Email ElizabethA Twist in the Sacramento Real Estate Market
I’ve noticed a slight difference in the Sacramento real estate market this week. It’s a sign, I believe, that the market is struggling to head north instead of south. I wouldn’t say we are headed for full-blown appreciation by any stretch of the imagination but it is a positive signal that we might be pulling out of this real estate slump in Sacramento. It’s the piece of evidence I’ve been watching to emerge and have not yet witnessed until this week. We’ve monitored small median price change increases in year-over-year monthly stats, but not this.
I prepare offer tracking sheets for each of my listings. That way, if I need to know years from now about the offers I had received for any particular real estate listing, I’ve got that information at my fingertips. Each of these sheets give me an overview of what happened. For the first time since 2005, I’m receiving over-market offers from investors who are paying cash. That’s the sign I’ve been waiting for. I disregard the first-time home buyers. It’s the investors I watch.
For months now, multiple offers in Sacramento have been the norm. That’s due to low inventory, low interest rates and high demand. It’s cheaper to buy in the buy or rent scenario. When it’s cheaper to buy than to rent, it also means investors will get positive cash flow even if they finance a home. So, investors and first-time home buyers have been competing, often for the same home.
Here is something to understand about first-time home buyers. When a first-time home buyer bids over list price for a home, that home buyer is not taking extra money out of her pocket. She is rolling the excess into her mortgage. So, it’s not really costing her a lot of extra money to make a purchase offer over the seller’s asking price. If she offers an extra $5,000, her mortgage payment changes by about $30. That’s peanuts. Using that formula, at 3.5% interest, she can bid $15,000 over list price and still not change her mortgage payment by more than a hundred bucks. Of course, it might not appraise at that amount, and therein lies the major problem with first-time home buyers overbidding.
If there are no comparable sales available at that price, the appraiser won’t submit a value at the purchase contract price. If the buyer gets a low appraisal, her only solution to move forward is to pay the $15,000 difference out of pocket, in cash. Most don’t have that kind of cash and, if they did, they wouldn’t pay over market with it. Not just for the opportunity to buy a home, nope. Unless they would. Unless they were that desperate to buy a home.
Not only am I seeing owner occupants who are willing to play all loosey-goosey with cash, but now investors are, too. Investors are no longer guarding their cash like a precious commodity. They are willing to pay above market value, because that’s the last thing to give in negotiations. It’s no longer enough to pay cash. Now, it’s got to be over market. That’s what it takes to make prices go up. An investor who is willing to pay more than the going rate. Investors who pay over market result in higher comparable sales. Higher comparable sales pave the road for higher appraisals, which opens the flood gates for first-time home buyers.
The kink in all of this is sellers don’t seem to be aware of this new twist. When I tell sellers about the market, they look at me like I just landed here from Mars. Do I have spinach in my teeth?
I predict a very strong 4th quarter for 2012. I believe when we look back at the numbers in the spring, our Sacramento real estate market will blow your socks off. This is a fabulous time to be a seller or a listing agent in Sacramento.
Taxes for that Sacramento Short Sale
Time is running out to avoid paying taxes on a Sacramento short sale. The 2007 Mortgage Forgiveness Debt Relief Act expires on December 31, 2012. This is the law that exempts a short sale seller from paying taxes on forgiven debt for a personal residence. Will the law be extended? Most likely, if the past is any indication and the future continues to be as uncertain as it is. You know how they say history repeats itself. That’s because it does. And we have an election year. It’s in the 2013 budget.
Some of you may not recall what happened last go-around with this short sale tax issue. When it expired, it was not renewed right away for the following year. Sellers were closing short sales fearing the worst: that not only did they lose their home, but now the government would be sticking outs its hand and taxing them on the short fall difference. We had California taxes to deal with at the same time. It was a scary problem. Congress dinged around on the short sale taxation extension and finally granted the extension. Then our California exemption came through, too. Just in time for taxes. And it was made retroactive. We were all biting our fingernails.
I am working on a Bank of America HAFA short sale. Yeah, I know, I’m a sucker for punishment. I have a few of them. You can read all the government rules for HAFA about the timeframes to process a HAFA short sale, and they are pretty much meaningless. It takes Bank of America a good 4 months, on average, to approve a HAFA short sale. If you’re teamed up with a Green Tree mortgage in second position, God help you. Green Tree closes files after 90 days. So, you can see the problem. Not only that, but after 6 months, Green Tree sends its loans to charge off. It’s better not to have a short sale charge off if you can avoid it.
This particular seller is very concerned that she won’t close this year. I believe she will. It’s been 9 months already. You can get pregnant and give birth in that period of time. Bring a tiny new life form into being. But that HAFA short sale at Bank of America can’t close within a reasonable timeframe.
Your safest bet is to close your short sale escrow within the confines of the 2012 calendar year. That way there is no question. But if you have to rollover into 2013, do so knowing it’s a risk. Although, a calculated risk. Do you think the government will hang all of these short sellers out to dry? This Sacramento short sale agent says probably not. Not if history repeats itself.
Elizabeth Weintraub Earns Top Agent at Lyon Real Estate
The managing broker of Lyon’s downtown office called me yesterday to report the Elizabeth Weintraub Team is #1 in the company for August. That makes me the top agent at Lyon Real Estate, number one. I can’t believe it. She says my production is over $5.3 million for last month. That’s a lot for 30 days of work. That’s especially a lot when my average sales price is less than $300,000. Sometimes, I sell condos for $50,000. I can’t verify that number because, to be honest, I’m too busy and it’s not a top priority. Who has time to count pennies?
