buying a home in sacramento
The February 2020 Sacramento Area Housing Report, everyone is talking about it. Wall Street is in meltdown, toilet paper doesn’t exist at Costco and my friend just in a panic bought three firearms. Whoa! The majority of us are handling this current COVID-19 virus pretty well. Others, are of course being impacted on a variety of levels. There will always be different ranges of reactions. When isolated, it is often challenging to know the reality of the housing market. This blog serves to be a source of information. So let’s talk about interest rates. Yes, they spiked up slightly (still under 4%) a week after they dropped to a record low 3.13%. This is in part to a backlog of loan applications (up 55%) that lenders cannot keep up with.
Ever wonder what happens if you do not hire a Sacramento Realtor with experience? Well, here is a good example. While reviewing multiple offers on my East Sacramento listing last evening, It got me thinking about some of the sour grapes responses from buyer’s agents who had made offers. One of the agents called a bit upset. Muttering that he had called and texted about his offer, submitted the day before, and had not yet had a seller response. I explained that the seller had no obligation to respond to his offer. Additionally, that the MLS disclosed the seller is out of state so instructions were to give plenty of response time. His offer was a low offer price compared to the pile of top offers we had.
Are you looking for homebuying tips to buy a home in our fall Sacramento real estate market? As a potential home buyer, you are now in a wonderful position to buy a home. Some of you got too frustrated with the market and gave up. Maybe it’s time to give the market another look? Because our seller’s market is over. O.V.E.R. Except for a small handful of picture-perfect listings, you probably will not encounter multiple offers for a home you want to buy.
I could give you all the reasons why the market has changed, but not everyone is interested in how we got here or the stats. Most buyers just want to know what they need to do buy a home. They want to be aware of the types of benefits can get they out of today’s market.
Of course, if you are already working with the exclusive buyer’s agents on the Elizabeth Weintraub Team, then you’re covered. Your buyer’s agent is already informing you of the choices awaiting your decision. Here are my top 5 homebuying tips that you can confidently put to use when you’re ready to buy.
Homebuying Tips for Sacramento’s Fall Market
When you’re ready to make an offer, you will need to consider the amount of earnest money deposit required for a purchase contract. Although the amount of earnest money deposit is not specified, and could be just a $1.00 or even simply “love and affection,” consideration is part of the essential elements of a purchase contract. Because back in Real Estate 101, we had the essential elements of a purchase contract drilled into our heads. Do you know what those elements are? I’ll tell you, in case you have forgotten.
Amount of Earnest Money Deposit and
Essential Elements of a Purchase Contract
- A legal purpose
- Competent parties
- Offer and Acceptance
While there is no minimum amount required, most buyer’s agents try to keep the earnest money deposit under 3% of the sales price. The reason for that is in the event of default, the seller might be entitled to liquidated damages, and that amount is limited to 3% of the sales price. Any amounts deposited over that sum would be returned to the buyer. Unless, of course, the seller refused to release the earnest money, and then there is a penalty that can be imposed for refusing to release. To get that penalty, though, and to get the rest of the money released, well, it could involve an expensive court case or Small Claims.
Rather than fight that battle, it’s safer to limit the earnest money deposit to less than 3%. But how low can you go is what some buyers want to know. Now, considering how the seller will interpret the buyer’s eagerness and willingness to buy the home, it might be wise to put your money where your mouth is. If the amount of an earnest money deposit is $1,000, that doesn’t show the buyer is very serious, even if the buyer is. Especially if the sales price is $400,000. 3% of that is $12,000.
Another twist that plays into this, which was mentioned at one of our office meetings at Lyon Real Estate, is some listing agents are getting sued if the buyer later bails and the deposit was puny, inadequate. I can see that. A judge might question whether the agent was protecting her seller by not asking for a larger earnest money deposit.
From a Sacramento listing agent’s point of view, 1% of the sales price is the bare minimum, but I really prefer 2% to 3% for my sellers. It shows the buyer is genuine and committed. All buyers, unless otherwise agreed to in writing, have a contingency period in the contract that provides for cancellation and a release of the earnest money deposit.
I was thinking about this news last night when a client who moved to Colorado called me. I had recently sold her mother’s condo at Riva on the River, followed a few years later by selling her own home in West Sacramento. This seller wasn’t planning to buy a home in Colorado right away. But like most people who make the transition from buying to renting, buying another home was never far from her mind. You get that bug. She admitted to tapping into Zillow and Realtor.com to view homes for sale. Then one day, out riding bikes with her husband, they stumbled upon a neighborhood and said, hey, we could live here.
Sure enough, they found a home for sale, very similar to the home she left behind in West Sacramento. Except this is their house on steroids. More than twice the square footage. The market in Colorado is still crazy, bidding wars, multiple offers, says my Realtor friend in Denver, Joan Cox. My fingers are crossed that their offer gets accepted. My former client and her family should be in their new home by Thanksgiving.
All of this might lead you to wondering if rising California homes prices will keep you out of the marketplace. Not if you don’t let it. Not if you act within the next year or so. This is a great time to buy as rates are still super low, hovering around 3.875% to 4%, depending on the type of loan you get. The market won’t crash because too many buyers pay cash and others who finance are extremely well qualified with strong down payments. I had hoped we were headed toward stabilization. That would be a calming influence in Sacramento real estate. But not predicted to happen.
In Sacramento County, our highest median price for single-family homes was $395,000 in August of 2005. That was also the month I recall the phones had stopped ringing. The merry-go-round was over. As of September, 2017, our median price for single-family homes in Sacramento is $348,000. Sacramento was among the first affected in California. Our rock bottom was the summer of 2011. Hopefully, we will be among the first to taper off.
The prediction for California overall is 3 to 5 years. However, I predict at the rate we are moving, we’ll see Sacramento meet our high of 2005 in only 1 to 3 years.
We still have a lot of buyers who deserve to own a home in Sacramento. If you’d like more information or help with Sacramento real estate, please call top Sacramento Realtor Elizabeth Weintraub at 916.233.6759. I answer my phone. Put 43 years of experience to work for you.