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Have you ever wondered if there is a value difference between a single-story house and two-story house? Is it proper to list your home at the same price level as a similar-sized house that has one extra level?

I asked some Sacramento area real estate pros to pitch in a few thoughts, and here is what they said:

Sue Galster – Realtor/Broker: By default, a one-story house appeals to a wider range of current home owners and future buyers than a two-story house. Rarely if ever do I meet a buyer who says they need or prefer a two-story house, but it’s quite common to hear that a one-story is a non-negotiable. With the aging of the Baby Boomers and people living longer, I believe more home owners will require a one-story house for health and safety reasons so that stairs aren’t an issue in their lives.

Steve Ostrom – Realtor/Broker: Over 30% of my clients say they must have a one-story. Another 40% say they prefer a single story. That is around 70% targeting single story. The number one reason they state is that they are getting older and worry about having to climb stairs later in life. The second reason is energy costs of a two-story. My reason is that my wife has a history of falling down stairs. Regardless of the reason, there is much more demand for single story homes than two-story, and supply and demand ultimately determines value.

Whitney Johnson – Realtor: I do think that if you are willing to purchase a two-story home on a same or similar lot size as a single story home, you will obviously get a larger lot, which could be a benefit. We have never taken a number of stories into consideration when comping our properties. We tend to go off the basics, bed, bath, sq ft. When I asked around office it was pretty split.  Some would take a single story all day long and have a smaller lot. The other half would prefer a two-story larger lot. Both sides agreed the pricing should be the same.

Jeff Grenz – Realtor/Broker: Single level homes are always in high demand. They typically reach every end of the market from entry-level to empty nester…. so when demand is hot, the single levels typically go first, and when demand is slack, again, the single levels typically go first, leaving more excess inventory in the multi-story homes – unless the prices get adjusted to make multi-story homes a better buy. It actually costs less to build a two-story home vs a single level in most cases, given the same square footage and amenities, so builders are often able to balance the higher demand for single level homes with the better pricing for two-story homes. So if square footage is your measure of “value” than a two-story home, as efficiently shaped as possible, will give you the best “value” – a definition of an efficient building shape? Think “salt box” like the east coast. If accessibility is more valuable, and IMHO, higher demand for resale, then single levels are the best “value”.

Craig Dunnigan – Realtor/Broker: I have always held the opinion that single story homes sell for more money than a two-story of equal size….this is based on observing sales trends for over 35 years…. my opinion was confirmed today at our sales meeting. Our agents unanimously stated that single story homes are in higher demand and sell for more than most two-story homes…. The aging “baby boomers” don’t want to be walking up and down stairs. The bottom line is “supply and demand”…..there is not a vast supply of single story homes coupled with a high demand!

My take as an appraiser: I tend to compare single-story with single-story and two-story with two-story because there is sometimes (not always) a difference in value. Unfortunately there is no universal value adjustment given for a variance in stories because it really depends on the neighborhood as well as supply and demand. I have noticed among higher-end tract homes that buyers typically pay a premium for single-story units. As an example, a buyer would very likely pay more for a 2800 square-foot single-story house than a 2800 square-foot two-story house with similar updates. Whatever the case, it’s usually best to start a market comparison by using single-story comps when appraising a single-story house and two-story comps for a two-story unit. This tends to give us the best picture for value because we’re comparing “apples to apples” so to speak.

Question: Is there any price difference in your mind? I’d love to hear your take in the comments below.

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Did you know the current unemployment rate in Sacramento County at 8.3% has not been this low since November 2008? How does that strike you?

Quick Video: Here is a very quick screencast I did to talk about fresh job stats for the United States, California and Sacramento County. Take less than two minutes to watch so you can be in tune with local and national trends. Your brain size will increase, and you’ll also become a more potent resource for your clients. Okay, maybe I can’t guarantee the size of your brain. 

Watch below (or here on YouTube directly).

Here are some graphs from the video (and one bonus graph). Share them in your newsletter or on your blog, Facebook or any other social place. The only thing I ask is you keep the images intact and link back to my blog if possible. Enjoy.

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Do you use video for business? Why or why not?

I’m excited to share that next week I’ll be giving a presentation for the Sacramento Business Journal’s “Connectionopolis” event called “Video & Social Media – Rewriting the Rules of Marketing“. The presentation will focus on how businesses can integrate video into their online presence and marketing plan. You’ll hear from Kerry Shearer, a professional video expert,  and then me – a local practitioner finding success with YouTube videos. This will be very informative as well as practical. The goal is to give out information and tools so businesses are more equipped to confidently step into the world of videos.

