Love Letter to Seller – Does it Make a Difference?

Does it make a difference for a buyer to write and include a personal letter with an offer?  I jokingly call them love letters, because they can ooze with emotion and sometimes be kinda cheesy.

letter

Over the years, working with home buyers, I’ve been an advocate for the buyer writing a personal letter to the owner.  One might wonder if this even makes a difference?  I got my real estate license in 2005 and wrote my first offer on the house I’m living in today.  During those days, buying a home was extremely competitive and the prices were going through the roof.  A buyer had to do whatever they could to get an offer accepted.  So, I too wrote a “letter from the heart” on my first deal as a licensed agent.  It was flowery, heart-warming, and true – we loved the house (and still do!).  The seller subsequently told us that this separated our offer from the others, especially the part where you said, “[your child] immediately ran into the back yard and jumped on the play structure.”  Hmmm, I instantly learned, there’s something to this letter writing thing.

Subsequently, I’ve had many of the same experiences with other clients.  Just recently I listed a home where we received 3 offers.  One of them included a personal letter.  To my surprise the seller said, “I know that this one is lower in price, and you might think we are crazy, but we just love this buyer’s story and want to go with that offer!”

Try this with an investment property and the owner may laugh out loud.  I’ve actually had investor sellers tell me to not show them the personal letters because they didn’t want to be influences by their emotions.  This statement nails it on the head… We are humans with emotions.  Even though every seller wants the most money out of their sale, there is always the human element and emotions involved.

“What should I say in the letter?” is the next questions I get.  While I enjoy writing, not everyone is as confident with their prose.  Here are some suggestions.

  • Make it short and to the point – most people don’t want to read several pages on your life and journey of buying a home. Several paragraphs get the job done.
  • With that said, introduce yourself. Briefly say who you are and maybe something interesting that relates to the home.  Example:  We love the river and are so glad it’s in walking distance! OR,  This home is close enough for me to bike to work – this is so relieving since I’ve been commuting by car for 8 years, an hour each way! OR, I’ve always loved trains and always wanted to live next to the railroad tracks [I kid you not, I actually heard someone say this!]
  • You may even want to start by complimenting the owner in some way, without being heavy handed. Example:  When we walked into the house, we immediately knew this was the one for us!  Purple is our favorite color and we absolutely love the stenciled lettering above the bed, that reads, “YOU ARE AWESOME!”  The deal was done when we saw the bidet in the bathroom – ahhh to be back in Paris again!  Okay, I’m trying to be funny here and this is an example of heavy-handedness, but you get the point.   When done appropriately, a little flattery goes a long way.  How about this:  We love your sense of style and can tell you really cared for this house.
  • Briefly talk about how this house fits you. Do you have a family that you will raise here and enjoy it for years to come?  Is your elderly mom going to live with you and the downstairs bedroom is perfect?  Are you single, and this downtown loft is a “babe magnet?”  [okay don’t say that].
  • End with a “thank you for considering our offer.  And, we look forward to a smooth transaction.

What else would you include or omit?  Do you have success stories of your own, or maybe a reason why not to include a personal letter?  Your stories and feedback are always welcome.

Cheers!

Keith Klassen, Real Estate Broker – 916.595.7900

 

Income Properties in : Is it better to sell vacant or with tenant in property?

foreclosure-48120__180

A good portion of my business has trended toward investors and investment properties, I get this question/scenario posed to me often.  If the question is not asked directly, I’m usually bringing up the issues revolving around selling with a tenant in the property.  There are a lot reasons why the answer could go either way on this topic, but let’s explore some of the main concepts that will help you make a good decision based on your situation.  (Qualification:  This discussion mainly has to do with single family income properties, rather than multi-family units).

Many agents just don’t want to deal with the hassle of selling with a tenant. There are scheduling conflicts, posting of notices, and high emotions when treading on someone’s living situation – all potentially emotionally charged and exasperating situations.  While these can be good reasons to sell vacant, they may not be the best.  A good agent knows how to handle and deal with tenants in a caring and professional manner.  It does, however, make the process a bit more grueling and cumbersome.

I find the main issue boils down to is loss of income. Most owners balk at asking tenants to leave, because they don’t want to lose the monthly rents.  In most cases I’ve found that the loss in rent is less than the higher amount a home will fetch when vacant.  Why?

  1. Home buyer’s (people who want and need to live in the home) will pay more than an investor (someone buying a property to rent for income purposes). The reasons for buying are different.  An investor will want a deal to make money.  A home buyer wants a place to live and call home.
  2. Many investors have cash for purchase or a loan that requires 25+% down payment. Home-owner loans (like FHA) require only 3.5% down payment.  VA loans are virtually 100% financed!  Less money out-of-pocket, less skin in the game for an owner occupied loan, which means the purchase price can go higher.  Or another way to say it, money is cheaper for a home-buyer with an owner occupied loan.
  3. A typical home buyer’s loan (Conventional or FHA) requires the buyer to live in the home. If the tenant is on a lease, then tenant’s rights say that the lease must be honored and a home buyer cannot buy the property.

