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The Sacramento Real Estate Market Train
The fall real estate market in Sacramento is not at all how I pictured it would be. Usually, transitions are made slowly and you can see the danged train coming, but not this year. One day it was summer and the next, bare trees. This was a very abrupt change in the Sacramento real estate market. But like with all things in life, you’ve got to go with the flow and change with it.
Take home pricing, for example. Just a short while ago, a listing agent could advise her seller to price a home very aggressively. In fact, this Sacramento real estate agent would push ahead of the curve. Examine all of the comparable sales for the past 6 months, single out the best for the last 3 months, determine the direction they were moving, calculate the difference, pare it with the active listings to position and pad it a little. That strategy no longer works in today’s real estate market in Sacramento.
The reason it doesn’t work is because the attitude of buyers has changed. Buyers always drive the market, even if it’s a seller’s market. Today’s buyers are worried. They are worried that another bubble is around the corner, which it is not. They are worried about interest rates going up, as they should be concerned. They are worried about whether they’ll still have a job tomorrow and whether our government will ever get back to work.
Meanwhile, you’ve got REOs coming on the market at almost double the prices from last year. I just spotted another foreclosure this morning. This was a home that I had sold a year ago as a short sale, a cooperative short sale through Bank of America. We had the cooperative agreement signed from Bank of America and yet still the bank released the servicing just days before we were set to receive short sale approval. Bam. Now the file fell into the lap of Seterus, the seller no longer qualified for the short sale, and the home went to foreclosure.
Back on the market today, a year later, at almost double the cost. The comparables in that neighborhood do not support the price.
Today, it’s better to be sitting at the back of the train and watching where the train is moving. Catching glimpses of the front of the train going around the curve. That’s how a Sacramento real estate agent will know where the market is headed.
photo credit: White Pass Train at Skagway, Alaska, by Elizabeth Weintraub
Pricing a Home in Sacramento Ahead of the Curve
Pricing a home in Sacramento ahead of the curve is the strategy a few select Sacramento real estate agents are offering to today’s sellers. It means pricing a home where you think the market is heading and not where the market is now. This strategy doesn’t work so well if the home is difficult to sell or is unique. It works well in areas of high demand where buyers are lined up the minute a home goes on the market — in places like Natomas, Elk Grove and Lincoln.
In Elk Grove today, you can pretty much walk the line of buyers with an order pad and pen, asking each what they will pay for this home in Elk Grove advertised at $185,000. Guy first in line might say $200,000. Tear off a ticket and write $200,000 on it. Woman behind him will smirk and promise she’ll pay $220,000. Tear off a ticket and write $225,000 on it. Couple behind both of them will trump those offers and, my goodness, they’ll pay $250,000. And so it goes. Throw your pad and pen in the air. Nobody has any regard as to whether the home will appraise when push comes to shove. They’re just thinking about their mortgage payment.
Why? Because every $10,000 increment at 3.5% interest equates to an additional $45 per month. If the home would appraise, a buyer could increase an offer by $50,000 and pay only an additional $225, less than, say, an HOA fee. Buyers don’t know how real estate works. They don’t understand that an appraiser will need to find solid comparable sales to justify a price that is $50,000 higher than any other home near it. And if they do understand, they are hoping that when the appraisal comes in less, the seller will lower her price.
A price ahead of the curve might be $225,000. Because in 30 to 45 days, there might be comparable sales at that price. Of course, you won’t get a ton of buyers. You probably won’t get multiple offers. None of that excitement. But you might get 2 offers, and one of those will be an offer you can take. All you need is that one offer from one committed and qualified buyer at a price that will close escrow. If you need more information on pricing a home in Sacramento, call Elizabeth Weintraub at 916.233.6759.
Is Your Home for Sale at Too Low of a Price?
Sellers are often amazed when they immediately receive an offer after going on the market in Sacramento. Part of that amazement comes from not fully realizing the reach and breadth of our MLS and Internet marketing. Everything is instant nowadays. People have no patience for anything. They want it now, and two hours ago would be even better. However, when you consider the fact that we are now in a seller’s market — which means buyers are camped out in your back yard, lurking around the corner, ready to jump out at you when you take out the morning trash and shout SURPRISE, here is a full price offer plus a little bit more — it is not really amazing at all to get a fast response on your home for sale.
But there will always be sellers who genuinely believe that if they receive an offer as soon as the home goes on the market, they must have priced it too low. I don’t know where they get that idea. They could have priced that home in Sacramento at such a high price point where it won’t ever appraise until Honey Boo Boo grows up to become president, god forbid, but buyers still might make an offer on that home for sale. The price of a home can make or break a transaction, and homes that won’t appraise are unlikely to close escrow.
