First Time Homebuyer Question

I received this email the other day and I wanted to answer it here because this is an issue that comes up often. Read on!

Dear Sacramento Real Estate Gal,

I thoroughly enjoyed reading your posts because it really helped point me, a first time homebuyer, in the right direction. I have a question for you that I'm hoping you would be able to help me out with.

I started looking at houses about 4 months ago and am working with a realtor (family friend) in the Contra Costa county. However, I live and am looking in the Alameda county and I'm not sure if he has my best interest at heart.

Here's the situation:

I have found a house that I'm really interested in. I saw this house almost 2 months ago and put an offer in at the beginning of December. At the time, list price was $325k. My realtor told me that the selling agent had 27 other offers and that I'd have to offer above asking price if I wanted to be competitive. So I put in an offer of $350k. After I put in my offer, the selling agent told my realtor that the bank had picked someone to work with. In the meantime, I kept checking up on the house and noticed the house went active again at the end of December. So I asked my realtor to contact the selling agent to find out what was going on. The selling agent told my realtor that the house was back on the market and so far he's gotten another 15 offers. So my realtor re-submitted my offer, but I have not heard anything since then. Then a couple days ago, I checked up on the same house listing again and noticed that the asking price had dropped to $309k.

So now I'm confused. First of all, I offered above the asking price and it wasn't good enough for the selling agent. Then he said the bank had a pending sale, but then the house went back onto the market. So I resubmitted the same offer and I didn't hear anything back. Now the selling agent has lowered the asking price. I can understand that the selling agent is trying to look for the highest bidder, but why then would they drop the price on the house? This also leads me to wonder if my realtor is doing all he can to help me out.

If you have any suggestions, insight, or ideas, I would greatly appreciate it.

-S.T.

Here's what I wrote back:

Hi, S.T.

I’m glad you’re enjoying the blog and I’m providing useful information to you and others. I really think in this situation it is not usually the agent’s fault. It is normal for you to worry – buying a home is very stressful and sometimes you can wonder if everyone is really on your side. But Realtors don’t get paid unless you buy a home, so we really have no reason to keep you from the home you want. The biggest error I think your agent may have made is not assuring you enough of being on the same page.

I think the person here that is at fault is perhaps the bank. I have been in situations where the bank keeps dropping the price so they can see multiple offers. Then they pick the best one and try to work with it. if it falls through, they don’t go back and look at the others because they never put anything in back up positions and assume the buyers have moved on anyway. Technically, your offer is only good for 3 days, so they assume you have moved on.

Your best recourse if you are really in love with the home is to resubmit your offer and let your agent know that even if your offer is not selected you would like to be kept in back up position. If not, tell him you would like to write as many offers as necessary (as many times the home comes back on the market) to get into escrow. Also, it would be a good idea to find out why the home is back on the market. If it was buyer financing, that might be okay, but if it was related to inspections, you would want to know and save yourself some time and money.

I wish you luck. I’m posting this on my blog since many buyers have this question. But I will not use your name to protect your identity.

Hope this helps you first time homebuyers looking at REOs right now!

Real Estate Good Ideas? Yes, There Are Some!

Just so you know, I am still writing about real estate. Read my latest post about Good Ideas in Real Estate at Sacramento-Home. I have another one coming up tomorrow as well about good investing ideas in real estate.

Citrus Heights Real Estate: December 2008

I mentioned a while ago that there is anecdotal evidence that short sales are beginning to sell and now we are beginning to see that in the numbers as well. Citrus Heights, for one, has seen a 600% increase in short sales year over year! Couple that with a 129% increase in foreclosure sales (REO sales) and you have the making of a perfect storm of home buyers in Citrus Heights.

Non-distressed properties have suffered a decline of 35% year over year, and that is not surprising seeing the fallen prices. REOs and short sales are, frankly, just better bargains today. Overall sales are also up in Citrus Heights by 78%.

This is the reason: average sold price per square foot is 28% lower than it was last year at the same time. Sold price per square foot has gone from $175.96 to $127.01. Average sales price has also dropped 27% from $250,639 to $181,844. Median price has dropped from $250,350 to $180,000 - a drop of 28%.

Inventory is at 4 months and 3.5 months. If you're considering buying in Citrus Heights, this might be a good time. I was showing homes in the area last week and for all the complaints I hear about it being "too busy" or "too noisy" I should mention that there are some areas within Citrus Heights that couldn't be quieter! Take a look, you might be surprised!

My Real Estate Broker's License: the Trials

I suppose the title could have read "Why I Love Working in a Small Real Estate Company" but it wouldn't be as catchy. For those of you who know, I'm currently studying for my real estate broker's license. With the market being slow and with all the time on my hands during my almost-five-month-old's nap time, I decided adding another feather to my cap was a good idea.

At first sight, studying for the broker's exam is a lot like studying for the real estate salesperson's test. There is a lot of theory and many laws to know. And it teaches you almost nothing about how to deal with the real world with real people and about how everyday real estate transactions are put together. Nevertheless, it is interesting and a good refresher on the basics of real estate.

One requirement though is documenting real estate sales transactions in the last two years as a licensee. And this is where your current brokers have to vouch for you. I've worked with three real estate brokerages in all - two big brokerages and one small company - Elite Properties. Well, guess who was quickest in getting me what I required and who put me through three days of phone calls and unanswered voice messages and general heartache.

