Be it the real estate market in 2009 or any other real estate market for that matter, the structure of a real estate purchase contract offer can be the difference in it being accepted or rejected.
No, the offering price is not the only factor in negotiating a contract to purchase a home.
Regardless of the number of pages in the sales contract, a contract offer can be broken down into 3 separate parts which can be important to the seller: Price, Terms and Conditions.
Each has to be satisfactory in order to obtain seller acceptance. In some situations, full price offers are not acceptable due to the buyer's terms and conditions in the contract offer. In other instances, contracts get accepted and signed even though the offer was lower in price than other competing offers, but was more favorable for the seller in terms and conditions.
What then is the secret in preparing and submitting a contract offer to buy real estate? This is where the value of an experienced REALTOR and Buyer's Agent is with providing assistance in preparing and structuring the contract offer in a manner that does not create questions or concerns for the seller and their listing agent when it is presented to them.
There is more to purchasing a home than just looking at houses, whether the home is in Land Park, Natomas, Folsom, Roseville or Elk Grove.
The first step toward purchasing a home is obtaining Mortgage Pre-Approval from a reputable Mortgage Lender (Mortgage Pre-Approval Versus Mortgage Pre-Qualification), and be sure a copy is included with the contract offer. Why? The first question to be asked by the seller and listing agent at a contract presentation will be "Does the buyer have Mortgage Pre-Approval? And this is where the benefit of a Mortgage Pre-Approval letter provides advantages over a standard Pre-Qualification letter. I have excellent lenders available to assist you with pre-approvals.
Secondly, there is no cardinal rule that there must be some fixed amount that a seller will negotiate from their asking price. Home buyers need to obtain factual sales information about the market area, and section of Town, they are considering buying in before submitting an offer. While it is very likely that sale prices have declined in the past few years, they have not dropped equally in all Towns and in all neighborhood locations. In fact, due to a lack of supply in available homes, some areas have seen a price increase over the last few months in Sacramento.
Remember Economics 101 from School: "What's true of the whole may not be true of the parts." That is what I am referring to here. Real estate values are local, and various factors influence market value such as buyer demand (Which is currently high in most Sacramento areas), amount of homes for sale (which is currently low in most Sacramento areas), mortgage rates, local economic conditions and so on and so on. As important, similar design and size homes may differ in value due to condition and improvements.
In preparing a contract offer, it is important that a buyer obtain a Market Analysis for the property being considered. A report like this can be prepared by the buyer's agent and it should contain information comparing similar properties which are active on the market for sale, homes which expired and did not sell in the past six months, under contract sales and closed sales in the past six months. This information should also provide the asking price history and days on market before sold. With a report like this, a buyer can then have a better understanding of the real estate market and be better prepared when submitting a contract offer.
It is highly recommended that buyers obtain a blank contract of sale and addendums early in the home searching process. Contracts can be intimidating to many buyers. It would be much better to review the contract documents in advance of making a contract offer. Making a contract offer is an important decision. Being properly prepared is an important aspect of making a successful contract offer.
Thirdly, buyers should be completely aware of their personal finances and the total costs of purchasing a home. Buying a home involves down payment, expenses occurred during the purchase, such as loan fees, inspection fees, and closing costs. It is important for buyers to obtain the estimates related to transaction expenses and closings costs. When a buyer is not properly prepared for expenses like these, they could have an affect on exactly how much a buyer has for the down payment which then could affect how much is needed in a mortgage to complete the purchase.
Buyers should be educated and informed when making an offer to buy a home. That's where I come in and can help you with all aspects of the home purchase. Feel free to email or call me any time with your questions.
The median sales price jumped from $167,100 for April to $180,000 for May. A 7.7% increase!!!
Here is the median price since October 2008:
October $195,100
November $184,944
December $180,000
January $169,000
February $167,000
March $167,500
April $167,100
May $180,000
As I've been pointing out in my market updates, the median sales price (the price at which half of the homes sold for more and half sold for less) has been staying relatively flat since the beginning of the year. I have also been sending emails about stories of multiple offers for over list price, the housing inventory continuing to drop and homes selling in a few days. Well, like most people say, you don't know when you're at "the bottom" until it has passed. According to the May 2009 housing stats for Sacramento, the Sacramento area appears to have hit bottom. Not only did the median price stay flat, but it went up 7.7% compared to April!!! Look over the statistics below and feel free to call or email with any questions. This summer is the time to buy if you have been sitting on the fence. Especially since interest rates are nudging up from their historic lows at the beginning of the year. Also, remember that Real Estate is a regional/local "thing." You may be hearing news of markets still doing horrible, huge inventories and prices still dropping. Well, Sacramento was one of the very first markets into the housing bust and is going to be one of the first out of it. The market stabilization's are starting here in the West and will be slowly traveling East over the next months/year. Remember that when you are hearing real estate news.
Doug's Take: I don't expect the market to continue increasing at a 7.7% each month. We will probably see some volatility for a while but the stats appear to at least show a definite flat area and now even a bit of an increase. Hopefully the banks can release a few more properties so the inventory can come up a bit and the supply and demand can balance out.
article from the Sacramento Bee:
By Jim Wasserman
Published: Friday, May. 15, 2009 - 12:00 am | Page 1B
For all the pain and trouble associated with this housing bust, one thing is clear: It's getting better and better for first-time buyers.
And few places beat Sacramento, according to a new report from the California Association of Realtors.
CAR says 80 percent of Sacramento County first-timers could afford a median-priced entry-level home in the first quarter of 2009.
The same quarter in 2008 it was 65 percent - considered then to be amazing.
Only the high desert region of Southern California and the San Joaquin Valley's Merced County - which has seen a median entry-level price tumble to an astonishing $89,040 - were more affordable than Sacramento County. (Median is where half the homes cost more and half less.)
In California, 69 percent of buyers could afford a median-priced entry-level house at $213,040, CAR said.
The report, issued Thursday, pegged Sacramento County's entry-level median at $143,870, requiring a qualifying income of $25,720 based on 10 percent down and a 4.96 percent interest rate. Sacramento County tends to do well in CAR's affordability index with its relatively good public-sector salaries and its inland California home values.
Median sales prices for all existing homes sold in Sacramento County have dropped by a third in the past year to $160,000, according to researcher MDA DataQuick. They're off 57 percent from an August 2005 high of $374,000.
Roadblocks still abound for first-time buyers, including qualifying for loans. Many of these great prices, too, are attached to beat-up bank repos that account for two-thirds of sales and reflect the stresses of their previous owners.
Yet there are lots of first-timers out there, say real estate agents, and they're scoring. It's the happy corner of a market still greatly suffering from its many excesses of 2003-2007.
Doug's Take: Wow, two big things from this. 80% of first time buyers can afford a "median-priced entry-level home in Sac county. Granted these aren't mansions or palaces but even still, 80%. That is definitely why we are starting to see major signs that the market is coming to a bottom. The majority of renters can afford a house. And by "afford" i mean truly afford. They are putting a bit of money down and are actually qualifying for the loan. Not just writing a make believe income figure. Also, look at the opportunity with prices right now. We are 57% less expensive than the peak in August 2005. Talk about "SALE" Properties are on sale right now and most buyers are finally realizing that they better buy something now before the sale begins to end. Granted i don't think prices are going to just jump/spike up but the power is slowly beginning to shift to the sellers right now as buyers fight with each other on multiple offers. Real estate is cyclical but in California over a century worth of data shows that every time it goes down it always comes up higher. Great time to buy, especially before the tax credit goes away.
Hello Potential Buyers/Friends/Clients,
Just wanted to pass on some information to help each and every one of you to make informed decisions with each of your personal situations in regards to buying a home. I have attached some documents that I would like you to spend a few minutes reading. The first two are from major newspapers (Wall Street Journal and New York Times) discussing how Sacramento is one of the first markets in the country to show major signs of hitting "bottom." The third is the market statistics for Sacramento County, April 2009 (the stats were just released Monday). The last attachment is about the Federal Tax credit of up to $8,000 for First time Home buyers who CLOSE escrow before the END of NOVEMBER 2009. Make a mental note that escrows right now are taking about 45 days to close. The lenders are just slammed with work (plus being under staffed from laying many people off over the last year) and are having slow turn times. So to be safe, you would need to have an accepted offer on a property at least by the end of September/beginning of October.
Back to the articles and stats. Within the last few months the market has kind of done a 180 turn. It's a pretty unique situation. The inventory is so low right now, buyers are having to bid with other buyers to get an accepted offer. The standard for a "Normal" market is considered 6 months of inventory (meaning at the current sales pace, if no new listings were added to the market, you would run out of houses for sale in 6 months). Historically, anything higher than that is considered a "buyers market" and anything lower than that is considered a "sellers market". Right now, Sacramento County is down to 3.1 months of inventory. That is very low and is the major reason for the current situation of multiple offers, homes selling in a few days and offers being written for over list price. Current buyers are seeing that the market is finding a bottom and are now having to compete with each other so that they can purchase a home very close to the "bottom of the market."
Let's look back to see how we got where we are now. The median sales price in Sacramento County peaked at $392,750 in August 2005. Since then Sacramento county has seen the median price drop each month until this year (it's been flat since February to now). During that time, the inventory began to grow and grow. The inventory peaked at 14.2 months of inventory(!!!) in September 2007 with the amount of sales being very low. Since then the amount of sales have begun to grow while the inventory slowly began to shrink. Leading us to where we are at right now. Very low inventory with a high sales volume, group that with extremely low interest rates and tax credits and you have a formula for a good opportunity at bottoming out. Granted this isn't happening everywhere in the country, but is what is going on in Sacramento right now. For two straight months, the median sales price has been flat, right around $167,000. Another sign we are reaching bottom, a median sales price that is not dropping.
However, I do want to discuss something that is being talked about. Many Realtors and news outlets are discussing a "shadow inventory" that is out there. This is referencing many homes that are currently owned by banks but have not been put on the market yet. There are also many homes that have not been foreclosed on in the last few months due to moratoriums. These moratoriums are now ending and the foreclosures should theoretically begin to pick back up. Some people feel that these two factors will add to the inventory going back up a bit more but that still remains to be seen. I keep waiting but it hasn't happened yet. Right now a few more listings would help this market to truly flatten and become stable rather than going from one extreme of a buyer's market to another extreme of no inventory and buyers fighting for homes.
I know each and every one of you have a unique situation. Please feel free to give me a call if you would like to discuss further with what is happening in the market and get any advice I can give for your personal situation. I am always here to help and am always available for any of your referrals of friends, family and co-workers. Thanks so much for all of your support with referrals that help my business continue to grow. I hope to hear from each of you and I hope that this email was clear, informative and helpful.
Sacramento was one of the first markets into this mess and it sure looks like it's going to be one of the first out. I think with interest rates where they are right now and with the data I'm seeing, this year is going to be an incredible time to buy! BUT, it has to be a right fit for you and make sense. Prices are still going to be great for a while you just can't see "the bottom" until you are past and look back and say, "Ok, that's where the bottom was."
Last thing, I just listed a property on Thursday for $184,900. By Sunday we had two offers with purchase prices a good amount over list price. It was a great looking home, but that's what's going on right now if it's listed for a good price. That's part of the reason why I'm hoping for a bit more inventory so we can ease into the flat part of the market, rather than taking a big bounce up. I'll continue to keep my eye on the market for you. Just ask and I'll tell you exactly what's going on!
Attached articles:
http://www.sacrealtor.org/documents/about/statistics/april2009.pdf
http://www.irs.gov/newsroom/article/0,,id=204672,00.html
Clear Skies,
Doug Reynolds
The Following article is from the Wall Street Journal:
First Housing Markets to Heal? Analyst Bets on Sacramento, Washington
By Michael Corkery
With the latest S&P/Case-Shiller report showing that home prices are declining less rapidly in some markets, some economists and analysts are gaining more confidence that a bottom is forming in the U.S. housing market.
So, when will the healing begin? It depends on where you live. Washington, D.C. and Sacramento, Calif. are at the top of housing analyst John Burns's list of markets that will recover first.
Mr. Burns says the new home supply in Sacramento has shrunk more than in nearly all the markets he tracks. Decreasing supply, combined with affordable home prices and mortgage availability, mean Sacramento is poised to rebound. One big spoiler could be California's miserable employment picture.
Washington is also outpacing most other markets in nearing a bottom, as the area's job growth from the federal government is helping boost housing demand. While Mr. Burns predicts that prices of existing homes may fall in Washington an additional 5% to 10%, "sales volumes have likely stabilized already."
Other markets at the top of Mr. Burns' list include Denver and Raleigh, N.C., which were not that overheated during the boom, and San Antonio, which has a solid economic base and extremely inexpensive housing.
The areas that could take the longest to recover include Fort Myers and Port St. Lucie, Fla., which were rife with house flippers and subprime lending, and now have weak economies. New York City, which was one of the last markets to enter the downturn, will also lag many other cities in the housing recovery, Mr. Burns predicts.
Doug's Take: As most current home buyers are finding out right now, this is the case. Sacramento was one of the very first markets to drop in the country and appears to be one of the very first coming to a bottom. Right now the lower end market is selling with multiple offers, sales closing for over list price and a hint of prices finding a flat spot. Granted, it might be temporary because there is supposed to be more homes released by the banks in the next few weeks. It is just unknown whether it will be a flood or just a gradual increase in inventory. As of right now, i think a gradual increase in our inventory would be helpful. There is just not that much "good" inventory out there. And as soon as it hits the market, it's got multiple offers and is gone in a few days. The inventory for March was down to a 3.6 month supply. Somewhere around 5-6 would probably be the healthiest for our market to flatten. I'll be posting the Market stats for April once the become available within the next few days.
clear skies,
doug reynolds
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