"So, what's going on with the real estate market?"

"Dear Sacramento Estate Gal: What's going on with the real estate market? Thanks, Everyone You Know Who Isn't a Realtor."

Well, you might as well ask. What's happening isn't great - if I have to liken it to having a baby - and I do liken everything to it lately - it's a little bit like the first trimester. It makes you feel nauseated and not quite all right, you have no sense of the baby moving at all, so you don't feel pregnant, but it's still fun to wait and watch.

And then there's the worrisome AFP screening to get through, so you're praying everything will be all right in the end.

But seriously, here's why a lot of business has dried up:
- many buyers who want to buy can't - there are no zero down loans (for now)
- many buyers who want to buy and can can't make up their minds about prices and how much to pay
- too many buyers are interested in deep, deep discounts
- move up buyers (those who want to sell and buy) are stuck competing with foreclosures
- and lastly, those darn short sales don't help comps.

So now you know. (Need I remind you first-time buyers that I told you this would happen and that last year was the time to buy?)

But I'm still holding on to unshakable optimism that history will repeat itself and everything will be all right in the end.

Ask Sacramento Real Estate Gal Answers!

I received this email the other day and thought it would be interesting to answer it online. I know the recent foreclosures have created this problem for many tenants in the Sacramento area and all I can say is that my heart goes out to them. I have always emphasized that landlords treat their rentals as a business - an ethical business - and this is obviously no way to do so. Read on:

Sacramento Real Estate Gal,
We are renting a house in Fair Oaks. The mortgage went into default in December, but we continued paying rent through February. The landlord has denied any problem every time we ask her. My husband decided to withhold March rent because she definitely won't refund our deposit. She served us with eviction papers March 10th, we received a Notice of Trustees sale on the door March 11th. The sale is scheduled for April 1st. We have been told we have to pay rent, don't pay the rent...what should we do? - S.P.

S.P.,
My recommendation to you would be to start looking for another place right away. Serve the landlord with a 30 day notice and pay the rent. Then you can pursue your deposit in small claims court. California has very strict laws about returning a tenant's deposit. You can read about them here.

To the landlord involved: shame on you. It's landlords like you that give the rest of us a bad name. Unfortunately, you are who the tenants think we all are and so it seems to make it okay for otherwise law-abiding tenants to want to steal from their landlords.

For the rest who are considering becoming landlords, you might want to head over to Landlord Land Mines regularly to make sure you're not blowing your leg off!

Ask Sacramento Real Estate Gal Answers!

Some weeks ago, I wrote about a Sacramento homeowner regarding a possible short sale on two of his homes. I have now done enough research to be able to answer this very important question with the seriousness it deserves.

If you are a Sacramento homeowner in distress, here are the steps you should take:

1. Admit it. Many people that call me never take action because they are in denial. In fact, a lot of them hope their home will never be foreclosed upon and are still in denial when the home is auctioned on the courthouse steps. Don't be that person!

2. Call the mortgage company. The first thing you should do when you suspect not being able to pay your mortgage bill, is call the mortgage company and ask them if they can rewrite the loan under new terms. Now, be forewarned that they cannot create miracles. If your home had been bought just two years ago and the value has plummeted, the mortgage company might not be able to rewrite the loan without you contributing some cash. Try and work it out so that you can keep your home.

3. Research the ARM freeze plan and see if it benefits you. If you had taken out an adjustable rate mortgage, hoping to refinance in two to three years, and can still make the minimum payment, you might be able to freeze your rate for some time. Here's the FAQ page about how you might be able to freeze your rate.

4. If none of the above options work, then your might have to consider bankruptcy and see if you can still keep your home. Research bankruptcy options here. If they sound like something you might be able to do, hire a bankruptcy lawyer or at least go in for a consultation. If you can keep your home until after this mortgage mess ends, it might be worth at least looking into.

