I was all primed to write about investors who are buying short sales this morning when I received an email from a buyer's agent who is representing herself. She's trying to buy a short sale in Elk Grove. I have to share this. The agent said she was withdrawing an offer she made yesterday that was too low. I had asked her to bump it up to meet the comps. She said, "According to Zillow.com, it is worth $XXX." As a licensed real estate agent, she has world class tools at her disposal to help her to determine market value but this agent relies on a worthless website such as Zillow? See, this is part of what's wrong with the Sacramento real estate market.
The other part is our local real estate market is exploding at the moment. We've got investors and buyers fighting over the same Sacramento-area properties. The reason is simple. Investors can get positive cash flow because of today's prices and historically low interest rates. This means an investor can collect more in rent than she pays for a mortgage payment. Many renters should be home buyers because it's costing them more to rent than to own.
Much of the inventory available for sale is a short sale. As a Sacramento short sale agent, I carry a large inventory of short sale listings. My goal is to put that short sale into escrow and close it. To accomplish that goal, I help my sellers to choose the best short sale offer. Is that an offer from an investor or a home buyer, in other words, an owner occupant? Which is the best buyer?
Most of the time, sellers prefer to choose the offer from the owner occupant. Why would they do that when the investor can wait forever and the first-time home buyer typically cannot? Because there are problems with offers from investors. For starters, if the short sale home is occupied by the seller and a Notice of Default has been filed, investor buyers must comply with the Home Equity Sales Act. Many of them don't and have never heard of this law. But if they don't comply, the seller can rescind the transaction 2 years later -- after the seller restores credit from the short sale.
Another problem is some investors want to hold title as an LLC, and short sale banks don't like to accept offers from an LLC. Additionally, some investors want to flip the property. Many short sale approval letters restrict flipping for 90 to 120 days. If that's the goal, the buyer will cancel upon short sale approval. And not to mention, sometimes the buyer's agent is acting as principal and, when that happens, the banks don't always allow the agent to receive a commission. These types of offers magically vanish when agents discover they are stiffed.
But aside from all of that, who is more motivated to wait for short sale approval? Who is more motivated to increase the sales price if the short sale bank demands it? Who is emotionally connected to the home, enough to jump through qualifying hoops the bank throws into the air? Which type of buyer does a seller feel attracted to? Mr. Money Banks who wants to rent out his home and retire with a big, fat, 401K? Or, Miss FHA first-time home buyer?
I'm not even going to talk about the investor who is trying to cancel one of my short sales because another came back on the market that caught his eye . . .
Certified HAFA Specialist
Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
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Lyon Real Estate is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate. Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice. It could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.