Category Archives: The Sacramento Real Estate Market

Effective Tenants Screening

Keith has a knack for effective screening of potential tenants. He has given recommendations for reasonably priced contractors when we need them. He is good at keeping our tenant and us calm and working together when issues arise. Thank you Keith!  

–Amy & Robert (Property Management Clients)

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Effective Tenant Screening

When engaged in a job role that required repetitive actions, it’s easy to think that some things are obvious, and forget that others have no understanding or bearing, in this case, when it comes to screening tenants.  I’ve had clients initially tell me that this is what they are most afraid of.  When I ask why… here are a list of reasons given to me:

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  1. Don’t we have to accept anyone who applies, due to non-discrimination laws?
  2. How do we know if they qualify? What if they can’t pay their rent?
  3. What if they are partiers? And the neighbors complain and then everyone will be mad at us!
  4. What if no one applies?
  5. How does the process work?

Many times people inherit a property, or make their old residence a rental and then fall into property management or become landlords (this is what happened to me).  When this is the case, it becomes extra scary for the new landlord.  This makes more sense, versus a savvy landlord who already owns or intends to buy a property with renting it out solely in mind.  Either way, to a property manager and someone seasoned in rental properties, these are easy questions to address.  Hopefully I can take some of the fear out of the process for people reading this.

#1 – You DO NOT have to accept any applicant that applies.  However, you CANNOT base your reasoning on any discriminatory factors, such as, race, religious, familial status, sexuality, age, etc.  A good property manager follows set practices and procedures that eliminate much of this concern and fear.  One practice that is helpful is to have a minimum requirements to rent sheet available to all applicants.  This then helps potential applicant figure out whether they meet the criteria or not, and takes it out of the category of subjective choosing.

#2 – All property management should use a filter, as stated above… a systematic approach to qualify an applicant.  Primary requirements: Income; credit score; rental history (evictions and what past landlords report).  There are other factors I’d be happy to share with you as a client, and which I develop for each client individually based on their preferences and the situation.

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But what if they cannot pay rent?  The employment/income check gives way to the prospect’s capacity to pay rent, however, without the ability to forecast the future and fully predict human behavior, there is always this risk of not getting rent from tenants.  However, the best predictor of the future is past behavior, yet there are still unseen variables and life events that are never foreseen.

#3 – This answer is similar to the last, regarding predicting the future.  I like to try to have a conversation with the last landlord or property manager, oppose to just emailing a questionnaire.  By taking a relational approach to all of property management (tenants, landlords, vendors, etc.), you can build a bridge with a fellow property manager and, you’d be surprised how much information I can glean from a conversation by just appealing to one’s humanity.  Yet, sometimes it’s very difficult to know if a potential tenant like to play music late night, or work odd hours, or rev their motorcycle at midnight.  I say this because I had a great tenant once, whose adult son moved back in with him mid-lease.  The original, single guy was quiet, helpful, and always paid on time.  Once his son moved in, the entire neighborhood was up in arms about the smoking, rude behavior, revving of motorcycles late night, etc.  You never know what will transpire.  This is the risk an owner/landlord takes when owning income property.  This is another reason why many owners opt to have a property manager, even if they live two doors down.   Good tenant screening and selection will always make the management aspect easier.  If things go sideways, a good property manager can objectively take the next procedural steps, communicating with the owner along the way, a many times sooth a tumultuous situation better than an owner.

#4 – If no one applies, then most of the time (if the property has been marketed correctly) the rent is too high.  Most of the time it’s better to ratchet the rent down a little rather than hold out for a unicorn tenant.  The loss of the lower rent is usually less than the monthly vacancy expenses.   If these does not make sense to you , I can elaborate on this more if you want to message me directly.

#5 – How does the process of finding and renting a property out work?  I’m happy to sit down with you or have a conference call to lead you through each step.  Feel free to email or text.

Keep your tenants happy!

Keith Klassen, Real Estate Broker – 916.595.7900

Specializing in Residential Sales & Property Management

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Midtown Sacramento CA – 4 plex for Sale

I’m excited to present this classic four unit income property.  As you may know, rents have gone a little crazy in Midtown, unfortunate for renters, but income property owners are loving it.  With the advent of Golden 1 arena, gobs of new restaurants opening every month, and the coming of the railyard build-out, this building is still a winner now and in the future!Flyer

Please contact me if you have interest.