5. If the mortgage company won't rewrite the loan and the ARM freeze doesn't help and you decide bankruptcy is not the way to go, you're probably resigned to the fact that you are going to have to move out of the home. A short sale might be possible and you should list your home as soon as you can. The mortgage company will not tell you what amount they will accept and probably will start the foreclosure process as soon as you stop paying your mortgage, but if your Realtor prices the home right and it shows well, you might be one of the lucky few that gets a short sale through, where the mortgage company forgives your debt and settles for less than what you owe. While there is some debate on how little or how much it affects your credit score, the most important thing about a short sale is speed. The quicker the home is sold, the less it brings down your score, so pricing it right is important. Also, the Mortgage Forgiveness Act may now forgive your debt even if your lender gives you a 1099, so you may not pay taxes on it. Consult your tax professional.

6. Of course, if none of these options work, the last option is foreclosure chosen by your lender. They are however required to follow a process to foreclose on your home and you will be apprised of the actual foreclosure date, so be sure to leave the home before that date. Because California is a non-recourse state, the lender can only take the house back and cannot pursue you to pay the outstanding debt. It does however stay on your credit history for seven years.

Short Sales in Sacramento - Now What?

The other day, I received a call from someone who has read this blog with a very serious question. He owned two homes and was making payments on both homes every month, with not one missed bill. However, he knew he couldn't keep this up much longer. He was stuck with an Option ARM on both homes and the value of both homes had dropped about $100,000 each. What were his options, he wanted to know. He had a job offer in the Bay Area and was considering moving, but didn't know what to do with the homes. The rent wouldn't cover the mortgage and he didn't have enough to pay the real estate taxes.

So I thought I would deal with what I told him with a post under "Ask Sacramento Real Estate Gal."

Check back for the details!

Sacramento Real Estate Gal Answers!

Today's answer is directed toward this post about the necessity of a buyer's agent and the comment that followed. I thought writing about it and answering the questions raised in it through an "Ask Sacramento Real Estate Gal" feature would make more sense. So here goes!

Question/Comment:
"The buyers are going to get a loan and the bank is going to require a [sic] appraisal which will protect the buyers from overpaying by 25% so really they still don’t need to use you. Oh and say they wanted to get their independent appraisal just to be sure… I’m sure $300 - $500 is lesser than your commission. I realized [sic] the buyer doesn’t pay your commission but he could use that as a negotiation tool to get a better price on the house. Realtors are only needed for very uneducated people or people that have a very high value on their time such as very, very rich people. People use Realtors because they are to [sic] lazy to get educated about a very simple process. My .02 cents."- Luke Hoppel.

Answer:
Luke,
The basic premise of your argument is flawed because even if the buyers don't use a Realtor to represent them, the seller will have a seller's agent. Whether the buyers use a Realtor or not, the Realtor on the seller's side will have to be paid. There is no negotiation in terms of commission because the fee for the Realtor is set at the time when the listing agreement is signed - with the seller.

Another thing - I understand people can really get their hands dirty and buy and sell a house on their own and actually I encourage people to learn as much as they can about the process. I don't think most people are lazy about the process. I think frankly that they want to have a good quality of life. Sure you can do everything yourself - in fact, why even buy a house made by someone else, why not grow a tree yourself and then make a house out of it. It's cheaper!

Obviously, I'm exaggerating. But I'm doing so to make a point. Using the services of a professional who does the same thing day in and day out makes all our lives easier. I'm very capable of doing my own taxes, for example, but am I studying taxes everyday of the year, learning what has changed from last year? Am I sure I'm getting all the deductions I can get? No. Which is why I use my tax professionals and that's the reason most people use a Realtor.

Not to mention the liability aspect of things. Have you noticed the lack of documentation in a FSBO, the kind you support? Have you noticed that most of them are usually 10 - 20% overpriced in any market?
What's going on here?

Paying someone for the specialized job they do is not only important it's the basis for our free market economy. Sure, it's cheaper to do it yourself, but the costs outweigh the benefits.

Sacramento Real Estate Gal Answers Tomorrow!

I'm going to be responding to a comment on this post about people needing a Realtor to represent them.

Here is the comment in its entirety, that is, without the blatant advertising. The commenter was trying to say that buyers do not need a Realtor representing them, that they can do very well just by themselves. Read on:

"The buyers are going to get a loan and the bank is going to require a [sic] appraisal which will protect the buyers from overpaying by 25% so really they still don’t need to use you.

