Removing chain link fences to beautify a neighborhood

photo from SNRIt’s easy to make idols out of athletes and celebrities, but who are the real heroes? I’m not saying sports figures and musicians can’t be worthy of respect and admiration, but in my book the most heroic people I know are normal everyday individuals walking out the grind of life – yet living out a sense of vision to make a difference. This is exactly who Amanda Dodd is, and I wanted to interview her because she is doing amazing work in the Oak Park neighborhood of Sacramento.

Several years ago Amanda started a volunteer effort called Neighbors Without Borders, which removes front yard chain link fences for the sake of beautifying the neighborhood. You might think chain link fences have no effect on real estate, but read The verdict on chain link fences and property value. Moreover, ask yourself when the last time was you saw a builder install chain link fencing in a tract home subdivision. If you really want to go deeper, check out a study of Diggs Town Public Housing to see the power of a focus on traditional neighborhood design. This isn’t about judging anyone who has a certain type of fence, but only highlighting the reality that the way a neighborhood looks tends to say something. Right or wrong, outsiders will judge whether a community is safe or even pleasant by its appearance.

Enjoy the interview and be inspired. What do you think of Amanda’s work?

chain link fences and property value - by sacramento appraisal blog

Ryan: First off, Amanda, why don’t you introduce yourself. Who are you and what do you do?

Amanda: I’m a  resident of Oak Park, Wife, Mom of a 1 year old little boy, and Clinical Social Worker who works part-time in Private Practice.

Ryan: How long have you lived in Oak Park?

Amanda: I’ve lived in Oak Park for 6 years

Ryan: What do you like most about the neighborhood?

Amanda: I love the architecture–the Bungalows, Victorians, and history of the area. I love that I can walk to the post office and mail a letter, or walk through beautiful McClatchy Park on my way to the bank. The diversity here is amazing, and there is a huge sense of community unlike anywhere else. People are so involved and the energy is contagious.

before and after chain link fence removal - sacramento appraisal blog

Ryan: Explain what your project is and how it began.

Amanda: When I moved to Oak Park in 2008, the first thing I noticed was how friendly and open people were. One neighbor was dropping vegetables off on my porch, people were waving hi to each other and stopping to talk…this was in stark contrast where I moved from. In Natomas, the yards were well-manicured and front yards were open, but I never met any neighbors in 4 years of living there. In Oak Park, however, people were so open and friendly, yet my street was covered in chain link and iron fences in front of almost every house. The irony was not lost on me. I noticed that the beautiful architecture of these hundred-old houses was covered up and hidden behind street after street of chain link and metal. It was so sad to me that the true beauty of the neighborhood, besides the people who reside here, would be covered up like that. So, I researched other cities such as Toronto and Boston who have done fence removal projects in certain neighborhoods, and they reported a decrease in crime, and an increase in sense of community. I wanted to do that here too.

Ryan: What is your role in the project, and who else volunteers?

Amanda: I came up with the idea of Neighbors Without Borders five years ago, and didn’t get much support around it. Then this past year, decided to try and resurrect it. I came together with a committee and we talked about how to get the idea out there, and we educated ourselves on how to take down fences. We removed about five this summer. Victor Duron is my co-partner and has been an essential part of this process. I couldn’t have done it without his support.

before and after chain link fence removal - 2 - sacramento appraisal blog

Ryan: Did you ever imagine you’d be doing this?

Amanda: I think I’ve always had a mindset toward change. I’m a social worker by nature, and when I see something that can be better, I want to get my hands dirty and go there.

Ryan: Why is removing chain link fencing a big deal for the neighborhood?

Amanda: There is nothing necessarily wrong with having a chain link fence; many people need fences to keep in dogs or children, and chain link is the most cost-effective fence you can put up. However, when you look down a street and see a solid line of fence metal, the street appears to be almost prison-like, or  a compound. The underlying message that is communicated is,  “Keep Out” or “This is a not a safe neighborhood”. Aesthetically, it can appear cold and unwelcoming. So a first time visitor to Oak Park  would likely  get the opposite idea about the types of people who live here.  Also, I think the biggest misconception is that “Fences keep you safe”. Research shows otherwise, and I have talked to many people who have had their house broken into even though they have a fence. A fence is not going to stop someone who wants to get in. I think fences can definitely bring about a false sense of security. If you look at the safest neighhorhoods in Sacramento, they don’t have any fences in their front yards.

Ryan: It seems kind of touchy to ask someone if a chain link fence can be torn out. How do you pull that off without offending residents or making them feel isolated?

Amanda: This is a good question because having a fence is a personal decision for everyone, and each person has a reason for having a fence. My goal is that people examine their reasons to see if they are no longer applicable. Maybe they put the fence up in the 80’s when the neighborhood was much less safe. Maybe the previous owner had a dog and they have just left it up as a matter of convenience. We don’t force people to remove their fences, or pass judgment on why people leave them up. Basically, our services are an offer for anyone who wants them.

before and after rehab by The Oak Park Team - Sacramento Appraisal Blog

Ryan: What would your quick response be if someone said, “My house has always had a chain link fence. It’s not bringing down the neighborhood.”

