5 Reasons Why Your Offer Wasn’t Accepted

November 26, 2008

Getting An Offer Accepted In This Market Is Tough

It isn’t easy to buy a peice of opportunity in the Sacramento real estate market today.  Getting what is perceived as a “good deal” is even harder.  Fact is, the entire market is under priced.  Why do I say that?  Just look at what’s going on out there.

Offers are being submitted, listing agents more often than not don’t respond to your offer at all in any way.  This is getting worse and buyers are very disappointed.  I’ve written extensively about this.  The professional courtesy once touted as being supreme among Realtors is gone.  I’ve had this happen to me with agents I’ve known for years.  Submit an offer and no response.  No “I got it, we’re working on it, we’ll get back to you” nothing all under the guise of “I’m too busy” or “we’re too busy”.

Is It So Hard?

I was complimented by a client in the last week who told me straight out that she was so happy that I answered the phone when she called.  Is it because I have nothing to do?  No, it’s not.  I work from 6am to at least 7pm, most days, 6 days a week.  Often times I’m working until 10pm. Honestly, I’m grateful for this as I know many Realtors who have rejected the market as it is and have chosen to fail.

It takes a split second to shoot off an email, have an assistant do it or make a phone call on the way home.  Am I asking too much?  Don’t we have a duty to our clients and fellow professionals to extend the minimum courtesy?  I think we do..

ANYWAY, now that the rant is over…

The Top 5 Reasons Why Your Offer Wasn’t Accepted…Again!

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The Most Challenging Financing in Sacramento Real Estate

November 19, 2008

The VA Loan

VA loans are excellent for the buyers of residential property.  They afford the buyer much more latitude in down payment, lower interest rates and paperwork.  There is one side of it that can take some time, obtaining the certificate of eligibility, but for most qualified borrowers, they are great.

The problem with VA loans is that they require a few things of sellers accepting these offers:

1.  Clear the home of current pest damage.

2.  Pay the lender fees that the buyers aren’t allowed to pay.

3.  Homes must “pass” a the VA appraisal process.

Pest Damage

The VA requires that the damage created by wood destroying organisms, termites, wood beetles, dry rot, etc. be repaired.  This is a great protective measure for the buyer.  This is a problem for the majority of homes in the Sacramento real estate.  The majority of listings on the market are either bank owned or bank negotiated.  Depending on the price range and neighborhood, 85% to 95% of the listings on the market are bank owned or bank negotiated short sales.  In listing description after listing description, the notation is “seller will make no repairs, home is sold “as-is”.  The VA buyer doesn’t have an option on these homes.

This eliminates the majority of homes in Sacramento from consideration for the VA borrower.

Credit Backs

The VA doesn’t allow the buyer to pay certain lender costs.  These costs are passed along to the seller to pay out the proceeds of the sale.  This isn’t as big a hurdle as requiring that the pest work be completed, the buyer must realize, however, that this affects the net proceeds for the seller.  With competition for homes in Sacramento, buyers with VA loans, depending on how long the property has been on the market, are well advised to offer more than the listed price to help the seller make up these costs and so that their offer will be considered.

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October 2008 Foreclosure Stats – Sacramento Real Estate

November 18, 2008

Foreclosures In Sacramento County Decline for 3rd Consecutive Month

The rate of notice of defaults filed has declined 39% since August but, as most professionals in the bank owned home side of the industry in Sacramento homes will tell you, this is a short lived trend.

The legislation passed by the State of California has delayed many homes from coming on the market and in the next few months, we will, in all likelihood, see a dramatic increase in homes to sell.  The result of this could be a further decline in home values across the region.

The Subprime Issue

The homes being foreclosed upon are no longer just those homeowners who got bad loans or who bought more home than they could afford.  The poor economy, lead by housing, caused the unemployment rate to rise and with those resulting job losses people who wouldn’t otherwise be affected by the housing downturn are losing there homes.  I heard a quote on the news that 25% of homeowners in the U.S. are underwater.  This means they owe more on their homes than they are worth.  That, from a historical perspective, is simply astounding.

More Than a Quarter Million Homes

Over 250,000 U. S. homeowners received notices of default in October.  Filings are up 25% nationwide over last year and this trend is expected to continue unless there is some unification between the government and mortgage companies on mortgage modifications.  While the banks are now working more with sellers to modify loans, there is still more that needs to be done to “stem the tide”, so to speak, of foreclosed homes.

Sacramento County Foreclosures

The graph illustrates the cities that had 60 or more notices of default filed against them.  All other cities in the region were under 60 notices filed.

I was asked by a potential buyer yesterday what the future holds for this market, how soon will it end and what did I see on the other side of this mess.  My answer was “who knows”.  The experts have all been wrong up to this point.  Gas was supposed to be $5 a gallon this summer, it never got to that and it was supposed to stop going down at $2.20 and that hasn’t happened either.

As the values continue to trend down and the transactions continue the current pace, the inventory levels will certainly begin to stabalize.  I’m am getting the impression that housing will lead us out of this mess as it lead us into it.  It will just take time.

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Related must read?  See Forth Hoyt’s article at SacramentoRealEstateTalk.com.  It’s a good one.

