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What if Sacramento Real Estate Sold and Closed in 3 Days?
What do you think would happen if you could buy a home in Sacramento and close within 3 days? Wouldn’t it be sorta cool if we could demonstrably alter the way Sacramento real estate is sold and buyers did all of their due diligence upfront, meaning they came to the table with an appraisal and underwriting approval? Back East, buyers often conduct a home inspection prior to contract ratification. This idea isn’t so far fetched.
You can buy just about any kind of product, even an illegal product from overseas, and receive it within 3 days. If you were to refinance a mortgage, that takes 30 days generally, but even when all is said and done and they are ready to close, that’s when they are required by law to ask a borrower: are you sure? Are you really, really sure you want this loan? Because we’re gonna give you 3 days to change your mind and rescind.
Yet in our neck of the woods to close escrow on a piece of Sacramento real estate, we enter into 30-day escrow periods, sometimes longer when underwriting is said to drags things out — but a delay is often not due to underwriting but because the mortgage loan officer (MLO) did not carefully scrutinize the loan application at inception or possess enough experience to predict the problem. I see some situations that never should have progressed to the point they made it to if the MLO had been more competent, but I digress.
Back to closing Sacramento real estate within 3 days. It would add certainty to transactions and definitely reduce the number of cancellations. Of course I’m looking at this solely from a seller’s perspective and how anxious sellers become when a purchase contract is signed, but then they go through 30 days of uncertainty and anxiety, never knowing whether the transaction will close. Buyers have 10 ways from Sunday to cancel a contract. They don’t even have to sneeze and trip over their own feet. They can just cancel.
Part of the reason home buyers cancel is because they’ve had too long to think about buying that home. Why, if they only had 3 days before they were in their new home, sitting back on the sofa and putting up their feet on the coffee table before the realization hit: What in the hell did we do? Well, it would be too late. For more thoughts, call Elizabeth Weintraub, Broker #00697006, at 916.233.6759.
The Upside When FHA Buyers Cancel the Escrow
FHA buyers who cancel escrow pave the way for the next FHA buyer.
It’s doubtful that most potential home buyers start out the home buying process by thinking they will become one of those freaked out FHA buyers who might cancel the escrow, but it can happen even in markets of tight inventory more often than you would imagine. There are many reasons, none particularly substantial from an experienced listing agent’s point of view. The reasons tend to range the gamut, from unsophisticated to twisted to incorrect analyzations, but whatever the reasons the decision is right for them. Buyer’s agents do their best to manage these events; however, they are not always successful.
You can’t change the mindset of stubbornness in some people. It’s a fine walk for buyer’s agents. On the one hand, they may instinctively realize the buyer is unreasonable but, if they agree, they lose the buyer. Sometimes they are afraid to point out: No, the seller will not rip off the two-year-old brown roof and replace it with your favorite color of black. In that instance, the buyer would probably feel alienated and jump ship. They often feel there is not enough real estate business to allow them the luxury of choosing their buyers, so they stick with whomever they get.
The thing is you can’t blame the buyer’s agents when FHA buyers cancel the escrow. Their agents are doing the best they can. You also really can’t blame the buyers, especially when they are first-time home buyers. It probably hasn’t sunk in that all homes have defects, nor that they might not buy a home now, especially if they try to force the seller to meet demands the next buyer won’t make. Or, that it could take them another year to find a home. We have such reduced inventory in the Sacramento area, so little for sale, and almost every cute home will receive more than one offer for it. With every rejected contract, though, they learn more about the market in Sacramento and what it will take to buy a home.
Meanwhile, back at the ranch, the sellers might be wary that the next buyer will cancel the escrow. But that is unlikely. The odds are most buyers who go into escrow manage to close escrow. Sometimes, sellers want to take an offer from a conventional buyer over that from an FHA buyer — OK, most of the time, they do. But in a situation where it was an FHA buyer who elected to cancel the escrow, the seller is actually in luck. Because FHA appraisals are assigned a case number, and when the home immediately resells to another FHA buyer, that same case number will be pulled.
I sold a home in Natomas last year this way. We did not want a conventional offer but accepted FHA for that reason. Agents could not understand, what? No conventional offers?
An FHA buyer who cancels escrow means there are no appraisal concerns for the next FHA buyer. The seller simply lost a couple of weeks of marketing time, but there are dozens of excited buyers right around the corner who would love to buy that home this spring. All the reports have been completed, too, so the seller is able to supply full disclosure prior to an offer. When an FHA buyer cancels the escrow, it’s a slight setback but odds are the next buyer will be stronger, better informed and more deserving in the seller’s eyes, especially when there are no concerns of a low appraisal.
Better yet, the market has gone up. If you’re thinking about selling a home in the Sacramento area, call Elizabeth Weintraub, 916.233.6759. Put 40 years of experience to work for you.
The Seller Demand to Release Deposit Can Shake Up California Escrows
Seller Demand for Release of Deposit is new form
Many of the disputes and disagreements in an escrow seem to center around the buyer’s earnest money deposit and its release. Whenever a buyer cannot close for some reason — and there seems to be more and more of “those reasons” lately — the sellers tend to immediately eyeball the earnest money deposit and they expect to get it. If the seller has a right to the earnest money deposit, there is a new form generated late in 2014 by C.A.R. that can be delivered to the buyer called a C.A.R. Form SDRD, 11/14: Seller Demand to Release Deposit.
The Seller Demand to Release Deposit allows an escrow company, at the escrow company’s discretion, to release the deposit within 10 days to the sellers without the buyer’s cooperation or agreement.