Amanda: I wouldn’t even argue that. It’s their decision. Maybe their particular fence isn’t bringing down the neighborhood, but collectively, the 14 other fences on the same street might not be sending the most open message.

Ryan: How do you let other people know about your project’s services?

Amanda: We have announced our services at Oak Park meetings, and have mailed letters offering our services. Also, word of mouth. In a community like Oak Park, people know what’s going on and talk to each other.

Ryan: Do you only focus on chain link fences?

Amanda: Right now, yes.

before and after chain link fence - the oak park team

Ryan: Is chain link difficult to remove? What do you do with it once it’s taken down?

Amanda: It’s surprisingly so easy! I bought some bolt cutters and a sawzall, and two people can take it down from start to finish in about half an hour! We have people who pick up the fence to sell as scrap metal to recycling centers.

Ryan: Lastly, in just a few words, how would you sum up what is happening in the Oak Park neighborhood right now?

Amanda: So much energy! People who live here can’t stop talking about all of the change.

—————————————————————————————————————

I hope you enjoyed the interview. Thank you Amanda for your time, and keep up the incredible work. If anyone wishes to connect with Neighbors Without Borders, email oakparkbeautiful@gmail.com. It’s easy to see the need for change, but rare to find individuals willing to help start to make change happen. If you are considering helping your neighborhood connect or grow in the right direction, why not get started? You just might be the right person at the right time to get the ball of change rolling. If not you, then who? Thank you also to The Oak Park team (Micah & Sam) for letting me use some photos.

Questions: What stood out to you most about the interview? What are your thoughts on chain link fences? Oak Park residents, how would you describe the neighborhood right now?

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10 sentences to describe Sacramento’s regional housing market

Have you ever attended a presentation and thought, “Wow, there wasn’t any reason why that needed to be an hour. The speaker could have said everything in 15 minutes.” This is why speaking is an art form. It takes real skill and time to hone a presentation, yet still pack the same punch in a shorter amount of time. The same holds true for writing. Twice a month I have two big market posts, but today instead of writing paragraphs below each graph, I’m simply sharing an image and then one sentence. Here are 10 sentences to describe Sacramento’s regional housing market (and Placer County). Any thoughts? Enjoy.

GRAPHS

SACRAMENTO’S REGIONAL MARKET

1) The median price has been the same for 5 months in a row ($310,000).

median price and inventory in sacramento placer yolo el dorado county

2) Housing inventory increased last month to 2.72 months (inventory isn’t the same at every price level).

months of housing inventory in region by sacramento appraisal blog

3) It took an average of 45 days to sell a house last month.

days on market in placer sac el dorado yolo county by sacramento appraisal blog

4) Sales volume is down about 9% this year compared to last year.

SALES volume in sacramento region - by home appraiser blog

5) There have been 36% less cash sales in 2014 compared to last year.

cash sales and volume in sacramento region - by home appraiser blog

6) The number of listings increased again last month.

number of listings in Placer Sacramento Yolo El Dorado county - July 2014 - by home appraiser blog

PLACER COUNTY

7) The median price has been fairly flat in Placer County ($386K).

Placer County median price and inventory - by home appraiser blog

8) Inventory is hovering just below 3 months in Placer County.

Placer County housing inventory - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

9) It took an average of 47 days to sell a home last month in Placer County.

days on market in placer county by sacramento appraisal blog

10) Sales volume is at fairly normal levels in Placer County.

Placer County sales volume - by sacramento appraisal blog

wright-reportThe Wright Report: By the way, I contributed a few thoughts to The Wright Report, which is the most exhaustive local real estate report I know of. If you need some resourceful bathroom reading, I suggest downloading it. You can read it carefully or maybe take a quick stroll through the graphs. I’m honored to pitch in a few thoughts, but that’s not why I’m sharing it. I really like what Joel Wright puts together, and it’s a great service to the real estate community. When we understand the market and how it’s moving, it’s good for business and for our clients. Download and enjoy.

Sharing Trends with your Clients? If you want to share graphs online or in your newsletter, please see my sharing policy. Thank you for sharing.

Questions: Do you like the format for this post? I’d love to hear your feedback. How else would you describe the market?

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The biggest change in Sacramento’s housing market (the mind of the buyer)

Have you been feeling the market change lately? We all know real estate has been slowing down, but the big theme last month seemed to be the change in the psychology of the buyer’s mind. A year and-a-half ago buyers were getting beat down by cash investors, but now buyers feel like they are sitting in the driver’s seat of the market because they have more power, selection, and even the perceived luxury of time being on their side. Let’s talk about this below as well as hit on some other trends. Remember, the goal of my big monthly post is to help better understand and explain what the market is doing. I hope this helps.