Your Questions Answered, Sort of!

November 14, 2008

Recently I was contacted by a gentleman in Chico who has about a year before he’s ready to move to the Sacramento area but asked a very good question about the Sacramento real estate market.

Because he won’t be ready for a year and wants to make the most of the current market opportunity, he asked,

“Do you think there’s serious threat of a significant rebound in the housing market over the next year?”

This is a good question and a tough answer.  No one really knows what the future holds.  Based on how things are looking, rising unemployment, the credit markets being pretty tight at the moment and the economy for all intents and purposes in a recession, it’s very hard to predict what will happen over the next year.

In the beginning of 2007, the “experts” said that the market was going to rebound and begin to bounce along the bottom.  The “experts” all agreed that this would occur.  That didn’t happen nor did we come close to that happening.  In the beginning of 2008, I was working for a new home builder and they were saying that we were at the bottom.  That didn’t happen either.

The correct answer is, and no one likes to admit it but it’s true, I don’t know.  I have only a vague idea of what’s possible as anyone with any sense will tell you.

Change Is In The Air

I’ll say this, I’m glad the election is behind us.

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How to Get an Offer Accepted on a Home in Sacramento – Part 3

November 10, 2008

Part 3 – Terms

The terms of your purchase agreement is the final thing to consider when making an offer on a home in Sacramento.  The more favorable you make the terms for the seller, the more likely you’re offer will be considered.  Having said that, if you have good terms and an offer price that doens’t fit your financing, down payment while taking into consideration how long the home has been on the market, you’re missing the point.

The terms of the contract, while important, don’t mean as much as the offer price and financing.  Every offer I write has the bank paying all costs with exception to the escrow fees which are split.  These costs aren’t significant enough for the bank to reject the offer outright if the offer price has been properly selected with one exception…..

The Big Ticket Item

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How to Get an Offer Accepted on a Home In Sacramento – Part 2

November 9, 2008

Part 2 – How Your Financing Affects Your Offer

Once you’ve established a price to offer price range based on the considerations in Part 1 of this article, you’ve got to understand how your financing is perceived by the seller and to narrow your offer price.  Many people who have good credit feel that this alone should be good enough and that their offer should be considered regardless of the price.

That’s fantasy.

The sellers (in our market, the banks) focus on the bottom line number.  Which offer will make us the most money on this asset.  Everyone is submitting pre-approval letters or all cash offers.  Constructing your offer so that it’s favorable to the seller is crucial to success in this market.  Here’s why:

The banks have no emotional investment in the homes they are selling in the Sacramento region.  They want to get these assets off their books.  For the most part, they price these homes below market, meaning that they are already discounted, to attract multiple offers.  Whenever multiple offers occur, the price goes up but very rarely above the market price and if it does it’s only by a fraction of a percent.

Don’t feel that you’re not going to get a good deal because there are multiple offers.  Every home out there sells for the market price based on it’s condition and location. At worst, you’ll pay the current market price for any home in this market.

The trick is getting your offer accepted and that’s about making it look better than the other offers being submitted by other buyers and their agents.  Here’s how your financing figures into the equation.

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How To Get an Offer Accepted on a Home in Sacramento – Part 1

November 8, 2008

Part 1 – Know Your Target

Getting an offer accepted these days on a home in Sacramento can be a bit difficult.  There is a art to it and if you understand the information below, getting an accepted agreement on the home or investment property you’re interested in will be easier.

In Part 1, I’ll discuss the important considerations you’ll need to know prior to making your offer.  Skip this “pre offer” step and there is a good chance you’ll be wasting your time.  This information assumes you have already been pre-approved by a lender.

What You Need to Know Before You Write an Offer

Below is a short list of information you will need to help you make the best decision on what price to offer on a home in Sacramento.  There isn’t an order of importance or priority.  All of these are equally important and all should be considered together BEFORE making an offer.  Every home should be evaluated by a similar standard.  This can be done quickly and effectively without a need to view the home.

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Your Questions Answered!

November 6, 2008

“Is a Duplex a Good Investment in Sacramento?”

I got asked this question from a seasoned investor yesterday and I thought it was a great one.  I prefer a duplex as an investment property more than a single family home, triplex or fourplex.  I like apartment complexes’ the best but of the standard residential investment homes, duplexes are my favorite.

As I’ve said before, any asset, something that pays you monthly AND appreciates is a good investment no matter what it is.  Positive cash flow should always be the goal.

Here’s why I like duplexes:

Price

In our market right now, a duplex can be had for the price of the single family home. I’ve seen duplexes in the $150K to $250K range that cash flow with 20% down in good rental areas.  The foreclosure market being what it is, there are plenty of renters out there right now to fill these homes.

My investor client and I looked at 4 duplexes in the Sacramento area yesterday.  Everything we saw could cash flow with 20 to 30% down.  Most needed a little repair work to bring them up to “nice”.  One we saw, priced at the $175K range was in need of a good cleaning but other than that, it was ready to go.  Nice tile, slightly upgraded, it was a perfect rental.  With 30% down, the payment came out to be about $850, principal and interest only.  Each side produces about a $1000 a month in rent maybe more with a little upgrading and cleaning.

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