Buying a Short Sale in Sacramento–This might happen…..
With the existing inventory of homes at extremely low levels and approximately 30% of those being short sales you might find your final choice being a short sale. Many things might happen along the road after you write your offer….
You might have your offer accepted by the Seller (owner), the Bank (lien holder) might approve the sale, all of your inspections might be satisfactory and property will appraise and your lender will fund your loan. You will move into your new house and live happily ever after or….
Your offer will be ignored by the lien holder because they are still waiting for a hardship letter or….
You will find out the property sold on the court house steps for $50,000 less than you offered (while you were in escrow) or….
You will be one of 20 offers because it is a deal too good to be true (your offer isn’t even close) or…..
The owner will replace the custom stainless appliances with the cheapest that Home Depot has to offer (or not replace them at all) or….
You will wait so long for an answer that the value will either drop or increase and make your financing impossible, or…..
The lien holder will get an unrealistic appraisal or broker price opinion and approve the sale (at a price well above the market) or….
The Seller will vacate the property and all the plants and grass will die and someone will take the air-conditioner, or…..
Your offer will be accepted by the Seller and you will qualify for AARP before you hear from the Bank, or…..
You will bid more and more on the next listing just to WIN, finally.
This message is not intended to scare, it is merely an attempt to let you know What Might Happen, on the path to buying a short
sale.
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Is it time to Buy a house in Sacramento-Listen to Warren Buffet
As he said, with interest rates in the low 4% range and prices at a 10 year low it is a great time to buy a house in Sacramento. Whether you are
looking to buy your very first home or upgrade your current residence or invest in rentals or fixer-upppers it is a time of opportunity. Many
people have already made this decision, we are seeing properties hit the market and go into contract in a period of hours, not weeks or months.
One of Mr. Buffets key statements regards buying and holding, so unless you are very handy or want to take on a major project, flipping is for a
very select few. The majority of people should look at their home as a home first (still an asset) and an investment second. Investors who want
to be landlords see the benefit of someone else (tenants) building their equity. In each case, there are many opportunities in today’s Sacramento
Real Estate market.
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Why won’t they do repairs?? Buying Short Sales and REO’s.
With the large number of bank owned (REO) properties and short sales still being sold, one of the hardest questions asked by most Buyer’s is why won’t they do any repairs that may be indicated in a pest or physical inspection? The answer, is really quite simple, money. Most of these types of properties are being sold for less money than their equity counterparts and as a result, the need for repairs is actually part of the homes pricing. In a short sale, the Owner nets $0.00 (that is zero dollars) and is usually in a difficult financial situation already. Since they are not going to see any money, then any money spent is gone to, what they already think of as, a losing proposition. The lien holder that must approve the short sale is taking less than they are owed and are going to do everything in their power to cut their losses. That is also why they seldom agree to pay many traditional Seller’s costs and are looking to cut commissions as well. Repairs and inspections are just another dollar lost and they are not going to pay unless the property is in very dire straights. Bank owned properties are usually very similar in that the property has reverted to their ownership with no records of past problems and little motivation to address any found in inspections. They have incurred a whole new set of expenses that make them less than eager to do any more. Some REO properties have been rehabbed in order to sell them at all or to try and minimize the loss.
The bottom line is the bottom line. Where the party that stands to benefit the most from the sale, is the Buyer. In February of this year in Sacramento County there were 1337 single family homes sold. Equity sales (where a traditional Seller and Buyer conveyed) were 471 of those or 35%, the average price was $228,938.00. REO sales (bank owned) represented 452 transactions or 34% and their average was $137,865.00, or 40% less than their equity counterpart. Short sales accounted for 31% of the sales or 414 units. The average price of a short sale was $178,466.00, that is on average $50,000 less than an equity sale but $41,000 more than the average bank owned property. What this means is that the new bathroom or roof or termite work has already been incorporated into the price in most cases.
As a Buyer knowing this, the key is not going in blind but doing your inspections and figuring out the costs and then deciding if you are still at or below the market for the neighborhood you desire. Most contracts have an as is clause but, still allow for a Buyer to approve or disapprove of the result of their inspections with little risk. Consult with your Realtor for those particulars and Happy House and Bargain hunting.
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Somebody is Buying Homes in Sacramento!!! or trying too.
In the last two weeks I have been showing homes to a few groups of people with different buying criteria. The one thing that has become very apparent is that there are a lot of people trying to buy houses in the area. When my clients look on Zillow or Trulia or Realtor.com and send me requests for information on a particular property, it seems that most of what they are sending is already spoken for. Either the properties are Pending which means that most of the inspections and contingencies are out of the way or the Seller no longer wishes the property to be shown, or they are Active Short Sale Contingent which means that the owner has accepted an offer and is submitting it to the lien holder for their approval. In either case they are spoken for and Buyer’s must proceed to the next property on their list.
These are just a few examples of what I am talking about:
A client wants to buy a 5 to 6 Bedroom house over 2700 square feet in Elk Grove for up to $400,000.00, you might think that there would be a large selection based on what the local media presents. The reality is that there are 99 homes in the Multiple Listing Service that meet that criteria and only 28 that are available for offers. That means 72 percent of the homes are spoken for at this date.
Another client wants a 4 Bedroom home in West Sacramento for under $400,000.00. Again you would think they would have a field day trying to choose, but, there are 92 homes in the MLS with only 18 available or 81 percent that are in contract.
