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Don’t Be So Certain a Sacramento House Near High Voltage Qualifies for an FHA Loan
A house near high voltage power lines might not pass an FHA appraisal.
An appraiser called me with a few questions about a listing we have in escrow, a house near high voltage, which is located in Sacramento near the light rail. To say it’s near light rail is putting it politely as you can see the tracks out the window, but not everybody minds a bit of transportation nearby. I have clients who live on busy streets, for example, and they say it connects them to the outside world. Makes them feel part of what’s going on, so I don’t judge locations that much. Everybody has their own ideas.
The appraiser wasn’t that concerned, either, about the light rail. He was more interested in the house and how the location of a house near high voltage can affect FHA appraisals. I quickly looked up the date the seller bought the property and pointed it out, because she bought with an FHA loan and it wasn’t all that long ago. Didn’t matter, said the appraiser, lots of things have changed over the past few years. OK, how about the fact the seller refinanced into a new FHA loan last spring? That is surely a much shorter gap of time.
Maybe that particular appraiser was lazy, he offered. There are good appraisers, mediocre and bad, just like Sacramento Realtors, just like any profession. And think about THAT the next time you go to the doctor. However, he wasn’t a lazy appraiser and he would measure. He would calculate exactly the distance of the house near high voltage power lines.
Measure what? Apparently the height of the high power voltage lines are addressed as the fall distance, and they can’t fall on a house nearby. Plus, the house needs to sit outside of the high voltage power lines easement to qualify for FHA.
Further, just because the seller previously received FHA loans twice for this property was no guarantee that it met FHA guidelines. Oh, my goodness. My heart started to pound. The seller is already moving out, and the buyers have removed contingencies. Who knew a house near high voltage lines could cause such a dilemma? I quickly called the buyer’s agent. Oh, says she, I forgot to tell you, a couple weeks ago we switched the buyer to a conventional loan. YES!
The Price a Sacramento Buyer Will Pay Can Exceed Market Value
Examining comparable sales is not the only way to establish market value.
Real estate 101 teaches us that market value is the price at which a seller is willing to sell and a buyer is willing to buy. However that doesn’t always apply to the amount a home will appraise for, and when you’ve got a lender involved at 80% of the value or greater, that lender will rely on an appraisal. And appraisals are an opinion of value, not fact. This is what can get Sacramento sellers in an uproar.
They know what their home is worth. I, as their Sacramento Realtor, also can generally accurately predict how much a buyer will pay, based on how I will market the property. Another agent might not get the same result; in fact, I know other agents don’t. Because they won’t take the listing. They think they know more than anybody else in the universe about Sacramento real estate. When they don’t.
I read a lot of blogs by agents who claim to walk out the door when sellers are “unreasonable” about their hopeful list prices. They act like it is beneath them or unprofessional not to take a listing at the market value they deem. Seems a bit arrogant to me. There are other ways to deal with this than to say adios, and don’t let the door hit you in the butt on the way out.
In hot seller’s markets, it is not unusual to sell a home for higher than its appraised value. I often get that result from my real estate marketing efforts. In those instances, the buyer can sometimes soften the sting of a lower appraisal by contributing cash to the transaction, and some buyers absolutely will accommodate that seller request. They realize market value is just one person’s opinion.
But the one thing that everybody forgets when they are riding on that high horse of they-know-the-market-better-than-anybody is what about cash? Huh? What about those cash buyers? There is no appraisal with a cash buyer. Many buyers from the Bay area pay cash. I market to buyers from the Bay area by networking with those agents, mostly foreign agents and their foreign buyers.
I had such a situation close escrow recently. I won the listing battle and had to call the rejected agent to ask him to remove his lockbox because he ignored the seller’s request to take it off. The agent appeared a bit snippy and sassy, saying he thought the price was too high above market value, and he didn’t want to take such a bad listing. Well, that listing sold after our open house at our list price for cash in 2 days and closed in 6 days. Sucks to be that agent right now.
There are many meanings to market value in Sacramento real estate, fine nuances. I’d also like to see the day the banks require two appraisals to justify market value. Why do they rely on the opinion of one appraiser anyway? If you’re looking for a Sacramento Realtor who uses her 40 years of experience to attract offers at maximum value, call Elizabeth Weintraub at 916.233.6759.
What Happens After Escrow is Opened in Sacramento?
After escrow is opened, buyers should stop looking at homes.
After escrow is opened in Sacramento, any number of things can happen. What is supposed to happen is the buyer is excited and wires funds for her earnest money deposit, and the listing agent changes MLS to pending. But that doesn’t always occur like it should and, even if it does, there is more that can go haywire. Especially if the buyer is not counseled by her agent and is not fully committed to the transaction.
Buyers are not supposed to be online combing through other houses and wondering if there is something better to buy. I hate to say this, but there is not something better. There are hardly any homes at all available for sale.
I’ve got a home closing this week that I had to sell four times. Four times. And why? I was kidding with the seller and saying, Oh, third time is a charm, and then that buyer canceled, too. It’s generally nothing to do with the property. Mostly, it’s the buyers. If buyers did uncover some small defect, it’s often blown out of proportion to such an extent there is no piecing it back together, regardless of how much sense a listing agent might make for the case.
We had an offer accepted on Thursday for another of my listings. I discussed with the seller at length about whether we should accept backups and whether we should change MLS to pending. MLS rules grant listing agents 3 business days to change a status, so with an offer accepted on Thursday, we don’t have to change the status until Tuesday. By changing the showing instructions to call listing agent, it means I am inundated all weekend with calls. That’s the downside.
