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Can I Make a Low-Ball Offer? Buying by the Numbers in Sacramento, CA

I get this question from buyers of all kinds, whether first-timers or investor clients. When I bought my first home about 12 years ago, I recall asking my agent this same question, How do you feel about making low-ball offers? Granted, I didn’t have the best understanding of the market at that time and the market was different. However, some of the same principles hold true.

1) There are logical boundaries:  Most sellers do not price their home too far above or below the market trend.  Most sellers want to sell their home and know that over-pricing it will hamper their possibilities.  Most agents (well, I can only speak for myself, but I’d hope this to be true) will not take a listing that will not sell – it doesn’t make sense.  Why spend money on a listing when you know that the price is not even close to the market values.  I understand that agents are willing to talk a listing a little higher, knowing that the seller will see the light of day and lower the price, but on the whole, an agents job is to help a seller price and position their client’s property best to sell at the highest price and in the shortest time.

2) Statistics show that bank-owned (REO) properties are usually prices at or lower than the market value.  Banks want to sell fast, they are in “as-is” condition, and many times in need of work.  The lower price compensates for the risk and condition.

3) Short sales, many times are also priced a little lower than the market value.  However, they will sell close to market value or little under, as the seller’s lender will only approve a short sale based on sound statistics (an appraisal, a Broker Price Opinion [BPO], and their own internal algorithms, and of course a Crazy 8 Ball [sometimes it feels this way]).

4) There are situations to make low offers, which are not a waste of time.

a) When the property has been on the market a long time without a price reduction.

b) When there is something severely defective about the property

c) When your terms are cash and can close fast

I am working with a first-time home buyer client that is shopping in the $150K range.  She sent me a property listed at $189K and said she “knows it’s not worth that much!”  Granted, it’s been on the market for 76 days, but they just reduced the price $10,000.  I said, “I am happy to make a lower offer, but your budget is around $150,000… $40K under asking would be a far stretch.”  The buyer’s response… “I know, but can’t we just try it?  I mean, all they can say is ‘no,’ right?”  While this is true, it is a waste of everyone’s time.  Let me demonstrate by the analysis I did for the client.

I did two searches for homes sold in a 4 miles radius of the area the client is looking (which covers a broad area).  I searched homes sold in the past 3 months in the $150-200K range and the $125-150K range.  My goal was to see how many homes sold for under the asking price and by how much.  Here’s what I came up with:

There were 57 homes sold between $150-200K in the last 3 months in the chosen area:

– 39 of them were sold at the asking price or higher.  The highest over was $20,000

– 18 were sold lower than asking price.  The biggest discount was $29,000 (from $225K to $196K) and the next was $20,000 (from $185K to $160K), but neither of these qualified for FHA lending, (which is what my client’s finance situation) – in other words, theses tow homes were fixers.  The next biggest discount on the list was $15,000 (from $180K to $165K) and it sold using FHA financing.
There were 62 homes sold between $125-150K in the last 3 months in the chosen area:

– 45 of them were sold at the asking price or higher.  The highest over was $31,000 – I know this first hand because it was one of my clients that bought this home.

– 17 were sold lower then full price. The biggest discount was $21,000 ($160K to 139K) and this one sold with FHA financing.

Most all of the homes either sell within $2,000 to 7,000 over or under asking…. but you can see that the majority are sold at full price or over asking.  As you can see the largest discount in price was about 13%.

Even though I articulated this prior to the research and knew this internally, some times it’s good to show people the picture on paper – The numbers don’t lie.  No matter how bad you want “that home,” or why you think it should be priced less, or just would like to make a low-ball offer (because you can) – take a look at the numbers in the area that you want to buy and get a reality check.

I sincerely hope this is helpful.  It was for my client.


Keith Klassen – Real Estate Broker


Consumnes River Preserve, Sacramento Area

The Consumnes River Preserve is actually in north Galt… it only took us about 15-20 minutes to drive there from the downtown Sacramento area.  We were looking for something to do outdoors with the kids on this Saturday.  I Googled “‘nature walks” and this caught my attention.  We packed a picnic and ate at the visitor center before we set out on the walk.  The visitor center had helpful “rangers” (not sure what their official title is, but they were cool and jumped right in and showed the boys around and told about the different things to do).   I love the note above the picture – Please Touch! This is the kind of exhibit I like.