"Oh and say they wanted to get their independent appraisal just to be sure… I’m sure $300 - $500 is lesser than your commission.

"I realized [sic] the buyer doesn’t pay your commission but he could use that as a negotiation tool to get a better price on the house.

"Realtors are only needed for very uneducated people or people that have a very high value on their time such as very, very rich people.

"People use Realtors because they are to [sic] lazy to get educated about a very simple process.

My .02 cents."

- Luke Hoppel.

I wrote about this comment again here.

Check back tomorrow!

Ask Sacramento Real Estate Gal Answers

Welcome to Ask Sacramento Real Estate Gal where you can ask your burning real estate questions and I answer them! So let's get straight to it!

Dear Sacramento Real Estate Gal,
My house has a fence that is rotting and breaking down on the back of the property. I will be selling the home next year and I know that in this market I have to make it the best it can look.
As such, I have tried to talk to my neighbors who share the fence to get them to pay for half. I have only been successful in locating the tenants - the house behind me is a rental. And then last week finally I got the landlord's phone number. I have left him innumberable messages, but he won't get back to me. I'm assuming he doesn't want to pay for half, as he is legally required to do.
I have a good mind to put up just half a fence. Your thoughts? - D.S.

Dear D.S.,
Wow... half a fence?!? :) Seriously though, you don't want to do that, do you? Look, it's obvious that your neighbor doesn't want to pay for half, but that's the only part I agree with you on.
It's common for neighbors to share costs for a common fence, but I'm not sure if it's a legal requirement. Personally, my husband and I have replaced a fence on our own because there was a chain link fence in the backyard and we wanted our privacy. We contacted the owner just like you did and he didn't respond. I would recommend sending him a registered letter, though, just in case.
And then let it go and build the entire fence. Your need for it is higher than his, perhaps. Nevertheless, if you don't build it (or build half a fence, which I really hope you're not serious about!) you will be the one most negatively affected by it in terms of the sale of your home.
Good luck!

Ask Sacramento Real Estate Gal Answers!

Happy Friday! Today we have a very interesting question by a potential homeowner - let's get right to it!

Question:
Dear Sacramento Real Estate Gal,
I will be buying a home soon with my wife and was wondering how we should hold title. I have no idea - I'm assuming everything is held jointly since we're a community property state here in California, right? - A.F.

Answer:
Dear A.F.,
Right. Since California is a community property state, everything is held jointly between husband and wife.
However, there are a few different options for you two to hold title to your home. You can hold it as "tenancy in common," "joint tenancy," or "community property."
In my opinion, the best way for a husband and wife to hold property is "community property with right of survivorship." This allows equal ownership to both, allows you to avoid probate and gives you a "stepped-up" tax basis when you sell the home.
You should ask your escrow officer to explain the differences to you before you sign.
For more details on community property with right of survivorship, go here.

Ask Sacramento Real Estate Gal Answers!

Well, here we are again. This week has been a little crazy, so forgive the fact that this Ask Sacramento Real Estate Gal is a day late. Let's just go to the questions directly, shall we?

Question #1: I missed the booming market! I was considering selling my home last year, but reconsidered. Now I would like to move but I'm hearing that homes are not selling. Exactly how bad is it? - Home Seller Who Missed the Mark.

Answer:
Dear Home Seller, I'm sorry to hear that. The truth is, homes are taking longer to sell because of the huge amount of bank-owned inventory. But how bad it really is out there depends on your particular situation. The blanket statement I like to use is, if you don't have to sell, don't. If you can afford to hold on to your home for another three - five years, do so.
Real estate markets are cyclical and this one will come back. The question is not if, it's when.
However, if you just cannot afford to hold on and are not interested in refinancing (to get your money out) and renting this place out and moving, you would do well to talk to a Realtor and see if the price you can expect to get from the sale of your home is something you can live with.
Remember there are still areas (and price ranges) in Sacramento that are not affected by this housing slump. If your home happens to fall into one of them, you can weigh your options and decide the best one for you. Good luck!


