Multiple Offers are Happening in Sacramento Real Estate
Multiple offers are happening. The Sacramento real estate market in 2012 VS 2019 is similar in so many ways. The article below in italics, A Twist in the Sacramento Real Estate Market, was written in 2012 by my partner Elizabeth Weintraub. So let’s now look at my interpretation of 2019. I just sold an investor-type listing; we had 6 offers, all investors. Several were over the list price. The final selling price was 10% over list. This was the same thing happening in 2012. Multiple offers are happening on properties priced to sell. Low-interest rates, too, at 3.75%. Rents are matching purchase price monthly payments.
Inventory is still low. New construction is adding inventory, but they can’t build them fast enough. When investors pay 10% over the list on a fixer,it contributes to higher appraisal values. While many people are nervous about the political climate, people still have to find housing. Wages need to go up to help people afford homes. I think 2020 is going to be a bumper crop year for real estate. 2012 was a big year and eight years later, we are experiencing very similar market conditions. Currently, the economy is doing quite well and unemployment is very low.
I prepare offer tracking sheets for each of my listings. That way, if I need to know years from now about the offers I had received for any particular real estate listing, I’ve got that information at my fingertips. Each of these sheets give me an overview of what happened. For the first time since 2005, I’m receiving over-market offers from investors who are paying cash. That’s the sign I’ve been waiting for. I disregard the first-time home buyers. It’s the investors I watch.
For months now, multiple offers are happening in Sacramento and have been the norm. That’s due to low inventory, low interest rates and high demand. It’s cheaper to buy in the buy or rent scenario. When it’s cheaper to buy than to rent, it also means investors will get positive cash flow even if they finance a home. So, investors and first-time home buyers have been competing, often for the same home.
Here is something to understand about first-time home buyers. When a first-time home buyer bids over list price for a home, that home buyer is not taking extra money out of her pocket. She is rolling the excess into her mortgage. So, it’s not really costing her a lot of extra money to make a purchase offer over the seller’s asking price. If she offers an extra $5,000, her mortgage payment changes by about $30. That’s peanuts. Using that formula, at 3.5% interest, she can bid $15,000 over list price and still not change her mortgage payment by more than a hundred bucks. Of course, it might not appraise at that amount, and therein lies the major problem with first-time home buyers overbidding.
If there are no comparable sales available at that price, the appraiser won’t submit a value at the purchase contract price. If the buyer gets a low appraisal, her only solution to move forward is to pay the $15,000 difference out of pocket, in cash. Most don’t have that kind of cash and, if they did, they wouldn’t pay over market with it. Not just for the opportunity to buy a home, nope. Unless they would. Unless they were that desperate to buy a home.
Not only am I seeing owner occupants who are willing to play all loosey-goosey with cash, but now investors are, too. Investors are no longer guarding their cash like a precious commodity. They are willing to pay above market value, because that’s the last thing to give in negotiations. It’s no longer enough to pay cash. Now, it’s got to be over market. That’s what it takes to make prices go up. An investor who is willing to pay more than the going rate. Investors who pay over market result in higher comparable sales. Higher comparable sales pave the road for higher appraisals, which opens the flood gates for first-time home buyers. — Elizabeth Weintraub
This is a great time to sell. Cash in on how multiple offers are happening today. Call Weintraub & Wallace Realtors, with RE/MAX Gold. 916-233-6759