Two ways to read this post:

  1. Scan the talking points and graphs quickly.
  2. Grab a cup of coffee and spend a few minutes digesting what is here.

changing market in mind of buyers -by sacramento appraisal blog

free-market-trend-graphs-from-sacramento-appraisal-blog4

1)  The median price INCREASED, but the market is NOT increasing:

median price and inventory since 2013 - by sacramento appraisal blog

The median price increased from $270,000 to $275,000 last month. Does that surprise you? I think many of us were expecting the median price to show a decline this past month in light of rising inventory and a general malaise in the marketplace. However, remember that sales stats for September strongly reflect what the market actually did in August rather than September. Being that properties are taking 41 days to sell right now in Sacramento, this means most escrows in August actually ended up closing in September. Thus the slowness felt in the market in September will theoretically be better reflected in sales stats in October. This is a good reminder too to not take one month of data and draw a big conclusion from it. We also must ask what the surrounding market is doing (hint: The median price has been the same for 5 months in a row).

One last thought on Trendgraphix: I mentioned previously how Trendgraphix in MLS showed the median price was increasing over the past few months in Sacramento County despite the trend really being flat. This has now been corrected. Just be aware that Trendvision adjusts publishes stats at the beginning of the month, but then they adjust their graphs at the end of the month. This means the data might look different depending on when you look at it.

2) Distressed sales represent only 6% of the market

REOs and Short Sales in Sacramento County

REOs and Short Sales Percentage and Volume in Sacramento County

There were less REO sales and less short sales over the past quarter compared to the previous quarter. I hear rumors of increasing REO sales, but that hasn’t shown up in the stats yet since both bank-owned sales and short sales showed a decline from the previous quarter. Keep in mind REOs and short sales each only represented about 6% of all sales over the past three months. Remember too that “Boomerang Buyers” are entering the market right now after having gone through a foreclosure or short sales, and they are hungry to buy again.

3) Inventory increased again last month and is now at 2.5 months:

inventory in sacramento county - by sacramento appraisal blog

Inventory is now at 2.5 months of housing supply (up from 2.41 month last month). This means there are 2.5 months worth of houses for sale right now in Sacramento County. Inventory also increased in the regional market, but we’ll dissect that in two days. Inventory right now at the beginning of Fall is at the peak of what it was at the end of Fall last year.

months of housing inventory by sacramento appraisal blog

number of listings in sacramento - July 2014 - by home appraiser blog

What happens with inventory over the next 3 to 5 months will set the stage for the housing market in 2015. Increasing housing inventory is definitely one of the X-factors for how values are going to move in coming time. A larger housing supply is also indicative of having a more “normal” level of demand now that cash investors are no longer driving the market. Investors acted like a steroid for the housing market, and their rampant purchases made it seem like demand was much stronger than it really was. But lately we are getting a taste of what demand is really like now that regular non-cash buyers have to support the market. As you can see above, inventory is not the same in every price range, and that is a key marketing point for buyers and sellers to embrace. Anything below $300K is still a bit of a fight to get into contract.

4) Sales volume is down 10% from last year:

sales volume in Sacramento County

Sacramento County has seen about 10% less sales volume so far in 2014 compared to 2013, but sales volume is only down 2% when looking at September 2013 and September 2014. The more sluggish volume of course is due to less purchases by cash investors.

5) Sellers are lagging behind the changing market

sellers lagging behind the trend in Sacramento County

The market has changed and really softened over these past five months, but many sellers are stuck in Q1 2013 when the market was very aggressive, or the first quarter of 2014 when the market experienced a normal seasonal uptick. Throughout September there were about 400 price reductions every day in MLS, and that tells us the market has been overpriced. This means it’s all the more important to price according to the most recent listings that are actually getting into contract (instead of the most recent sales from six months ago). If you haven’t seen my “Open Letter to Sellers in Sacramento“, it may be worth a look or share.

6) Cash sales are down 42.5% from last year:

cash sales and volume in sacramento county - by home appraiser blog - Copy

Cash sales since 2009 in Sacramento County by sacramento appraisal blog

There have been more non-cash purchases in 2014 so far compared to 2013, but the big news is cash sales volume is down by 42.5% from last year. Furthermore, cash sales used to represent almost 36% of the entire market in Sacramento County, but now cash sales are just under 18%. At the same time, it’s important to realize cash sales below $200,000 still represent almost 34% of the market, which tells us cash purchases are more aggressive at the lower end of the price spectrum than the rest of the market (that’s normal). Remember, taking cash out of the market has led to buyers gaining more power.

