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Rising California Homes Prices to Break 2007 Record High
It is only a matter of time before our rising California home prices will reach our record high set in 2007, says C.A.R. Chief Economist Leslie Appleton-Young. In fact, Appleton-Young says our homes prices will surpass that pinnacle during the next 3 to 5 years. We are still sitting with low inventory and fewer numbers of buyers who can afford to buy a home. According to C.A.R., almost 3 out 4 buyers cannot afford to buy a home in California. That’s staggering to think about. Not to mention, any little jump in interest rates could further dampen enthusiasm to buy a home in Sacramento.
I was thinking about this news last night when a client who moved to Colorado called me. I had recently sold her mother’s condo at Riva on the River, followed a few years later by selling her own home in West Sacramento. This seller wasn’t planning to buy a home in Colorado right away. But like most people who make the transition from buying to renting, buying another home was never far from her mind. You get that bug. She admitted to tapping into Zillow and Realtor.com to view homes for sale. Then one day, out riding bikes with her husband, they stumbled upon a neighborhood and said, hey, we could live here.
Sure enough, they found a home for sale, very similar to the home she left behind in West Sacramento. Except this is their house on steroids. More than twice the square footage. The market in Colorado is still crazy, bidding wars, multiple offers, says my Realtor friend in Denver, Joan Cox. My fingers are crossed that their offer gets accepted. My former client and her family should be in their new home by Thanksgiving.
All of this might lead you to wondering if rising California homes prices will keep you out of the marketplace. Not if you don’t let it. Not if you act within the next year or so. This is a great time to buy as rates are still super low, hovering around 3.875% to 4%, depending on the type of loan you get. The market won’t crash because too many buyers pay cash and others who finance are extremely well qualified with strong down payments. I had hoped we were headed toward stabilization. That would be a calming influence in Sacramento real estate. But not predicted to happen.
In Sacramento County, our highest median price for single-family homes was $395,000 in August of 2005. That was also the month I recall the phones had stopped ringing. The merry-go-round was over. As of September, 2017, our median price for single-family homes in Sacramento is $348,000. Sacramento was among the first affected in California. Our rock bottom was the summer of 2011. Hopefully, we will be among the first to taper off.
The prediction for California overall is 3 to 5 years. However, I predict at the rate we are moving, we’ll see Sacramento meet our high of 2005 in only 1 to 3 years.
We still have a lot of buyers who deserve to own a home in Sacramento. If you’d like more information or help with Sacramento real estate, please call top Sacramento Realtor Elizabeth Weintraub at 916.233.6759. I answer my phone. Put 43 years of experience to work for you.
When Agents End Up Working With Crazy Buyers
Working with crazy buyers is part of Sacramento real estate.
I have to be careful when I am facetious. My humor leans toward dry. Because my general nature tends to present itself as a nice person, sometimes people don’t realize when I am insulting them. I suppose that could be interpreted as a good thing. I could say I feel sorry for an agent, and another would think I truly felt empathy — when what I meant was I’m sorry the agent is such an idiot. In that event, the other side of the street is a better place for that agent to walk upon than to chance an encounter with me.
Some agents are forced to work with crazy buyers; I get it. The market is tough on many agents. The limited inventory in the Sacramento real estate market makes some agents desperate for business. But if an agent chooses to work with a crazy client, that agent owes it to the rest of us to rein in that person. You don’t give a loopy dude 10 shots of bourbon and turn him loose with a six shooter unless you’re a sucker for punishment.
When an agent knows her client is a loose cannon, she doesn’t send her client unauthorized correspondence just to stir the water further. Because that end result is no transaction for her. Like the Soup Nazi. No soup for you. The seller doesn’t want to be in escrow with a nut job. Neither does the listing agent. There is also that problem of guilt by association.
Over the years of being a Sacramento Realtor and dealing with Sacramento real estate, I have come to be highly selective. I select the sellers I work with. I work only with people I like. If I can’t find something to like about a person, I don’t work with them. Further, I am especially critical of purchase offers. I scrutinize. My job is to make sure the seller closes escrow. That means going into escrow with a person who is likely to close.
One thing I do is ask buyers to do before looking at homes is to sign an agency disclosure. It’s required by California Civil Code prior to showing any real estate. Yet many agents never present an agency disclosure until weeks of showings have passed. If buyers struggle with signing that document, which is just a disclosure, that could be a red flag. It needs to be addressed.
Not every buyer is a serious buyer. Not every buyer today is committed to closing. We have crazy buyers in the market. For a million different reasons, buyers sign offers and never move forward. Agents should be able to pick out these types of clients and correct that behavior before they ever get to the offer stage.
The agents who can’t, well, they lose credibility. Not to mention, sales. Because they spend way too much time working with clients who are not really clients.
When You Know the Sacramento Buyer is Not Buying a Home
Experienced agents can tell when a Sacramento buyer is not buying a home.
When you know the Sacramento buyer is not buying a home, it’s not fair to anybody to pretend otherwise. Regardless of how much a buyer may yearn for a home, not every buyer will end up a homeowner. How do I know this? Because I speak with first-time home buyers who want to buy a home nearly every day. I listen to their wants and needs. From this information, I determine whether these buyers are realistic and motivated. See, a buyer can possess all the motivation and determination in the world, but if a buyer is stuck in fantasy land, the odds of buying a home are dramatically reduced.
I try to be non-judgmental. I know that buyers are not professional real estate agents and don’t possess intimate knowledge of the market. Part of my job is to educate buyers. Especially those who rely on Zillow or other websites that often provide inaccurate information. Armed with knowledge, a buyer is then able to make an informed decision.