I figure August must be a good month for everybody in Sacramento real estate. I know August is the month that all the agents at Lyon Real Estate have to pay for Errors and Omissions insurance, plus legal representation, and those fees are pretty hefty. So, if I was the head of Lyon Real Estate — which I need to point out I am not — I would probably charge agent’s statements in the month that agents are likely to have the most closings. That would ensure a more likely payment.
Squeezing money out of agents is probably harder than it sounds, knowing agents like I know real estate agents. So, that would mean the month of August is probably the biggest month of production for most agents in Sacramento.
If that’s the case, then it’s pretty cool to earn status as the top agent at Lyon Real Estate for August. I don’t know how many agents work at Lyon. I’d guess it’s around 1,000. I have to give the credit to my Elizabeth Weintraub Team members, though, and I’m not just saying that because that’s what you’re supposed to say. The truth is I could not do what I do without Barbara Dow, Linda Swanson and Shaundra Bradley. Not to mention, my escrow officer, Dawn Herlache and her assistant Jennifer Baranoff, at Placer Title. And of course the guy who closes mortgages for our buyers, Dan Tharp, at Comstock Mortgage, is incredible, and I often receive glowing reviews of him. There are also behind-the-scenes players, the office assistants and managers who cover my butt every single day. I suspect they also take care of crap that I never even hear about.
Funny thing yesterday an agent whose offer was accepted on one of my Sacramento short sales called me the No Drama Agent. That’s his nickname for me. We closed a transaction a few years ago, and I guess my demeanor struck a chord with him. I don’t have any respect for drama, and drama is unproductive and a stupid waste of time. Maybe that will be my new motto: the No Drama Agent.?
Make a Commitment to Your Sacramento Short Sale
If you’re committed to doing a short sale in Sacramento, you should be committed to the long haul, just like your Sacramento short sale agent. It’s kind of a two-way street. A seller promises to provide financial documents over and over until her eyes spin, and an agent promises to submit those financials to the short sale bank while keeping her personal opinions to herself. OK, maybe not that last part. The point is nobody gives up and splits.
An agent called me yesterday to say she had received short sale approval for a seller on a file she started working on about a year ago. She had struggles like we all have struggles. It was tough to get the home in marketable condition, and one of the parties to the short sale was not exactly cooperable. The agent had put the home on the market but could not open the short sale with the bank because she was missing documents. Her solution was to cancel the listing.
This is the thing about short sales and life in general. You can learn from your own mistakes or you can learn from somebody else’s. It’s easier to learn from somebody else. My suggestion to the agent was to put the home into temporarily off the market status, but don’t give up on your seller. Don’t look at the seller who isn’t cooperating, focus on the seller who is agreeable and committed to the short sale process. The other guy will come around.
Sacramento short sale agents have a responsibility to many parties in the short sale. As a listing agent, we have a fiduciary responsibility to the sellers. If there are two sellers, that responsibility extends to both parties, even if those parties are divorced and not speaking to each other. As a short sale listing agent, we have a responsibility to the buyer’s agent and the buyer, too. If an agent has reason to believe the short sale will not happen, the agent should not list that short sale nor present it for sale to the marketplace. It’s not fair to a buyer to sit in escrow week after week waiting for approval when it’s not gonna happen.
The agent took the home off the market and put it into limbo status in MLS. She continued to work on the short sale. She didn’t throw in the towel and walk away. She honored her commitment to the Sacramento short sale. It took a year but both parties finally cooperated and she received short sale approval.
I keep telling people this secret but they don’t believe me. The secret to a successful short sale is commitment. Don’t give up. Not every short sale will close the first time around. You might have to submit that short sale for approval a second time or a third time or a fourth time. My longest short sale was almost three years but we closed. It doesn’t matter how long it takes to close a short sale; it matters whether one is made from the material to see it through to fruition.
Make a commitment to your Sacramento short sale.
Welcome to the Sacramento Fall Home Selling Market
The Fall home selling market in Sacramento starts today! Aren’t you excited? Many people don’t even realize that Sacramento has two real estate markets. Some concentrate only on Spring home selling without realizing homeowners get a second chance to sell in Sacramento, and that season starts in the Fall, the day after Labor Day weekend.
After the vacations are over. After the kids are back in school. After it’s no longer considered cool to wear white, that’s when your real estate market in Sacramento takes off. The only problem with this is the market was already steamin’ hot in August. It’s a seller’s market in Sacramento, for those of you who have been living under a rock. It’s no longer a buyer’s market and hasn’t been for some time.
The conditions in Sacramento are tough, almost as tough as driving down the hill from Lake Tahoe after Labor Day in crawling bumper-to-bumper traffic. I swear, we probably would have been better off if we had turned off at the intersection and drove out of our way to Jackson than continuing to inch along Highway 50 from Tahoe. We have tough conditions in Sacramento because we have about 10% of the number of homes for sale that we had 5 years ago. Mix that with low interest rates, below 4%, and throw in first-time home buyers on top of cash investors, hit the chop button, and you’ve got a blender full of something inedible.
I’m doing my part to help. This Sacramento REALTOR has a handful of new listings today hitting the market. Fresh-faced and scrubbed. Priced right. First-come, first-serve. We don’t play favorites. There’s a home in the Pocket that’s been pre-approved by Bank of America as a Cooperative Short Sale. There’s a newer home in Natomas under $150,000, offered as a short sale. How about a hot little number in Arden Manor as a starter home? We also have another Cooperative Short Sale with 4 bedrooms near Elk Grove, passed over by a confused soul. Coming attractions this week include a home near College Greens that is a traditional sale, offered by a seller with equity, and a third Cooperative Short Sale in East Sacramento’s River Park.
I tell Sacramento home buyers to look on my website for new listings, and to stay away from the dated inventory they find elsewhere. But do they listen? What do you think?
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