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Don’t Shoot Yourself in the Foot When You Make an Offer on a Sacramento Home
Buyers who make an offer on a new listing should discuss the price with a Realtor.
The trouble with making an offer on a home is many buyers judge the value of the home by the sales prices of surrounding homes and not the comparable sales. They do not seem to understand that the gray house with the remodeled kitchen and additional 500 square feet is worth many thousands more than the home they can really afford to buy, which is the brown house, two blocks over, without the remodeled kitchen and 500 square feet less.
You might read this and say to yourself: it makes sense, why doesn’t it make sense to the buyer? And it’s because they don’t look at it this way. They see 6 or 7 homes, all of which vary in size, configurations, location and condition, and in their mind those homes are all the same. They are homes for sale in Sacramento, and all they have to do is pick one and make an offer for less. I know agents are chuckling?over this scenario but it’s how buyers’ minds work. I hear it day after day from buyer’s agents who call on my listings.
I can also understand why buyer’s agents might not want to discourage them because to do so could alienate the buyer from the agent. Nobody wants to be told they don’t understand what they are doing. Agents often will urge them to make an offer, any offer, because once they get a signature on the contract, they hope the negotiations will continue.
But you can take a brand new listing in Sacramento that is attracting a lot of attention and buyers will still think it is OK to offer less. The problem is the seller is very unlikely to accept such an offer. Even if the buyer were to make an offer for FULL list price, the seller might not even take that kind of offer, and believe it or not, a seller is not required to. Nope, no law.
Often I get buyer’s agents who say their buyer wants to make an offer just prior to an open house because they are worried another buyer at the open house will want their home and swipe it. Yet, they often make an offer that the seller cannot or will not accept. Talk about shooting yourself in the foot.
Bottom line, if the buyer wants to make an offer, it helps to determine market conditions, assess the competition for the home, and best of all, to consider the comparable sales.
Writing an FHA Offer for Homes Listed with Conventional Terms
Writing an FHA offer for a home listed with cash or conventional terms is sorta like trying to stuff a square peg into a round hole, yet buyer’s agents in Sacramento do it all the time. It’s not like we listing agents can play the listing police and stop the offers at the door. We have to present all offers to the seller, regardless of whether they fit criteria. It’s not the job of the Sacramento listing agent to determine whether an FHA offer should be presented; it’s just not our call to make, yet it can be a waste of time for everybody involved when buyer’s agents don’t do their homework.
It’s a lot of work for a buyer’s agent to write an FHA offer for a buyer. Not to mention, the emotional toll it takes on the buyer. Because after all, the buyer’s agent has shown Suzy Creamcheese the home of her dreams. Ms. Creamcheese has already figured out on which wall she’ll hang her flat-screen TV. She’s stuck photographs of this home on her refrigerator. She’s fallen in love with a home that a) she cannot buy and b) should not have been shown to her, and whose fault is that? Between the two agents, it’s not the listing agent.
The listing agent has most likely entered this particular home into MLS with cash / conventional terms. Was it an oversight or can the home be approved by an FHA appraiser, will it fit FHA repair requirements? Every so often in this business, you’ll find some listing agents who might automatically assume a home won’t pass an FHA inspection when it will, or their office staff might have forgotten to check a box and made a mistake when inputting the listing. The way to find out is to call the listing agent and ask.
Even so, the listing agent might not know the answer without asking the seller. Some sellers, quite frankly, do not want to sell to a buyer who is obtaining an FHA loan or a VA loan. There are a variety of reasons for that stance, which I won’t go into at this point, but one of which is often the fact the home might be tenant occupied with long-term tenants, and month-to-month long-term tenants require a 60-day notice in California. Not every seller wants to give their tenants a notice to vacate, for obvious reasons. Too much risk. Some prefer to let the buyer do it.
FHA guidelines require occupancy within 60 days. Notice from the date rent is due might exceed 60 days. Tenants might refuse to move. There could be problems. Yet, even if a buyer was willing to deal with the tenants, given a seller’s choice between a 15-day close with a cash buyer or a 35- to 40-day close with an FHA buyer — moreover, subject to all sorts of ways the transaction could blow up with that FHA buyer — which do you think a seller will choose? It’s a business transaction to many sellers, especially investors. They are not required to care about the buyer. It doesn’t make them heartless.
