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How to Decide Which House to Buy
My intentions yesterday were to list homes and not to necessarily encounter a great method for home buyers to decide which house to buy. As I sat in the kitchen of a home in Carmichael, I explained to the owners how buyers often make impulse decisions and purchase a home based on emotions. Which is why I do my darnedest to evoke an emotional attachment. My goal in marketing is to make buyers fall in love with the home.
Now, in the past, whenever I showed homes, I would ask buyers to rate the home on a scale of 1 to 10. With 10 being the highest and 1 being the lowest. This helps buyers remember which homes they viewed and whether they were good candidates. One of the sellers I spoke with yesterday mentioned she bought a home a few years back and came up with her own idea of rating. It was so clever and smart that I have to share this with you. In fact, I don’t know why every home buyer would not want to use this method.
If I understand her correctly, I believe the first thing a buyer would do is make a list of things that are not negotiable in the purchase of a new home. Starting with the most important item at the top and working your way down to the lesser items. Then, assign a rating number to each issue. For example, say you have 7 things on your list that describe the type of home you hope to buy. If you gave location the highest rating of 10, you are on the right track. Next to location might be number of bedrooms. Assign a value to that. And so on.
Then, when you believe you have found your dream home, you need to decide which house to buy. There might be another home on the list that fits all of your parameters. What you would do is add together all of your assigned values and divide by the number of non-negotiable items. This will give you a weighted average.
If you cannot decide which house to buy because you are madly in love with the first house, this method will show you which is a better choice for you. Because if the weighted averages of non-negotiable items is considerably larger for the second-choice house than the averages of the home that tugs on your heart strings, this is a way to see through the emotional pull. Who can argue with logic? OK, don’t answer. Because we all know who that person is.
Can a Seller Withdraw a Counter Offer Before its Deadline?
The following story of can a seller withdraw a counter offer before its deadline happened recently in Sacramento. It goes like this. Seller put a home in Elk Grove on the market just before Thanksgiving. On December 31, the seller takes the home off the market and cancels the listing. On January 1, the home comes back on the market as a new listing at a new price. This is a way to reset the days on market and get a new MLS number. We do this to revitalize a listing and generate more excitement.
I should note this is not my listing. The story involves the buyer for this home in Elk Grove and how can a seller withdraw a counter offer. This home was listed by another agent. The price was apparently too high because it did not sell. Sometime in February, the agent put the home into “temporary off market” status or TOM, as agents refer to it. Sellers are supposed to give approval for a TOM status but not every agent asks.
In March, the listing came back on the market and then a few days later expired, and then extended. Toward the end of April, the home’s price dropped again substantially, where it sat for another month. Finally, buyers came along, represented by an agent, and made an offer. The sellers countered that offer. The buyers signed the seller’s counter offer.
This is when we had a seller withdraw a counter offer. The important thing to remember in this unfortunate chain of events is the timing. Before the agent sent the counter offer to the listing agent, the listing agent texted that the sellers had rescinded the counter offer. A few moments later, the agent sent another text to say the sellers no longer want to sell. The listing has been withdrawn from MLS.
The agent asked how can a seller withdraw a counter offer when my buyer has signed it? See, the deal is if the buyer’s agent had returned the counter offer prior to receipt of the text rescinding it, the seller would have been in contract. But for whatever reason, the accepted counter offer was not delivered to the buyer’s agent before the listing agent withdrew the counter.
I see this story play out time and time again. Often what happens is even worse than this story, though. Often what happens is another offer arrives while we are waiting for the buyer’s agent to send back the counter. In those instances, we immediately pull that counter offer before the deadline. Buyers who don’t act fast enough lose.
Don’t make the mistake of thinking that just because a counter offer is in front of you that you hold the cards. The clock is ticking, and you don’t.
Photo of Vika Gerassimenko at Yosemite
There is Always Another Buyer for That Sacramento Home
No matter what, there is always another buyer for that Sacramento home.
There are many listing agents in Sacramento who do not subscribe to the theory that there is always another buyer for that Sacramento home. That’s OK, that’s their practice. We’re all different. Those who do not believe that premise tend to be the agents who will do just about anything to make a sale, including, at times, throwing their seller under the bus. That’s my opinion, btw. Of course, if you ask those agents, they will disagree. But the truth is I close so many escrows, my life is not tied up in any ONE sale. I’m not gonna miss a mortgage payment or starve my cats to death if we have to find another buyer. There is always another buyer for that Sacramento home.
It’s a fact, Jack. Especially in this seller’s market. Often, agents plead with me to make the deal work. Code for push the seller into a detrimental situation. Not gonna do it. First, it is not a deal. It is a sale involving collective memories and emotional attachments created in a home, often in which a seller has lived for years, if not decades. Second, this is a financial transaction involving a willing seller and a willing buyer. Until the buyer turns not so willing.