7) Buyers are gaining an obvious edge in the market

FHA sales in Sacramento County by sacramento appraisal blog

FHA and cash sales since 2009 in Sacramento County by sacramento appraisal blog

FHA sales have taken back about 7% more of the entire market since cash investors began exiting the scene 15 months ago. This is important for several reasons: 1) It shows us many first-time buyers are getting FHA offers accepted; 2) Sellers are more accepting of FHA offers lately (and conventional & VA); and 3) As buyers gain more power in the market, they are gaining the power to negotiate for lower prices and seller credits. If you are rusty when it comes to FHA appraisal standards, be sure you get in tune with FHA minimum property requirements.

8) It took 1 day longer on average to sell a house last month:

CDOM in Sacramento County - by Sacramento Appraisal Blog

On average it took 41 days to sell a home in Sacramento County last month, which is up 1 day from the previous month (and up 68% from September 2013). All things considered, properties that are well-priced and in good condition are tending to sell quickly, but anything that is overpriced is simply sitting on the market. Buyers have become much more picky about location and upgrades also, so any detrimental property characteristic is standing out like a sore thumb right now. Remember, when the market is very competitive and inventory is low, outdated homes and adverse characteristics are less of a big deal for buyers, but now that buyers have more choice and feel that time is on their side, they are tending to ignore certain listings because they believe they can find something better or wait out the market to see what happens. On the positive side, if your home is upgraded already, you have a marketing edge.

9) Interest rates are hovering in the 4% range:

interest rates by sacramento appraisal blog

Interest rates have been hovering in the lower 4s lately. It seems week by week the tone of real estate articles change from saying rates are likely to increase or they’ll likely to decrease. Ultimately only The Fed knows what will be done, so we’ll see how this pans out. This will be an important factor to watch since a change in rates can impact affordability and competition. Personally, I’m hoping interest rates don’t creep down too low because that will only ramp up prices again. Our market needs some space to figure out how to be normal rather than more outside forces to help inflate values beyond where the local economy would naturally take housing prices.

10) Values when the “bubble” burst and when we hit bottom

Since the bubble burst by sacramento appraisal blogThe median price is currently about 30% lower than it was when the previous real estate “bubble” burst in the summer of 2005. This may be helpful to consider for context for some buyers and sellers. I’ve heard a number of friends say, “I know values increased rapidly recently, but they are still so much lower than they used to be.” What do you think of that?

Median price and inventory since 2012 by sacramento appraisal blog

The market hit bottom in early 2012 and has since seen exponential appreciation.

context for median price since the real estate bubble by sacramento appraisal blog

Current values in Sacramento County are similar to where they were during Dec 2007/Jan 2008 and Dec 2003/Jan 2004. Keep in mind different neighborhoods or property types might not be experiencing this same trend.

Summary: Despite the median price showing an uptick this month, the market is NOT increasing. The market can best be described as flat, price-sensitive, and less competitive than it was in recent months. At the same time inventory is still relatively low, interest rates are near historically low levels, and there is still stiff competition to get into contract in various price ranges. We can look at housing market metrics until we’re blue in the face, but one of the biggest changes not shown on a graph above per se is the mind of the buyer. Real estate and Psychology definitely mix, and we’re seeing the mixture with buyers beginning to feel much more confident and in control of their housing destiny.

Two speaking engagements: By the way, I’m speaking at Sacramento Association of Realtors at the end of the month on the 24th. This is a free event, and I’ll be sharing about market trends and how to talk about them with clients when the market slows down. Secondly, I’ll be teaching a class on how to work with appraisers on the 27th. The cost is $25 for this class, and you have to sign up with SAR. Full disclosure, as the instructor I get a portion of the $25 fee.

ryan lundquist speaking events in october - 530 2

Sharing Trends with your Clients? If you want to share graphs online or in your newsletter, please see my sharing policy. Thank you for sharing.

Questions: How else would you describe the market? I’d love to hear your take.

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A “cheat sheet” for agents of information to provide to the appraiser

I recently appraised a custom home, and when the order came through the property looked overpriced. I thought, “Yep, I’m going to look like the bad guy when this one appraises too ‘low'”. However, after doing all my research AND asking all the right questions to the listing agent, this property was clearly worth slightly more than the contract price. Ultimately I left the transaction feeling a bit curious why the agent did not offer more information about the property until I asked. At the end of the day her insight was actually vital since I found out there was a back-up cash offer above asking, one other full-priced conventional offer, and another listing coming on the market priced at a similar level – not to mention the feedback on the layout, landscaping, and location. The agent spent so much time, effort, and money to market this listing, but when it came to communicating with the appraiser, her approach was hands-off.

A “cheat sheet” to communicate with appraisers: What if you had a document on your desktop to simply address some of the questions appraisers tend to ask? You could quickly fill it out, and then email it or give it to the appraiser in person. Check out the document below, and you can download in WORD or a PDF.

information to give to the appraiser

This document addresses how the market responded to the subject property, and it also gives an opportunity for the listing agent to share any insight about the neighborhood, school district boundaries, market trends, important reasons buyers might be looking in the neighborhood (that the appraiser may or may not know), or insider knowledge about the subject property or street. Remember, this is potential market data, so it can be important for the appraised value. Also, you can look like even more of a rock star to your client when your client sees how intentional you are with the appraiser.