SacBiz Connectionopolis Video Event
William Jessup University
333 Sunset Blvd Rocklin CA 95765
May 23, 2013 8-10am – $20 per person (includes catering)

You can read more about the event here. Thanks to the Sacramento Business Journal and Social Media Club of Sacramento for making this happen. I’m honored to participate. I hope to see you there.

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Here is a quick snapshot of housing inventory in Sacramento County for the past ten years. I used a graph from Trendgraphix as my base to highlight some of the major happenings in the market. It’s interesting to see parallels and differences between the previous boom and the recent surge in values. Any thoughts?

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If you meet appraisers at your listings, do you feel like you have a valuable exchange or are you simply handing over a stack of comps?

Help for Agents: Today I want to give some quick tips to help facilitate better interactions so real estate agents can communicate well about their listings and appraisers leave with a deeper understanding of the property and transaction. I realize that some appraisers are pretty much non-communicative, but even if that is the case, you can still get across good information by following the tips below.

1. Prime the Meeting: When setting up the appraisal inspection, let the appraiser know you have a packet and you hope to have a quick market conversation during the inspection. Also, ask the appraiser if there is any information he or she needs during the inspection. Remember, a conversation goes two ways, so don’t just talk at an appraiser. An experienced appraiser will be able to offer market insight or even answer some of your questions.
2. Leave Your Baggage at Home: Treat each meeting as a new opportunity. If you felt the last appraiser you encountered was a dimwit, leave that in the past. It can be easy to bring baggage, anger or frustration into new situations, but that’s hardly ever helpful for the present. In short, be professional and emotionally fresh for the new situation.
3. Advice on Giving “Comps”: If you do provide sales and listings to the appraiser, make sure they are actually competitive (similar) rather than the highest sales in the neighborhood that happen to meet the subject property’s contract price. I recommend providing a full detail MLS print out too (including the other agent’s information) so the appraiser does not have to re-print your sales to get the full scoop. This saves paper and time. If you want to go the extra mile, take a few minutes to write notes on the top of each sale to help highlight differences between the subject and other sales.
4. Focus on Insider Details: Help the appraiser understand how the market responded to your listing. How many offers did you have on the property? What price levels were the other offers? Why was there a change in listing price? Why did the seller accept the particular offer instead of others? What have you noticed happening in the neighborhood market? This sounds like quite a bit of information, but it’s really only a few sentences. Rehearse answering questions like this so you can quickly tell the story of your listing.
5. Info Sheet: Give the appraiser an information sheet that has already been filled out by the home owner (or you). I created the following form to easily provide more information about recent updates, the neighborhood or anything else that might be relevant. Remember, value is often found in the details. DOWNLOAD HERE for free as a PDF or WORD document. I recommend saving the Word file to your desktop. Feel free to edit the form to your liking.
6. Quick Tour: Don’t hover over the appraiser, but do point out anything that helps the house stand out. What has been attractive to buyers? Is there anything different about this house that is more or less appealing than other homes in the neighborhood?

It’s easy to let these details slide because life is busy, but taking time to prepare to meet the appraiser is definitely something worthy of building into the rhythm of business. Every other detail in the transaction is handled with great care and attention, so it seems fitting to do the same with the appraisal inspection too.

I hope this was helpful. Any stories or questions? Comment below.

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It’s not always easy to understand how the market sees a property, right? This is especially true for something unique. Well, let me share two things I sometimes do to pick up a deeper perspective on a property. Nothing replaces current data of course, but understanding how the market has historically responded to a home can be really valuable when sifting current trends.

1) Previous Sales: If a house has sold any time after 1998 on Sacramento MLS, you can do a search for other nearby properties at the time of the respective sale. If before October 2008, then use the “Archive” search feature on MLS (you can draw a polygon map there too). As an example, I was talking with a Realtor friend about a tricky property he was hoping to list, and after looking up the sales history for this house, I saw it had sold previously in both 2005 and 2008. There were very few recent sales in this custom neighborhood other than larger and more upgraded homes, so having two previous sales to research was like a gold mine to help answer questions like: What types of houses did the market see as comparable during the sales? What was the price difference between the subject and homes with uber upgrades? How much more did the market pay for larger-sized homes? Assuming there was nothing funky about the previous sales, this search can help give a little more context for historic neighborhood trends and even help support choosing the right comps today. Take this for what it’s worth and realize it’s just one more way to help gain a little more insight.