The bad part about the practice of Sacramento real estate, and most everywhere else as well, is the fact the listing agent is not allowed to talk to the buyer. Can’t negotiate with the buyer nor directly influence. Their agent bears that responsibility. Further, we have many different types of buyer’s agents in Sacramento. Plus, no telling from where the buyer originated. Could have walked into an open house, an office or stumbled across the agent in Facebook. Not necessarily a person the agent even knows. Personally, I think many buyer’s agents do a bad job of explaining to their buyers the agent’s role. They are so worried about offending or risking the buyer’s loyalty that they often say nothing.
Unfortunately, those types of buyer’s agents are door openers. Paper pushers. Taxi drivers. People pleasers. Ineffective non-communicators.
Which means we get uninformed buyers — buyers without any kind of professional relationship with their agent — those are the ones you never know if they will close escrow. They will sign a purchase contract, but it can be meaningless to them. Agents? If the buyer asks you how she can cancel, that’s a red flag.
One thing I know for certain. If a buyer wants to cancel, the buyer will do it. Oh, the buyer might claim the home inspection revealed too many defects, but what home inspection doesn’t? Most homes have stuff wrong. Wait until the next one, buddy, I think. You think this home inspection is awful, just hang tight. Your next home might be worse. And all of the things the buyer freaked out over? Fairly certain our next buyer isn’t gonna give a damn.
Because there is always another buyer for that Sacramento home. Sometimes, buyers with cold feet drop out of buying a home all together. They quit. They remain renters. On the other hand, the sellers I represent will sell and close.
Squeeze Every Dime From a Seller Credit to Buyer Closing Costs
If you don’t use every cent of the seller credit to buyer closing costs, you lose it.
Due to the new regulations proposed by Trump for FHA loans, borrowers could find themselves limited in the amount they can receive from a seller credit to buyer closing costs. Since many loans in Sacramento are FHA loans, that can cause a problem for cash strapped buyers. See, the thing is many first-time home buyers can afford to pay a hefty mortgage payment, but they don’t always have enough reserves to pay closing costs.
It is not unusual for a seller to negotiate paying part or all of those costs for the buyer. This seller credit to buyer closing costs is often figured as a percentage of the sales price. Before Trump, that amount was 6% for FHA, but it’s likely to be reduced to 3% of the sales price. However, before you start jumping for joy and grateful it wasn’t eliminated all together, be aware there are several things that can go haywire.
Low Appraisal Can Erase a Seller Credit to Buyer Closing Costs
For starters, often a seller will increase the sales price to accommodate for the closing cost credit. In other words, if a seller listed a home for $300,000, a buyer might offer a seller $310,000 and ask for a 3% seller credit to buyer closing costs, which would give the seller an effective price of $300,700.
If it appraises. That is the kicker. If it doesn’t appraise, the seller could find herself netting $291,000, if the maximum appraisal amount is the sales price. It can backfire. Further, the seller is free to cancel and is not required to lower the price for a low appraisal.
What if the Closing Costs Are Less than the Seller Credit?
Sometimes the seller credit to buyer closing costs is negotiated after a home inspection, and the buyer finds a bunch of stuff wrong and wants it fixed. Instead of fixing the defects, sometimes a seller will offer a buyer a credit instead. Since the lender will not allow a credit to repair a defect, the credit is instead applied toward closing costs. The reasoning is the money the buyer would have used for closing costs can be saved for repairs. Not so fast, though.
Part of the problem with this approach is sometimes buyers think they will receive the full credit. For a home selling at $300,000, that would amount to 3% of the sales price or $9,000. If the buyer’s total closing costs do not add up to $9,000, there is a problem. Say, the closing costs are only $7,000. That means the $2,000 the buyer expected to receive stays in the seller’s pocket. The buyer can lose that extra money.
How Agents Can Protect a Buyer’s Closing Cost Credit
The smart thing for any agent to do is to call the buyer’s lender when the closing cost credit is negotiated. Don’t reply on an addendum or other paperwork that could be misread or misfiled. Call the mortgage loan officer and make sure the lender is aware and recalculates the closing costs. There are ways to stretch the costs to cover all of the credit from the seller so the buyer doesn’t lose any of that money. Just don’t wait for the last minute.
Smart buyer’s agents are always thinking ahead and coming up with ways to avoid problems down the road for their clients. This is one of those situations that needs close monitoring. It’s better to be safe than sorry. Don’t always assume somebody else will do their job. They don’t always. They let you down. Lenders make mistakes. So be proactive.