Some quick tips:

  1. Save this document to your desktop and use it for each listing.
  2. Tell the truth in everything you write.
  3. Feel free to skip, delete, or add any categories.
  4. Take 10 to 15 minutes to answer questions.
  5. You don’t need to write a novel, but it’s okay if the document ends up being more than one page (try to keep it less than two though).
  6. Remember, this information is about sharing facts instead of pressure to “hit the number”. This is exactly why it’s okay to share this type of information.
  7. Try to avoid subtle pressure statements like, “Please get value as high as possible”, or “We really need this one to work out”, because that comes across as trying to steer the value.
  8. Be specific about upgrades. For instance, instead of saying, “The house was remodeled throughout,” unpack what that means and when any remodeling was done (if you know).
  9. If you don’t feel comfortable providing sales or listings to the appraiser, that’s okay. However, if you do provide sales, make sure they are actually competitive to the subject property. If you know the sales well, you can always write out any differences at the top of the MLS sheets. I recommend saying “here is data I used to price the property” instead of “here are your comps”. If the appraiser doesn’t want to take any sales from you, maybe the appraiser would still take this information sheet.

DOWNLOAD the WORD DOCUMENT or DOWNLOAD a PDF.

Is there anything you’d tweak about this document? Speak up or offer constructive feedback below. If there is enough response, I can post a second round of an improved document in a few weeks. I’m all for better communication, and I would LOVE to get more information like this on a regular basis.

Questions: Do you think this document would be useful? Anything you’d add or take away?

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10 things appraisers can do to improve the appraisal industry

The appraisal industry is in a funk. There is a lack of national unity, but more than that there is a culture of isolation and negativity that seems to leach the industry of forward progress. I was reminded of this recently while reading an article by Jonathan Miller, so I thought it might be fitting to share some practical and actionable steps to improve the appraisal profession. I’m not pointing fingers or talking down to anyone, but rather hoping we as appraisers can get on the same page about some of the basics. This is coming from a guy who frequently collaborates with other appraisers, and serves as a board member for an appraisal organization in Sacramento. What do you think?

isolation in appraisal industry -image purchased by sacramento appraisal blog

10 things appraisers can do to improve the appraisal industry:

  1. Increase your skill set. Study the market. Become a local expert.
  2. Think of appraisers as peers or potential collaborators instead of the enemy.
  3. Learn to visually illustrate the market by graphing trends. This can help you be relevant, show support for market trends instead of using boiler plate lingo, and ultimately tell a more compelling story of value in reports.
  4. Stop working for clients who pay too little. Expand your skill set so you are more marketable to a better clientele, and then break up with your old clients. Marketing to new clients can feel scary for anyone, but if you don’t step out to do it, you’ll never get those clients. Remember, waiting for the phone to ring is not a marketing plan.
  5. Don’t be afraid to ask questions. You will never grow if you do not ask questions and reach out to other appraisers for help. Don’t be a lone ranger.
  6. Be friendly. Appraisers are not known for their warm people skills, but it’s still possible to be personable while remaining objective.
  7. Be professional. Incessant complaining about other real estate professionals is a bad look. Why would a real estate agent, attorney, or CPA want to work with you if you are a toxic person?
  8. Be humble since no appraiser gets value absolutely right 100% of the time.
  9. Be a mentor by answering questions to other appraisers (whether they are younger or older). Too many appraisers think they are right about everything, but at the end of the day being right doesn’t help anyone grow. Find ways to share your knowledge and build others up. Realize lots of appraisers need your help because they had poor training or were taught to “hit the number”. Many of these appraisers are isolated, so help draw them out.
  10. Join a local appraisal organization that meets together regularly. Isolation is hands-down one of the biggest threats in the appraisal community, so this is a necessary solution. Think about how you can improve the organization too. Or better yet, become a board member or volunteer.

The truth is we all have room to grow in life and business, and there is no such thing as a perfect appraiser either. There are surely some big things that need to happen to help steer the appraisal industry toward health and national unity, but if we begin to focus on some of the small steps above, it just might help put us on the right track.

If you have further thoughts, ideas, constructive feedback, or feel inspired about something, I’d love to hear from you in the comments.

Questions: Any thoughts or stories to share? What is #11?

