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In Defense of Multiple Offers from Sacramento Home Buyers
The biscuit recipe for Sacramento home buyers that is guaranteed to drive multiple offers in the Sacramento real estate market goes like this: add 2 cups of a highly desirable home in the right location, perfect condition and priced well, toss in a pinch of salt representing all of the other homes for sale in that particular neighborhood (none), stir in 2 teaspoons of pending sales, cut in a stick of low interest rates and blend well with a cup of eager Sacramento home buyers. Drop on to a Sunday open house and bake at 400 degrees for 15 minutes — within 2 hours they’ll be history.
Our Sacramento real estate market reflects low inventory, low interest rates and a high demand from buyers. Sacramento home buyers, who often say things like: I don’t want to be involved in a multiple offer situation. It makes me wonder what they mean. Do they want to buy a home that nobody else wants? Some ugly dog that is overpriced and under-loved? Is that it? Because there are some of those homes for sale in Sacramento, and nobody is trying to buy those homes. The field is wide open for that kind of home. No competition for that stuff.
Don’t they want to be the winning bidder for a home that everybody drooled over but only they were smart enough and lucky enough to win? One thing is for certain when a home buyer goes into contract in these situations: when the time comes to sell that home down the road — maybe not next year, maybe not in 10 years, but eventually when that buyer turns into a seller — that same intense interest from buyers will still exist. The home will hold its appeal. Your hair might start to turn gray by then and your body might run off southbound, but that home will still be alluring, even after the Sacramento real estate market cools.
That extra $5,000 or whatever a multiple-offer might cost, can be the difference between owning a home or not owning a home. Think how less important that will seem 5 years, 10 years from now. Sure, your emotional conscience might be fighting a losing battle by telling you not to pay more than list price, but what if the list price is low to start with? Listen to your logical, rational side. What do the comparable sales reflect? Because remember, the home will most likely still need to appraise. It matters less what the list price is and matters more the value of the home.
And let’s not forget about appreciation. Home prices are on an upward swing right now.
I also wonder if “I don’t want to be involved in multiple offers” means the buyers intend to lowball the sales price and realize they can’t possibly win with that strategy when other buyers are offering more than list price. Of course, if that’s the case, they are not buying a highly desirable home in the Sacramento real estate market this spring.
I’ve heard agents say they think sellers are greedy when multiple offers occur. As though somehow it is the seller’s fault for maintaining such a beautiful home in pristine condition. It’s not the sellers who are driving the marketplace; it’s the buyers. Buyers establish final value. My advice is don’t worry about what everybody else is doing. Focus on yourself. Write your best purchase offer and call it a day. Don’t wander about wondering “what if” . . .
Fixing Bay Area Offers Involves Finesse While Closing Sacramento Sales
Fixing Bay Area offers without offending the parties involved often means stepping back and putting your client’s needs first and foremost. There is no easy way to tell a Bay Area agent that so much stuff in the agent’s buyer’s offer is wrong. At first blush, I was tempted to quickly judge the parties as not being serious. They made demands that nobody asks for in our Sacramento seller’s market. The buyer asked the seller to pay for things no other seller pays for. In fact, it was about as one-sided as a buyer’s purchase offer that I would have written myself in 1978, but certainly not in today’s market.
To make matters worse, it wasn’t just a matter of fixing Bay Area offers, there were also 2 or 3 other offers on the table. After talking to the sellers, it was clear to me they would like to find a way to make the Bay Area offer work. After all, it was cash, so no appraisal. Getting an appraisal on this home would be difficult because there were really no comparable sales. The home was a white elephant. Overbuilt for the neighborhood.
After every open house, buyers would ooh and ahh over the upgrades and improvements. But after driving the area, they said no thank you. It was one of the nicest homes in the area. Plus, with cars parked up and down the street, basketball hoops blocking driveways, well, it didn’t present the neighborhood in its finest light. However, we knew that walking into the situation. The sellers were patient because they didn’t have to move until the end of October. They felt now would be a good time to sell over October, and they were right.
I decided to try to find a way to make the purchase offer work because that’s what my sellers desired. The buyer was doing a 1031 exchange, although the home would not be a rental. It would be occupied by family. Not even about to argue how it is not a 1031. Not our problem. So, I asked the buyer’s agent if the buyer would consider renting back to the sellers until the end of October. The buyer said yes and named an agreeable rental amount. This was a hugely important benefit to the sellers. Not moving twice.
OK, the dilemma was how to handle the fact the buyer refused to purchase the home in its AS IS condition. The way I saw it, we could argue over the black-and-white verbiage in the purchase contract which clearly states the home is sold AS IS. Or, we could find a way to make it work. The agent said the buyer expects all repairs from inspections to be completed. What? And we didn’t even have a home inspection yet. How could we agree to do all repairs when we don’t know what they are? That sounded like a recipe for disaster.