All in all, a peaceful day and a nice, close get-away with the family.  Oh and did I mention, it’s free!

Here are some other snap shots (below) I took while on the River Walk.


Keith Klassen

History of Glorious Curtis Park Neighborhood in Sacramento

Can you tell I’m partial by the title?  Yes, I love the neighborhood in which I live.  Also it’s interesting to have the author, Dan Murphy, of “Sacramento’s Curtis Park,” a national neighborhood brief history series.  As a matter of fact, Dan brought us a copy of a new clipping that featured our home when it was for sale in the early part of the 1900’s – fasinating stuff, and our home was for sale for a mere $10,000.

Dan’s website is chalked full of great information about Curtis Park, Sacramento.


Keith Klassen

Real Estate Broker

Visual Aids for the Sacramento Market

A picture is worth a thousand words, so they say.  This graph depicts the general Sacramento areas homes on the market, bought and sold.

The one below portrays the area I live, Curtis Park Sacramento (95818)

If you want to discuss specifics leave a comment.


Keith Klassen

Real Estate Broker

Real Estate on Super Bowl Sunday?

Why do I always find myself trying to get into contract or make a significant move on  a holiday weekend, or big cultural “holiday?”  What I’ve found, these are prime opportunities for deals to be made.  While other agents are getting their buffalo wings and chilli cheese dogs ready, I’m showing houses and preparing offers.  I know, it sounds a little snotty and arrogant.  The reality is, I enjoy working hard and getting the job done.  My hope is to have it all.  I was back in time to be with my family, have a meal with our neighbors, eat some tri-tip, catch some of the game, and write the offer.  Feels good.  I am thankful, especially during these economically challenging times.


Keith Klassen

Real Estate Broker

Horrific experience with Glen Oaks Escrow

It’s one thing to do a low-end, bank-owned transaction and get paid 2.25% … It’s another thing for the bank to require us to use their escrow company in the Los Angeles area (I am in Sacramento) and have paltry service and poor communication.  By the way, it is now illegal for a bank (owned property) to require a certain title and escrow company, yet they will continue to make it part of the game.

Here’s my real beef… About a week passes and I have not received my commission check (payment for completing the job) from the Title Company, Glen Oaks Escrow.  I called to follow up and they said they would look into it.  I had to call back the next day to check and they said, “Oh yeah, I guess the check got lost in the mail.”  We will reissue it.  I get my check a few days later and deposit it.  To my horror (okay I am now being dramatic), I discovered through viewing my online account that they put a stop payment on my check, and of course my bank slaps me with a fee to boot.

After several phone calls to the bank and to Alenoush (the escrow officer who handled the file) at Glen Oaks Escrow Company, I began to get a little frustrated, since I was the guy who was not getting paid.  I am not worried about getting my pay check eventually, it’s now all about principle.  I called Alenoush with Glen Oaks Escrow and she said she’s looking into it and for me to send proof – no apology or assumption that they did anything wrong (okay, no big deal).  I forwarded my proof and ask for verification that she received it…. I got none.  I called the next day and asked for a status update… I got none.  I called the next day and requested a call back in the next hour… I got none.  Oh, and by the way, I do have to continue my regular fast-paced, heavy work load during this fiasco.  Finally I went over Alenoush’s head and spoke with the supervisor…. a little bit better experience – thank you Carla.  However, I still have not gotten paid!  Carla said, “Well, did your bank tell you why it bounced… we have a trust account and never bounce checks.”  Yeah I get that… but I still have not gotten paid!

