- 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!

 

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.

 

If you are a Rental Property Owner in Sacramento... You don't want to miss the next Rental Owners Expo!

On March 27, 2010, the Rental Housing Association will be hosting the largest Sacramento Investor Expo (that I know about) at the Hilton Hotel in Sacramento.

Our own Todd Newington from First Priority Financial and Lori Mode from Keller Williams Realty will be presenting one of the many courses offered at the Sacramento Rental Owners Expo!

Here is our description of the class we will be teaching...

What to Know Before You Buy in the Sacramento Real Estate Market
Foreclosures and short sales offer great investment opportunities, but you need to understand the process and potential pitfalls. Learn how to evaluate a prospective rental investment and qualify for financing in the current tight lending market.

Check out this video snipit from last year's event:

Highlights of Rental Owners Expo:

• Choose from 11 seminars focusing on a wide range of investment, management and legal topics.

• Get sound advice from industry experts without any "get rich quick" hype.

• Includes luncheon with panel discussion on Successful Property Management in Today's Market

• Meet with vendors of products and services for rental properties.

• Network with other rental owners and property managers.

• Attend all or part of the one-day event, conveniently held on a Saturday.

• Learn about the benefits of membership in the Rental Housing Association.

• Chances to win dozens of prizes throughout the day.

• Get certified to comply with the Sacramento County Rental Housing Inspection Ordinance.

The Sacramento Rental Owners Expo is a good bank for your buck! If you are not a member... the price is $69 and includes 3 seminar classes, a sit down lunch with a guest panel, and an opportunity to win prizes!

Here is some pictures from last years event!

 

In order to register for the event you must complete the Sacramento Rental Owners Expo Registration form.

We hope to see you there!

 

 

 

I ran across this graph and wanted to share it with you!

It shows the progression of the unemployment rates per County since 2007 for the entire United States.

This just goes to show that the foreclosures in the Sacramento Real Estate Market are not just because folks got placed in bad home loans.

As more Sacramento Residents lose their job or increased furlough days... Stormy waters are still ahead for the Sacramento Real Estate Market.

Watch the video... It's shocking!

It is pretty scary! Check it out!

Sacramento Rental Owners get FREE Tax Planning Advice November 18th at the Sacramento Rental Housing Association!

You can earn a ton of income from your wise investment choices... but at the end of the day it is what is left in your wallet that counts. Good tax strategy is key BEFORE purchasing your next Sacramento investment property.

Take advantage of the tax laws that can shelter your hard-earned rental income! One of Sacramento's premier tax attorneys explain various ways you can structure the ownership of your properties and estate to minimize taxes.

Todd and I are facilitating this Sacramento Real Estate Investors Forum hosted by the Rental Housing Association Wednesday night! Not only will you get some tax advice you can use to find legal tax loop holes to offset your rental income... We will also give you a Sacramento Real Estate Market update and let you know about upcoming changes in the lending world that could impact your ability to qualify for a new mortgage in 2010.

This meeting is FREE and is always well attended... so you want to make sure to register quickly!

 

Here are the details...

Date:
November 18th
5:30pm - 7:30pm

Location:
RHA Office
201 Lathrop Way Suite C
Sacramento, CA 95815
www.RHA.org

Cost:
FREE... Just Download RHA's registration flyer to claim your spot! >>

We look forward to seeing you there and answer any questions you may have about the Sacramento Real Estate Market!