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Convincing sellers to NOT overprice their homes by making graphs

The market is overpriced. So if you are a real estate agent trying to communicate with sellers, how do you get someone who wants to test the market at $500K to realize a more reasonable price is $375K? There are surely many strategies, but today I want to mention the power of graphing neighborhood sales. I don’t mean to beat the dead horse by bringing this up again, but knowing how to graph will help you communicate effectively, stand out from other industry professionals, and seize your role as a market trend expert instead of letting Zillow have all the glory. Sure, you can show your client a graph of city or zip code trends by using Trendvision, but it’s hard to argue with neighborhood-specific data.

making graphs - image purchased by sacramento appraisal blog

A letterhead to give your sellers: Before we dig in, here is a letter I wrote for sellers about things to consider when pricing in this market. This letterhead is based on a post I wrote recently, but I tweaked a few things. See the image below and DOWNLOAD here (PDF). Feel free to email or use as you see fit. Obviously the letter does not address a specific property. If you need a letterhead for your specific property, let’s talk about some consulting.

letterhead

Excel Tutorial: I know, you don’t use Excel because it’s only for nerds. But let me break it down for you below so you can join the club. Previously I shared a tutorial on how to graph with Gnumeric, but I had a few requests for using Excel instead since that’s what most people already have on their computers.

land park two-bedroom graph example by sacramento appraisal blog

This graph shows the range of similar-sized neighborhood sales is between $300-375K for the most part (instead of $500K). This can be a very powerful visual, especially when you begin to show the sales at $375K have been remodeled.

A tutorial on how to show the market: I recommend watching the tutorial below and then pulling up some MLS data for a neighborhood you are working in so you can create a graph by following the steps I took. This is perfect for Sacramento MLS, but as long as you can export data from your MLS system, you should be okay too. You may need to pause my video several times or rewind at moments. Whenever we do something new, it takes a while to catch on. If you don’t have Microsoft Paint to paste the graph like I did, you can use a different photo editing program, or maybe use a snipping tool on your computer. Additionally, you can open up Paint and simply start a new file, and then paste your graph (as opposed to opening an existing photo like I did). Watch below (or here if it’s too small below).

Please let me know if you have any questions. I hope this was helpful. Perhaps this will spur on a new skill set for you that can make a difference in your business.

Questions: Was the tutorial helpful? Anything you need clarity on?

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Does an enclosed patio count in the square footage?

Can you count an enclosed patio as square footage? I had a real estate agent ask me this question recently, and the answer was going to make a huge difference in the value and pricing strategy for an upcoming listing. The agent did not want to include the enclosed patio as square footage, but the seller did.

enclosed patio square footage - by sacramento appraisal blog

Question: Does a permitted “enclosed patio” built back in 1970 count as sq footage in a home? Tax records does not reflect any extra sq footage, but of course the owner wants to add 400 sq ft to the MLS listing.

Answer: An enclosed patio usually does not count in the square footage unless it is more like the home than not. The fact that it was built in 1970 is not the issue, but rather the quality of the enclosed patio is a big deal. Enclosed patios often have a lower quality compared to the rest of the house, and they don’t usually have the same feel as other parts of the home either. Moreover, they often don’t have a heat source, which is essential for any space to be considered square footage. In cases like this, a buyer would likely walk in to the enclosed patio, and think “This is a nice enclosed patio”, instead of “Wow, look at the 400 extra square feet of living space.” We have to keep in mind how buyers would view the property because if they don’t think of it as square footage, they won’t pay the same price per sq ft for the enclosed patio as they would for the rest of the house. On the other hand if the quality is very high, it feels like the rest of the home, and it has a heat source, it can sometimes be included in the total square footage (as was the case in the last photo below). Ultimately I would say the majority of enclosed patios are just that – enclosed patios. Not living space. This means in most scenarios enclosed patios are NOT included in the total square footage by appraisers. This does not mean they cannot contribute to the appraised value, but only that they are not considered as living space.

enclosed patio square footage 2 - by sacramento appraisal blog

enclosed patio square footage 3 - by sacramento appraisal blog

Keep in mind various portions of the country might have different rules for enclosed patios, so be sure to know your local code and how buyers perceive the market too.

NOTE: Photos in this post are not of the home in question, but rather of two different homes in the Sacramento area.

I hope this was helpful.

Question: Any further insight, questions, or stories to share?

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Why a little black book of value doesn’t exist in real estate

little black book of real estate values 2 - photo purchased and used with permission by sacramento appraisal blogReal estate would be so much easier if we had a little black book to tell us how much each feature of a home was worth. Imagine a list of values for things like bathrooms, bedroom count, garage spaces, square footage, extensive landscaping, built-in pools, etc…. The truth is I get asked all the time how much a particular something is worth, and my answer is very often “it depends”, which I know can seem frustrating. But this is the best answer because what something is worth is based on the location.

Location Matters: It’s Real Estate 101 to know location plays an enormous role in shaping value. For instance, if you took the same house from Sacramento and put it in San Francisco or Hollywood, it would be worth substantially more in those cities. We all know this, but one thing we sometimes don’t consider is how the value of certain upgrades or features is also strongly influenced by location. Let’s consider the following examples.

