home buying tips
Submitting home buying offers in Sacramento 2020 should be well-thought out with a strategic plan. The market is very competitive as inventory is down by a third in many areas. What does this mean for homebuyers? Perseverance is the answer. Understand your priorities. Be willing to compromise and invest in sweat equity. When buyers cling to very stringent criteria, it is a challenging journey. To have “it all,” you will pay dearly and may have to build a custom home, which is not inexpensive. However, when you buy a resale home, you are not paying top dollar for upgrades.
What home buyers don’t know about a loan contingency can come back to bite. It’s not just home buyers in Sacramento who might not understand how a loan contingency works, either, it’s also some of the mortgage lenders. I can’t count the number of times I’ve heard a mortgage loan officer tell a borrower on the due date, we’re not ready to release the loan contingency yet. What?
If I get wind of it, as a Sacramento listing agent, you can bet hell is gonna break loose. For starters, I represent the seller, not the buyer. If the buyer is not ready to release her loan contingency on the date it is due because her lender is dragging feet or her lender feels “uncomfortable,” that is not my seller’s problem. It is not my problem, either. It is the buyer’s problem.
Because the likelihood is that purchase contract says the buyer will remove the loan contingency within 21 days. This does not mean the buyer has a loan contingency that runs all the way to closing. It means the buyer has agreed to release the loan contingency within 21 days. If a buyer had no intentions of honoring the purchase contract, well, that is pretty dishonest. I’ve had buyer’s agents tell me, “Let me check with the lender to see if it’s OK to release the loan contingency.” That is not the lender’s call.
Makes about as much sense as asking your next-door neighbor. Or one of those creepy guys on Fox News. I guess you could consult a Magic 8 Ball. If the buyer doesn’t want to release the loan contingency, boo-hoo.
This situation is magnified in a hot market like our seller’s market in Sacramento this spring. We might have a backup offer, it could be all cash and ready to close in 5 days. The market could have gone up during our first 3 weeks of escrow. The seller could decide for any reason to enforce the contingency release. The seller can issue a demand and cancel the buyer within 2 days if the buyer doesn’t release the loan contingency. Yet, time and time again a loan officer will try to stick her unauthorized nose into the purchase contract by telling a buyer not to release the loan contingency.
This makes no sense. The lender is not a party to the contract. Potential home buyers should discuss contingencies with their buyer’s agents when they sign a purchase contract. If a buyer needs a little more time, the best course of action is to bring this to the seller’s attention by submitting an extension of time addendum and requesting additional time. However, sellers are under no obligation to grant the extension. Sellers can refuse. And then where are you left?
Sellers’ agents in Sacramento insist that the buyer submit a loan preapproval with the purchase offer. They want to see that the buyer is qualified to purchase the property and has at least taken the steps to talk to a lender. But the letters themselves don’t guarantee that the buyer will get a loan.
If you want to give a Sacramento home seller ammunition to reject your purchase offer, here are three things you can do to mess up your loan preapproval process:
Choose an out-of-area lender. There is nothing inherently wrong with an out-of-area mortgage broker, but listing agents typically won’t know the lender nor its performance record and, let’s face it, there are a lot of loosely-defined mortgage brokers practicing. Listing agents and their sellers don’t want to watch the transaction fall apart because the buyer tried to get a loan from a lender that could not perform or did not fully vet the buyer.
Submit a prequal letter instead of a preapproval letter. A prequal letter says the lender has had a conversation with the borrower. A loan preapproval letter generally discloses the lender has a completed loan application, obtained the buyer’s credit report, approved it, ran it through actual or desktop underwriting and reviewed the buyer’s documentation. It speaks volumes.
Attach a loan preapproval letter that shows the buyer is qualified to pay more than the asking price of the home. Nothing says to the seller: “Let’s issue a counter for a higher price” faster. In fact, the mortgage broker I work with emails me the preapproval letter in a Word format so I can immediately lower the price, if necessary, before submitting the offer.