Example: The graph below shows two previous sales of a property in a particular neighborhood. How did the market respond to a newer property with less charm in an older area of Sacramento? What does the graph tell us? This might give us some insight for choosing comps today, right?

2) Past & Current Market: Secondly, if you’re been following trends, you’ve probably noticed current values in the Sacramento area are similar to levels somewhere around 2002 and 2009 (as the graph below illustrates). While it was unfortunate to see the market collapse in previous years, it’s actually useful from a data perspective to be able to compare current price levels to two previous time periods when values were similar. For instance, if you research sales around 2002 and 2009 in a neighborhood, you might be able to glean a better understanding of how the market has traditionally viewed similar properties or even value aspects such as location or size. This is also a bit of a check to see if your pricing is mostly in sync with trends or if you’re getting too aggressive by using 2005 price levels. Ultimately, this is only to gain more context, so take it with a grain of salt. Be sure to use caution too because not every neighborhood or property type is at the same historical value level right now.

Thank you Brian: By the way, I want to thank Realtor/Broker Brian McMartin for sharing some incredible graphs with me this week. The data geek in me was rejoicing when he sent over a stuffed Excel file of trends he watches closely to share with his clients. I made the graph above based on his information, and I really appreciate his generosity to share some of his hard work with me (and you). Click the thumbnail to the side to view one of his graphs.

Anything you’d like to add? What do you think?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

Today I wanted to share some of the small but interesting things I’ve seen lately while out in the field during appraisal inspections. All of these images help illustrate something about real estate.

1) Iron Bars & New Construction:

Does anything catch your eye about this house? When driving through a two-year old neighborhood in Elk Grove, this property caught my attention because it’s literally the only house with iron bars on the front. I’m not saying there is anything wrong with bars or even that they adversely affect value, but they are definitely not typical for this neighborhood. It’s always important to consider that the type of fence or front yard presentation can impact value. Is this a positive, negative or neutral feature? Would it be a big deal if every house on the street had bars?

2) A fireplace chopped in half:

What’s the story here with this house on 12th Avenue? Maybe a recent attic conversion along with other additions? Or maybe a fireplace relocation? By the way, I asked a handful of real estate agents recently if they would ever recommend removing a fireplace and their response was overwhelmingly no. What do you say?

3) Loose straps

Appraisers aren’t code enforcement officers, but they do know something about code for water heaters. While many conventional lenders do not require the appraiser to verify if the water heater is double-strapped (some do), FHA appraisers do need to ensure the water heater complies with local standards. In the instance above, the water heater was clearly not properly strapped since I shouldn’t have been able to easily fit my entire hand between the strap and the heater. And no, I’m not a hand model. 

4) A “shocking” light switch location:

I was surprised to find this light switch literally inside of the shower. Do you think this might be a safety issue?

5) An appraisal in 1996:

This is a California Market Data Cooperative book from the 1990s. These books are full of charts of real estate sales information, and they used to be published almost monthly before sales data went online in 1998 through Metrolist in Sacramento. I have a stack of these books in my office right now since I’m doing a “Date of Death” appraisal based on a date in 1996. I’ll use these CMDC books to find comps, verify sales data and analyze market trends. It’s definitely a tedious process to establish a value this way, but I’m grateful these books are at my disposal thanks to my membership with the Real Estate Appraiser’s Association of Sacramento (REAA). Otherwise I was going to need to contact some long-time brokers to find someone willing to lend or rent me these books.

6) My backyard garden

Lastly, this is personal real estate for me. I mentioned in the beginning of the year one of my goals was to finish the backyard garden that was supposed to be done last year. I’m pleased to announce that after ripping out 30% or so of my rear lawn last year, and then putting the project on hold for about nine months, I finally finished the job last week. I’ll be honest, it feels really good to check this goal off my list.

Have you seen anything interesting lately relating to real estate?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

If you’ve been surprised at how cash is dominating the single family market, take a look at what’s happening with condominiums specifically.

