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When Homes in Placer County are Priced Under Comps
When the appraised value of homes in Placer County are less than the prices of homes for sale in your particular neighborhood, you may encounter problems selling that home in Placer County. Prices have not appreciated in all neighborhoods over the past couple of years in Sacramento and Placer, especially in certain high end gated communities when the attraction specifically targets a certain kind of buyer for a luxury home.
In some of those areas, when a listing agent is doing research it helps to look at the market from the eyes of a buyer and not the seller nor the appraiser. After all in the end it is always the buyer who determines the price, regardless of what the seller, the agents or the appraiser may believe. If a buyer wants to pay more than the appraised value, the buyer is rarely prohibited from doing so by financing restrictions.
Standard business practices calls for Placer County listing agents to perform a comparable sales search within a half-mile radius of the property or maybe even within the same subdivision, but there is a benefit to looking at the real estate market outside of those parameters. Why? Because buyers do. Buyers are generally not wedded to our industry boundaries. They search an entire area. If buyers can purchase the same type of home a mile away, only better and bigger for less in the same type of neighborhood, they will do it.
Basing values on the prices of active listings is not typically a high priority when pricing a home because sellers can stick on any old price tag and find some newbie agent willing to stick a for sale sign in the yard. It’s the comparable sales, the homes that have actually sold, that tend to establish value. Unless they don’t establish value. It can happen. Then active listings are very important to compare to your home.
Take a subdivision of homes in Placer County where there have been no sales over the past 3 months. I had one of those briefly listed, and the comparable sales from months earlier – sales that an appraiser will not a lot of weight to because they fall outside of the accepted timeframe – reflected a much higher value. In reality, though, after trying to sell the home for 3 weeks, it became clear that the sellers had paid more for the home a few years back then they can probably sell it for today. Doesn’t a listing agent have a fiduciary duty to disclose those findings to the seller?
You would think so. But listing agents are often reluctant because the messenger tends to get shot. I will tell a seller, though, if I see it is highly unlikely a seller will receive the price he believes the home should sell for based on the comps. For example, if there are homes for sale in a subdivision, and the last 3 homes that sold were single stories and 4 of the 6 homes for sale are single stories, and your listing is a two-story what do you think will happen? Single story homes are also more popular.
Further, if out of those 6 active listings of houses in Placer County, your home is the highest sales price, buyers will lowball that price. The price per-square-foot tends to lose its grip. Luxury home buyers can face too many choices in some areas. They want to pay the same price for a larger home that mirrors the price of smaller homes. Of course they do. They want the most house they can buy for the least amount of money. That might not be the sellers’ goal and in that case, the home should probably be removed from the market.
Good News is Often on the Tail End of Bad News
White blonde hair is not the same thing as silver hair
There is really no such thing as horribly bad news in the life of a Sacramento Realtor. Although, I could point to the 7 hours I spent at a Land Park hair salon yesterday, trying to process my hair into silver, and it’s still only a white blonde. At one point my hairdresser was ready to boot me out the door with golden blonde locks but instead I canceled my manicure and pedicure next door on Riverside to try one more go around. I made an appointment for silver hair, not golden blonde.
The worst thing is I’ll show up to claim our VIP tickets at the Basilica of Saint Mary’s Block Party this Saturday in Minneapolis with white blonde hair. Probably go visit my brother who is dying from lung cancer and not talking to anybody until now. Eventually, I’ll return to my hairdresser and give it another go for silver. Or, Mother Nature will do it for me in enough time.
Then I received an offer for a troublesome property that the agent did not show and could not verify if the buyer can even qualify. Plus, another sale blew up because the buyers freaked out and, since I am not their buyer’s agent, I can’t try to calm those irrational fears. It’s their ultimate loss.
When a sale blows up, I try to break the news to the sellers as gently as possible, especially if we are not able to talk by phone about it. The last thing a seller needs to see in her email is the subject line that the buyer canceled. The cancellation of a purchase contract can be jarring and disturbing news, delivered unexpectedly. I approach it along the lines of the cat is the roof and can’t come down. Like yesterday I emailed the seller that the Buyer Has Problems. Because they do. Their problem is they aren’t closing because it never occurred to them that buying a 100-year home could present a few a minor issues.
