buying home sacramento
Is it smart to look at homes outside your price range? At first blush, sometimes buyers think, oh, what can it hurt? Maybe the homes are overpriced and the owners will eventually lower the price to my price range? Or, maybe the seller is severally distressed and needs an immediate sale so she will take less.
Looking at homes outside your price range is likely to do one of three things. All three of them can be damaging.
1) You may find yourself falling in love with a home that is so far out of your price range you’ll do practically anything, liquidate any asset, to possess it. When emotions run away with you, that’s how people often end up in financial trouble.
2) You could fall into a great pit of depression. Quite logically, you may ascertain this is not a property you can afford, maybe not ever, and that makes you sad. It’s the opposite reaction you expected. There is little joy in drooling over a commodity you cannot afford as all it does it elevate your expectations to a level you might never achieve. And that’s a terribly negative place to be.
3) You could lose out on an opportunity that is well within your price range because you are spending too much time looking at homes outside your price range. When that window of opportunity opens, you’re already behind closed doors elsewhere. And that’s a shame.
It truly makes more logical sense to look at homes within a range you can afford to buy. Let’s say you are preapproved for $525,000 and want to buy a modest home in the leafy Sacramento neighborhood, Land Park. The first thing I would tell you is look somewhere else or raise your price point. Many of the homes for sale in that price range are near noise, some other detriment or incredibly small.
You could instead look at Southside Park, which is a perfectly nice neighborhood in the same ZIP code as Land Park but it is not Land Park. It is more urban, like Midtown. I would also encourage you to check out 2214 Davini Lane near Southside Park. It is a tri-level built in 2007, which features all the bells and whistles. For sale at $489,000.
By focusing on your price range and not looking outside your price range, you’ll have a better chance of buying a home you love for the long run. It’s a lot of work to go through buying a home. Why repeat the experience due to a mistake? You can get it right the first time around by talking about your price ranges with your agent and making sure your parameters for a property search are returning results you can live with.
When will mortgage interest rates go down, the caller asked yesterday. Sure, he’s just doing construction across the street or maybe he lives in the neighborhood. Not really a buyer, he says. After a much longer discussion, turns out the caller is actually a vet with a VA eligibility. What he really wanted to know was is it a good time to buy a home?
But like so many other first-time home buyers today, he asked the question of when will mortgage interest rates go down. As though that is some kind of secret measurement of the gateway to homeownership.
Never. That’s my answer. Our days of historically low interest rates, oh, please dear, God, let them be over. Interest rates have been superficially suppressed for almost 10 years and are not an indicator of a strong economy.
You live long enough, you see everything. Why, in 1995, I recall feeling almost giddy that I was able to score an interest rate of 8%. Also, when making the transition in the 1970s from escrow officer to real estate agent, I saw first-hand the days of 18% to 20% interest rates.
So when rates hover around 5% today, which gets buyers fretting and wondering: when will mortgage interest rates go down, part of me says they have no idea how good they have it. It also makes me want to ask: hey, have you looked at your VISA card statement lately? Making the minimum payment, are we? How much is that interest rate?
Quentin Fottrell, personal finance editor at MarketWatch, says making minimum payments on a credit card is insane. He offers the following: “A $2,000 credit balance with an 18% annual rate, with a minimum payment of 2% of the balance, or $10, whichever is greater, would take 370 months or just over 30 years to pay off.”
Yet, you don’t hear anybody complaining about that 18% credit card interest rate. Instead, they focus on a 5% mortgage interest rate and wonder when will mortgage interest rates go down.
Further, what do borrowers have to show for paying on that 18% credit card rate? Not a house, that much I can tell you. Generally, it’s impulse purchases or depreciating items. For some borrowers, all living expenses are financed, like gas and groceries.
However, facts are prices are soft on many homes as inventory rises, which makes it a great time to buy. Our Sacramento housing trends for September 2018 show double the number of homes for sale since January. Plenty of selections. Just lock in that interest rate. Because every one-half of a percent drops your purchasing power by about $25,000. That means if you had hoped to buy a $400,000 home, you can only afford $375,000.
Such a relief that I am not on the receiving end anymore when a buyer freaks out, but I do feel the ramifications when it’s the buyer in my transaction with cold feet and it’s my seller who is affected. In this instance, it’s neither of those situations, which is why I can tell you what happened. Because it’s not my transaction. But it is a transaction that almost happened, then didn’t, then got yanked out of the fire and resurrected.
Say an agent has a home listed in Fair Oaks. Along comes a buyer, the offer is accepted and escrow is opened. Then the buyer’s appraisal comes in for less than list price, and the seller decides to let that buyer go along his or her merry little way. New buyer pops into the picture. Writes an offer agreeing to bridge any difference in appraised value, but whoa! The appraisal comes in not at the previous appraised price like expected but another $30K less.