But then a seller will have the right to march around and tell all her friends that she got a whopping offer for her house but the appraisal just messed up everything. That appraisers don’t know what they are doing. And some of them don’t. That’s part of the problem, too.
I tell my sellers to respond to offers within 2 to 3 days. Buyers don’t like to wait more than a day or two at the most. It’s possible that subsequent offers might be higher but they might not. The best offer is not always the highest. Sometimes the best offer is your first offer and sometimes it’s not. There is no hard and fast rule for offers on a home for sale.
But just because you received an offer right away doesn’t mean you’ve priced it too low. It means you have priced it just right.
When Will Home Prices Double in Sacramento?
“When my home is worth a gazillion dollars, call me.” That’s what a former client expressed this morning. It put a smile on my face, and it was a good thing to wake up to find in my email. It makes me realize that as a Sacramento real estate agent, I need to keep in the back of my mind that we are all a sum of our total experiences. Most sellers do not really know anything about real estate or how it works — even though they might think they do — because they are not in the real estate business and / or they didn’t focus on economics much less real estate in college.
We can’t forget our roots, from whence we came. At one point in my life, I knew very little about real estate. Back when I was crawling around on all fours. After I gained an upright position and could jump rope and tie my shoes, I began an early fascination with real estate. I built houses out of sandboxes. Later, of course, I learned much from college courses, mentors, books, and the very best learning ground: first-hand experience. That means I probably made mistakes from which I learned. That was about 40 years ago, but I still try to keep those moments in time in check and myself grounded in reality.
A former client called yesterday in a panic because she thought for certain that I had sent her the wrong document to sign. For some reason, she did not read the lone sentence on the document, which gave her exactly what she wanted. No, she insisted that I send her a different form that we do not use. Then, she dove into further panic mode because she had signed the document in DocuSign and that was not her signature on the document. How could that be legal, she asked?
We are all a sum of our total experiences.
However, that does not explain how Kevin Spacey acquired that upper-crust Southern accent when his character’s father was a peach farmer. I’m talking about that great Netflix show: House of Cards. I suppose it comes from hanging around with other aristocrats. You don’t have to grow up with it.
I am also excited about Game of Thrones. First, let me say I am no Scarlett O’Hara. I am not clutching a handful of dirt thrust into the air and crying as God is my witness, but I do remember my roots. And I try to stay true to who I am. I grew up in the Midwest, in Minnesota. I relate to that pull-herself-up-by-her-bootstraps character, the Khaleesi. Something I read described her as the balls of a man and the heart of a woman. I appreciate strong women, and it makes the show interesting to me because it wouldn’t be interesting if it was just about men fighting. I get enough of that excitement from third-party mortgage brokers who can’t fund. Only thing is I don’t have any dragons. I have cats, but almost the same thing. Except they can’t breathe fire or explain to clients that I will be dead and gone by the time their $300,000 home is worth again $600,000 in Sacramento.
Lowering the Price of that Sacramento Home Listing
The California Association of REALTORS sent me and every other Sacramento real estate agent an email this morning. I could not figure out if it was an April Fool’s joke. It said that on April 1, 55 million households will see its new commercials: California REALTORS, Champions of Home. I don’t recall exactly how many people live in California, but I think the number is around 35 million. Maybe 38 million. I suppose many people could own more than one home; hey, I know, maybe babies own a few extra homes.
My thoughts today is how to be a champion of home for sellers in Sacramento when sellers don’t have enough equity and don’t want to do, or won’t qualify for, a short sale. One thing an agent can do is offer to put the home on the market at a price point where it will not be a short sale if a buyer elects to pay that price. In other words, let the market decide. Don’t make the decision for the seller. But that approach can backfire because when the home doesn’t sell, the sellers might be very upset with their agent.
Some agents just want the listing, period. They don’t always care if the home will ever sell. They just want their sign in the front yard and for buyers to call them. It’s free advertising. I never want to be THAT listing agent. I won’t tell sellers what they want to hear. I will tell sellers what I think. That’s what I promised to do many many decades ago when I became a real estate agent, and I don’t vary from that premise today.
Sometimes, it is necessary to tell a seller that the price might be too high. Telltale signs are many showings and no offers. The only thing worse than that is no showings at all, but in this market, buyers want to turn over every rock. Hence, just because a seller is getting showings doesn’t mean the buyer wants to buy that home. If a seller has showings and no offers, then the price might need to be reduced to a point that will entice a buyer to make an offer.
How do you know the price point that will work? By examining comparable sales. In this crazy market, wetting your finger and sticking it in the air might work, too. It might be painful to tell a seller that she may be better off renting her home than trying to sell it, but sometimes, that’s the call a Sacramento real estate agent has to make.
