- Sacramento Real Estate Adventures - Your Sacramento Real Estate and mortgage blog!

My investor got a great deal on this Homepath home in Sacramento! They purchased it as a rental property and were able to put as little as 10% down using the Homepath loan program.

This investment home is super clean! It's located in a good area for the price range, in great condition, nice hard wood floors, big yard with fruit trees, and a great floor plan.

The issue with this one was the illegal garage conversion. Previous owners had abandoned the 1 car garage and had converted it to an extra room. Things like this create headaches and financing becomes challenging. The appraiser most likely is going to call it and require that it gets converted back to a garage before the loan can fund.

Here is where the HomePath mortgage saves the day!  This mortgage program does not require an appraisal. This means nobody is coming to create a mess with the transaction!!! 

So why is this loan program offered?  Well there is a catch!!! Come on... there's always a catch! You can only use this program to buy Fannie Mae approved homes. Basically they are breaking their own lending rules, by not requiring an appraisal, in order to get their inventory of foreclosed homes sold.

My client is going to get a great return on their investment, because they were able to purchase it for very little money down.

Looking to invest in the Sacramento real estate market? I can help you too use the Homepath mortgage to put as little as 10% down on an investment purchase!

Call me! I'm here to help!

Ready for another Sacramento Real Estate Market Update! Let's review what is going on right now in our current foreclosure market.

Since the beginning of the year we have seen an increase in our inventory of homes available for sale. What we are struggling with right now is even though inventory is going up... Our sales in the last 2-3 months has dipped. I suspect that this has to do somewhat with the tax credit that was available earlier this year.  We had so many people running to the finish line trying to take advantage of the tax incentives, it's only natural to see a drop off once that incentive goes away.

Since August 2010, the number of homes (single family homes only) sold in Sacramento County dropped by 13%.  The good news is pending sales are up 13.5% since August as well.

Over the last year we have seen listing prices continue to decline. The green line below indicates the average original listing price for homes in our area. The red line shows what the sellers actually sold the homes for. So on average in September, we saw homes sell for approx 18% less than their original listing price.

If you compaire September of 2009 with September of 2010... You can tell sellers are becoming more in tune with our market and are pricing their homes more realistically.

Here is another graph to see our increase in inventory over the last several months. As you can see, our inventory level jumped in mid July, as we saw more and more bank owned homes hit the market.

As of September 2010, there are 4.4 months of inventory left in Sacramento County (single family homes only). This means that if no other homes came on the market... At our current pace we are selling homes... It would take us 4.4 months to absorb our inventory.

So let's recap!

Inventory is up especially bank owned homes! This is good for two reasons....

• Buyers have more to choose from when they go shop for homes!
• We are cycling though more foreclosures than we have in recent months. The sooner we can get these foreclosed homes addressed and resold... the sooner we can move on to a more stable real estate market!

Homes sales are down!

• This is likely because of the surge of homes sales due to the home buyer tax incentives in previous months. There was just such a rush and sense of urgency with buyers to take advantage of the tax credit. Once that was gone... it felt to me... as if buyers who didn't get into a home wanted to take a breather before they started looking again. Just look on the first graph at the pending sales in April of this year! Pendings were way up... right around the tax credit expiration deadlines. Then they dipped for a couple months and they are now back up!
  
  There have also been challenges with financing. Many lenders are being ultra strick right now making escrows tougher to close. One branch manager I talked to at a large nation bank said that their fundings were only 12% of their total applications... that's scary folks!

Pending sales are up!

• Way up in fact! So if you are in the market to buy a home... you might what to get out and look at the new inventory that has come on the market in recent months.... because other buyers obviously are!

That is where we are today in regard to the Sacramento Real Estate Market! If you are interested to buy or sell a home... our team is here to help!

Watching foreclosure trends in the Sacramento real estate market will help you monitor the level of distressed homes that will soon be listed for sale.  

The the first step of the foreclosure process begins when the bank files a Notice of Default. This document is typically filed after the homeowner is 90 days late making their payments. The Notice of Trustee Sale is the final stage of the foreclosure process. This notifies the homeowner that their home is going to auction and is filed 21 days before the sale date.

As you can see, Notice of Default filings have declined this quarter. Many banks are now working with homeowners using tools like a loan modification or a short sale to avoid the completion of the foreclosure process. Trustee sales for the most part have stabilized in the last 3 quarters.

After the filing of a Notice of Trustee Sale, there are only three possible outcomes.

1. The foreclosure sale can be canceled.
Reasons for a cancellation can involve a successful loan modification or short sale, a filing error, or a legal requirement to re-file the notice after extended postponements.

2. The property goes back to the bank.
When the property goes to the court house steps to auction, the bank will place an opening bid. If a third party doesn't outbid the bank's bid, then the property goes back to the bank. The property is listed for sale soon after as a bank owned home.