That's right. Now you know why we're better. Like a famous commercial said, We try harder.

Update on First Time Homebuyer Post

This just in. I had written earlier about the USDA Rural Access Program and then, just last week, I received this email from Huck Ferrill, our contributing mortgage lender.

Apparently the 100% program has enjoyed so much success that USDA has suspended it until they've appropriated more money. Best guess is March, 2009. We will keep you informed!

However, if you are a first time homebuyer, there might still be a program out there for you. So give me a call and I will help you get into the home you want and pointed in the direction of a good mortgage that fits you!

Sacramento County Real Estate: December 2008

Well, here they are: the numbers. Obviously, with the holidays and the general gloomy environment in real estate, nothing much changed this December over last month. Obviously, the bargain hunters are still out there, though, as evidenced by the 106% increase in sold home year over year.

A total of 1916 houses sold in December of 2008 as compared with December 2007. The real difference though is in the number of non-distressed homes: just 329 this year as compared with 450 last December. That's a decline of 27%. Of course, sales of bank-owned homes are through the roof. 1385 REOs sold in the month of December. But wait... here's the real caveat: 200 short sales also closed escrow. That makes almost 83% of all residential units sold distress sales! No wonder no private seller is interested in putting his house on the market.

Some averages: sold price per square foot for Sacramento county is now at $120.64. Average sales price is now at $192,773. That's a drop of 31.6% for price per square foot year over year and a drop of 36.3% for average sales price year over year.

First Time Home Buyers: New Loan Program

I am hearing from so many people lately that they feel like homeownership is actually within their reach. Just recently, some friends of mine in the Bay Area bought a home and are absolutely thrilled with it. In their own words:

We love the house. We are never moving. If something needs to change, we'll just work with it.

These were sworn tenants by the way, buying their first home in their fifties. Sigh! I love hearing such stories!

But what I hear most from first time buyers is that they don't have enough for a down payment. Although with an FHA loan, the down payment is small (3.5%) there is a program called the USDA Rural Access which requires no down payment and no mortgage insurance! It is not for refinances, as I just found out, but for purchases only in the technically "rural" areas of Cameron Park, El Dorado, Shingle Springs and so on along Highway 50.

So if you're considering buying anywhere along Highway 50, give me a call and we'll see if the home qualifies! I should check with Huck, our lender, but so far I don't believe this program is for first time buyers only.

In Addition to REOs...

... more short sales have begun to sell. Now that I've been watching the numbers over at the Elite Properties blog for the tri-county area as well as specific neighborhoods and here are some trends I've begun to notice throughout the end of 2008.

REOs are still good deals
We have been seeing some excellent bargains as REOs on the market. But be forewarned, some of these are going fast. Especially if they don't require much work to be liveable, these bank-owned homes are being picked up. The fastest to get sold are - of course - the model homes and others built in the last five to ten years. Banks are still pricing homes under the market and encouraging multiple offers.

Short sales are beginning to sell
Around the beginning of last year, we saw many home buyers make offers on short sales, but banks were taking a month or more to approve them. Not any more. The numbers seem to suggest that twice or even three times the number of short sales that sold around the beginning of the year are selling today. Whether they are the same ones, I can't say. Statistics have their limitations and this is one of them.

Some areas are showing signs of improvement
Even though Sacramento county as a whole seems to be bouncing around the bottom, there are areas and neighborhoods within it that seem to be showing signs of recovery. Some that come to mind are Fair Oaks, Greenhaven, and downtown Sacramento. This change seems to occur every time the REO inventory in any little pocket dries up and one of the non-distressed homes sells.

So there you have it... the three big trends toward the end of 2008. We'll see if they carry into the new year!

Real Estate Quote of the Month

You simply adapt your strategy and techniques to whatever new market conditions are emerging. Savvy real estate investors ignore the media chatter about bubbles and peaks, hard times, and depressed markets. Instead, they work the available opportunities - no matter what type of market they face.

- Gary W. Eldred, investor, author.

Real Estate Resolutions I Intend to Keep

It's resolution time! And while I remember saying sometime in college - during my smart alec days - that my resolution was not to make any, I'm breaking that rule right now to make some. So here are a few that are top on my list of real estate resolutions to keep in 2009:

1. I resolve not to constantly check comps to get an idea of the value of my house or my rental properties. I will use the Metrolist MLS for the purposes it was invented - as a way to search for listings for my clients.

2. I resolve to love my home - flaws and all - and not fall for any home I am showing my clients. Yes, even the million dollar ones.

3. I resolve not to drive my husband insane trying to get my house to look like either the ones on HGTV or the new homes.

4. I resolve not to watch so much HGTV.

5. ...or Property Ladder.

6. I resolve to write this blog at least every other day.

7. ...and write it for my readers, not the Chicken Littles.

Well, there they are. Pretty good handful there, huh? If buying a home is one of your resolutions this year, be sure to get in touch with me!

Happy New Year!

And - along with everyone else - I'm hoping this is a good year for real estate. I must say with long term mortgage rates falling, there seems to be a renewed interest in real estate just lately. While this information is only anecdotal right now, I imagine the numbers will start bearing them out.

Anyway, I'm back at work, so please do come back to read more features!