Bad news for them. Good news on the tail end of bad news for some other lucky buyers, though.
The other good news is I am relisting another home that the seller canceled last year and now wants to sell again. She was very apologetic for doubting certain aspects of this transaction; I understand confusion like that and tend to forgive. It’s a nice home in a good community, and should not present any unusual difficulties to sell. All of this just goes to show that when a door closes, a couple more open up. There is no good reason to let any bad news in Sacramento real estate create a negative or adverse situation.
Maybe You Should Hang On to That Sacramento Duplex in the Pocket
The beauty of selling hundreds and hundreds of homes in Sacramento is I have direct experience in so many different neighborhoods that I can often picture the home in my mind just by hearing the address. That’s what happened yesterday when a prospective seller called to talk about the real estate market in Sacramento and selling his Sacramento duplex in the Pocket neighborhood. I pay attention to what people say to me, and I heard this guy say he was not in a hurry to sell and he wanted to maximize his profit. He asked for my opinion and I told him it was probably best not to sell right now.
I can hear my company’s managers having a conniption fit at the moment. Other readers are probably spitting coffee at their monitor wondering WTH? Did she go off the deep end? Why would a Sacramento Realtor tell a prospective seller that now is the not the best time to sell when it’s a freakin’ seller’s market with no inventory, low interest rates and high demand?
Because of the seller’s goals and motivation, that’s why. It’s not about me.
There are basically 3 types of people who will buy a small Sacramento duplex in the Pocket: local investors, first-time home buyers or Bay area investors. Of the 3 types, the buyer most likely to pay the most money for a small duplex in our present market is the first-time home buyer. We are witnessing screaming crazy demand for multiple-family homes, whether it’s two houses on a lot or a duplex, for buyers with expanded families.
Local investors watched the market fall and hit rock bottom in 2011. At that time, they were willing to pay more than list price to grab a home. Today, not so much. Today, with rising property values, they want a discount. They want a hedge against falling values as well. Bay area investors will often pay a little bit more, simply because they don’t know the neighborhoods where they buy or they hire an agent from out of area as well. They also tend to compare values to the Bay area, which are absolutely insane, so by comparison Sacramento looks like more reasonable, but they, too, are often too stubborn and reluctant to pay list price. Many investors today try to demand a deal in exchange for a cash offer, so much that when we hear an investor is a “cash buyer” those words cause agents to moan.
This seller’s best bet is to clear out at least one side of the duplex. Get it empty, fix it up, and make a few small upgrades. Make it easy to show. Change the other side to month-to-month from a lease. He won’t get top dollar from an investor even with A-rated tenants. He’ll get the most money from an owner occupant.
I could picture this Sacramento duplex before he gave me the address, and I asked if it was a corner unit that wrapped around facing two different streets, a one-story and, sure enough, it was. I knew the value without even looking it up in MLS to run the comps. Sure, he might lose $2,000 in rent, but he’ll probably gain $20,000 in sales price, and that’s enough to warrant moving the tenants out to show the unit as vacant. It will increase showings, too. And he can’t do that until next spring. So, there you go, now is probably not the optimum time for him to sell.
But it’s not a bad time.
A Good Purchase Offer Does Not Make the Seller Issue a Counter Offer
Small mistakes in a purchase offer can require a counter offer.
With almost every new Sacramento listing these days comes a flurry of purchase offers from an assortment of buyer’s agents. Every strong listing agent in Sacramento is witnessing this sort of stuff right now. Some of us, I should add, are fairly detail oriented, and we expect purchase contracts to arrive with all the I’s dotted and the T’s crossed. It should not be surprising, then, when we find mistakes in the purchase contract that it means we will undoubtedly be required to suggest a counter offer to the seller.
A well written contract is a purchase offer the seller can immediately accept. If an agent is submitting an offer in a multiple-offer situation, for example, and that offer is less than list price, a buyer’s agent should not force the seller to issue a counter by making a mistake in the offer. Because a seller will start looking at other things in the offer to object to, perhaps and quite rightly so, starting with the sales price.