Call or write to discuss your situation in more depth.

Best,

Ketih Klassen, Real Estate Broker – 916.595.7900

Signature2

Solar Panels in Sacramento

I just read an interesting article that motivated me to convey some thoughts and experiences on solar panels.

It’s exciting to see the progress solar power and panels have made in the last decade – more affordable and more efficient.  I visited a remote village in Northern, rural India where no power line reached… but to my surprise, they had a communal solar panel in the middle of the village to, yes … charge their cell phones.  Solar farms are popping up in open spaces – I saw a huge one recently on a drive to Las Vegas.  When I visit my home town of San Francisco and look out over a view, it seems more homes had solar panels than ones that do not.  I’ve sold new homes that now have solar panels as part of the purchase package – what home owner doesn’t love almost free energy!  And I’ve now interviewed three companies to hear their pitch for solar panels on my own home.

solar-panels-1477987_960_720

 

While I’m all for solar power, saving the planet, and money if possible, my experience was a little discouraging.  I hope that you might get a few tid-bits from my own journey.

It seems that purchasing panels is still not very popular, as the out-of-pocket expense out weigh the benefits/savings.  Some might argue, like buying a hybrid car, “You don’t buy it for the saving, rather for the planet.” There are also many incentives in California that go along with the purchase of solar panels.  The federal government gives tax credits (write-offs) for owners of solar panels.  And, there are a bunch of local incentives to look into if you are going to purchase panels.  Like a car, there are avenues and incentives to finance the purchase of solar panels too.  This attracted me, because it seemed that one could save money on power, then eventually own the panels.  However, I was also informed that the life of the panel’s efficiency is only about 20-25 years, which just so happens to be the life of the loan.  Take the time, look into the kick backs for your area, do the math and then make a decision.  Purchasing may be the right path for you?

Leasing the panels is another option where you pay a set amount (lower than your average monthly utility bill), but I found that a “power purchase agreement [PPA]” seems to be most popular route offered.  Leasing and the PPA are similar in that there’s little to no money out-of-pocket.  With the PPA, it’s as if you are agreeing to a fixed utility rate (lower than your average monthly utility bill) and allowing the company to use your roof to harvest solar power.  The company I spent the most time with asks for a 20 year agreement.

At the end of the day, while I love our planet and believe solar power and panels are a great move, I decided against it for now.  Here are the issues I came against:

  1. The numbers did not work for me on the purchase route, nor any other route.  Many told me ahead of time, “If you have SMUD (Sacramento Municipal Utility District) then it doesn’t make sense,” due to how inexpensive our power is.  With the PPA I would have save about 2 cents a month.  This does not give me any incentive to save energy either.  The PPA company gets all of the incentives in this scenario.
  2. My roof may need replacing in the next 5 or so years.  I would be charged about $500 extra to have the panels removed while the roof was replaced.  They would not budge on this or work it into the deal.  I did not want to bear this extra cost.
  3. Lastly, I hated the sales tactics.  The big push seems to be part reality and part fear base… “Energy cost will be going through the roof in the near future!!!!!  Sir, do you want to pay triple what you are paying now?”  Are rates going up?  Who’s to say?  Do you trust the guy selling panels?  Maybe, but I definitely do not like the fear-base sales technique.  Also, the sales person was extremely friendly and helpful, even when I said I was not sure… he kept saying, “Just keep moving forward, you can say ‘no’ at any time.”  When I finally said, “Not at this time,” he got really pushy and aggressive, trying to make me feel like the bad guy for backing out.  That actually helped me “break up.”  There are plenty of solar companies out there that offer great service and similar product.  Don’t feel bound to one.

Again, I have friends and associates that it’s worked great for, and I love the idea.  For me, it’s not the right time.  What experience have you had?  What am I missing here?  Surely my experience is not all-inclusive.

 solar in India Picture from my trip to India in 2015, with small solar panel on roof.

Enjoy,

Keith Klassen – Real Estate Broker

916.669.9030

Happy 4th of July!

fireworks-180553_960_720

It’s been a tradition on our street for at least the last 10 years to have a block party.  Kids decorate their bikes, food is brought out and shared, adults have a pie eating contest (and one time played “chubby bunny”).  There is always a great interaction with family, neighbors, and new friends.  Come on by with something to share and you will be welcomed!

