do it so much better.
Isn’t the public tired of, say, Sacramento real estate agents who hype, hype, hype, but have little tangible to say? It’s like the difference between an agent shouting: Buy this awesome house!!!!! and an agent who draws back the drapes to point out the perfect spot by the living room window to display a Christmas tree. It’s like showing up for job interview with a red ball glued to your nose, sporting orange hair. Too many exclamation points lose their emphasis and meaning.
My house collapsing into the Pacific ocean during a turbulent winter storm might deserve an exclamation point. A light overnight rain in Sacramento that streaks my bedroom windows does not. Placing too many exclamation points into a sentence is like walking into a room full of strangers, tearing off your clothes and screaming DO me, NOW!!!! Reserve your exclamation points to express orgasm. And you’ll probably have more of them.
Sacramento Home Buyers and the Light Fixer
What is too much work for a first-time home buyer in Sacramento? I always follow up on my listings by emailing buyer’s agents after a showing. I thank them for showing my listing because I am grateful for their efforts. Also, I realize it’s tough being a buyer’s agent today. Buyer’s agents have to write a lot of offers and face a lot of rejection. When I ask buyer’s agents to tell me what their buyers thought of the home, sometimes they say their buyers felt the home required too much work. It makes me wonder how a buyer who has never owned a home before knows how much work it needs. Or, is the work required merely an overblown perception?
It’s no secret that most home buyers want a turn-key home. They don’t want to do anything but move into it, like it is a rental. They also want a good price, sometimes an unreasonable price, which is why some buyers gravitate toward short sales and foreclosures. But the days of those below-market values are gone. Poof. Over. Short sales and foreclosures, like any other home in Sacramento, are selling at market value and, in many cases, way over market value.
That’s if you can buy a home. Some buyers can’t. There are not enough homes for sale for every aspiring home buyer in Sacramento today. So, if a home needs a little bit of work, why not find out how much work it needs? Maybe it’s not as expensive as you might think. For example, maybe it needs paint. High quality paint costs about $25 a can, cheap paint is $10 a can. You need 2 cans of paint to paint an average bedroom. Maybe it needs a $50 light fixture? That involves connecting the black wire to the black wire, and the white wire to the white wire, and the ground to the neutral. It’s not that difficult. But don’t take my word for it. And don’t touch electrical without turning off the power.
Why not buy yourself a home improvement book and learn how to maintain your home? Take care of the smaller projects yourself. If you’re in the market to buy your first home, believe me, something eventually will break or go wrong, and you’ll find great relief in knowing how to fix it.
I have written a series of articles about Buy, Fix and Sell, involving my own personal experiences of home buying.
Cash Investors, Pie Crusts and Robot Agents
There is an acronym company doing business as a limited liability corporation and trying to buy homes in Sacramento as a cash-infused investor. There are undoubtedly many such companies and investors vying for homes in Sacramento. But this one in particular canceled an escrow because it didn’t do its due diligence upfront, so I’m wary about them. This particular company has also hired at least 3 different real estate agents in Sacramento to throw offers at the wall. I know this because I have received offers from 3 different agents representing the same company.
You know, not a day goes by, honestly, in which I don’t answer my phone and hear the words: I am a cash investor. I suspect the callers feel I should treat them differently than I would anybody else, but they’re in for a rude awakening. Just like I am a number to them, they are a number to me. I realize they have little vested interest in the property or in meeting the seller’s needs. They probably have not even seen the property. If the escrow demands a special consideration, they are unlikely to provide it. They are not special. Their cash is not “king” to me.
It seems like the REO robot agents are being replaced by the robot buyer’s agents. The tide has changed from robot listing agents who represent banks and asset managers of foreclosed homes to robot selling agents who represent cash investors. These guys comb MLS daily looking for new listings, writing offers, uploading the purchase offers to DocuSign and emailing those offers to listing agents. You throw enough at the wall, something is bound to stick.
As a Sacramento short sale agent, I have to look out for my seller’s interests and help them to choose the most motivated buyer to close their short sale. As a general rule, short sale banks don’t seem to like limited liability corporations (LLCs). I’m not sure why, either. It could be that an LLC is in-your-face about profit, versus a home owner who just wants a roof over her head. In any case, it’s hard to get excited over these cash offers. If push comes to shove, they don’t shove.