Question #2: I am ready to get my hands dirty! Where can I find a cheap home to rehab and sell for a profit? - G.J.

Answer: Wow! I can see you're ready to go! If you are seriously considering flipping a house, I would recommend you do a thorough study of at least three books that explain the ins and outs of it. I would recommend that one of them be Flipping Confidential by Kirsten Kemp.
The second part of this equation is pure math and you must consider this question very carefully in this market - when the house is ready for sale, will you be able to afford to list the home under or at the same price as the bank owned homes in the neighborhood and still make a profit after expenses? If not, you would do better to wait a little longer.
As to where you can find these homes, go to the foreclosure auctions or the HUD website. There are also many online services where you can find out when foreclosed homes will be sold and go buy one at the courthouse. You can also check the county clerk recorder's office.
Good luck, but remember: Do The Math. First.

That's all for today! Remember to ask those questions, so I can feature them next week!

Sacramento Real Estate Gal Answers Tomorrow!

Get your questions in today. Tomorrow, we are dealing with home sellers and what they need to do to get their homes sold. Also answering questions from some investors.

Check back!

Sacramento Real Estate Gal Answers!

Okay, it's time for Sacramento Real Estate Gal to answer some of those questions that rolled in, without further ado...

Question #1: What is an REO? All these acronyms get thrown around so much and they make no sense to me! - Potential Investor But Don't Know Much.

Dear Potential Investor,
First of all, let me congratulate you on wanting to know more and learn. I always admire people who take initiative to learn about their money, because no one cares about it as much as you do!
As for the alphabet soup you've run into - an REO stands for Real Estate Owned. It is usually a house that has been foreclosed on by a lender for non-payment of the mortgage.
Usually, such a house is put back on the market for sale or auctioned. REO sales are always as-is sales, so it is wise to get all inspections done, including a termite, home inspection and roof inspection.
In today's market, you don't have to go about digging for these houses either. You can search the list of foreclosures at Elite Properties. This list is updated weekly.
Hope that helps you drop the "potential" from your name! Good luck!
Also read: Are Foreclosures Worth It?; Two Types of Investors

Question #2: I'd like to hear your advice for investors. Do you think it makes sense for investors to buy non-owner occupied RE in Sacramento? If so, what sort of deals make sense to you? You often say things like "Such and such was such a gret deal. I wish that I had bought it for my portfolio." So back this up with specific deals and/or strategies. - Bogonflux

Dear Bogonflux,
First off, let me just begin this with a disclaimer that you should never substitute anyone's advice, mine included, for your own research. But more specifically, I am of the buy and hold variety of investors. I would like to flip a house soon, but have not done so yet. I believe in buying houses that are well below the median priced homes in first-time buyer neighborhoods and rent them out to people who cannot afford to buy yet.
To make this even a better investment, it makes sense to buy them as fixers and live in them while you work on them. My husband and I have lived in every house we bought for at least two years while we worked on them.
The strategy goes something like this: buy an inexpensive fixer-upper, fix it up, refinance it, buy another home, rent the previous one out. While the cashflow is a trickle in the beginning, it is well worth it in the long term. I have friends that have used this strategy to build a pretty decent-sized nest egg.
Hope this helps!
Also read: Adding Value to your Real Estate; My Own Real Estate Numbers

Ask Sacramento Real Estate Gal Answers Tomorrow!

Thank you so much for the response to this new feature!

In brief, answers tomorrow will include:
- My favorite investing tool in real estate and others I'd like to try
- What is an REO? What is an NOD? What is a short sale?
and others.

Be sure to ask those burning real estate questions to be featured here next week!

New Feature Coming to Sacramento Real Estate Gal!

I'm introducing a new feature to this blog. Once a week, I will be responding to questions that might be on the minds of my future clients out there - that's right! You - ask a question!

Do you have a burning question about some aspect of real estate? It can be as large as buying a vacation home for retirement or as small as what you can do to get your home sold fast. Then email me or write a comment to this post and check back next week to read "Ask Sacramento Real Estate Gal!"