A few weeks ago, a buyer called to say she was unhappy with her agent because she wasn’t getting results. Since agents are generally in the real estate business to make a sale, it was entirely possible the problem did not lie with the agent. The buyer asked if I would research a particular home in Elk Grove. Her agent had shown her the property. She had not made an offer nor signed an exclusive buyer’s broker with this agent.
As a favor, I called the listing agent. The agent had 5 offers, several of which were all-cash offers, and those all-cash offers exceeded the list price of $400,000. As with some listings in today’s market of low inventory, this listing was priced to drive multiple offers. It makes little sense to compete in these types of situations if a buyer is unwilling to offer over the listed price.
The buyer asked if she could buy this $400,000 home for $300,000. Without laughing, I explained all of the reasons why this type of approach was not going to work. On top of which, this home was was highly desirable and unique — which means those other buyers aren’t going away. It’s painful for an agent to realize that a Sacramento buyer is not buying a home.
A few days later, the buyer emailed me to confess that she had gone back to see that home again with her agent. She was so overwhelmed with desire that she wrote an offer on the spot for $100,000 less than the list price. She asked if I would still work with her and show her other homes while she waits for an answer from the seller. I know, beyond a shadow of a doubt, that the buyer is not buying this home.
Now, I am not in the business to swipe other agent’s clients. There’s enough business in Sacramento for everybody. I had explained earlier how real estate agents work and why this buyer should decide which buyer’s agent she wants to hire. She told me she really liked her agent but did not feel her agent could perform. Yet she wrote an offer with that agent.
I suggested she stick with her agent, the two seem like peas in a pod. I didn’t refuse to work this buyer simply because she wrote an offer with her agent, although loyalty is paramount. This buyer performed contrary to her own best interests. I was forced to turn her loose because she could not, would not, did not listen to good advice.
Being a Realtor isn’t for everybody. Nobody wants to point out that a Sacramento buyer is not buying a home. It’s often best just to move on to those we can help.
Ways to Hold Title in Sacramento When Buying a Home
Sacramento home buyers should discuss ways to hold title before opening escrow.
Home buyers often give little thought to the ways to hold title. I hear escrow officers ask the question over and over, and watch buyers’ puzzled faces as they grope for answers. How to hold title is something buyers should decide upon about the same time as they receive a lender preapproval letter, but unless their agent brings it up, they might not give it a second thought.
Be aware that Sacramento Realtors are not licensed to practice law, so we can’t advise buyers, unfortunately. It’s a legal question that is best answered by a real estate lawyer. But let’s get real, how many buyers are going to run to their lawyers and pay for this type of advice, even though it’s suggested? Not one.
Here are some of the ways to hold title in California:
- Joint Tenants with Right of Survivorship
- A Married Person, Sole and Separate
- Community Property
- Community Property with Right of Survivorship
- Trust
- Corporation or Partnership
- LLC (limited liability corporation)
Apart from possible tax ramifications, the way a buyer holds title affects transfer, rights of transfer and whether the remaining interest will pass along to the survivor in the event of death. It’s an important consideration and should not be decided upon simply because one form sounds more familiar or because that’s how your parents hold title.
Please do your own research and get legal advice before deciding. Just don’t pick joint tenancy because all your friends pick that option. Community Property with Right of Survivorship is probably the most common that I see buyers leaning toward. It gives you the benefits of survivorship in the event one person dies, the property transfers to the remaining spouse but you can’t sell your interest.
Top 3 Loan Preapproval Mistakes by Sacramento Home Buyers
The biggest loan preapproval mistake is plucking an out-of-state lender off the internet.
Sellers’ agents in Sacramento insist that the buyer submit a loan preapproval with the purchase offer. They want to see that the buyer is qualified to purchase the property and has at least taken the steps to talk to a lender. But the letters themselves don’t guarantee that the buyer will get a loan.
If you want to give a Sacramento home seller ammunition to reject your purchase offer, here are three things you can do to mess up your loan preapproval process:
Choose an out-of-area lender. There is nothing inherently wrong with an out-of-area mortgage broker, but listing agents typically won’t know the lender nor its performance record and, let’s face it, there are a lot of loosely-defined mortgage brokers practicing. Listing agents and their sellers don’t want to watch the transaction fall apart because the buyer tried to get a loan from a lender that could not perform or did not fully vet the buyer.
Submit a prequal letter instead of a preapproval letter. A prequal letter says the lender has had a conversation with the borrower. A loan preapproval letter generally discloses the lender has a completed loan application, obtained the buyer’s credit report, approved it, ran it through actual or desktop underwriting and reviewed the buyer’s documentation. It speaks volumes.
Attach a loan preapproval letter that shows the buyer is qualified to pay more than the asking price of the home. Nothing says to the seller: “Let’s issue a counter for a higher price” faster. In fact, the mortgage broker I work with emails me the preapproval letter in a Word format so I can immediately lower the price, if necessary, before submitting the offer.
I always suggest that my buyers compare rates and terms among lenders, although I have no stake in the lender the buyer ultimately chooses. That’s the buyer’s decision to make. But I do want to submit the buyers’ offer in the strongest light possible, and that means submitting a preapproval letter (not a prequal) with their offer.
If your lender can’t or won’t issue a preapproval letter, then you might want to look for a lender who will. Don’t sabotage your efforts to buy a home by making these loan preapproval mistakes. Call Sacramento Realtor Elizabeth Weintraub at 916.233.6759 for a recommendation to a local Sacramento mortgage broker.