I did it for the seller. Kept the listing active and let callers know we are pending but welcome a back-up offer. Sure enough, though, just as soon as we changed the listing status to pending, the buyer canceled. That’s not how it is supposed to go. Buyers are supposed to be completing the documents their lender requires to process the loan, reviewing the loan estimate and preparing for a home inspection.
Instead, after escrow is opened, buyers are canceling and then we’re selling to somebody else. It happens so much lately it’s becoming the norm. Criminy, I don’t care who buys the home as long as the buyer is prepared to close. One thing is: I do not bail on my sellers. No matter how many times I have to sell that house, I’m in this to close this.
Sacramento Agents Can Cause Buyers to Lose the House
Sacramento agents should thoughtfully craft purchase offers to avoid counter offers in hot markets.
The one thing all Sacramento agents should try to avoid have happen with their buyer’s purchase offer is to give the seller’s agent and seller a reason to issue a counter offer. A few weeks ago, a seller had a counter offer out, and while we waited for the response, another buyer swooped in and submitted an offer that the seller accepted. After pulling the counter offer, of course. If one can avoid the counter-offer situation all together, a Sacramento agent can increase the odds her buyer won’t lose the house.
The Elizabeth Weintraub Team members realize this and we try to avoid counter offers at all costs. When my husband and I bought our house in Hawaii, for example, there was already a counter out. Our offer caused the seller to pull that counter, too. Buyers, don’t ever let the fact that there is an existing outstanding counter offer discourage you. Jump on that baby like hot fudge on a sundae.
Some Sacramento agents never call the listing agent before submitting an offer. Even in this market of low inventory and high demand, which makes this a seller’s market. They just shoot over an offer, thinking this is how they’ve always done it, but maybe that purchase offer contains things that need to be countered. Now they’ve set up their buyer for possible failure.
It’s not just the sales price a buyer needs to worry about. It’s not always the big things. Often, it’s the little things. Here are some of the small things that Sacramento agents can do to cause their buyers to lose the house by inadvertently forcing the seller to counter:
- Asking for personal property that is not included in the purchase price
- Bucking local custom on how fees are split
- Requesting government retrofits, i.e. water-saving devices
- Demanding to choose title and escrow
- Asking for longer than 30 days to close
- Not tightening contingency periods
Success is often buried in the details. In the fine print. And it is to a buyer’s advantage for her agent to find out if there are special things the seller might hope to see in the offer. Maybe the seller needs a few days to move or to rent back? Sacramento agents won’t know if they don’t call the listing agent. (Of course, that agent would have to answer her phone.)
If you’re looking for Sacramento agents who work to avoid counters for their buyers (and answer their phones), call Elizabeth Weintraub at 916.233.6759.
Sellers Who Get Presale Home Inspection Slit Own Throats
A presale home inspection is a bad idea for a seller.
An an exclusive seller’s listing agent in Sacramento, I can preach until the cows come home that getting a presale home inspection is lousy idea but I still get resistance from other listing agents who disagree. They are confused about what doing the right thing means. Doing the right thing means protecting our seller’s liability and profit, and paying for a pre-sale home inspection is overkill. Not only that, but it can come back to bite. Such a disclosure can cost sellers tens of thousands and could even destroy their chances of selling a home.
California real estate law says a seller is required to disclose what a seller knows, which includes material facts. It does not say a seller is required to dig up every defect about which the seller has ZERO knowledge and then present those unknown findings on a silver-plated platter to buyers. It makes no sense in any sense of a logical argument to obtain a presale home inspection, except maybe to a home inspector who stands to profit.
Buyers are required to do due diligence. Buyers are required to obtain their own inspections, any and all that they choose to do. If a buyer fails to perform due diligence or fails to uncover a defect (about which the seller had no prior knowledge), that is not the liability of the seller. It falls squarely on the shoulders of the buyer. That’s the beauty of California real estate law and seller disclosures.
Case in point of ignorance. Barry Stone is a certified building inspector who syndicates a column about home inspections. He suggested in a recent article that banks selling REOs (real estate owned), which are foreclosures, should be required to obtain presale home inspections. This is a good example of a person focusing only on one part of real estate without looking at the bigger picture.
Banks are not required to disclose defects in a foreclosure when they have no knowledge, just like ordinary home sellers are not required to disclose defects about which the have no knowledge. Banks are even more off the hook since they never lived in the house. They sell the house AS IS because they don’t want to invite liability, either. Just like regular sellers.
To try to impose a law that requires home sellers, banks or otherwise, to obtain a list of defects to present to a buyer is ludicrous. Sellers are not required to discover factual information to present. Mr. Stone implies banks are dishonest and unfair because they don’t give their innocent home buyers a list of defects and they allow buyers to purchase their foreclosures without insisting buyers get a home inspection either.
If buyers are naive enough not to pay for a home inspection, and their real estate agent is bad enough not to suggest a home inspection, how is this the fault of the seller? Buyers are accountable to themselves. Our purchase contracts requires that buyers perform certain duties, and sellers give them ample time to complete those duties.
It makes no sense for a seller to go looking for trouble. Not to mention, no two home inspections are ever identical. A presale home inspection could show a defect the buyer’s home inspection would not and vice versa. Just don’t do it. Don’t think about it. Don’t act on that impulse, either. Your California purchase agreement states your sale is AS IS. Just leave it alone.