The condo market in Sacramento County has some similarities to the overall single family market since foreclosures are down, short sales are up and FHA has decreased, but there are also some differences. One of the biggest distinctions is the whopping sum of 65% cash sales among condominiums compared to 38% cash purchases in the overall single family market. Moreover, it’s interesting to note that over 50% of condo sales have been cash purchases for over three years, which tells us investors have been a major force in this niche for some time.

Condo Issues: Since many condominium complexes have too many rentals, pending litigation or low reserves, quite a few have struggled to be loanable (and some are not on the approved FHA list). This has naturally given the green light to cash investors to hoard the condo market. Some complexes are advertising they will not accept cash offers since they are trying to get their owner-occupancy rates to adequate levels again. Yet clearly many complexes are accepting cash offers, which begs the question of what the future of the condo market will look like.

I asked real estate broker Bruce Slaton to lend some insight into the condo market, and here is what he said. Bruce really knows his stuff, and you can check out his website at www.SacramentoCondos.com.

Bruce Slaton – RE Broker & Condo Expert: What I am seeing both in inquires and in activity is almost a turning point in the condominium market. We are getting a lot of inquires from condo community owners who have been following the media claims of a recovering market and cash buyers driving up pricing, and the results have been surprising to a few owners who thought they would be less under water than they are. What we are seeing is complexes that do not qualify for FHA or Conventional financing coupled with Rental Limits leading to limited appreciation. We also see new litigation claims which tend to happen with newer complexes within a few years of release from the developer to the HOA, and end up hindering FHA and Conventional financing in those complexes. We are seeing premiums for Homepath listings and HUD homes in those complexes due to the availability of financing. We are seeing heavy interest in complexes in Elk Grove, Natomas, Roseville, Folsom and West Sacramento. In the last several weeks we have seen a large increase of requests for Midtown Sacramento which is probably a result of the NBA decision for the Kings and the anticipated future demand and appreciation possibilities for properties around the Midtown Sacramento area. We have recently had inquiries from investor groups asking about stalled condominium or loft projects as well in the Midtown area. We are seeing popular communities like Riva in West Sacramento emerge from settled litigation suits and approaching increased financing possibilities with the introduction of several credit unions and local banks who are now willing to do conventional loans in these complexes. We are still seeing lack of inventory, and many reasons are homeowners who have not recovered enough equity yet to be able to sell their units. The increase in cash sales and decrease in FHA or Conventional financing can be attributed to the lack of financing in condominium complexes and also real estate agents not familiar with financing options and therefore marketing their listings as Cash Only instead of finding alternative financing options for their buyers.

Question: How do you think it impacts property value in a condo subdivision to have so many cash purchases?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

Here’s a quick update to highlight some monthly real estate figures in Sacramento County from January through April 2013. In a nutshell, we are seeing less foreclosures, the same amount of cash as Q4 2012 (but up 5% from one year ago), and fairly steady levels of FHA and conventional loans. For reference, we saw about 18% less sales during the first four months of 2013 compared to 2012. You can get a more in-depth context for the market in a previous post, Tour de Sacramento Real Estate.

What stands out to you? What are you seeing in the trenches?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

We’ve all heard about cash in the Sacramento real estate market, but where is it exactly? Let’s take a look below to see what price segments are being targeted the most by cash buyers so far in 2013.

It’s amazing to see that 38.23% of all single family sales in Sacramento County in 2013 have been cash purchases. As you can see, the bulk of these sales are between $50,000 to $200,000. In fact, roughly two-thirds of all cash sales in Sacramento County are in this price range. There is also a good amount of cash between $200,000 to $250,000 also. Above that level (especially above $300,000), the numbers really begin to decline. Yes, Blackstone is still purchasing, but keep in mind there are many other investors playing the market too. By the way, Blackstone is also now buying as “IH2 Property West LP” (“IH” stands for Invitation Homes) along with “THR California LLC” and “THR California LP”.

Applying the Numbers: Data is always interesting, but it becomes really useful when we begin to apply it to business. In this case, if you are an investor, it may be worth considering flipping above $250,000. If you are a Buyer’s Agent, it’s probably a good time to find buyers at higher price levels to avoid the blood-bath under $200,000 since nearly 70% of Sacramento County’s cash purchases have been under $200,000. What other implications do you see?

Finding Inventory: Speaking of money, I figured this might be worth mentioning in light of so much cash and so little inventory in this market. I sit on the Housing Opportunity Committee through the Sacramento Association of Realtors, and we are putting on an event next week called “Show Me The Money”. This event is open to everyone and designed to give tools to real estate agents to create inventory in this current market as well as excel at door-knocking and attracting sellers at an open house. Watch the one-minute video I made below for details (or here).

