Some advice for sellers in an aggressive market

Dear Sellers,

The market feels aggressive out there and you’re probably going to get multiple offers, but let’s have some real talk. Last week I wrote an open letter to buyers, but today I want to share some perspective to help your end of the transaction. Whether you are in Sacramento or elsewhere, I hope this is useful. Any thoughts?

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Advice for sellers in an aggressive market:

1) Don’t get high on the headlines: It’s easy to read articles that say “the market is hot” and then ignore data in the neighborhood. It’s as if we see something in print and price according to the headline instead of actual sales and listings. Right now there are no shortage of articles saying “Sacramento is one of the hottest markets in the nation”, so be careful about getting distracted by the headlines.

2) Don’t aim for the unicorn: It’s easy to price for that one magical unicorn buyer who is going to pay more than anyone else for some reason, but I would advise you to price based on recent similar sales and similar listings that are actually getting into contract. I find some sellers say things like, “A cash investor from San Francisco is going to swoop in and pay top dollar for my property.” Yeah, maybe. But what might also happen is you sit on the market instead of sell because you priced for a mythical buyer instead of a real one.

3) Be careful to not treat the contract price as holy: We like to think there is something holy about a contract price as if price negotiation is finished when a contract is written, but that’s simply not true. If a buyer finds repairs are needed or if an appraisal rightly comes in lower than an inflated contract price, it may be prudent to reduce the price.

4) Remember the difference between “comps” and sales: We like to think all sales are “comps”, but there is a difference between properties that are actually comparable and ones that are simply sales. It’s easy to get distracted by a few high sales in the neighborhood, but if they are nothing like your property, then don’t give them much weight and pay the most attention to homes that are actually similar to yours. In simple terms, if your home was an apple, what have other apples sold for in the neighborhood? Don’t price your apple according to orange or banana sales.

5) Be aware of appraisals being scrutinized: If you haven’t sold a home in years, know the lending world has changed from what it used to be over ten years ago. These days lenders scrutinize appraisals like never before, so be careful about accepting an offer that is incredibly high if there is no way it is going to appraise that high. Of course if the buyer has cash to make up the difference, then you are fine. But if the buyer is strapped for cash, then the highest offer probably isn’t your best option. This is why many agents tell sellers to look for the strongest offer instead of the highest one.

6) Don’t hijack price per sq ft: One of the biggest pricing mistakes sellers make is to take a per sq ft figure from another sale down the street and use that figure to price their property. Here’s the thing though. There isn’t just one price per sq ft figure that applies to every single property in a neighborhood. For example, in East Sacramento the price per sq ft range for all sales last year was $169 to $552. So when a seller says, “Let’s use $552 to price my property,” my question would be, why not $551? Or why not $525? What about $436? Or maybe $278? We can quickly get a price that is far from reasonable if we are only looking at price per sq ft. Keep in mind smaller homes tend to have a much higher price per sq ft too (which I explain with my Starbucks cup analogy). My advice is to pay attention to price per sq ft, but don’t forget to look at actual similar sales in the neighborhood.

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7) Try to be objective about your house: Buyers are going to look at your home with a microscope, which means they’ll see the wonderful things as well as the faults. Remember, it’s easy to get sentimental about your property because you have a history there, but memories can also be a mask for not seeing flaws. A seller recently told me, “My house is the most well-built one on the block” (the same builder built the entire tract). Another seller said, “My house is really unique for the neighborhood, which is why it’s worth so much more” (it was totally outdated though). Agents are trying to tell these sellers to price lower because that’s where the market is, but both these homes are likely going to be overpriced because the sellers cannot get past their own subjective views.

8) Be FHA-ready: One in four homes in Sacramento county sold with an FHA loan last year, so it’s a good idea to have your home ready for an FHA appraiser if you think your home might go FHA. Your agent can most likely bring you up to speed on some repairs that might be required or maybe look over an FHA list. Keep in mind 34% of all homes under $300,000 went FHA in 2016 in Sacramento County and the current FHA loan limit is $474,950. This is also a reminder that financed offers are closing escrow and actually far outweighing cash transactions.

9) The market isn’t the same at every price range: We like to think the market is doing the same thing in every price range and neighborhood, but that’s not true. For instance, the market under $300,000 is more aggressive than the market above $1.5M. Thus the market could be “hot” in one price range or neighborhood and cool in another. This is important to remember because all day long we read about how hot the market is in Midtown and how rents are rising there, but that same dynamic might not be present in your neighborhood.

10) Listen to your agent: In a market that feels aggressive it’s easy to ignore pricing advice from agents, so some sellers price at completely unrealistic levels. Despite values showing upward pressure in many price ranges, we are not in a market where you can command whatever price you want (even with anemic inventory). So if your agent is telling you where the market is and showing you similar sales and listings, ask yourself why you are not listening.

