Part 2 of 3: I sat down recently with Sacramento real estate broker Joel Wright to discuss the 2-4 unit residential-income market in Sacramento. Joel specializes in working with investors and he knows his stuff. We hit on topics such as prices, inventory, rent levels and current trends with duplexes and fourplexes in the Sacramento area. Let me know if you have any questions and check out The Wright Report also for a very detailed analysis of the local market. View Part 1 of this interview series here and watch the new segment below.

Here is a graph of all duplex and fourplex sales in Sacramento County over the past three years. What do you see? Does anything stand out to you?

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook.

I am hired periodically from local real estate agents and home owners to do an appraisal during a short sale situation. Sometimes a bank will absolutely not budge to accept an offer lower than what they deem to be acceptable (even though their price is way too high), so the Listing Agent or home owner will hire me to do a full appraisal. The goal for the agent and owner is to show the bank what true market value is so that the sale can hopefully proceed at a more realistic price based on the market rather than a number the bank has picked. For example, if a bank says they will accept $200,000 for a property, but all other sales are at $175,000, a solid appraisal could potentially give the bank a realistic view of the market and thus help the home owner avoid foreclosure.

Should you hire an appraiser during a short sale situation? My advice is to first attempt to negotiate with your bank. Don’t spend money on an appraisal if you don’t have to. If the bank will absolutely not budge on their price though, and your sense is that market value is really lower than what they are saying, then it’s time to hire a local and experienced appraiser to provide you with a credible and detailed appraisal. 

Here is an example of some graphs below in a Sacramento neighborhood based on research I did during a short sale for a 2-bedroom house. All offers on this property had come in 10-15% lower than the bank’s approved number, but the bank would still not accept a lower price on this property. 

As you can see in the graphs, over the past few years and recently, the 2-bedroom units have tended to sell at the lowest end of the market. In this particular case, the final appraised value ended up being about 10% less than what the bank was willing to accept, which is very helpful and relevant information for the bank to consider. When dealing with a huge number of short sale and foreclosure inventory, a bank will not always be in touch with market trends, particularly when something like bedroom count might make a huge impact on the value of a property.

If you have any questions or a need for an appraisal or consulting in the Sacramento area, give me a call at 916.595.3735, send me an email, catch me on Facebook, or see my company website at www.LundquistCompany.com.

I’m disheartened to hear stats on President Obama’s “Making Home Affordable” program. So far it doesn’t look like the program is working very well (at all). A CNN article last week stated ”The administration projected that between half and three-quarters of applicants would have new mortgages at this point. As of the end of November, the number is 4.3 percent.” That’s not good.

In light of this less-than-wonderful news, I thought it would be interesting to use the “Obama Cam” app on my mobile phone to snap a few images of some local REO and Short Sale properties in the Sacramento area. The “Obama Cam” application overlays an image of President Obama (17 to choose from) on any picture taken with my mobile phone (an Android G1).

These images are in no way meant to belittle the President, make a political statement for any political party, or even rant about the Making Home Affordable program. There is actually a deep element here for me since the shots juxtapose governmental programs with real life local distressed properties. I’m reminded of the ever-present struggle in today’s economy for so many households, that recovery is going to take a long time, and also that good intentions in Washington DC do not necessarily translate to good results on “Main Street”.

What do these images evoke in you? Why is the “Making Home Affordable” program not yet working as it should? Please give your two cents and feel free to share your experience. By the way, do you have an app like this on your phone? Your comments are welcome below.

www.SacramentoAppraisalBlog.com ”Obama Cam” Photos in Sacramento

What sort of a price difference is there between bank-owned properties (REO), short sales, and arms-length transactions in the market? For an example, let’s take a look at a trend graph of all sales in Rancho Cordova below, where blue dots are REO sales, green dots are Short Sales and red dots are typical arms-length sales (per Sacramento MLS).

Each neighborhood, niche, and location will differ in results, but generally speaking, like the data above seems to show for Rancho Cordova sales over the past 2 years, buyers tend to pay more for houses that are non-distressed transactions (notice how the red dots on the graph above tend to be located toward the top and NOT the bottom). When it comes to REO properties, it looks like the price level is a bit higher overall than short sales, though there are quite a few short sales on the upper-end of the market too. In fact, both Rancho Cordova and Sacramento County saw a 7% increase in short sales last year in comparison to the year before, so clearly there is a greater acceptance for short sales in the marketplace.

One important observation is that most of the sales at the bottom of the market are bank-owned. Why is that? Investors typically gobble up the lowest end of the market with all-cash offers because fixer-type properties at the lowest level will not qualify for conventional or government financing. This means first-time buyers utilizing conventional or FHA financing will usually need to look to a price level above the “all cash” market. In light of this segmentation, imagine scraping off the bottom layer of all-cash foreclosures. What would you find? You’d still see many REO properties, but you’d certainly see a good amount of Short Sales too. 

Overall, in my experience as a Sacramento-area real estate appraiser it seems the market price tier goes: 1) Arms-length sale; 2) REO; 3) Short Sale. This is common sense really, but it’s another thing to prove that by crunching numbers, making trend graphs, and observing data in the marketplace. But there are certainly cases and stories and sub-markets that might show a different order for whatever reason - especially depending on the supply of housing inventory and particulars of a given property. Interestingly enough, sometimes there is little to no difference between non-distressed sales and REO sales. For example, what does it do to pricing differences when 90% of all sales in a market are either bank-owned or short sales? In a case like this, since the market is clearly saturated with distressed sales, it’s probably a safe bet to assume foreclosure-pricing is indeed the market and will set the pace for what buyers expect to pay for properties (see a previous post on Patterson having 96.5% of all sales as distressed). In a case like this, there may be no verifiable difference between REO and non-distressed sales.

Let me know if you have questions or insight. Comments are welcome.

www.SacramentoAppraisalBlog.com Is there a price difference between REO properties, short sales, and arms-length transactions?

We hear so many voices in today’s real estate market talk about the foreclosure rate decreasing in the Sacramento Region. Is that true? Are there less REO (bank-owned) sales today than there were two or three years ago? Let’s look at some hard numbers below for Sacramento County.

The information above is based on all residential sales listed in Sacramento Metrolist over the past two years. Overall, it’s true that there were less bank-owned sales in Sacramento County during the last 12 months in comparison to the year before that. The foreclosure rate decreased by 5% overall, but the interesting thing is that short sales increased by 7% during this same time period. What do you make of that? Have short sales simply replaced what would have been a similar rate of foreclosure for this year? As a home owner or real estate agent, have you found banks to be more receptive to working with you to do a short sale? Comments welcome.

www.SacramentoAppraisalBlog.com The Up and Down Dynamic of Foreclosures and Short Sales in Sacramento County