3. The property is sold to a 3rd party.
During the auction process the property is purchased by a 3rd party.

Foreclosure cancellations are on the rise, indicating more banks are willing to work with struggling homeowners. With more and more short sales hitting the Sacramento market... it's no surprise to me that we have seen an increase in foreclosure cancellations. 

Another interesting statistics foreclosures by loan amount. If you compare the 2 charts below you will see, for example, homes with loan amounts in the $150,000 range led the pack in 2007. This is most likely because folks who purchased in that price range had less reserves to get them through tough times than those in a higher price range.

Now fast forward to 2009... we are starting to see more foreclosure filings in the higher loan amounts.

Well that is a look at where we are as of the 2nd quarter of 2010 in regards to foreclosures. Make sure to come back and visit for future updates!

If you are looking to invest in the Sacramento real estate market, please give me a call to discuss your options!

I am sponsoring another event at the Sacramento Rental Housing Association tomorrow! Join me for another installment of RHA's Real Estate Investment Forums!

This month our speaker will be attorney Gary Link who will discuss present legal issues for real estate investors. Gary Link's specialty is working with Sacramento landlords to make sure they are protected.

This is a FREE event you don't want to miss! Get a couple hours will a local attorney who specializes in rental property and find out what the latest and greatest legal issues you need to be aware of!

You must register to attend this event at the RHA website! Register Now >>

Back in April, my out of town investor client put an offer in on a duplex in Fair Oaks. It was a great little deal and we were able lock it up in contract while we waited for the short sale approval.

About 7 weeks went by before the short sale was approved! I was thrilled by the turn-time and was excited to move forward to close this deal.

To put it bluntly... this was the best and most efficient part of this escrow!

You see, as the buyer's agent, we have to depend on the listing agent to coordinate the short sale with the seller's bank(s).

This particular agent probably won the prize for the biggest liar I have ever met. I tried and tried to wade through his lies... trying to maneuver around them so I could get the escrow closed.

• First he submitted for a short sale approval with an inaccurate HUD (his seller would need to bring in 4k).
  
• Then he told me not to worry... he could get the bank to fix it right before we close... go ahead and do your inspections.
  
• Then he encouraged my buyer not to do his inspections and deliberately avoided turning on the power to the unit so we could do our inspections.
  
• Then he said he did not know the seller moved a tenant into the vacant unit after we were in contract.
  
• Then he said he personally inspects the property 2 times a week.
  
• Then he said he could not call the bank to get help with the short sale approval, but could only communicate via email.
  
• Then he say that he has calls into the lender and left several messages for the negotiator.
  
• Then he told his broker we were the ones delaying this file. That he and the seller were covering the 4k difference the whole time.
  
• Then he got the denial from BofA (as I suspected you would) and asked me to contribute to the 4k deficit.
  

I finally realized that this particular agent just could not get this deal done. It's not that the bank would not approve it... this agent just didn't know what the heck he was doing. That part would have been OK and we could have worked through that. The part I could not get past was the lies. If you are not going to be honest with me... we just can't do business together!

I am afraid that this particular out of town listing agent's challenge with integrity will result in his soon departure from our industry!

The good news is my clients are in the process of negotiations on a new duplex. The duplex is on a nicer street and has an additional bathroom per unit than the previous escrow. It's also bank owed.... so we can get escrow closed quickly!

Sometimes things work out for a reason!

Save the date! Our next Sacrament investment club meeting is August 23rd.
Join me for Elk Grove REIA's monthly meeting!

How do you create more profit from a rental? Create a business inside of it!

Right now in the Sacramento real estate market we are able to get cash flow! For years investors were taking their money outside of California in order to get cash flow properties.

A nice cash flow home is good …. But what if you kicked it up a notch and buy a property… THEN add a business to pump up the cash flow! OR lease it to a business and potentially net more rent because the location is move in ready for that type of business.

Did you know that many of the occupations projected to grow the fastest in this economy are concentrated in the health care industry? This is according to the U.S. Bureau of Labor Statistics. With our aging population and our baby boomer starting to go into retirement… Running a care home can be a profitable venture!

Come and learn from Delia Quinley, owner of M&D professional Services, and find out what it takes to run this kind of business.

You will learn… 

• What specs the home needs to have in order to optimize the income potential of the business!
  
• What type of licensing requirements, inspections, and certifications are needed!
  
• What type and how many staff needs to be on-site!
  
• How profitable these care homes can be!
  
• What you should know about your liability!
  
• Bring your questions!
  

You may not want the liability of actually running the care home… but what if you bought one and leased it to someone who does? They get a location to run their business… and you might do a lease to own with them so they buy it from you in the next 5 years. It’s a different twist on your normal investment property purchase!