I heard a radio broadcast simply reminding people how to stay safe with firework:

  • Eye injuries are taken for granted, but most common – wear glasses and/or protective eye gear
  • Wear long sleeves and glove to prevent burns (shoes and pants may be a good idea too)
  • Have a hose or bucket of water nearby
  • Keep an eye out for kids running around, especially with the fireworks going off (maybe even have some ear plugs, as I know one neighbor’s kids is super sensitive to load noises)
  • Keep an eye on pets too – some going nuts (in a bad way) once the fireworks start going off

Also, if you live on a street nearby me that also hosts a block party, this is your warning.  There may be a plan to have out bike parade go down your street, and some adults have talked about water balloons… that’s all I’m going to say.

Stay safe and sane:)

Enjoy,

Keith Klassen – Real Estate Broker

916.595.7900

 

Net Sheets: What Are The Cost of Selling a Property in Sacramento?

Whether you are selling retail, wholesale, or analyzing a flip project, the costs can sometimes be tricky to figure out.  It’s not just estimating the sales price and backing the loan amount out of the proceeds.  There are many fees involved that can sting a seller if unaware.  This is where experience and some simple tools come in handy.

the-net-1573366

For retail sales, your favorite title company can drum up an estimated cost sheet with your potential sales price.  Or, you can usually get the title company to give you a net sheet spreadsheet or a link to their website, which many of them have a seller’s and buyer’s net sheet program.  If you are an agent, doing it yourself can save time and help establish your expertise.  Remember to remind the seller that this is an estimate, however, the better you get at filling in the net sheet (and comping properties) the closer you will be to the exact net number.  I like to give a worst case scenario, then the client is happy when I negotiate a better deal.  The following are included in a typical net sheet:

  • CA Withholdings: If this is an investment property and you are not selling in a corporation and you are receiving a gain, the state of California withholds 3 1/3% of the sales price .  Ugh – no one likes to pay this and it’s a surprise to your clients at closing if they are unaware.
  • Purchase Price:  Again, if you don’t have an accepted offer/contract on the property, then this is an estimate based on your ability to know the market.  This is selling 101 for any agent – become good at valuing properties.
  •   Title Insurance / Escrow Fee / City and County Transfer Tax – All of these are part of the real estate purchase contract and can be negotiated as to who pays.  Currently in Sacramento, CA the custom is for the seller to pay for title fees, city and county transfer taxes.  The escrow fee is usually split 50/50 between the buyer and seller.  Title and Escrow fees are set and published yearly by the companies and tend to be competitively price so that there is not a huge price variation between one company to the next
    • City transfer taxes are calculated by multiplying the [potential] sales price by $2.75 and dividing by 1000.  I see this one split more often as the sale price rises.
    • County transfer taxes are calculated by multiplying the [potential] sales price by $1.10 and dividing by 1000.
  • Real Estate Commissions – usually split between listing and buyer’s agent, unless one agent handles both sides of the deal.  In Sacramento, commissions typically ranges between 5-6% depending on the experience, services provided, and what is negotiated
  • Loan amount, plus fees associated with payoff.
  • Natural Hazard Disclosure Report – 99% of the time, the seller pay for this.  The main company in town charges $99, but there are a few that charge less.
  • Pest Report – typically the buyer pays for this and their home inspection, unless the buyer has a VA loan, then the seller is required to purchase the pest report.  Also, this specialized company is mainly looking for termites, wood-boring beetles, and fungus that causes dry rot, not mice, rat, bats, and other pest.  Depending on the size of the house, you can get a report and inspection for $100-150.
  • Home Warranty – many buyers ask for the seller to provide a year home warranty.  Depending on the size of the house and item covered, typically they range between $350-500.
  • Other Costs and Credits:  Depending on what is negotiated, there can be other costs associated with closing the deal
    • Credit to buyer for closing costs – lenders typically allow up to 3% of the purchase priced to be credited to a buyer
    • After inspection and due diligence has been completed by the buyer, many times a request for repairs or credit is issued to the seller.  Is it nearly impossible to estimate or predict.
    • I some times charge a transaction coordination fee to pay for the file auditing ($350-400)
    • “Junk Fees” – There are about 4-8 escrow/title fees that fall under this category.  Doc. prep, courier, notary, drawing fee, etc. – think $250-500.  The net sheet I use through a title co. auto-fills these categories.