Buyers, before falling in love with a home in Sacramento, you might ask your buyer’s agent to find out whether the home you want to buy is a) listed to allow an FHA offer and b) likely to qualify for an FHA loan. Be aware that you’ll probably struggle with a CHDAP loan as well. Sacramento agents don’t create the markets; we just report on them, so don’t shoot the messenger.
What the Heck is a “Coming Soon” Home?
There are reasons to pursue a Coming Soon home for sale listing in Sacramento.
There are pros and cons to a Coming Soon home for sale, which you’ve probably noticed around Sacramento. You might have wondered what they are. Perhaps you’ve spotted a sign in front of a home that looks like it might be for sale but the rider on top of the sign post reads: “Coming Soon.” Or, maybe you’ve seen it as a type of off-market listing in Zillow that promotes it as Coming Soon, and it’s not yet in any online MLS system that you can find. What’s the deal? And further, what’s the point if you can’t buy it?
The best thing a buyer can do is ask her buyer’s agent to follow up with the listing agent. Now, I realize some listing agents in Sacramento routinely try to position new listings in such a way that buyers will call the listing agent directly, which allows the listing agent to double-end the commission — what is known as dual representation — by locking out all other agents. It’s a reason we contend with pocket listings, for example, and how sellers can potentially lose out on all of the benefits of mass marketing; we mourn for them the lost opportunities due to reducing exposure to the largest pool of buyers through a pocket listing.
That’s never been the method of operation nor intent of this Sacramento Realtor. My goal is to treat all agents fairly. In fact, I prefer that buyers hire a buyer’s agent instead of trying to deal with me directly. This way I can focus on my seller’s needs and not feel torn nor conflicted; my vision is clear.
While a listing agent cannot show a home that is in Coming Soon status nor solicit purchase offers while it is not yet on the market, agents have always been permitted to network with other real estate agents. I use this opportunity to network with other agents. The Coming Soon listings in Zillow typically contain an on market date.
If I’m working on a Coming Soon home listing, I let buyer’s agents know that they can show the home when it comes on the market. In fact, they can be first, if they like, but in a market with limited inventory and high demand like our present Sacramento real estate market, we will likely hold an open house on Sunday after the home hits the market. It only makes sense from a seller’s perspective to give the home a few days on market and to promote the open house before entertaining purchase offers. But it doesn’t mean a buyer who spots a Coming Soon listing can’t prepare a strategy with his or her own buyer’s agent and end up the winning recipient.
Home buyers definitely can get an edge over multiple offers by following a simple strategy.
Coming Soon home listings generate excitement. That approach also gives buyers a little bit of advance notice that a home is coming on the market. It stops the feeling of agony some buyers experience when a home pops up on the market and less than 24 hours later is in pending status, before a buyer has even noticed the home was for sale.
Ella Dining Room a Good Bet Before Steve Earle at the Crest
Light Rail at Ella Dining Room and Bar.
Just about every time I go to Ella Dining Room and Bar in downtown Sacramento, I try to capture the Light Rail going by. It wraps the restaurant, from K Street around on 12th, and it’s such a lovely view. Not that I would want to live anywhere near the Light Rail nor look at it every day, mind you, but for an evening out downtown, it lends that exciting, raw urban atmosphere, an element to the environment at Ella that stimulates and, if I pause for just one moment can make myself believe that I am not in Sacramento at all but instead am on vacation somewhere in Europe.
Which sometimes is a better frame of mind than thinking about the mortgage lender who left me a voice mail promising absolutely, positively, without fail, that loan docs would arrive in escrow yesterday. The same loan docs we’ve been waiting for from 7 days back. Good thing I didn’t alert the media! When they’ve cried wolf so many times, you get to a point where nothing they have to say holds much credence. At the end of the day, when loan docs don’t arrive, well, let’s say I don’t want to be that guy with my fly unzipped.
You don’t promise what you can’t deliver.