I hope this was helpful.

Sincerely,

Ryan

Questions: What piece of advice resonates with you? What is #11? Did I miss something? I’d love to hear your take.

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Things to look at closely when buying a home

You know what they say when you’re hunting for love? Look closely. When you don’t, or if you intentionally ignore the red flags, there can be major trouble ahead. The same is true in real estate. If you don’t look closely when shopping for a home, or you don’t know what to look for, it can end very badly for your wallet.

I asked five Sacramento Realtors for their take on what buyers should look at carefully during the home-buying process, especially when purchasing a flipped property. I see these things all the time on appraisal inspections, so this is definitely important to pay attention to.

May-Boyko-Real-EstateMax Boyko – Realtor: Here are some things that get missed that I would consider important:  Insulation (although can always be blown in later); Remodeled home but may have original plumbing and electricity which may leak; Roof leaks may get covered by paint on the inside; and Showers and bathtubs are rarely tested to make sure they are leak proof.

Sheri Negri RealtorSheri Negri – Realtor: Here are some things I help my buyers look at in general and especially on homes that have been flipped and are poor quality: I look for signs of dry rot inside and outside the home. Sometimes dry rot is masked by a bad paint job, but even then you can tell if you look closely and feel the wood in most cases. I look at any water stains on the ceilings or walls that indicate a leak somewhere. I look to see how stable or unstable the fence is in the backyard and whether or not any repairs need to be done. I look for potential FHA flags such as: is the firewall completely drywalled, are the junction boxes covered, is the hot water heater strapped, are there any leaks in any of the toilets, do faucets work, potential roof issues, areas that need caulking, etc. I check underneath the sinks to ensure there are no major leaks. I check to make sure the bathrooms don’t have any signs of water damage. I take a close look at the water heater and HVAC to see the visual condition. I look at the roof from the front and the back to look at the visual condition to see if there are any major issues that might need to be repaired. I look for any cracks inside and out that might be more than the house settling. If a flipped property, I look for how they remodeled the cabinets, counter tops, flooring, doorways, trim, and the like. I also look for room additions where they may not have put heater/air vents, or electricity. Many flippers do a poor job at finishing bathrooms and kitchens, so I like to point out any flaws I see to my clients.

David Yaffee RealtorDavid Yaffee – Realtor: In today’s real estate market, many buyers are quite excited to see a flip property after viewing foreclosures and short sales, as a lot of foreclosures & short sales need cosmetic work or more. Flips can seem like a dream as you are getting a mostly updated home, but it is important that buyers keep in mind these homes are not perfect. Don’t let new appliances, flooring, paint etc stop you from looking at the home in detail. Some of the people who flip homes do not obtain permits for the work done, use non-licensed workers, and change the original layout of kitchens & bathrooms. This does not mean the home is going to fall down or the work is bad, but it is important to make sure you properly inspect the property. During your inspection make sure to ask your inspector if the work appears to be up to code. I often see that the type of vent or flue pipes used being called out by home inspectors as they are not the proper type. I also encourage my buyers to looks at the quality of the work because if it looks poor, chances are there are other flaws with the work done. If it is not provided to you when receive disclosures, have your agent ask the listing agent for any documentation that can provided on the work that was performed at the property. Investor flip properties are often beautiful homes and great opportunities for buyers, but you still need to inspect and protect yourself from potential issues.

Jeff-Grenz-Sacramento-Real-Estate-BrokerJeff Grenz – Realtor: All these items I see regularly in flips – as in I saw all these in the last 10 days on 3 different homes. All are code violations and so simple and well understood by licensed plumbers and building inspectors that if missing or improper, they are clear signs of problems.

Water Heater Installation problems: Vent in direct contact with a combustible (aka wood) as the requirement is 1″. Straps are loose and/or the tank moves in any direction (it must be braced or snug at rear also). Missing TPR (temperature and pressure relief) line -OR- it requires water to flow uphill (the TPR exits the water heater usually on the top and water must flow level or down hill until it exits outside, normally with a copper line).

Walking through homes with recent rehab, I look for steps that are even, consistent and feel like I expect them, stair railings that are firm, hoods that are at least 30″ above and the full width of gas ranges below (check manufacturers specs).  Toilets set firm.

Another easy check, go online for building permit records vs. age of roof, water heater, HVAC.  If there are no permits within the past 20 years, but any of those look newer, its time to inspect more closely, as lack of permit is a pretty good indicator of lack of license and skills.