A) Kitchen Remodel: Imagine a $50,000 kitchen remodel. You could literally put the same kitchen in a $150,000 neighborhood and a $500,0000 neighborhood, and the contributory value would be less in the lower-priced neighborhood and more in the higher-priced area. Why? Because buyers in the $150,000 neighborhood do not expect a kitchen that costs 1/3 of the entire home’s value, and affordability may also be a factor. In contrast, the remodeled kitchen would be much more acceptable in the $500,000 neighborhood, which means it would command a higher premium. This is why when someone asks, “how much is a kitchen remodel worth?”, the answer is, “it depends”, because the value of the kitchen is tied to the location.

B) Extra Bathroom: During a recent appraisal in a classic area of Sacramento the subject property had three bedrooms and one bathroom, whereas many of my comps had three bedrooms and two full bathrooms. How much is that extra bathroom worth? At the end of the day I ended up subtracting $25,000 from the comps with two bathrooms because that’s what it seemed the market was willing to pay. But this adjustment wouldn’t apply to every neighborhood because it would be WAY TOO HIGH in many other areas where the adjustment could easily be $10,000 or less. The value for a bathroom might also vary depending on whether we are talking about the difference between 1 and 2 bathrooms, 2 and 3 bathrooms, or 3 and 4 bathrooms.

C) Square Footage: How much is extra square footage worth? This is one of the most striking examples of how important location is for determining value. In some neighborhoods buyers could easily be willing to pay more than $100 per sq ft for additional square footage, but other neighborhoods might show a modest $30 per sq ft. This effectively means buyers could shell out $20,000 for an extra 200 sq ft in one neighborhood, but in a different community buyers might only pay $6,000 for the same 200 sq ft. Remember, we are not talking about the cost to build the extra 200 sq ft, but the amount buyers are willing to actually pay for the additional space in the resale market. As you can see, there is no standard square footage adjustment because the value of extra space is tied to the location. Read How appraisers come up with square footage adjustments for further insight.

different price in a different neighborhood brick house

The Big Reason why a Black Book Doesn’t Exist: It would be nice if a little black book of value did exist, but in real estate specific values are tied to specific neighborhoods and price ranges. This means it’s impossible to generalize about the value something might add because the same thing can be more or less valuable depending on where it is located. The danger of course is when an appraiser or real estate agent gives the same value adjustment for features regardless of the neighborhood.

Questions: What other examples have you seen where value is substantially different depending on location? Any further insight, questions, or stories to share?

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An open letter to sellers about pricing during a slower real estate market

Dear Sellers,

How are things? I hope all is well. I wanted to reach out and and pitch some thoughts your way about listing your property in a real estate market that is cooling off. I’m not trying to tell you what to do, but I figured this might give you some helpful context or conversation fodder with your agent. Here goes.

  1. Image purchased at 123rf dot com and used with permission - 14688774_s - smallerBe aware of change: Real estate markets are constantly changing. There are times when values increase and other times when they are flat or decline. This means it’s important to price according to how the market is behaving. Yes, values increased rapidly in recent years, but we’re not in that sort of market any longer. Moreover, the real estate market is cyclical where buyers tend to pay more in the Spring and less in the Fall/Winter.
  2. Know your competition: Price according to the most recent similar listings that are actually getting into contract instead of the highest sales from several months back. Remember that well-priced listings tell us about the current market whereas sales are more like pieces of history because they represent what the market used to be like in the past when these properties got into contract. The bottom line is if you want to sell, you need to be priced in the sweet spot where buyers are currently willing to pay. You can find that sweet spot by looking at sales, but don’t forget to give strong weight to similar actives and pendings.
  3. Be prepared for credits: It’s becoming normal for buyers to ask sellers for credits for repairs or even credits to assist with closing costs. This doesn’t happen in every price range, but it does tend to become more common when a real estate market softens.
  4. Listen to your agent: If your real estate agent keeps telling you the property is overpriced, is there a good reason why you are not listening? Your property might be incredible, but if it’s not generating interest or offers, something is wrong. What is it?
  5. Overpayment expectation: Don’t count on pricing your property really high in hopes of attracting that one magical cash buyer willing to pay extraordinarily more than anyone else. We are no longer in a market where buyers have to overpay since housing inventory is approaching normal levels.

I hope this was helpful. I’m around in case you have further questions or a story to share in the comments below.

Sincerely,

Ryan Lundquist
CA Certified Appraiser
Sacramento Appraisal Blog

p.s. Remember to pick up the dog mess before the appraiser comes  :)

an open letter to sellers from sacramento appraisal blog - image purchased and used with permission

NOTE: This information was written in response to many overpriced listings in the Sacramento area. Your market may or may not be similar. Be sure to study the trends in your market so you can price accordingly.

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5 trends to watch in Sacramento’s flattening real estate market

Let’s take a wider view of real estate today. I shared by big monthly post last week about Sacramento County, but what is regional market doing when we consider multiple counties surrounding Sacramento? Let’s look at five quick trends below.

