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How to Lose Your Dream Home in Sacramento
There are times in this business when home buyers ignore the essence of time and wrongly believe that they have all the time in the world to decide whether they want to buy a particular home in Sacramento. The constant that is sure to happen, even if a home has been on the market for a year, is the minute one home buyer decides she might want to buy it, so does another. I can’t explain how or why it happens but it does.
It’s not a trick. It’s not a listing agent trying to get more money for her seller. Nothing up my sleeve, I swear.
Such was the situation with a home that closed escrow this month. I first started talking with the seller about this home a year ago. He is retired and volunteers on government issues in Washington, D.C. He had never seen the home, and it has always been a rental property for him.
I inspected the home in Sacramento and found the living conditions to be substandard. The carpeting required replacement, the walls and cabinets needed repair and paint. Bottom line, the only way he could sell that home for a decent price would be to get the tenant out and fix it up. His property management company wasted about half a year to remove the tenant. No idea what’s so hard about giving 60 days to move.
I sent a handyman over to fix up the home and get it ready for market. First buyer in escrow could not qualify for a loan, some little glitch at the last minute prevented him from closing. Back on the market. A few months later, another buyer made an inquiry and wrote an offer through their agent. Although I warned the buyer’s agent that the seller would want list price, the buyer had other ideas.
It took the buyer another week to write a series of counter offers and to eventually end up at the place where the buyer should have been in the beginning. We asked for list price and no concessions. Pretty simple. But the buyer wanted to negotiate. By the time we got to the third offer with the buyer, or maybe it was the fourth offer, I don’t recall, I had uploaded all of the paperwork to DocuSign for the seller.
At that very moment, a full price cash offer arrived for this home in Sacramento. Cash is not always king anymore, but a full-price cash offer does tend to rule.
So, the moral of this story is the seller elected to ignore the first buyer’s final offer, which met all of his demands, and accepted instead the full-price cash offer. Those buyers were so close to buying what they continued to insist was their dream home. They lost it. One minute they were celebrating that the seller was about to accept their offer, and the next they were crying. I felt empathy for them because they were a young family with another baby on the way, but I didn’t represent them. I represented the seller.
The Worst Ways to Buy a Sacramento Home
Have you ever wondered what are the worst ways to buy a Sacramento home? I swear, there are times when I see flashes of 25 years ago watching buyers in Sacramento hunt for a home to buy. It makes me wonder why they waste the effort. I suppose part of it is due to the low inventory of homes for sale in Sacramento, and those slim pickings can make some buyers feel desperate. The other reason is probably due to the fact that some buyers think they know better than those of us in the industry, which means they probably don’t hold much respect for real estate agents, but some people are like that.
Every so often I will get a phone call from a buyer who starts out by explaining they are not interested in talking to me unless I am the listing agent. That’s code for they hope that by “offering me the opportunity” to work in dual agency (double-end the commission) that I’ll get them a better deal by sacrificing my integrity and ethics. Probably because that’s what they would do, but they don’t realize that I am not them.
Money is not my motivator.
They think that agents will do whatever is necessary to put a deal together because we’re all starving to death or maybe we’re just scumbags, I’m not sure. I refer these callers to my team members to show. But I don’t tell my sellers what I suspect these guys are up to unless I receive an offer, no sense in upsetting them. It does put me on notice, though. And that’s not a very good way to look for a home to buy in Sacramento.
Although maybe the #1 worst way to look for a home to buy is to drive around town calling on For Sale signs. I get a lot of those, and then buyers are ticked off when they find out the home is pending and demand to know why there are no pending signs on the For Sale sign. They don’t realize that all listings are available online these days. Hello, 2014. If they don’t look at an online feed from MLS, they’ll never know whether a listing is pending or not. About half the time the home is pending before the poor sign post company can even pound a post into the ground.
If you’re a buyer in Sacramento trying to buy a home, your best bet is to ask a buyer’s agent to work with you. You’ll get the best representation, the most attention and direct service, and you won’t be driving around calling listing agents to find out the home is already sold. ‘Course, in retrospect, the agents would have to answer their phone.
Sacramento Home Buyer Says: I Do Not Want to Be in a Bidding War
In Sacramento real estate I often hear expressions reiterated over and over such as I don’t want to give away my house and my new favorite: I do not want to be in a bidding war. Personally, I don’t know of any seller who is giving away her house, so that’s a goofy expression. I take it to mean they want to negotiate; they want market value, and that’s a more positive way to phrase it. But buyers who say they don’t want to participate in a bidding war, or in other words a multiple-offer situation, well, they generally don’t have much choice, to tell you the truth. If it’s a nice house, others will want it.
The problem that arises is a buyer’s perception of what a “bidding war” means. An agent told me yesterday that her client does not want to pay $10,000 over list price in a bidding war. I was dumbfounded. Where did they get that number? That was so 2012. Those days of buying homes in Sacramento are gone. We might be receiving 2 or 3 offers on a home now instead of 20, and those offers mean you will pay list price or very close to it. If a buyer has to offer a little bit more to make the offer attractive, generally it’s by a $1,000 to $2,000.
And smart agents will wrap those small incentives into the closing costs anyway, and not in the sales price. Because they know we listing agents give our seller’s net sheets to show how much they will receive when multiple offers arrive. It’s the best way to compare those offers.