Join us for our next meeting and find out if this twist on a real estate deal is for you!

Delia is an owner of M&D Professional Services in Elk Grove. Her company assists their clients to start-up care home facilities in Sacramento County. Her team knows the ins-and-out of the care home business and will give us great in-site into this up and coming industry. Learn more about Delia at her website at www.mdquinley.com!

MEETING INFORMATION

August 23rd, 2010 <——– PLEASE NOTE: Our meeting dates for August is not on our usual night due to a scheduling conflict!

6:30pm Networking
7:00pm Meeting starts

Cost: Members are FREE! Non-members $15 at the door/$25 for a couple!

Become a member >>

Location: 9275 East Stockton Blvd. #100, Elk Grove, CA 95624

Elk Grove REIA was created to offer investors (regardless of their skill level), an opportunity to come together and sharpen their skills. We would love it if you would join us for our next meeting! For more information please call Erin Newington at (916) 585-3858 or email her at erinnewington@kw.com!

Being a Sacramento landlord means you have to sometimes deal with tenants who don't leave your unit in the same condition as you rented it.

We get questions all the time at our Sacramento Real Estate Investment Club meetings about what to do when a tenant leaves their stuff behind. Many folks would just classify it as junk and throw it away! But you have to be careful because if that "junk" is valued over $300, you are responsible to store the items for 18 days for the tenant so they have an opportunity to pick them up.

This holds us up many of our team's bank owned listings!

As you can see in this picture, it's not always easy to determine the value of their junk. This is a bank owned home in Elk Grove that required the owner to be evicted. They obviously did not leave it in the greatest condition.

The banks are conservative and don't want to deal with disputes over the value of items left.  To be safe, they usually require us to store the items (in the house) for the 18 day waiting period. That way we make sure there are no more issues with the previous owner. It just means we have to waiting 18 more days to get the home on the market.

Here is one example offered by Kimball, Tirey & St. John LLP, a firm specializing in tenant law....

Question: Our tenant moved, but left items in a locked shed on the premises. We have left messages for him to give us the key and remove the items, but he has not responded. What should we do?

Answer: If you have taken back possession of the unit, you should send him a notice of belief of abandonment of personal property. If the property is more than $300 in value, you must sell it through a public sale if not claimed within 18 days of the notice. If it is worth less than $300, you can dispose of it if not claimed within the 18 days.

If you find you are in this position with one of your Sacramento investment properties, check out the Rental Housing Association to get the forms you need.

For legal advice... Call Calvin Clements with Kimball, Tirey & St. John LLP at (916) 714-6611!

Time to check in on the Sacramento Real Estate Market.

This month, I thought I would break down Sacramento into three categories and report to you what is going on in each.

The three categories I will be analyzing today are --------------------->

My clients often ask which category provides the best deal in our market! I thought I would take some time and break down each category and give you a snap shot of each .

I have obtained my statistics from our multiple listing service. Just a quick lesson for those of you who do not completely understand the three categories... let's review them for a minute.

Sacramento Short sale: These transactions involve a sellers who owes their bank more than their home is worth. The buyer makes an offer to the seller, then the seller has to obtain a short sale approval from their bank. This means the bank agrees to release the lien (mortgage) on the home, even though they will not be paid back in full.

Sacramento Bank Owned Home: These homes have been foreclosed on and are now owed by the bank and are more than likely vacant.

Private party sale or Other: These are homes that are NOT bank owned or short sales. They are private party sales, probate sales, bankruptcy sales and other non bank owned or short sale transactions.

Now that we are all on the same page... Let's look at some numbers! First off lets look at Sacramento Real Estate Market as a whole.

As you can see, we have 4365 active listings for single family homes for sale in the Sacramento market. Of those listings, 2454 of them are new listings and 2217 are pending sale. In the month of May 2010, 1668 single family homes sold out of the 4365 homes for same in Sacramento.

Here are some statistics to help you compare what is going on with bank owned homes, short sales, and private party/other sales:

The first item we are going to look at is how long on average bank owned homes, short sales, and private party sales stay on the market before they are sold.

It makes sense that short sales lead the pack having the most average days on the market (DOM) of 146.

The short sale process can take months to get an approval back from the bank. This makes sense that short sales take much longer to closes escrow than the other two categories.

Sacramento Bank owned homes are in 2nd place at at 47 days on the market and private party sales are at 46. This is because these homes are ready to sell today as opposed to a short sale.

Next... let's look at average cost per square foot for Sacramento homes that have been sold.

If you compare on average the cost per square foot of a bank owned home, short sale listing, or private party sale... the best deals on average is the Sacramento bank owned home.

As you can see, you can get the cheapest square foot cost for a bank owned home. Normally, there are issues with the condition or maintenance of these homes... which provides a discount in price.