Well, what we could do is have the seller pay for a home inspection from a reputable home inspector. Not some fly-by-night idiot. There are idiots doing home inspections in Sacramento because they don’t need to be licensed. Anybody can pretend to be a home inspector. An teenage mouth-breather can be an inspector. So I drew a counter offer that included the seller paying for a home inspection, subject to successful negotiation of a Request for Repair. We agreed not to open escrow until the Request for Repair is executed, and if it can’t be, then the offer is void and canceled.
Seemed like a perfect solution. We signed all the counter offers and the purchase offer. A few days later, the buyer’s agent noticed we were holding an open house because our status was changed to Active With Release Clause. The agent accused us being dishonest and underhanded. What? The agent threatened if we did not cancel the open house, the buyer would cancel the offer. Then, the agent tried to cancel the offer.
However, the offer could not be canceled until the terms and conditions were met. We had a binding agreement.
But they do things differently in the Bay Area, and not every Bay Area agent sells a lot of real estate. Many sell only a few homes a year. So you really can’t hold it against the agents. Some agents just don’t know what they don’t know. All I really wanted to do was spare my sellers the anxiety and drama. Very difficult under the circumstances. I was fully prepared for the buyer to make more unreasonable demands, especially after receiving all of the inspections.
However, suddenly we received the Request for Repair from the buyer and it was not completely unreasonable. Very surprised and excited over this. In keeping with fixing Bay Area offers, I also rewrote the response to the Request for Repair to make it very specific. The Bay Area agent copied the numbers from the home inspection report but it was not easily understood and could be misinterpreted. The report did not identify how to make repairs, and it alluded to further inspections. After laying out each specific repair, we went into contract. We signed the Request for Repair, which also stipulated the buyer would immediately release all contingencies.
By being very clear from the beginning, we can often avoid misunderstandings later.
This is also the first escrow I’ve ever closed in which we entered escrow ready to close. I’ve closed thousands of sales over my 40-some years in real estate, not one like this. Twenty-day closing. No monkey business, no weirdness. Oh, and it sold over list price.
Are Cash Offers King in Sacramento Real Estate?
Agents who consider cash offers king in Sacramento might want to reconsider.
A buyer’s agent on Sunday reminded me that he considers cash offers king when he sent over his buyer’s purchase contract to buy a home. He kept repeating himself, just in case I didn’t understand his English. Cash offer, cash offer, all cash offer. Maybe he’s used to dealing with idiots, but he’s not that experienced. I know this because I looked up his sales in MLS, primarily since I did recognize his name nor company. I always like to know who I’m dealing with on behalf of my sellers. These offers come in from left field so often. Those agents never call to introduce themselves, they just shoot the offer over in an email.
Like I tell my sellers, I’m not the kind of Sacramento Realtor who gets all excited when we receive an offer. That’s because I’ve received so many bogus offers, offers from non-committed buyers, offers that blow up prior to opening escrow, offers from crooks, offers from blowhards, and one thing is for certain. Everybody has an agenda of some sort. It’s my job as a top listing agent to find out as much as I can about the other side and relay that information to my clients so the sellers can make an intelligent decision.
My initial reaction is usually what is the angle here? What is going on? Not everybody writes straight forward and clean offers. I look for mistakes, and I usually find them.
The agent who considers cash offers king was a bit taken by surprise when I told him no, cash offers are not always king. For one thing, buyers with cash can buy anything their heart desires, as long as they can agree on price. There are really no restrictions. Therefore, some, not all of them, develop an attitude. It’s not unusual for a cash buyer to try to renegotiate in the middle of escrow for a lower sales price and threaten to take her cash elsewhere. Or, a cash buyer might find another property the buyer likes better while in the midst of home inspections and the buyer will cancel to chase the other house. There is not always a high level of dedication and commitment from the cash buyer.
Further, it’s all cash in the end to the seller anyway. The only difference is the appraisal and loan qualifications, and if the buyer is already prequalified, most of that hurdle is over. If the home is priced right, it will meet appraisal. So, how are cash offers king in Sacramento?
This particular”all-cash buyer” was also not really a cash buyer. He had a portfolio of stocks he needed to sell to obtain the cash. His cash was not liquid. Although the agent said the buyer lived in the area, the buyer was not in the area when he signed the offer. He was in another state. His check reflected an address in that other state. His offer stated he would not live in the property. When I looked at the agent’s sales over the last 18 months, I found only 2 sales. I went one step further and looked at the buyer for those sales, thinking perhaps it was the same buyer. But no, it was the same buyer, just not this buyer; however, the buyer’s home address was the buyer’s agent’s home address.
Sometimes it makes a difference to sellers if the potential buyer will live in the property versus renting it out. This was one of those times. I laid out all of the pros and cons to the seller. The seller chose the buyer from a position of knowledge. This is what I want for all of my clients, and what they deserve. If you are thinking about selling a home in Sacramento, why not call Elizabeth Weintraub at 916.233.6759, and more 40+ years of experience to work for you?