Lastly, a client wants a 3 or 4 Bedroom home in Rancho Cordova/ Gold River. There are many more that meet this criteria but the story remains the same. Between $150,000.00 and $400,000.00 there are 266 listings and 71 percent are already locked up.
So, in these three sub-markets of Sacramento homes, there is less than 1 out of every 3 signs or internet postings you see that are available. This would maybe give pause to those who are waiting for the market to turn. Buyer’s would be advised also that if you see something that you like, you should probably not wait too long to speak up. Many of the available homes are not competitively priced or are in need of a loving hand. It is truly a beauty contest out there and most every one is getting the bouquet.
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Sacramento Median Home Price $160,000- What can you Buy?
I was talking with a client the other day and they asked me what kind of house can you buy in Sacramento for the median price of $160,000. I thought about it for a moment and came back with the Real Estate response of it depends on location, location, location. Well it is more than that, it is location combined with condition and terms of the sale. By terms of the sale, I mean, is it bank owned real estate, is it a short sale or is it a traditional equity sale. Some short sales seem too good to be true and that is sometimes the case. But, that is a discussion for another time. Currently there are 82 listings in the MLS for Sacramento priced at $160,000. Of those, 21 are pending sales and 36 have contingent offers (those would be mostly short sales contingent on lien holder approval), the remaining 25 are still active listings waiting for offers. The 25 available homes are listed below. Of those, the largest is a 5 bedroom, 3 full bath home at 2234 square feet; the smallest is a 3 bedroom, 1 bath at 725 square feet.
The median home of median price homes available in Sacramento County is a 3 bedroom, 2 bath ranch with 1611 square feet. So, as you can see, there is a lot of variation in the median price availability.Median Price Available Homes 1:28:12 
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Sacramento Housing Inventory – Lowest in California
The California Association of Realtors just released its December sales and price report and it shows that of all the areas being monitored for research, Sacramento County has the lowest supply of homes available to meet market demand. CAR measures inventory in months of available houses on the market if current closing levels were left unchanged. At the current level of activity,that would leave 1.8 months of inventory (if no new listings were to come on the market) in Sacramento County. The report also shows median price activity, average days on market for the homes that have closed and month over month ( Nov 11 vs Dec 11) and year over year (Dec 11 vs Dec 10) in all catagories. For Sacramento, a few significant numbers are months of inventory, 3.4 in 2010 to 1.8 in 2011. Median price yr over yr $162,820 in 2011 compared to $179,040 in 2010, which is a 9.2% decline (it should be reiterated that this shows a relation of activity more than a state of value, half the homes sold were above this number and half were below). Anytime you have a major increase in first time home buyer’s or a reduction in move up buyer’s then this number will lower. Additionally the report include a comparison of interest rates as reported by Freddie Mac with 30 year fixed rates being almost 19% lower year over year, 3.96% in 2011 vs 4.71% in December of 2010.
What this means to you, if you are a seller then there is a demand and if you are a buyer, its not the time to be too picky.
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Sitting on the Fence
Sitting on the Fence
Rates are at historic lows, you’ve heard this but what does it mean to you? It means that when you are purchasing a house, your monthly and lifetime costs are going to be lower than ever before for the price of a home that you buy. Additionally, prices for homes in Sacramento are at 2001-2003 prices, homes that just a few years ago were beyond your wildest dreams are once again, priced within your means. If you wait for rates or prices to drop further you run the risk of being very unpleasantly surprised. We all know that sinking feeling when we know that we have missed a golden opportunity. Recently the headlines in the Sacramento Bee said that unemployment is down or to put it plainly, more people have jobs than last month or last year or the year before that, that is great news for everybody. It just may not be great news to people that are considering buying a house in the near future. As more people gain jobs, then they too will be joining the fray and looking for homes for their families. What this does is create demand, demand for mortgage money and demand for houses. Demand does one thing, it raises prices, by creating scarcity, scarcity of money to lend or borrow and scarcity of inventory or choice. So if you have been looking and waiting, it may be time to start the ball rolling and start choosing while the choosing is good.
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Are Sacramento Home Prices Stabilizing?
With the average home price in Sacramento County down 53% since their peak in February 2007, one may wonder if they are still headed down further. Most indications are that if there are more declines, they will be of a much less dramatic nature. In the attached video, it is noted that the greatest losses were experienced in 2007 and 2008 with a much less dramatic decline since 2009 to present. The greatest decline in average price is in bank owned or REO properties that are now about 10% below 2009 levels. All other sales, traditional equity and short sales are down 7 and 5 percent on average. Following is an excerpt from Kiplinger’s Economic Outlook date November 21, 2011 “Home prices will fall a bit more — 2% — through spring 2012 before making up that ground by the end of the year. Holding down a price rebound are the 3 million homes in the foreclosure pipeline. When they finally reach the market, they typically sell for up to 25% less than homes sold through normal channels, casting a pall on prices throughout the neighborhood. Foreclosures will drop in 2012 but still be an anchor on prices.”
Current interest rates are attractive and with a lower than normal number of homes on the market we are seeing multiple offers on many homes. These are all factors that would seem to indicate a strong pressure on holding prices at their current levels in Sacramento.
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Happy Thanksgiving
While previewing properties in Campus Commons, I happened to see these two. They seemed to know that it was time to make themselves scarce. Great thing about Sacramento is you may run into wild turkey’s like these in almost any neighborhood. They have adjusted to interlopers such as us and seem to make the best of it.
HAPPY THANKSGIVING.