Taking a wide view of real estate - image purchased by sacramento appraisal blog

Two ways to read this post:

  1. Briefly scan the 5 talking points and graphs below in 1 minute.
  2. Take a few minutes to digest the graphs and commentary.

Enjoy and let me know what you think.

free market trend graphs from sacramento appraisal blog

THE SACRAMENTO REGION:

1) Prices have been flat for 4 months:

median price sacramento placer yolo el dorado county

The median price has been the same for four months in the Sacramento Region, which is why so many in the real estate community have been talking about a flat market. As you can see on the graph, values cool off when inventory increases.

But Trendgraphix says… Trendgraphix shows the median price increased over the past few months from $310,000 to $315,000 for the Sacramento Region, but they seem to have pulled their sales data too early. When running stats in MLS for the past four months, the median price is clearly stable at $310,000 for each respective month. This is not to bash Trendgraphix at all because I am an enormous fan of their work. I only wanted to point out the importance of waiting long enough to publish stats, and how publishing even a few days too early can make a big difference.

2) Inventory is steadily increasing in the Sacramento Region:

months of housing inventory in region by sacramento appraisal blog

Housing inventory has been increasing and is helping fuel a greater sense of confidence among buyers (they’ve become more picky too), as well as many price reductions. Housing inventory increased from 2.50 months to 2.64 months over the course of the past month. Inventory is still not very high, but many sellers seem to have an unrealistic mindset about what their properties are worth, which is only leading to inevitable price reductions. Moreover, we are seeing weaker demand than in years past in light of less cash investors playing the market. My advice? Consider pricing according to the most recent competitive listings, that is, ones that are actually getting into contract (as opposed to the highest sale in the neighborhood three months ago).

number of listings in Placer  Yolo El Dorado Sacramento - by home appraiser blog

The graph above is a slightly different way to look at inventory. As you can see, the bulk of listings are between 200-400K, but there are quite a few from 400-750K too. Remember, not every price range, neighborhood, or property type is experiencing the same exact trend.

3) It took 2 days longer to sell a home last month:

days on market in placer sac el dorado yolo county by sacramento appraisal blog

In July it took three days longer to sell a home, and last month it took days longer. When days on market increases, it’s a sign the market is slowing down. Yet at the same time this is a very normal trend because the hot buying season does fade away as summer closes. Generally speaking, the higher the price, the longer it is taking to sell.

4) Sales volume is down 10% in 2014 compared to 2013:

SALES volume in sacramento region - by home appraiser blog

number of listings in Placer Sacramento Yolo El Dorado county - July 2014 - by home appraiser blog

Sales volume is down by slightly more than 10% this year compared to last year, and less sales is definitely one of the factors helping to cool the housing market. Less sales has led to increased inventory and a transfer of power from sellers to buyers.

5) Cash is down by 37% this year in the Sacramento Region:

cash sales and volume in sacramento region - by home appraiser blog

I mentioned already that the sales volume is down by 10%, but the X-factor for lower volume is really less cash sales. There have only been about 50 more non-cash sales in 2014 compared to 2013, but almost 2000 less cash sales this year. Having this many fewer sales has made certain months in the year feel sluggish, and it’s certainly contributed to the flattening trend we’ve seen over the past several months.

BONUS MATERIAL: PLACER COUNTY

Placer County median price and inventory - by home appraiser blog

median price in placer county and sacramento county by sacramento appraisal blog

Uptick, but still flat in Placer County: Placer County saw an uptick in median price last month, but it’s not really anything to write home about. One month of data does not mean the market is now increasing after being flat. Moreover, when talking with real estate agents, Placer County is very similar to Sacramento County in that the market is very price sensitive. If it’s not priced right, it’s going to sit.

Placer County housing inventory - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

Inventory in Placer County increased last month: Monthly inventory saw an increase last month from 2.72 months to 2.91 months. This effectively means there are 2.91 months worth of houses for sale in Placer County right now. Generally speaking, the higher the price, the more inventory there is.

days on market in placer county by sacramento appraisal blogIt’s taking two days longer to sell compared to last month: On average it is taking 47 days to sell a home in Placer County compared with 45 days last month. For context it is taking 40 days in Sacramento County and 42 days in the entire region. There were only 2 sales under $100,000, so disregard the 97 days listed above.

Placer County sales volume - by sacramento appraisal blog

Sales volume was fairly similar to last month: Sales volume was similar to last month, and is overall approaching more normal levels (though volume is still down slightly from 2013).

Sharing Trends? It’s a huge joy to put together these graphs each month, and I hope they’re helpful for you and your contacts. If you want to share graphs online or in your newsletter, please see my sharing policy. I hope you reach out for the graphs I didn’t post here too as I’d love to make those available to you. Fill out the form above or send me an email.

Thank you for being here.

Question: How else would you describe the market? I’d love to hear your take no matter what your level of interest or knowledge is about the housing market.

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