To put this into more clarity, let’s reiterate with numbers. Let’s say, just theoretically speaking, that the first offer was $350K. The appraisal came in at $330K so the seller canceled. Then the new buyer agrees he will bridge the gap, pay the $20K difference in cash if it comes down to it and offers $350K. Except his new appraisal is $300K. To bridge THAT gap, it would cost the buyer $50K. Yikes. What do you do? Could be a potential situation in which a buyer freaks out.
The agent, being a creative genius, says let’s go with the first appraisal from the first buyer. She calls that lender for whom the appraisal was completed and switches her buyer to that lender. The lender pulls a bunch of rabbits out of hats and gets the loan approved for the second buyer in record time. Loan docs are delivered to escrow. Everybody is ready to sign.
What are the odds that the second buyer freaks out? Why would the buyer get cold feet? I guess nobody has the answer to those questions. The only thing everybody in this situation knows for certain is the second buyer has decided to cancel at the 11th hour.
There is only one thing an agent can do. Send the cancellation to the listing agent, along with an offer from a third buyer (in the wings) at $330K, and an approval letter from that lender who prepared the first appraisal, plus include a contingency release for inspections based on existing reports. You can’t stop an existing buyer from getting cold feet. You can’t talk the buyer out of canceling, nor should you. The buyer will learn soon enough he is not buying a house, no matter what.
What an agent can do is focus on the new buyer who suddenly has become an extremely lucky person.
A Sacramento home buyer called yesterday to lament about her attempts to buy a home. She asked me if this was a good time to buy or a bad time to buy. It’s not as simple as that, I’m afraid. It’s a good time to buy if you can conform to the market, and if you can buy a home. That’s because interest rates are low and prices are very affordable. But it’s a lousy time to buy as well because you might not be able to buy a home at all. It’s not like a buyer can make a full price offer and expect that offer to be accepted. Come on, this is not the middle of the Mojave desert — even though that’s how Bay Area investors see us — this is Sacramento.
Sacramento — a severely distressed real estate market that is beginning to rebound. Prices are inches up. Prices are not kissing the sky like Jimi Hendrix. Yet home buyers are making crazy offers like Charlie Sheen on a bender. I can quietly list a home and slip it into MLS and within 24 hours, I’ll have a pile of offers on my desk for $20,000 to $50,000 more than list price. If this isn’t madness, I don’t know what is. If those Charlie Sheen offers were cash, I’d be dancing naked on my desk, but they aren’t. They are financed offers, and if the property won’t appraise to get that loan, they may as well be offering us a cart filled with gold bullion, which we all know will never leave the vaults at the U. S. Mint.
I can’t tell you if this a good time to buy a home. It depends on how much stamina you have and your appetite for rejection. It depends on your type of mortgage, too. It depends on who you are working with, which Sacramento real estate agents you choose to represent you. I can tell you the Elizabeth Weintraub Team is closing deals. I can tell you that some of the largest real estate companies in Sacramento tend to list most of the homes for sale in Sacramento. Some of the real estate companies do not put every listing immediately into MLS. If you are lucky enough to be working with a top producer in Sacramento, you might gain a bit of an edge.
It doesn’t mean that going to the listing agent ensures that buying edge because no reputable listing agent in Sacramento would put her seller at a disadvantage. No way, Jose. We want our sellers to get the highest and best offer; there are no compromises. No favorites. Everyone has an equal chance. But you might get a chance, and that’s the important part.
In this seller’s market in Sacramento, hitching your wagon to a top producer might be the wiser decision.
Don’t give sellers a reason to reject your purchase offer. Not in a seller’s market like our present real estate market in Sacramento. Don’t give them one little reason. The thing that buyers don’t realize is when a listing agent is reviewing offers with the sellers, they are probably looking for a reason to reject. They are not looking for a reason to accept. That’s because most homes right now are attracting multiple buyers.
If you’re buying a home in Sacramento, you want to make your offer stand out but not in a bad way. You don’t want your purchase offer to be the only offer, for example, that asks the seller to give you the refrigerator. A smart buyer makes no demands on a seller. A smart buyer makes the offer easy for the seller to accept. This is not the time to ask the seller to pay for a home warranty or to demand that the seller in a Sacramento short sale, for instance, not send any other offers to the bank.
Realize that a Sacramento home buyer is not in a position to make demands today. Don’t stand out like a sore thumb.
For one thing, I don’t know of a single Sacramento short sale agent who would send more than one offer to the bank. It’s just not protocol. The only reason to ever do that is if the initial offer is too low. As long as a buyer’s offer is sufficient and would be acceptable to the short sale bank, only a short sale agent with sadistic tendencies would advise a seller to send more than one offer to the bank. It’s unwise to insert any clause apart from the norm that would make your purchase offer stand out in a negative way.
I promise you that if you offend the seller, your offer won’t stand a chance in a blue moon. If you’re not getting offers accepted, there might be a burr wedged in your offer somewhere.