Tips For Buying a New Car Are Useful When Buying a New House
My husband accused me of car shopping because I was reading the new Consumer Reports about new cars for 2013, but I was really comparing the marketing to the new homes of 2013 in Sacramento. I’m talking about buying a new home from a builder. Personally, I don’t sell very many brand new homes — I mostly handle resale — but one of my Elizabeth Weintraub team members, Linda Swanson, has more than a decade of experience in new home sales. She was once a new home sales manager, too. So, while she is out showing homes to buyers, if they run across a new home subdivision, she’s extremely qualified to go to bat for her buyer.
Caution: new home buyers! Don’t ever walk into a new home subdivision alone because, if you do, they will track you, get your name and number, and no other buyer’s agent anywhere in Sacramento will be allowed to represent you. You will be on your own. With the builder’s agents who are experienced and with training you do not possess. You should hire your own separate buyer’s agent.
Here are new car tips from Consumer Reports, which also apply to buying a brand new home in Sacramento:
1. Start Online: Absolutely, spend all the time you want in your comfy PJs, search naked if you want, just don’t forget and use FaceTime. Get a feel for the homes that have come on the market and the homes that have sold, the types of neighborhoods where you might want to live.
2. Take Test Drives: Go to open houses. Book a private tour of a few homes you might want to buy. Sit in the living room and imagine what it would be like to entertain guests, ditto at the kitchen table. Just don’t fall asleep in the bed.
3. Get Approved For Financing Early. You can’t go home shopping without the ticket to ride in your hand. You need that preapproval letter. It’s not to prove to your agent that you are qualified because your agent probably doesn’t give a tiddlywink about it. Your preapproval letter is for the builder and because every other buyer competing with you will have one. Don’t be the odd guy out or people will poke fun and laugh at you.
4. Find Your Old Car’s Trade-in Value. If you have a home to sell, interview a couple of agents and ask for a comparative market analysis. Just don’t choose the agent who gives you the highest price because you might never get that price. Choose the agent you trust. Don’t sleep with your agent, either. You may develop a close bond, but keep the relationship professional.
5. Get Price Quotes. Ask your buyer’s agent to give you the complete financial history of this home and competing homes around it. Knowledge is power. You need numbers. You need to know what other homes have sold for, how much homes are presently pending at (because they will be your future comps) and, in this seller’s market, don’t pay too much attention to the sold comps because most homes are higher in price now than they were last week. Just don’t ask your agent to write a lowball offer in a seller’s market or she might be tempted to smack ya.
6. Have Dealers Compete. You can go with your agent to different new home subdivisions and look at the inventory offered for sale from various builders. If you can find a similar home in a different neighborhood, you might be able to use that home as a comparison to the home you prefer to buy. Remember, though, that in a seller’s market, the builder is in the driver’s seat, and if the subdivision is not overbuilt, this strategy might not work.
7. Negotiate Everything Separately. New home builders often want to bundle services and offer you a package deal on the lot, the home itself, the upgrades for the home, the appliances, the furniture (in a model home) and the mortgage and homeowner’s insurance to boot. All of these things have separate price tags and buying them in a package does not mean you are getting a discount. It could mean you are paying a premium. Unless you just like to throw around money, then go for it. Throw some in my direction, too.
8. Skip the Add-Ons. If you really need those granite counters, put them in afterwards. Granite is cheap, cheap, cheap right now. If you want hardwood flooring, buy the floors and install them after closing. If you desire top-of-the-line appliances, work out a price with a wholesale dealer from a distributor and don’t buy these items from a builder. Because you’ll pay through the nose. And we have enough problems with our noses and spring pollen allergies around here.
9. Check the Math. Everybody makes mistakes because we are all human. But even machines can make a mistake because they are input with data from human beings. It’s easy for a line to be eliminated or a zero to show up in the wrong place. Just think about text messaging and auto correction on your cellphone. Have you never sent an inappropriate message before by mistake? Hey, it can happen in a purchase contract, too.
10. Finalize the Paperwork. Don’t move in before you close escrow. Don’t sign any blank documents if all of the information has not been completed. Use a reputable title and escrow company. Oftentimes, builders will send all of their escrows to a particular company because they have negotiated a whopping discount in exchange for volume. When a company is flooded with volume, sometimes service vanishes and integrity diminishes. Make sure your paperwork is completed correctly. You won’t know what most of the financial documents say, so make sure your name is spelled correctly and the property address is right. That will be half of your battle right there.
The other half will be moving.
If you’re thinking about buying a brand new home in the Sacramento area, please call Elizabeth Weintraub at 916 233 6759.
10 Easy Steps to the Best Deal, Money-saving tips from our car-buying pros, from Consumer Reports April 2013