I call my bank and they explain that the issuer of the check put a stop payment on it and they have no reason given, but it’s usually because the payment is somehow disputed between the issuer and the recipient (that’d be me).  I convey this to Glen Oaks Escrow Co. and they said, “Oh yeah, there was a stop payment placed on that check… but we don’t know why?”  Then Carla said the magic words…. [wait for it…] “I’M SORRY”  My response… You are the first person who has called me back and apologized – Thank you for helping me get paid.

Sometimes that’s all it takes to soothe that “angry lion.”  Taking blame is not that big of a deal, but it sure goes a long way to iron out the wrinkles.  I know this is true from experience with my wife.  I know this is true from experience with my kids.  I know this is true from experience with friends and clients.  I know this is true from my experience working as a server at a restaurant, in a non-profit, at a church, and other service industries.

Mistakes are a fact of life that can be overlooked and forgiven – I am responsible for plenty of blunders.  Not admitting wrong doing and covering up errors to save face is tempting and can be our cultural, human response, but maybe this needs to be reconsidered. 

I end this rant with the hope of getting paid and not having to work with Glen Oaks Escrow again.

Thanks for bearing with me.

Township 9 is moving forward in Sacramento

Check it out, video and all

Market Update in Sacramento Real Estate


Here are the most current & accurate real estate statistics — specifically for our area. We saw a 17% increase in residential home sales in April, 2009 compared to April last year. 65% of all sales in April were “Bank-Owned Foreclosures”. This is a significant and quick decrease in the percent of sales that are “Bank-Owned”. Typically, at least 75% of the sales each month have been “Bank-Owned” for the past year. Another significant and quick change is the amount of listing inventory. Comparing April, 2009 to April, 2008 — there is a 37.6% decrease in number of houses for sale on the market. This has changed our supply and demand situation drastically. However, we expect this situation to change back to more of a buyer’s market again soon. Here’s why; there has been a moratorium on bank-owned property. We have been told that the banks will lift their moratoriums and start releasing foreclosed properties over the next four months, which will increase listing inventory again. Does that mean you should wait for more inventory if you are a buyer? No, and here’s why. Last week we saw a 1/2% interest rate increase on home loans. That is equal to $75 per month increase in a mortgage payment on a $200,000 loan. There is currently more than enough inventory to find a great house before rates go up again. Buyers – don’t forget about the $8,000 Tax Credit. You must close escrow by November 30th to qualify.


Spring is traditionally the home-buying season. True to course, existing home sales rose in April with strong buyer activity. From March to April, sales jumped up 2.9%. Who are the buyers? According to a National Association of Realtors’ survey, 60% are repeat buyers, entering the market to take advantage of the low interest rates, good inventory and more affordable prices. 40% are first-time buyers. First-time buyers as well as buyers who have rented for 3+ years also have the added incentive of an $8,000 tax credit offered by the federal government. Where are the sales? Regionally, home sales last month rose 3.5% in the West, 11.6% in the Northeast, 1.8% in the South, and slipped 2.0% in the Midwest. According to Lawrence Yun, Chief Economist for the NAR, buyers today are attracted to lower priced homes found in California, Nevada, and Florida. Yun forecasts that home sales in the second half of 2009 will be 10 – 20% higher than in 2008. Now may be your time to consider moving. Even if the selling price of your home is lower than expected, that price must be weighed against the opportunity to get an excellent price on your new home, plus the possibility of securing a better tax base. Let me know if you want to meet and talk. I am here to serve your real estate needs.

Hard Money Loans / Private Loans in Sacramento

Working with so many investors, I know that they are always looking for private money, especially those who are still flipping (uh, I mean “redeveloping,” now the politically correct term).

Here’s a typical scenario (as of today’s date) for hard money.  I would also add, this is for people just getting into the market.  As an investor gets more experience and develops a track record, then the money gets cheaper.

Typical Loan Program
60-65% LTV for cash-out refi’s
60-65% of ARV less repairs for purchases
12% note rate typical – may be 13% in certain circumstances
6 points origination fee
Interest-only payments monthly (we can do interest reserves)
12-24 month term
Title & escrow fees as charged by third party
4-6 months minimum interest guaranty (in lieu of a prepay)

Call or write if you don’t understand the above parameters.