Sacramento Private party sellers are selling their homes as quickly as banks, but are netting over 3 times as much! That is great news for those looking to sell a Sacramento home or investment property.

Finally... let's look at how many months of inventory we have left in the Sacramento Real Estate Market.

If you look at all the single family homes currently on the market, it would take us an average 2.6 months to sell every last house currently for sale in Sacramento County.

I thought it would be fun to check the absorption rates for each of our three categories (bank owned, short sale and private party sale).

What is the absorption rate?

The absorption rate tells us out of the available homes for sale in Sacramento County, how many were absorbed (purchased) by buyers.

Again the bank owned homes win again! Over 66% of the bank owned homes that were available to buy in May 2010 were sold.

When you compare that to figure to a short sales at just over 27% and private party sales at 33%... Sacramento bank owned homes are certainly getting snapped up 2 times as much as short sales and private party sales.

In conclusion, bank owned homes provide you on average the best price, but as you can see there is more competition for these homes based on the absorption rate.

Be prepared to move quick when a new bank owned home comes up for sale... because other buyers will be.

On another note... short sales don't provide you on average more of a discount than a bank owned home. Why not save yourself the hassle if you can and choose a bank owned home instead?

Expect to pay more for Sacramento private party homes for sale, but remember they are often in much better condition than a short sale or bank owned home.

Keep in mind these are averages and every neighborhood will reflect different numbers, but it will give you a indication of what is going on in our Sacramento Real Estate Market as a whole.

If you are new to investing in the Sacramento Real Estate Market... You should be leery of the Puppeteer!

So who is the puppeteer?

The Puppeteer (for sake of this conversation), is an experienced investor who takes advantage of another investor with less knowledge about the Sacramento Real Estate Market.

The puppeteer will help the newbie investor structure the deal, negotiate the short sale, show them how to get the bank to accept a low ball offer, and actually help the newbie fund the deal! Then the Puppeteer buys the home back from the newbie investor a couple of months after the escrow closes.

When you are dealing with the puppeteer... The newbie is in an extremely vulnerable place, because they really don't know right from wrong at that point when it comes to real estate investing.

Think about it! The puppeteer is not technically involved with the potentially shady transaction...

• They were not on the offer.
  
• They never had contact with either real estate agent involved.
• They never directly spoke to the short sale lender involved.
• They never even had ownership (until after the transaction closed).

The puppeteer gets to snap up the deal after the newbie puts their tail on the line and probably didn't even know it.

The message of the day?...

Just because an investor has more experience that you do... Don't rely on them to give you all the answers! It's your responsibility to do your own due diligence and know what you are doing.

Last night, I sponsored an event at the Rental Housing Association that taught Sacramento rental owners how to market their rental properties online!

I realized after we polled the audience, that many Sacramento landlords are not taking advantage of the Internet to market their rental properties.

Being a techie person... I just can't image NOT going to the Internet to market a vacant rental unit!

I thought it would be a good time to list the top reasons why a Sacramento rental owner would want to market their vacant rental unit online.

Drum roll please....

1. You can market your rental unit for FREE!
In our day and age, any dollar that can be saved should be! Why spend a lot of money on classified ads in a newspaper that many people no longer read.  The Internet offers a ton of places a rental owner can promote their vacant unit for FREE! 

Here is a great FREE resource:

www.Postlets.com 

This website allows you to upload photos and a description of your rental unit. The postlets website creates a professional online web page with it's own link that you can use to promote your unit online.

Postlets will also syndicate (send and post to other websites) your Postlet web page to several other websites like Craigslist.org, Facebook.com, Trulia.com, Twitter.com, Google, and more!

2. You get your vacant unit more exposure!
Think about it... Newspapers and magazines are closing their doors as most folks go to the Internet to get their information. If you place an ad in the newspaper, you will only expose your unit to a limited amount of people in the Sacramento area (those who have a subscription to that newspaper). If you go to the Internet, you get a ton more exposure and the reality is your ad is more likely to get in front of a perspective tenant.

3. Your tenant can tour your vacant unit virtually!
What if you didn't have to drive to your rental to show the unit? Ever made an appointment with a perspective tenant and they either never showed up or spent 3 minutes looking around before they decided it was not for them?

Another FREE tip.... YouTube.com! Take a video of the unit (here is a sample), then upload it to YouTube. When you get a call from someone who wants to look a your rental unit... now you can just send them to YouTube and have them view it online. If they still want to see it after they preview it online.... pre-qualify pre-qualify pre-qualify them over the phone before you go show them the unit.

Well those are my top three reasons why Sacramento rental owners should be marketing their vacant units online! If you are having difficult getting your rental tenanted... it's time to get creative and do a little Guerrilla Marketing!

Got questions or comments? ... post them below!