A bidding war means a Sacramento buyer might be in competition with one other buyer. And maybe that other buyer has a doofus agent who advises them to offer under market value as many of them do these days for no ungodly reason. If that’s the case, and odds are it is, a #2 buyer can buy that home just by writing a clean offer at list price.
Multiple offers don’t always mean what you think. They don’t always mean a bidding war. If a buyer doesn’t want to make an offer on a home that some other buyer wants, it’s possible that buyer might not buy anything. It’s worth the small risk to sign your name to a purchase contract and let your buyer’s agent go to bat for you. Don’t let words scare you.
Sacramento Home Buyers Ask: Why Wasn’t My Offer Accepted?
It pains me when I see a purchase offer to buy a home arrive in my email and I instinctively realize the buyer will be asking her agent: why wasn’t my offer accepted? In the mind of many Sacramento home buyers, they did everything right. This particular home buyer found the home she wanted online all by herself — it fit her parameters exactly. She fell in love with the photographs and knew before she ever stepped foot inside that house that she wanted to buy that home.
Visiting the home in person solidified those feelings and thoughts. Yes, she should definitely buy that home. She is qualified and has her pre-approval letter that confirms it. The buyer may have provided proof of funds from her checking account. She has delivered an earnest money deposit with her offer. Everything is as it should be. All the stars are aligned, and this is her home. She even offered list price. She did exactly what was asked. All that’s left to do is to figure out where to put the sofa.
Ack. The seller accepted a different offer. Why didn’t she get this house? Why did the seller reject her offer? What is wrong with her Sacramento real estate agent? These are the thoughts running through the buyers’ mind. Do you want to know what the problem is?
First, it’s probably not the real estate agent. I imagine the real estate agent told the buyer that Sacramento is experiencing a limited inventory market, there is not much for sale, and there is intense competition, especially for entry-level homes in good condition. This means many Sacramento home buyers must write a better-than-normal offer. It could entail a higher price, paying more of the closing costs or giving the seller extra benefits, among other home buying offer tips.
I know that buyer’s agents explain this to their Sacramento home buyers. But somehow, that advice seems to fall on deaf ears or for some other reason the buyer does not agree nor understand. An agent can tell a buyer they need to offer more than $300,000 for that listing at $295,000, and some buyers will still ask, can I offer $250,000? These are not true buyers who say those sorts of things; these are people who are mentally deranged, which means yes, they are buyers from another universe and don’t operate in our world.
Working with a veteran real estate agent can also help improve a buyer’s chances of getting an offer accepted. Listing agents know the agents who perform and agents gain a reputation in this industry — good reason not to rely on your cousin’s aunt who happens to have a real estate license.
It’s generally one of three reasons why a buyer’s offer is not accepted: the buyer or the agent or both. Which is your reason? Because it’s not the Sacramento real estate market. We all must adjust to the market. If a buyer conforms to the market, the buyer will get her offer accepted.
Why Buyers Should Talk to their Sacramento Neighbors
If you think your neighbors don’t matter when you buy a home in Sacramento — or anywhere for that matter — think again. I could not imagine a smart person buying a home in a neighborhood without talking to the neighbors and, perhaps, even asking the neighbors what they think about each other. Some people love to gossip.
My parents didn’t do that when I was growing up. They bought a home and did not talk to the neighbors in 1955 in a brand new subdivision called Heritage Homes, located in the Village of Circle Pines, an isolated area at the time about 15 minutes outside of Minneapolis. Our neighbors, the Palmquists — I vividly recall those horrid people and their hoard of little brats to this day — were absolutely unbearable. Apart from letting their lawn die, throwing trash all over the yard — such an eyesore — and their screaming, yelling and drunken brawls at all hours of the night, the kids were hoodlums who would steal toys in bright daylight right out of our yard. One of the Palmquist kids stuck a water hose into my bedroom window and turned it on full blast.
To try to put a stop to this kind of behavior, I stuffed one of the little Palmquist girls into my red wagon and pulled her out into the field across the street. A field that was converted into an ice rink in the winter but in the summer was blanketed with stickers. After a stern lecture and warning, I removed her shoes, dumped her in the field and left.
Fortunately, the neighbors on my street of homes in Land Park are wonderful. We stop when we see each other outside and talk. It’s a quiet street with very little traffic, only a block long. It’s rare for anybody who doesn’t live here to walk down our street or drive by. It’s like an oasis. There were a couple of neighbors whom some people didn’t much care for and they moved away.
Neighborhoods can change. We’ve been lucky throughout the ups and downs of the Sacramento real estate market that we’ve had only one short sale on our street. Imagine the economic make-up of areas where everybody paid half a million or more for their homes and those very homes are now worth $200,000 or so. That’s assuming, of course, that those individuals who overpaid could afford it at the time they bought.
One of my clients, a seller who had owned a home in an upscale community of million-dollar homes, recently closed escrow. Homes in that neighborhood are now selling around $400,000. He held a liquidation sale the last few days of his occupancy, and some of his neighbors who served on the board of his HOA showed up and tried to stop him from having the sale. They even sent security guards over to his house to stop the sale. They videotaped his wife screaming at their rude behavior, such a mild mannered and sweet woman otherwise. This is what neighbors can do.
You’re not just buying a home; you’re buying a neighborhood. Talk to the neighbors before buying a home.
