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When Sacramento Buyer’s Agents Use the Wrong Comps
Sometimes agents use the wrong comps or don’t provide comps to buyers.
Sacramento buyer’s agents do not always give the comparable sales to the buyer and, if they do, sometimes agents use the wrong comps. Buyers often base a price decision on what else is for sale and not on closed comps. It is not uncommon. Further, the reasons why agents use the wrong comps are varied. Agents might pull comps that are outside of the property’s radius. Or, there might be too many comparable sales in that particular neighborhood to choose from. Or, perhaps the agents just don’t know the neighborhood very well.
Maybe the buyer’s agent is unfamiliar with appraisal terms. There are all kinds of real estate agents in Sacramento real estate. A seller mentioned to me the other day that the first agent she considered to list her home was a property manager. He wanted to list her home for almost $50,000 more than the comps supported. Why? We don’t know. Maybe he didn’t want to lose the listing.
I explained to the seller that many property managers are not really real estate agents, per se. She said ever-so-sweetly, “Oh, but he has a real estate license.” Certainly, he has a real estate license because it is required by law to manage rental properties, but a license doesn’t make a property manager a real estate agent. Those are two different occupations and specialties. A person who deals with tenants, evictions, collections, repairs, does not necessarily know how to sell real estate, and could very well be one of the reasons agents use the wrong comps. I don’t know why he gave her the wrong price.
We also received an offer from a buyer that was $20,000 less than our list price. When I asked the buyer’s agent why the buyer made such a lowball offer in light of the comps, she replied there was a similar home on the market at that price. An active listing is not a comp. It is an active listing for sale. Homes do not become comps until they close escrow. Further, why didn’t the buyer go buy that house? That would be a reasonable question. Probably because there are things about that house the buyer doesn’t like. Doesn’t like enough to pay $20K less for, apparently. Which makes that home worth less than its list price, but not ours.
My solution? Since we cannot assure that a buyer’s agent will give the comparable sales to the buyer, the next best thing to do is make the comparable sales part of the counter offer, as an attachment. Little tells the story better than the numbers in black and white. Just check that little box for an attachment on the counter and merge the two seller-signed documents into one PDF file.
If you’re looking for an experienced Sacramento listing agent, please call Elizabeth Weintraub at 916.233.6759.
Negotiating Your Offer in Sacramento
Negotiating your offer in Sacramento is easier if you discuss strategy with your agent.
You will call it negotiating your offer in Sacramento, but the seller will call it justifying your lowball. Tomat-O, tomaTOE. I spot all sorts of offers to buy a home come across my desktop. The offers are accompanied by all kinds of reasons, too, but most of those “justifications” are inconsequential. In some ways, it would probably be better for a buyer’s agent not to supply any justification at all. They could just tell the truth. They could say my buyer just wants a discount. But that’s too novel of a concept. That’s not negotiating your offer in many people’s minds.
There are also obvious ways that negotiating your offer can backfire, though. For example, a buyer who claims her offer is at her maximum sales price for which she is preapproved, is somewhat useless information. I expect these types of buyers figure they can tug on a seller’s heart strings, and that a seller will care that they cannot afford to buy the house. Further, if a buyer’s ratios are that tight, any little thing she does to affect her credit report between signing the contract and closing could cause her loan to blow up. In addition, any small oversight by the lender could cause the loan to go sideways. It doesn’t make the buyer appear as a good credit risk.
Further, don’t discount the power of the Internet. Sellers and their agents enjoy access to Facebook, LinkedIn and a host of other websites that popup in Google searches. If the buyer works for the state of California, that buyer’s salary is public information, easily accessible online. Many buyers in Sacramento work for the State. It’s hard for a seller to believe a buyer is at her maximum, for example, if her annual salary exceeds half the sales price.
Sometimes buyers will say the home needs work, and they want to discount the price based on the projected dollar amount of their imaginary improvements. Sellers don’t care what type of upgrades the buyer hopes to make. Sellers base their asking price on the comparable sales. Generally the list price already accounts for condition of the property. Making a lowball offer because the home needs work is not a justification when the home is priced accordingly.
