Sacramento Real Estate Reflections

A collegue of mine (John Maulding) recently wrote on a subject that I wanted to relay. He said it just a well as I could have and more sustinct!

[Quoting]

On July 26, 2006 the U.S. House of Representatives passed a bill titled The Expanding American Homeownership Act. This is very good news for first time homebuyers. What it does is modernize and update the Federal Housing Administration’s (FHA) pricing structures and program requirements.

FHA has been a favorite loan program for first time homebuyers for many years, but in the last 3 or 4 years it became much less attractive to consumers. Why? The majority of first time homebuyers put zero down, yet FHA still required 3% down…and the #1 barrier to homeownership is coming up with a downpayment.

As FHA fell out of favor with homebuyers, we saw a big change in the mortgage industry, most notably, the increase in popularity of subprime (non-traditional) loans. These loans did a great job of getting Americans into homes, but did not contain the same consumer protections as FHA loans. Example: subprime lenders had much harsher interest rate adjustment caps on their adjustable rate mortgages (ARMs)…some also had prepayment penalties which imposed huge costs if a buyer should want to refinance or sell their home within the first 2 or 3 years of homeownership. This is not to say that while FHA faltered the mortgage industry was taken hostage by subprime lenders. The conventional standards of mortgage lending set down by Fannie Mae (FNMA) also changed to meet the changing needs of borrowers, and in doing so, became an attractive choice for many first time buyers (after playing second fiddle to FHA for years).

Here are the effects of the new House bill:

1. Eliminate current 3% down payment requirement.
2. Created new risk-based insurance premium structure that matches the premium (a.k.a mortgage inurance or PMI) with the credit risk that a borrower presents.
3. Increased and simplified FHA loan limits. In many areas of America, FHA was not a viable option for many buyers because the average home prices were so much higher than FHA allowed.

This is going to help many first-time home buyers, whether you are in Texas where John lives, or here in Sacramento.  If you have any questions about loans or Real Estate in Sacramento don’t hesitate to call (916.595.7900) or email me at Keith@BurmasterRES.com.  Also you can search for all the houses that are currently on the market on our website:   http://www.BurmasterRES.com

We were with some friends the other night and real estate seems to always come up in our conversations, “What’s the market doing? Where are the good investments? Should I rent or buy? Should we wait to sell?…” I try not to be the initiator of these conversations in a social setting, not because I don’t like talking shop, rather I don’t want to be “that guy” (see comments on cheesy real estate salesperson in previous blog, “Carmax of Realtors”) that no one wants around or will continue to invite to the party. I digress.

One woman at this gathering said, “I just loooooove my Realtor!” As if to say, “Keith, we’ll never use you for your services [accept to ask for your advice on the market].” I responded, “What do you looooooooove about your Realtor?” – Expecting to hear what great services she provided to them. The woman replied in a peppy tone, “I loooooove the fact that our Realtor is a ‘hugger’! She gives the best hugs!” I don’t know if this is a commentary on the nature of humans or just this particular woman. I realized in that moment that I truly would never take the place of this “hugger” Realtor. Don’t get me wrong, I’m a friendly guy and a hug here and there might be appropriate, but I hope that my clients would not give this as a sole reason for why they use my services.

For my past clients and potential new ones, here a short list of general reasons why you might loooooooove me as your Realtor.

1. I do an in-depth interview with each potential client before I begin to work with them.
2. I tailor my service to meet each client’s individual needs.
3. When I work with buyers and sellers, I focus on benefits rather than features.
4. When I work with investors I provide portfolio stewardship, and an investment system, including but not limited to financial investment spreadsheets, property management incentives, contractor estimates if needed, creative leveraging, innovative strategies to maximize profits, and more.
5. I find out what is important you to, not just my opinion or what I’ll like to sell you.
6. I have a comprehensive marketing plan.
7. I offer a “no-hassle” listing plan – meaning, if you are not satisfied with my service, at any point in the transaction you can cancel and back out.
8. When I close a transaction, I ask or survey my clients what I can do to improve my service in the future.
9. I have a strong support team (escrow coordinator, finance, title, inspections, etc.) that makes it easy for my customers throughout our entire transaction.
10. Oh, and I give hugs, when appropriate – ha ha! But that will cost you a little extra J

As a result I find that my past clients refer me business and want their family and friends to get the same exceptional treatment that they received.