You know, short sales involve a lot of frustration. I dodge a lot of whipped cream pies in this business. Speaking of pies and throwing crap at the wall, I’d like to share a story with you. It involves a pie crust. Those of you who have never made a pie crust may perhaps find it difficult to believe that pie crusts do not live in your grocer’s freezer. Yes, you can actually make a pie crust at home out of flour, salt, shortening and water.
The trick is to not overwork the dough. If you massage it and roll it too many times, it will become tough and crumble. I was probably 7-years-old when I made my first pie crust. I thought I had followed the directions explicitly but I was having trouble. It wasn’t sticking together. I blamed it on my rolling pin. After I had rolled out the dough, I tried to fold it into quarters and lift on waxed paper to the pie tin, but it fell apart. I rolled it again. It crumbled again. In a split second of frustration, I hurled it at the wall.
Uh, oh. I could not believe I did that. I was horrified. My mother stopped what she was doing and stared at me. I was in big trouble, and I knew it. My heart started to pound. I might never get to bake again in the kitchen. I might go to bed without dessert. Maybe stand in the corner. But instead, my mother started to laugh. “That’s exactly where my first pie crust ended up,” she said.
Today, I make a perfect pie crust. And I’m a pretty darn good Sacramento short sale agent, too. Just don’t call and tell me you’re a cash investor, because I don’t care.
How to Submit a Back Up Offer
The real estate market in Sacramento is so crazy that a really smart move for any aspiring buyer might be to try a back up offer. The problem is no inventory. Now, you would think that little inventory would have solved the problem of flakey and indecisive buyers, especially for those buying Sacramento short sales, but it hasn’t. Buyers still abruptly cancel transactions even though their chances of being able to buy another home are dwindling as surely as the minute hand on that clock continues to move.
An agent called me several days ago to explain why his buyer was canceling. Like I give a crap. Canceling is canceling. He said the buyer’s lender did not explain Mello Roos to the buyer and therefore had incorrectly quoted the buyer’s pending mortgage payment. The buyer had not counted on having to pay an additional $100 a month or so. Except when I looked at the original offer tracking sheet, I discovered the buyer’s first offer had been $10,000 over market value. I was the person who had explained to the buyer’s agent that the home had to appraise. The buyer had originally agreed to pay a higher mortgage payment, but now that the price was less, that same payment was freaky. Wha?
Logical or not, buyers do suddenly cancel purchase contracts. That part hasn’t changed. I don’t think they understand the market, and why should they? Home buyers are bit players. One person buying one house. Investors and real estate agents who are active in the Sacramento market realize how difficult it is to buy a home right now. The median sales price has gone up from $155,000 a year ago in October to $180,000 last month. Yet, another reason why it’s smart to lock down a potential purchase through a back-up offer. Lock in that lower price.
When a seller signs a back-up offer, it means if the existing buyer cancels, the new buyer moves into first position and becomes the buyer. There is no going back on the market as an active short sale or active listing. The home is never exposed to the market a second time.
But you can’t just send the listing agent an offer and say:“Keep this in backup.” Well, you can, but it won’t be in backup. You need to submit a formal Purchase Agreement Addendum (PAA) with your purchase contract. Moreover, you can’t just sign a PAA and send it. It must be completed. Don’t cry Ma. If an agent doesn’t fill in the two spots in Section 1, the PAA is incomplete. One spot signifies the position for the buyer. Does the buyer want to be in #1, #2 or #3 position? The second spot indicates how long the buyer is willing to wait for the existing buyer to cancel. Is it 10 days? 120 days? A year?
You can also use a much simpler form, the C.A.R. Backup Offer Addendum.
Of course, if a buyer offers less than list price or something else is incompatible in the offer for the seller, the seller is not obligated to accept a back-up offer. Sellers are never forced to accept a back-up offer — even if the home is offered for sale as an Active Short Contingent. But most sellers are happy to receive a back-up offer and will accept. Like with anything in real estate, your offer needs to be signed, dated and in writing.