The Seller Demand to Release Deposit illustrates and points to paragraph 14G of the residential purchase contract, which also states a party who refuses to cooperate can be fined a $1,000 penalty, according to Civil Code. I suppose this means if the buyer has no right to keep the deposit, but refuses to sign the release, not only can the escrow company release the money to the seller but the seller could sue the buyer in Small Claims Court for an additional $1,000. This is a pretty huge change over previous years because much of the purchase contract, up to this point, seems to favor the buyer in California, except for this portion.
Of course, the buyer’s deposit is generally only at risk if the buyer has released all of the contingencies and cannot perform or has been given a Notice to Buyer to Perform and fails to act. Let’s say a purchase contract expires because the buyer can’t close on time for some reason. The buyer can issue an Extension of Time Addendum but a seller does not have to agree. If the seller, say, refuses to sign an extension, the seller could most likely cancel the contract, after issuing a Demand to Close escrow, and then demand the deposit, providing it does not exceed Liquidated Damages.
In our limited inventory Sacramento real estate market, prices can rise and sellers might get a better price for the home if they put a home they sold in, say, a slow month like November, back on the market in February. This should be a wakeup call to buyer’s agents and their buyers when lenders can’t close on time and in accordance with the contract.
And of course, all parties should obtain legal advice and not rely on this Sacramento REALTOR’s observation because this REALTOR is not licensed to practice law.
When Sacramento Home Buyers Cancel a Contract
Delivering bad news to a seller in Sacramento is every bit as horrible as shooting antibiotics down your cat’s throat. You know it’s gotta be done, and you’re the one who’s gotta do it, but it’s not pleasant. I don’t know a Sacramento real estate agent alive who wants to tell her seller a buyer has gone sideways and fallen off the edge of the cliff, but so many of them are not watching where they’re walking these days. They seem to be unsupervised.
La-dee-la-dee-la-dee-dah, oops, over the cliff. It’s almost like a video game. Not real.
I blame it partly on DocuSign. It’s so easy to sign a residential purchase contract these days, why, you can sign on your cellphone. Blip, blip, done. It’s easier than buying a latte-half-soy-pumpkin-caramel at Starbucks. With whipped cream. Except by the time you finish consuming that 800-calorie fat bomb, at least you feel satiated. When Sacramento home buyers sign a purchase contract, it’s much more forgettable.
Oh, did I buy a house this afternoon? Slaps forehead. How silly of me. No, sorry, I didn’t want to buy a house. I wanted tickets to the TBD fest. Clicked the wrong thing. Please cancel the contract.
It’s a sorry state of affairs when I find myself grilling buyer’s agents about how much time they have spent with their buyers, how well they know them. Agents tend to use the term “client” rather loosely. Some stranger calls, asks to meet at a home and, around 2:00 AM, after the bars close, that person decides to sign the RPA waiting patiently in DocuSign, is that person a client? Or, is that a person we’ll have to chase around for the next couple of weeks to get the cancellation signed because her intentions to buy a home were never there in the first place?
Perhaps buyer’s agents should discuss next steps and consequences, and help a buyer figure out if the buyer truly wants to purchase a home before presenting a buyer with click here.
How to Profit from a 50% Pending Home Sales Fallout in Sacramento
It pays today to be a home buyer on a backup offer in Sacramento since we seem to be experiencing such a high cancellation rate on escrows; in some cases up to 50% of the pending sales are falling out. I say this not to be an alarmist but to point out what other real estate experts are too frightened to bring up because they are worried this kind of data would harm our fragile sales market. Every real estate professional, just about, knows this is happening in the Sacramento real estate market, if they’re doing any kind of business. They’re just not talking about it.
That’s because we have to be positive and spread only good news about Sacramento real estate. Oh, spittooey. You’ll read in other news media that sales are UP. What media is not telling you is real estate sales naturally increase in the spring. Inventory is low, which is true, inventory is low as compared to previous years, but it doesn’t matter because there aren’t enough buyers for it. Home buyers today typically lust over only the best home on the block and the rest are ignored.
On top of this, buyer’s agents think they are working with buyers because buyers tell the agents they are buyers. They might even pop up with a pre-approval letter in possession. But it doesn’t mean they are a buyer, because a buyer closes escrow and eventually ends up with a home.
It’s not the end of the world if an escrow cancels, because it will generally turnaround and go back into escrow again under a second purchase contract within a relatively short period of time, but that’s why you want to be a backup buyer, if you can. Don’t think you can’t write a contingent offer, either, if you have a home to sell, because sellers are accepting contingent to sell offers from buyers.
For other listing agents, my advice is don’t put that listing into pending status until the buyer has deposited funds into escrow, which should occur within the 3 days MLS gives us to change the listing status. Because nobody wants to deal with the unfair stigmatization of a back-on-market listing because some doofus buyer on a whim canceled the escrow.
For buyer’s agents, don’t write multiple offers when your buyer can’t afford to buy each of those homes. Not only is your reputation as a Sacramento real estate agent at stake, but those types of “buyers” can easily morph into a vanishing act after both offers are accepted. If your buyers really want a pending home, consider writing a backup offer.
For buyers, get over the fact that homes might cost $100,000 more today than they did 3 years ago. Those days are gone. But prices are still low as compared to the prices pre-market crash. Don’t wait for interest rates to go up and slowly rising prices to price you out of the Sacramento real estate market all together. Get in while the getting is good, and for heaven’s sakes, stay there.