Negotiating your offer based on the comparable sales is generally your best solution. It’s the logical solution. Agents who lay out that scenario will often get the attention of the seller. Otherwise, buyers are left with the bad strategy of starting low, splitting the difference and getting stuck with no right of renegotiation. The worst that happens is the buyer ends up with no home at all. It’s a good idea to listen to your agent when it comes to negotiating your offer in Sacramento. That’s why buyers typically hire an agent.
How Much to Offer to Buy a Home in Sacramento
Your Realtor can advise on how much to offer to buy a home in Sacramento.
Does the purchase price in an offer to buy a home in Sacramento give sellers insight as to the buyer’s motives? It might, depending on your type of marketplace. When we have a seller’s market in Sacramento, which is our case today, based on low inventory and high demand, many buyers are not winning homes when they offer less than list price. When we receive an offer under list price, it generally signifies the buyer is not that interested in buying the home. Little desire can equate to troublesome escrows.
The days on market, btw, don’t necessarily matter as much as some believe. Some homes simply take longer to sell, especially if the home is not a mainstream attraction. There is a certain mentality among buyers that says if a home is still on the market after, say, three weeks, they should make a lowball offer, and that kind of single-focus strategy does not tend to work. But then buyers don’t really know how to negotiate and neither do some of their agents.
In all fairness, the urge to negotiate is pretty much the American way. Everybody feels like they should do it. Even I, when buying a house in Hawaii, discussed with my agent if I should offer less than list price. I’m as susceptible as the next guy. Fortunately, my agent, looking me straight in the eye, leaned over and warned: Elizabeth . . . they have a counter out. Which abruptly snapped my wits to attention, and list price it was.
How Much to Offer to Buy a Home in Sacramento?
Throughout my years on this planet, and I’m gunning for 65 now, I have slowly come to realize this fact:
It’s not how much you pay for what you want, it’s whether you get what you want.
If the price seems fair for the object at hand, I agree. This is a simple lesson but ’twas a tough road to get there. How much to offer for a home in Sacramento should be based on whether you want that home. Here are more observations:
- This is not a flea market in Mexico.
- Offering list price is not always enough in a seller’s market.
- Five years from now, you won’t even remember how much you paid.
Working with home buyers, we discuss how much they want the home. We gather information to present odds. How much to offer to buy a home in Sacramento is then based on those odds. We might break it down into 50%, 80% and 95%. There might even be 110% odds if we’re feeling particularly strong vibes about the situation. Sizing it up, suggesting the right call, is how an experienced Sacramento Realtor helps a buyer to determine attraction. Of course, the final decision rests with the buyer.
Story of Selling a Damaged House in Elk Grove
The damaged house in Elk Grove was not this bad.
There seems to be a lot of rehab investors, both in town and outside of Sacramento, who expect advance phone calls from listing agents, because they email me all the time about buying a damaged house. The worse, the better, they say. I wonder if they haven’t heard about MLS? You know, that place where all the listings go? Or, maybe they haven’t noticed that Zillow and Trulia are also pulling listings from MLS? Or, perhaps they think my supposed greedy little heart will seize the chance to smash my seller’s hopes and I’ll engage in some secret, behind-the-scenes deal with them to be the only buyer because all agents are money-grubbing fools? I’d say gag me but I’m recovering from the flu and don’t want to think about that reflex.
Take this damaged house in Elk Grove, for example. This was a short sale home that had been abandoned for a while — what we call a fixer. There were no utilities and, in fact, there were utility liens recorded against the property. It needed flooring, paint, a new roof, pest work, stucco repair and there was a minor plumbing leak in one of the upstairs’ bathrooms. The home was located in a popular neighborhood in Elk Grove. Even though it needed work, which meant few owner occupants would make an offer, it should have sold sooner than it did. The reason it didn’t is many rehab investors don’t want to go back to the old market of years gone by, it seems, they expect higher profit margins. Higher profit margins are typically not available in a short sale. Short sale banks typically won’t fund an investor’s bank account.
We put this on the market last May, and it sat for 3 months without a viable offer. We received a number of lowball offers but none high enough to where the comparable sales suggested the bank would accept the offer. See, guys don’t understand why we won’t take a low offer and send it to the bank. That’s because they’re not on the listing side, doing possibly a ton of work for zero results. I’m not completely alien to fixing up homes and flipping, as I did it myself for 10 years. I also know how to compute comparable sales and deduct for repairs.