A past client of mine was over for dinner the other night and mentioned that she just bought a new/used car from CarMax. She raved about the great experience she had with the salesperson. She went on about how he put no pressure on her and educated her and so on. She said, “It felt like we didn’t even buy a car – I mean there was no stress or anxiety. Just like when we bought our house. Because of you, it was so relaxed and easy [emphasis added]. I quickly replied, “Well thank you for that compliment. [Tongue and Cheek] You know, I am the CarMax of Realtors.” We laughed.

I got to thinking, when I entered this business one of my goals was to NOT become a cheesy and desperate sales person. From my experience there are at least two types of sales people:

1) The guy in the cheap suit that employs tired clichés to make a sale. The last time I was on a car lot the guy actually said to me, “What would it take to get you in this car?” A friend of mine was buying tires and the sales person was trying to up sell a larger set of tires (that would actually not fit the vehicle). The sales person said, “Are you man enough for these tires?” No joke! He was serious! (However, I’ve told this story a dozen time and gotten huge laughs.) You know the person I’m talking about… It’s why this picture of a used car salesman is vivid and infamous. Unfortunately there are these types of Realtors in abundance.

2) While I hate buying car, even from the dealer, I have had positive experiences too (like my client at CarMax) – Experiences where I was educated, not pressured, listened to and served by the salesperson’s expertise. As my client said, “It was as if we didn’t even buy a house OR have to go through that horrible process [that seems inevitable to the transaction].” This is what I’d refer to as a real estate professional or even consultant, and what I strive to be.

I will earn your business and prove my professionalism.

Right now, Zillow is the hype, and rightly so. Check it out for yourself, this home value estimator has slick features, such as, “Heat Maps”, great mapping, tools for buyers, sellers and owners.

The first time I tried to find the value of my home, right after I purchased it, I was disappointed to see, according to Zillow, that I over paid $100,000. OUCH! Oh wait, there is another small link to adjust the value of your home for improvements and special features. Whew, I was able to bump up the price close to what I paid.

For a seller/owner, Zillow is a good tool.

Here’s the “not so good.” When it comes to buyers trying to find a legitimate valuation of a potential property, there is no way Zillow can accomplish this without actually viewing and physically inspecting the property. This is where a professional (like myself) is necessary. Many of the urban neighborhoods that I work in have complexities that make pricing an art-form, rather than an algorithm or science. Values vary from street to street and block to block. A liquor store next door will (obviously) lower the value of a property, whereas (not so obvious, and non-existent on the Zestimator) a nightclub next door may, not always, increase the value of a property (I have first had experience on this one). The interior of a home, which the Zestimator cannot see, make all the difference . As in my own case, we have $100,000 of upgrades in our home. While in another case, the exterior of a home is flawless to the eye, yet there is dry rot and structure issue that lie beneath the surface. The plumbing is pieced together by the previous owner/”weekend warrior” and the electrical is updated, but not to code (can you say fire hazard).

How about this case study in valuation: One investor of ours just bought a parcel with two homes on it – they were boarded up and very undesirable. However, we were able to negotiate the price down $30,000, have our contractor bid the job to rehabilitate these home for $30,000 and work with the city to divide the parcel into two lots. This investor will be able to resell these, now individual properties and net $75-$100K. Now I don’t expect Zillow to do this kind of “magic.”

Bottom line, Zillow may be a good place to start. Oh, I love Zillow’s qualification – they say that their estimates will come within 10%. I’d fire myself if that were my margin of error. If you want to know what your home is really worth or the homes that you are looking to buy, please call me for a free consultation and accurate valuation. Or if you are looking to invest, let’s discuss some strategies to get you going.

Also, there are tools on our website that can assist you in your search. Go to: www.BurmasterRES.com