Sometimes agents will toss other factors into an offer such as requesting a certain title company when the seller is paying for the title insurance and may have a preference for a different title company. That’s enough to require a counter offer as well. If an agent is from out-of-area and uncertain about what types of expenses are customary fees paid for by the parties in Sacramento, the agent could call the listing agent to ask.
It’s not just listing agents who might gravitate toward easy-to-sign purchase offers; it’s also the sellers themselves. Sellers read entire contracts, believe it or not, and they can note subtle differences among the offers. For example, if the listing in MLS does not offer FHA nor VA financing, the likelihood is it was not a mistake. The seller might prefer only cash or conventional offers. A buyer’s agent’s opinion about that is of no consequence.
I’ve even had agents send this Sacramento Realtor a purchase offer accompanied by an email asking to please send us a counter offer. Not only is that in bad form and could possibly violate a fiduciary relationship with the buyer, but it also suggests the agent has been unable to get the buyer to understand the realities of the marketplace. That’s not exactly the kind of people we want to go into escrow with, although, sometimes it’s just the luck of the draw with buyers and buyer’s agents are stuck with who they get. You can’t always change people, especially the stubborn ones.
My advice for agents is to just write the best offer, check for mistakes, and try not to encourage the seller to issue a counter offer.
Sacramento MetroList to Agents: We Lied, Too Bad, So Sad
Just when us Sacramento REALTORS thought it was safe again to bend over in the shower, our Mafia Sacramento MetroList proves us wrong. About 6 months after MetroList announced we were NOT required to sell our lockboxes back to MetroList at 60 bucks (or so) a pop and we could continue to use those lockboxes until the day they died, MetroList, without explanation, has reversed that decision. Wait, it gets better. Remember that shitty $60 trade-in allowance offered for the iBox Exchange? Now it’s only $20. They cut it by two thirds. But not wanting to be total assholes, apparently, MetroList will give every agent until the end of December 2015 to comply and buy new Bluetooth iBoxes, the Supra BT LE.
The way I found out was by logging into my Sacramento MetroList yesterday to read the announcement — which has since vanished from its homepage — so I thought it best to alert my fellow agents that some of us are about to get screwed even worse than last fall. If you sell 2 or 3 homes a year, this probably is not a big deal to you. But if you’re like me, a Sacramento REALTOR who moves more than 100 homes a year, it totally sucks. My Supra account reports that I personally maintain 62 lockboxes in my inventory, and 12 of those are new Bluetooth iBoxes. This means I must sell 50 lockboxes, once worth about $5,000, for 20 cents on the dollar. Then I can replace that inventory by blowing $6,250 (*including tax for those of you doing the math) for the new Bluetooth iBoxes.
No matter how you look at it, if I want to maintain my present inventory, I’ve gotta dig into my nickel jar to find $5,000 to donate to MetroList. Not to mention drag out my red wagon to load up 50 lockboxes, and pull it along like a pack mule in 100-degree summer heat for 2 1/2 hours to reach MetroList. They should send a Rolls Royce to pick me up for the money I’m throwing at them.
What happened to the promise that we can keep our old lockboxes? I guess we’re SOL. My lockboxes still have plenty of juice left in them and should fully function at least another 4 to 5 years. They work, and when they don’t work for some reason, they can be fixed without much trouble. When a Bluetooth iBox malfunctions, you’re up a creek without a bolt cutters. I had a Bluetooth iBox die after only 20 showings. Stuck on the handrail of a home in Land Park. Just refused to operate.
I can speculate about why MetroList reversed itself without warning and without a conversation nor an explanation, but that would be pure speculation. It’s probably about the money, though. It’s always about the money. Especially when they say it’s not about the money, you can rest assured, it’s about the money.
Agents: If you don’t replace your lockboxes by December 31, MetroList will automatically fine you. Keep it up, and they’ll send you to, get this, a “tribunal hearing.” That’s a fine how do you do.