Come August, we decided to take the highest offer we could get, which wasn’t enough to satisfy what we felt the bank would want, but since it involved a 203K loan, the buyer had room to move up, if necessary. It’s one thing if they pay cash and the bank wants more money. It’s quite another if the buyer plans to live there and is obtaining financing, so a $10,000 increase could mean a difference of only fifty bucks in a mortgage payment. Not surprising, the bank asked for a higher price, it demanded our original list price. See, I’m often right on the nose with how they think because I’ve been doing this for so long.
The buyer bailed. Fortunately, we found other buyers, several at one time. The seller chose the most committed buyer. I went back to the bank and negotiated a price somewhere between the lowball offer and the original list price. I know these are trouble, walking into these listings. It’s hard to show homes without electricity. It’s hard to get a loan without utilities. It’s almost impossible to get the bank to agree to allow payment of utility liens. And people are often afraid of abandoned homes with damage. These homes appeal to a small majority. Not to mention, the lowballers come crawling out of the woodwork looking for a steal, and it makes me feel like I should put on white socks so I can see the fleas jumping on me.
Throw on top of these situations, other individuals in title who won’t cooperate with a short sale, and a seller whose second mortgage was charged off but not reconveyed and therefore included in the short sale, all of which makes it a recipe for a whopping fun time.
Yet, it closed. They all eventually close. Because this Sacramento Realtor does not give up. If I can close a horrendous situation like this, imagine what I do with a beautiful home in Elk Grove that’s in pristine condition.
What Does a Sacramento REALTOR Do With a Lowball Offer?
Probably one of the worst things a Sacramento REALTOR can do is make a judgment call on an offer, even about a lowball offer, when presenting an offer to a seller. That’s because the listing agent is not the seller, and we don’t ever really know what a seller will do. To presume we do is sorta stupid. The one exception to this, though, is when the transaction is listed as a short sale, and the bank has already authorized a sales price, which is probably not subject to negotiations and conforms to a formula, like FHA Short Sales.
There are agents in the Bay Area, for example, who often send lowball offers without any warning or notice. Most of the lowball offers I receive like this are faxed to my office, even though all of my listings contain explicit directions on how to submit an offer, and faxing the offer to the office is not one of those options. They are often missing crucial elements of the offer, especially when it’s a short sale. I try to overlook those mistakes because I realize when buyer’s agents are crazy-busy throwing offers at the wall to see what sticks, they don’t always have the time nor the patience to thoroughly read each MLS listing.
It’s possible these same agents could also be the type to double-end their own transactions as the principal buyer. Yowza. They probably think they are clever, living life at its fullest and not on the edge. I try not to be judgmental about them, and I just pass along their offers.
When I send these offers that don’t stand in chance in hell of acceptance to the seller, it is a waste of time for everybody, but I am required by law to do it. If a buyer’s agent sent me an offer written on a roll of toilet paper, I’d have to send it, and many of these lowballs would be better off scribbled on a roll of toilet paper than handwritten and faxed. But I also apologize to the seller for a) sending them a worthless offer that the agent should have known better than to send, and b) wasting my seller’s time. I explain that I am legally required to send the lowball offer but they are not required to respond and, in fact, they should ignore it.
It’s somewhat more disturbing when lowball offers arrive on pending listings. I’m not sure what the thought process is, maybe that the deal will blow up and the seller will be so despondent or desperate that she will grab any offer that floats through email. But the fact is if a transaction should blow up, I simply sell it again, generally at a higher price. I just closed a few days ago on a waterfront home in Elk Grove, which I sold 4 times. The final sale was the highest ever, and such a good offer that we rescinded a counter about to be accepted, grabbed the new offer and ran with it all the way to the closing table.
This is what Sacramento real estate is about.
I received 3 offers recently on two preapproved short sales, varying between $50,000 and $100,000 LESS than the approved and pending price. That was unusual. Enough so that I called the out-of-area agent to ask why was he creating all of this unnecessary work for me, and bothering the seller with these silly-ass offers that are obviously going nowhere. I considered not calling him but due to the volume of business I do, I had a sneaky feeling if I didn’t nip this in the bud, it would continue on my other listings. My time is valuable.
The agent’s response was he has to do what the client tells him to do, just like I would do. No, see, the difference is I don’t work with idiots.