Keith Klassen, Real Estate Broker – 916.595.7900

Specializing in residential real estate sales and property management

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Real Estate Growth in Sacramento

 

I found this little article and video on McKinley Village interesting – Let’s go take a look!

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Best,

Keith Klassen, Real Estate Broker

916.595.7900

Wind-Water Knowledge in Real Estate

I’ve had several clients in the past that caused me to think more seriously about feng shui and pushed me to get a bit more educated on the topic.  This was especially the case when we would find, what I thought was the perfect home, yet the responses were, “Yeah, but it’s located on a ‘T’,” or “I really wish you could see the fireplace when you walk in,” or simply, “There’s not enough natural light.”  I understood people like natural like, but some of the other comments left me scratching my head.  I began to ask more questions and do some simple research.  Each one of these items and more stop the flow of the home for me have gotten in the way of a home sale.  Some things can be corrected with simply measures, while other items are almost impossible to over-come.   Here are some basic examples I’ve come across and a few links at the bottom of the page to guide you deeper.

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The term feng shui literally translates as “wind-water” in English.  While a fad to some or superstition to others, feng shui has been popularized among people with money and hipsters alike, others take it more seriously, as a deeply rooted practice and way of being.

Colors are important, which can also be easily changed.  The placement of color in specific areas of your home can enhance your mood and demeanor.  Others would say that colors attract or magnify the energies of your life.  For example, certain colors in the bedroom can spice up one’s love life (or maybe just picking up dirty clothes would help!  My wife gets turned on when I clean the bathroom – ha ha).  Green is known to be the color of health and family – it makes sense to add plants to the living/family room of your home.

Flow and Organization – If a home is built a certain way not conducive to good flow, this may be hard to overcome, while arranging one’s furniture in a congruent, life-given way can be an easy enhancement.  The same goes for getting rid of clutter and cleaning – this a personal decision that takes just a little effort.  Entries and exits are important in feng shui.  Attracting good energies and blocking negative forces is key.  Open up the entryway for the good to flow in.   Some guru’s attest that a toilet lid must be kept down!  This “waterway” can suck positivity out of a home.  Fireplaces that can be seen from the entry encourage prosperity to leave one’s home, or be sucked out of one’s life (so I’m told).

The direction the house faces or is oriented is key … I’ve heard East is good.  But another friend said that the entrance to the North is better, due the sun exposure.

Numbers seem to be important.  Eights are good.  I know some agents price their listings with $_____, 888 at the end.  I’ve had buyers tell me to write the offer with 8’s (for good luck).  Someone told me that if the last two digits of the address adds up to eight, that’s good too.

Corners – I’ve heard that sharp corners are not good, say when it comes to small eating tables.  Some don’t like corner houses.  Homes located on a “T” are definitely bad feng shui.  Practically speaking, cars can run into a home easier in this case (nothing that some scrubs/trees or a few blockades won’t fix).  We had a neighbor whose parents warned them about bad spirits entering into their home since they lived on a “T.”  The fix was simply to hang a small crystal (like you’d see on an old chandelier) from a string at the entrance, as well as a small mirror and this did the trick.  When I asked why these objects, they said that this confused and repelled the bad spirits.

Death – Dead plants, trash around the house, a cluttered table, and dead people… many buyer’s have a hard time seeing through a mess, and many more clients buying a home want nothing to do with a property where a death has taken place – Some just want to know that it was peaceful, or not violent.  Whereas, I had an investor client who was not happy (or just not alarmed) to find out that a gang shooting had taken place at the house they were purchasing!  Really?  This became a negotiating tool for a deep discount.  A friend of mine had a dying tree in front of this home.  His father sternly told him, “Get rid of it… it’s blocking your wealth!”  He swears that they very next day his stock portfolio began to soar!

Whether your desire is to gain deeper soul-strength or just have a better flow in your home, I hope you found some inspiration, creativity and practical help in this post.  I’d love to hear some of your stories on how feng shui has affected your life.

Here’s some links to explore future.

http://fengshui.about.com/od/glossaryofterms/ss/Feng-Shui-Basics-Create-Good-Feng-Shui-Home.htm

http://inhabitat.com/9-simple-tips-to-feng-shui-your-home/

http://inhabitat.com/feng-shui-101-getting-started-with-the-basics-of-feng-shui/

 

Cheers,

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Keith Klassen, Broker

Klassen & Associates

916.595.7900

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.

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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?

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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

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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.

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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