Bruce_Slaton Bruce Slaton – Realtor: Exposed white PVC outside, is this the correct grade for exposure or could it lead to broken pipes? Duct tape on anything electrical or for that matter anything. If they walk into a room and it reminds them of a patio or the materials are different from the interior of the house, could be a red flag of a converted patio or addition. Any cracks that they can stick a quarter in. Dirty AC filters, this could: a) Be a sign of deferred maintenance; and b) Could lead to a home warranty repair denial later. Pet urine damage on exterior of AC condenser. Storage in the rafters of the garage. Lofts in condos being used as living space. For that matter, hot water heaters in rooms. Fences that look like they are at the end of their life, good idea to talk to that neighbor before and see if it will be your cost or shared. Last but not least NEVER accept your agent telling you “don’t worry about it, the home warranty will cover it”, chances are it will not because it is pre-existing. Always get a professional home inspection.

I hope this was helpful. I’d love to hear your thoughts in the comments below.

Questions: Anything you’d add to the list? Have you ever bought a home only to find out something was wrong? What will you look at more closely during your next home purchase?

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

How to increase curb appeal for less than $100

We’ve come to the end of “Blight Week“, so it seems fitting to finish this discussion with some very practical ideas for how to easily help a neighborhood look better. I asked seven trusted Sacramento real estate professionals for some tips on how to increase curb appeal for less than $100, and here is what they said:

Keith Klassen, Burmaster Real Estate Services: While pruning and planting is the stand-by and must do for curb appeal on the cheap, many times painting either the front door or just the trim on the home can make it stand out.  I know someone else who takes the window screens off the front of the home, which when left on gives the house “black eyes.”

Jacque McBurney, Dean Adams Residential Brokerage: Here are some suggestions for outside of the home under $100: Keep lawn mowed and trimmed. Spray down any spider webs and bird droppings. If you have spare paint – paint trim and/or entry door to make a cleaner appearance. Fix broken porch lights, address plates or mail boxes. Replace worn doormat and torn screens. Plant new flowers in front & put down new bark. Get rid of any debris or old boxes/garbage that may be in sight (less is more). If you show pride of ownership others will see it and that will make your home more desirable than any other home on the block. First impressions are the most important!

tamara-dorrisTamara Dorris, Realtor: I would say the best, cheapest way to give a house-front a facelift would be to get rid of all the garbage and debris, trim back shrubs, weeds, overgrowth, wash windows, (all pretty much free), and for your budget, paint trim and plant some bright flowers.

kellie-swayneKellie Swayne, Dunnigan Realtors: I’ve found that a LOT can be done for free by owners to increase their curb appeal.  The first and most important thing is to put a little sweat equity into the home and spend some time outside!  Mow the lawn, edge, weed the gardens, trim the trees and shrubs, clean the gutters, dust away the cobwebs, water blast any stains off of concrete, porches or siding, get the paint out of the garage and touch up any places that might need it, and CLEAN THE WINDOWS.  If trees are lacking, get in touch with SMUD and the Sacramento Tree Foundation who offer free shade trees! I’ve also noticed that sometimes homes that look a little plain in the front can be dressed up with some inexpensive shutters, if the space is right. I would also recommend putting a little bit of the $100 toward some fresh colorful flowers.  Or, if the landscaping is already colorful – think about adding some shredded bark or mulch of some kind.  You can even get free wood chips from PG&E (800-743-5000).

Dennis Lanni, Housing Group Fund: How about replacing broken & old single pane windows for free!  Sacramento is an amazing community with rich resources to spur community improvement. One of my favorite programs running right now is the Community Resource Project, which is a free program that promotes energy conservation by upgrading windows, door weather-stripping and much more.

LJ, Connect Realty: If your home is currently on the market, there are likely many competing sales nearby. This means your home has to sparkle in order to draw buyers. One great way to facilitate this is by pressure washing your driveway and the sidewalk in front of your home. This can drastically reduce unsightly oil stains and other discolorations. Fences can also be pressured washed, but beware because pressure washers release a very strong stream of water that may damage wood surfaces if you use the wrong tip or operate the spray nozzle too close to the surface. Pressure washers can often be rented for approximately $50-$60 per day at select Lowe’s and Home Depot stores.

Heather Ostrom, RosevilleandRocklin.com: I know not everyone has the budget for big fixes or upgrades, so I think just sweeping up the driveway and sidewalk as well as picking up trash does wonders. Mowed and maintained lawns and hedged bushes and shrubs are also something that really has high-impact. If a car must be kept in the driveway or on the street, keep it web-free and clean. Paint your front door or mailbox if it’s looking dingy and worn because it can be a high-profile yard item.

Can we solve blight? There are no simple answers to end blight in a community because it is a complex issue, yet at the same time a focus on getting to know neighbors and taking care of some of the small signs of neighborhood decay is a relevant place to begin. It’s these “small things” that really add up to help make or break the image of a neighborhood and impact the ethos of the community too. Thank you everyone for reading along this week.

What do you think of the tips? Anything else you’d like to add?

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