Here’s a sample net sheet:

SELLER’S NET SHEET

 

Seller: xxx Date: 6/28/2016
Address: SACRAMENTO, CA 95818 Est. Close Date: 6/28/2016
Prepared by: Keith Klassen, Klassen & Associates, 916.595.7900 Annual Taxes: $0.00

 

Estimated Sales Price: $645000.00 1st Loan Balance: $385000.00 Interest: $
Approx. Gross Equity: $260000.00 2nd Loan Balance: $0 Interest: $

 

CLOSING COSTS
CA Withholding (3 1/3% of sales price): $
County Transfer Tax: Paid by: Seller $709.50
City Transfer Tax: Paid by: Seller $1773.75
Title Insurance Premium (Owner’s Policy): Paid by: Seller $1815.00
Escrow Fees: Paid by: Both $712.50
Notary Fees: $150.00
EWC Drawing Fee: $0.00
Courier Fee (includes Federal Express): $40.00
Total Commission: 6.00% + $0 $38700.00
Transaction Coordination Fee: $350.00
First Loan Balance: $385000.00
        Interest on 1st Loan: $
        Prepayment Penalty: $
        Statement Fee: $30.00
        Reconveyance Fee: $45.00
Second Loan Balance: $0
        Interest on 2nd Loan: $
        Prepayment Penalty: $
        Statement Fee: $
        Reconveyance Fee: $
Recording Fees: $50.00
Natural Hazard Disclosure Report: $99.00
Pest Control Report: $125.00
Work Required for Pest Clearance: $
Home Warranty: $400.00
Tax Proration (if not paid to date of recording): $
Security Deposit(s): $
Total Estimated Costs to Seller: $429999.75

 

CREDITS TO SELLER
Tax Proration: $
Total Estimated Credits to Seller: $0

 

CASH TO SELLER
Estimated Sales Price: $645000.00
Plus Estimated Credits: $0
Less Estimated Costs: $429999.75
Estimated Sale Proceeds to Seller: $215000.25

Contact me if you’d like a complimentary value assessment done on your property, or to discuss the costs of selling in detail.

Enjoy,

Keith Klassen – Real Estate Broker

916.595.7900

 

 

 

 

 

 

 

 

Summer Movies & Music in Curtis Park, Sacramento

Every summer Curtis Park (at the actual park) holds several movie nights!  It’s always great fun for the whole family.  Check out the schedule HERE.

Also, on super hot days, we sometimes flee to the coast for a weekend, OR an air-conditioned movie theater is not a bad option.  At the bottom of the above list/link, Regal offers younger kid movies for a dollar.

Everyone loves the concerts in the park!  Curtis Park hosts a few each year – check out flyer below.  And East Sac. is known for its summer concert series, Pops in the Park.

2016 MIP jpeg

Have a fantastic summer!

Cheers,

Signature2

Keith Klassen/Real Estate Broker/916.595.7900

New Development in Curtis Park, Sacramento

Yeah, I know what you were hoping for… an article about Curtis Park rail yard development.  Sorry not on this one – no chit chat about gas station wars and dollar stores.  Instead I’m inviting you to follow my own development experience as I build out two houses.  I hope to post some thoughts on the grueling process of splitting the lot / sub-dividing the parcel map.  Could be educational to some – loads of learning from my mistakes and experience.  I’ll be talking about the ins and outs of the scope of work, contracting, and architectural plans.  I’d love some feedback on the design elements when we get to the interior (yeah, everyone loves the interior – this is the sexy part).  Ultimately, these babies will be sold and I will be high-fiving my contractor and business partner.  Welcome to my housing development journey.house rendering

Brief background

If you live in the area, you can check out the progress on 5th Ave., highway 99 frontage road, and Portola Alley.  I bought the house on 5th Ave. in 2008 and got the approval to subdivide the parcel later that year into 3 lots (original house sits on one, leaving 2 to build on).  Oh yes, it came with conditions.  I figured a budget of $25,000 to do curb and gutter work and maybe a few other things.  The City gave me a laundry list of improvements that got bid out between $100,000-125,000 – Yikes!  That killed the deal quickly.  So for the next six years I paid a portion of the property taxes and kept the weeds down.

5th ave overview pic

Fast forward to 2014… I saw a house sell for a decent price on the alley and knew it was time to build.  I got a contractor on board to share the project and do the work at cost (cutting the improvement work cost more than half).

Contact me if you want to discuss the boring, but essential ins and outs of engineering, special use permits, bonding, traffic plans, dealing with the City/fighting with the City (everyone has their war stories), utilities, etc.

We’ve begun improvement work – manholes, water main, sewer main, fire hydrant, and much more!  At the same time I’ve got an architect putting plans together and submitting to the Design Review Board.  In addition, I just got bids from five structural engineers and Title 24 bids.  Yay, getting serious.

lot clearing

Scrubbing the lot earlier 2016

 

“Man holes” – or should I be PC and call them “people holes” – might get a few weird looks?

 

Dropping the “hole” in the ground

Jimmy is the MAN!

Never thought I’d be so exited about a fire hydrant.

Water main beginnings.

Stay tuned for the next phase.

Cheers,

Signature2
Keith Klassen, Real Estate Broker / 916.595.7900