I always suggest that my buyers compare rates and terms among lenders, although I have no stake in the lender the buyer ultimately chooses. That’s the buyer’s decision to make. But I do want to submit the buyers’ offer in the strongest light possible, and that means submitting a preapproval letter (not a prequal) with their offer.
If your lender can’t or won’t issue a preapproval letter, then you might want to look for a lender who will. Don’t sabotage your efforts to buy a home by making these loan preapproval mistakes. Call Sacramento Realtor Elizabeth Weintraub at 916.233.6759 for a recommendation to a local Sacramento mortgage broker.
If you’re looking for a good buy, try looking at overpriced homes in Sacramento. Look at homes that have been on the market for more than 60 days. The longer, the better.
Most buyers pass up these opportunities. Agents do, too. They presume the seller is unreasonable or maybe insists on a pie-in-the-sky sales price. They also believe that the seller has probably turned down other offers, so they reason it’s wasting time to chase a lost cause.
However, the truth is most buyers do not make substantially low offers to sellers. Agents advise against it, too. Few agents want to gain a reputation among peers in the community as being a low-baller or a time waster. Besides, if you look at MLS statistics for averages, you won’t spot these homes. Even in buyer’s markets, most homes still sell between 95% and 100% of sales price (not accounting for concessions), if they are priced right.
So the lonely, neglected listing just sits there. Collecting cobwebs. The listing agent pleads with buyer’s agents to submit an offer — any offer — but buyer’s agents tend to gravitate toward well priced listings; it’s simply human nature.
I advise buyers to hook up with an area agent who is on top of the inventory, be it me or some other Sacramento Realtor. That’s the only way they will know which properties might be a bargain in disguise. I’m always on the lookout for gems. They don’t pop up all the time, and every transaction is different, but if agents poke around in MLS and get to know neighborhoods, they probably already know which two or three homes in an area might be worth pursuing.
Area specialists should feel comfortable enough to share that knowledge with buyers and write those offers. You know what the listing agent said about the last overpriced home in Sacramento? She said not a single real estate agent had shared with her that it was overpriced. Why? Agents don’t want to insult other agents. Sometimes out-of-area agents face blackballing from local agents, too, because locals tend to frown on territory infringement. Ha! Spittooey!
It’s a complicated business. It pays to have a buyer’s agent on the side of buyers.
Does it mean that you have a relative in the real estate business whom you might call to represent you to buy a home? Does “are you working with a Sacramento Realtor” mean you are beginning to dislike your real estate agent who has been sending listings but never calls or follows up to see if you’re ready to look at homes or offers any other kind of assistance to you? Maybe not. It’s complicated.
Basically, when an agent asks a home buyer are you working with a Sacramento Realtor, it means are you presently working with an agent or about to work with another agent who will write the offer for you? It could also mean have you signed a buyer broker agreement, in which case, even if you’ve changed your mind about working with that agent, you’re probably stuck with that agent and can’t choose somebody else.
When an agent asks if you are working with another real estate agent, just be honest. Explain your situation. Because the agent is asking in a roundabout way if he or she can write the offer for you. If he or she cannot write the offer for you and represent you, then the answer is yes, you are working with another agent. Be aware that Realtors are prevented from interfering with another Realtor’s client.
Sometimes buyers want to work directly with the listing agent because they wrongly believe they’ll get some kind of break or preferential treatment. Not much we can do about those disillusioned people. They tend to get what they deserve, which is not necessarily excellent representation. Don’t go that route. It doesn’t mean, however, that if a listing agent shows you the property that the listing agent won’t want to write the offer because the agent most likely will.
My team members are upfront when they talk to buyers. They say, if we show the home, we will represent you. Do you understand and agree to it? Or, are you working with another Sacramento Realtor? It’s OK, to talk about this, and it is imperative. Otherwise, you might end up in trouble over procuring cause. You can save yourself a lot of time and trouble if the agent who shows you the home is the agent who will represent you.