Any insight or stories to share?

UPDATE: Welcome to any Sacramento Business Journal readers who are visiting from today’s “Want a house? That’ll be cash, please“. I appreciate you being here. It’s always an honor to be featured in a BizJournal article. If you are looking for real estate trends, let’s connect. You are welcome to subscribe to my posts too.

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

A real estate agent asked me this question last week via email, so I thought I would share my response. How would you answer this question?

Question: I was wondering if you could tell me how much value you give a bedroom and full bath. Is there some kind of guideline for us agents to look at?

Answer: There really isn’t a standard bedroom or bathroom adjustment. Well, I will say appraisers often give $5000 for a bathroom and $5,000 to $10,000 for a bedroom, but those are often just filler adjustments that may or may not really reflect the market. Ultimately it depends on the neighborhood as well as the overall square footage. For instance, the difference between a 2-bedroom and 3-bedroom unit can be substantial depending on the neighborhood and sometimes easily $20-30K+ (not just $10,000). The same holds true for the distinction between one and two bathrooms as the price gap is often much wider than just $5,000. It seems like the price variance between three and four bedrooms depends heavily on the size of the property. A four-bedroom unit is usually larger in size than a 3-bedroom house, so it naturally carries a value premium. However, that’s not always the case. For instance, an 1100 square foot 4-bedroom house might not sell for more than a 1100 square foot 3-bedroom house because the 4-bedroom house probably has a tiny Living Room.

I wish I could give an exact answer, but the most honest response is that there is no end-all solution other than to research sales in the neighborhood. What do the competitive sales tell us? It’s also important to look closely at square footage because a price distinction for bedroom count may in part be due to the larger size. Lastly, I try to always compare single story with single story and 2-story with 2-story. That helps promote better adjustments.

Any other thoughts? Feel free to share your insight in the comments below.

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

I was talking with a Realtor recently and he was telling me about an escrow where his buyer ended up paying $20,000 above the appraised value to make the deal work. There really wasn’t any value-related reason why the property should have sold that high, but the seller simply refused to budge on the price.

Do high sales become new comps? When a property sells for too much, it’s usually obvious. If everything else in a neighborhood is selling lower, and there is one “lone ranger” sale without a compelling reason why it closed so high, it’ll likely be considered an outlier by an appraiser. Take the example below where one very plain bank-owned listing is pending at $310,000, yet zero competitive sales have sold above $280,000 over the past year. Moreover, the highest listings in the neighborhood are at $285,000.

If this property actually does sell at $310,000, it shouldn’t set the pace for neighborhood values because it clearly doesn’t represent the market. Other listings in the neighborhood might try to match the new sale of course, which could start to put some upward pressure on the market, but overall one lonely sale doesn’t make or break a market. That’s why appraisers can either utterly ignore an outlier or consider the sale but give it very little real weight in a valuation.

But the appraiser doesn’t know about the out-of-pocket cash: The truth is appraisers won’t always have the inside track on the details of a transaction. After all, the Listing Agent might not write “buyer paid $20K out-of-pocket” in MLS or readily disclose that during a conversation. However, even without inside information, it’s still obvious when a property is an outlier, and an outlier shouldn’t be treated like a market sale when it obviously deviates quite a bit from the rest of the pack. This is where the power of graphing comes in handy so recent sales and listings can be plotted to help show what the market is doing.

Is it just me or are Fannie Mae sales high? A good case-in-point for properties that have tended to sell above others in the Sacramento market are Fannie Mae foreclosures. Several years ago foreclosure sales represented 73% of all sales in Sacramento County. During the “foreclosure flood” where bank-owned properties were unleashed in mass, they were priced very aggressively and usually had almost no repairs made by the seller either. In contrast, today’s foreclosure market is very different in light of an extremely low housing inventory in the Sacramento area. This has caused sellers like Fannie Mae to generally list their properties at higher levels – and sometimes even 10% above other listings in a neighborhood. This is why I find myself being very cautious about relying on these sales as comps since the final price often does not reflect the true market. By the way, do you think  Homepath financing not requiring an appraisal might have something to do with these properties closing so high?

Any insight or stories to share? Your comments are welcome below.

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook