Diane and Bill are going out to their favorite Sacramento restaurant to celebrate. Months ago they made the exciting and scary decision to purchase their first home. They researched the process for purchasing in the Sacramento real estate market and discovered that first, they had to get prequalified to be certain they could qualify for that perfect home and could give a letter reflecting this to the seller when they made their offer. Then, after talking to friends and family, they interviewed several Realtors, settling on one that they felt they could trust and, at the same time, one that they thought would make the process a smooth and enjoyable one. They were ready.
Then, someone flipped a switch and the Sacramento real estate market changed. No longer was there a plethora of homes to view. Homes in their price range started selling before they even had a chance to view them. In a strange turn of events, it was no longer a buyers market, even though homes were still very affordable. Simply put, there were too many buyers and not enough homes to buy.
This is not a unique story in the Sacramento real estate market, or the California one for that matter. In an industry where a normal inventory is 5-6 months (the amount of time it would take to sell all of the homes on the market at any given moment in time), Sacramento’s inventory is below 1 month. Prices are still competitive, but certainly not dropping any lower. As a local lender put it, interest rates are truly at an all time low.
The result of all of these factors is that most properties priced well are receiving multiple offers and selling over the asking price. 3-6 offers for a property is not unusual. That translates to many buyers having their offers not being accepted multiple times…a frustrating experience for the buyers and their agents alike.
Enter the appraiser and a whole new set of issues arise. The properties list price was determined by the comparable properties that have recently sold. Unfortunately, with the shortage of inventory and resulting shortage of sales, there aren’t many com-parables for appraisers to use. Their only option is to go back further in time, which was in a different market where there was inventory and sales were slow and as a result, sales prices were lower.
Who are the buyers who are winning out in this market? Cash remains king. If buyers can make an all cash offer, their odds of having their offer accepted increases dramatically. If they cannot offer all cash, then certainly make the largest down payment possible. Offers should be written as cleanly as possible – don’t ask for the refrigerator, a pest clearance or participation by the seller in closing costs. If a buyer is purchasing through an FHA loan, they should probably be looking at homes that have been on the market a while where the sellers will be more motivated to go through the FHA process.
The market has turned a corner. Those who were waiting for the perfect time to buy are too late…that was last year. Oh, and Diane and Bill had their 7th offer accepted and they are on their way to their first home!
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