Steve Earle at the Crest Theatre, Sacramento
Or, thinking about the buyer’s agent who has the miserable job of submitting an offer almost 15% under list price for a home that’s been on the market for only 5 days. It makes me cringe for that guy. That buyer’s agent who is way too professional and polite to blurt: you are a knucklehead to the buyer. That buyer’s agent who hopes that sooner or later the buyer will learn his lesson and realize that the buyer’s agent’s advice is correct and, if the buyer has any shot whatsoever at buying a home in Sacramento’s seller’s market today, well, that buyer better start relying on the agent’s experience and, for crying out loud, analyze the comparable sales.
Throwing darts blindfolded at a wall doesn’t work very well.
Steve Earle, The Dukes, The Mastersons
Don’t get me started on the agents who believe banks are desperate to sell short sales they don’t own and wrongly assume that because a home has been on the market for a while, that it’s priced too high. Price is not the only reason a home doesn’t quickly sell. They don’t realize that some homes take longer to sell because they need work and not every buyer today wants to tackle repairs immediately after closing. Those homes take longer to sell, especially when they need to sell at market, which is calculated as market less cost of repair. With that kind of calculation, most buyers would prefer to buy a home that doesn’t need repair.
But a buyer eventually will buy this house, it just won’t be theirs.
Instead, I am grateful that we had parked our car with valet at Ella and could walk two blocks to the Crest Theatre to see Steve Earle and the Dukes, along with The Mastersons. It was a long show, by my standards, starting at 7:30 and emptying out 3 hours later, with no breaks,and way past my bedtime. I am grateful for front row seats so I don’t have to peer over or around somebody else’s bald head, as there were a lot of older people in the audience. I am grateful there were no kids kicking the back of my chair or spilling beer down my back. I am grateful talents like Steve Earle are still performing, and an experience like that is available to me.
His show was very unlike the Steve Earle show in 2009. Lots of Blues. He also talked about his child who has autism, and he said one in 85 children are diagnosed with autism today, and those odds affect 1 in 58 boys, specifically. If true, why is that?
Are You Working With a Sacramento Realtor?
That is such a simple question, are you working with a Sacramento Realtor, but it is extremely difficult for some buyers to answer. I can see why, too. Because what does it mean? They don’t know. Does it mean they know a Sacramento Realtor? Everybody knows somebody who works in real estate in Sacramento, you can’t turn around in a crowded Midtown bar or slam a grocery cart into the checkout counter at Safeway without stumbling into a real estate agent these days.
Does it mean that you have a relative in the real estate business whom you might call to represent you to buy a home? Does “are you working with a Sacramento Realtor” mean you are beginning to dislike your real estate agent who has been sending listings but never calls or follows up to see if you’re ready to look at homes or offers any other kind of assistance to you? Maybe not. It’s complicated.
Basically, when an agent asks a home buyer are you working with a Sacramento Realtor, it means are you presently working with an agent or about to work with another agent who will write the offer for you? It could also mean have you signed a buyer broker agreement, in which case, even if you’ve changed your mind about working with that agent, you’re probably stuck with that agent and can’t choose somebody else.
When an agent asks if you are working with another real estate agent, just be honest. Explain your situation. Because the agent is asking in a roundabout way if he or she can write the offer for you. If he or she cannot write the offer for you and represent you, then the answer is yes, you are working with another agent. Be aware that Realtors are prevented from interfering with another Realtor’s client.
Sometimes buyers want to work directly with the listing agent because they wrongly believe they’ll get some kind of break or preferential treatment. Not much we can do about those disillusioned people. They tend to get what they deserve, which is not necessarily excellent representation. Don’t go that route. It doesn’t mean, however, that if a listing agent shows you the property that the listing agent won’t want to write the offer because the agent most likely will.
My team members are upfront when they talk to buyers. They say, if we show the home, we will represent you. Do you understand and agree to it? Or, are you working with another Sacramento Realtor? It’s OK, to talk about this, and it is imperative. Otherwise, you might end up in trouble over procuring cause. You can save yourself a lot of time and trouble if the agent who shows you the home is the agent who will represent you.
