I have been speaking with a lot of prospective first time buyers lately, and it seems that the overall sentiment among them is that it has become more affordable to buy a home than rent a home. In many areas and under many circumstances, I believe this to be true. When you take into consideration the average home price and probable monthly mortgage payment in particular Sacramento neighborhoods vs. the average rent, often times the mortgage payment is less. Let’s take a look at a few different areas…just for the sake of citing my information sources, for average home price (used to calculate mortgage payment scenarios) I am using most recent January 2011 Trendgraphix data which is taken directly from MLS, and for average rent I am using the most recent Q1 2011 Homepointe Quarterly Residential Rental Survey. For my mortgage payment calculations, I am basing it on a 5% interest rate (which is actually above today’s average market interest rates), and including the full PITI – loan principle, interest, monthly property taxes, and monthly homeowner’s insurance (and mortgage insurance where applicable).

Natomas95833, 95834, 95835
Average single family home sale price: $199,000
Average rent for a 3 bedroom home: $1,361
30-Year Fixed VA Loan (Zero downpayment): $1,357
30-Year Fixed FHA Loan (3.5% downpayment): $1,451
30-Year Fixed Conventional Loan (10% downpayment): $1,319
30-Year Fixed Conventional Loan (20% downpayment): $1,120

Elk Grove / Laguna95757, 95758
Average single family home sale price: $223,000
Average rent for a 3 bedroom home: $1,392
30-Year Fixed VA Loan (Zero downpayment): $1,627
30-Year Fixed FHA Loan (3.5% downpayment): $1,400
30-Year Fixed Conventional Loan (10% downpayment): $1,478
30-Year Fixed Conventional Loan (20% downpayment): $1,255

Rosemont / College Greens95826, 95827
Average single family home sale price: $147,000
Average rent for a 3 bedroom home: $1,230
30-Year Fixed VA Loan (Zero downpayment): $1,002
30-Year Fixed FHA Loan (3.5% downpayment): $1,072
30-Year Fixed Conventional Loan (10% downpayment): $975
30-Year Fixed Conventional Loan (20% downpayment): $827

Arden95821, 95825, 95864
Average single family home sale price: $207,000
Average rent for a 3 bedroom home: $1,226
30-Year Fixed VA Loan (Zero downpayment): $1,411
30-Year Fixed FHA Loan (3.5% downpayment): $1,510
30-Year Fixed Conventional Loan (10% downpayment): $1,372
30-Year Fixed Conventional Loan (20% downpayment): $1,165

Carmichael, Fair Oaks95608, 95628
Average single family home sale price: $246,000
Average rent for a 3 bedroom home: $1,360
30-Year Fixed VA Loan (Zero downpayment): $1,677
30-Year Fixed FHA Loan (3.5% downpayment): $1,795
30-Year Fixed Conventional Loan (10% downpayment): $1,631
30-Year Fixed Conventional Loan (20% downpayment): $1,384

Citrus Heights, Orangevale95610, 95621, 95662
Average single family home sale price: $179,000
Average rent for a 3 bedroom home: $1,293
30-Year Fixed VA Loan (Zero downpayment): $1,220
30-Year Fixed FHA Loan (3.5% downpayment): $1,306
30-Year Fixed Conventional Loan (10% downpayment): $1,187
30-Year Fixed Conventional Loan (20% downpayment): $1,007

South Land Park, Pocket / Greenhaven95822, 95831
Average single family home sale price: $189,000
Average rent for a 3 bedroom home: $1,240
30-Year Fixed VA Loan (Zero downpayment): $1,288
30-Year Fixed FHA Loan (3.5% downpayment): $1,379
30-Year Fixed Conventional Loan (10% downpayment): $1,253
30-Year Fixed Conventional Loan (20% downpayment): $1,064

Obviously there are other tangible and intangible benefits to home ownership as well…for example, a tangible benefit is the fact you can write-off your mortgage interest on your income taxes, and also deduct some other related expenses each year. An intangible benefit might be that as a homeowner, you have the freedom to paint the walls, decorate, plant a garden, remodel, etc.

So clearly these numbers are just a baseline to give you an idea of housing affordability in certain areas. You definitely need to consult a loan officer to see what type of financing is the best fit for you, and ultimately just how much you can afford – and there are several variables that will affect your interest rate and terms. You should also speak with a CPA or qualified tax professional regarding the mortgage interest and other tax deductions to see how it will affect your particular situation. If you need a good referral to either one, feel free to contact me and I can put you in touch.

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Yes, it is time for my seventh installment of Erin’s Sacramento Short Sale Experiment! I am sure ya’ll are just on the edge of your seats to find out just what has transpired in the world of short sales in our Sacramento metro area since the last time? I am anxious to see if 2011 continues to bring a high volume of active short sale listings, and more importantly, more closed short sales. For those of you not following along at home, or perhaps if you are reading this for the first time, my short sale experiment is tracking a few different Sacramento zip codes to see what how the short sale activity increases or decreases over time as compared with traditional resale listings (where there is a seller with equity in a “normal transaction”) and to bank-owned resale transactions. My hypothesis at the start of this experiment: the number of short sales will grow over time, as will their dominance in our greater Sacramento marketplace (overall percentage of listings). I have continued to list more short sale properties, and thus far I think my hypothesis has been proven to be true. Starting in this installment, just for kicks and for the sake of comparison, I am going to track the numbers of active Foreclosure / REO listings. Let’s see how this new data compares to the “control data” for the experiment and also to last installment

95624 is the section of Elk Grove closest to Hwy 99. As of right this second according to MLS, there are a total of 354 active listings there. 231/354 listings are short sales. The median price in that zip code in December 2010 was $244,000 according to Trendgraphix. The result vs. the control data? Control data was 68.6% of all active listings in 95624 were short sales, vs. 71.9% last installment, vs. 65.3% this month. DECREASE over the control data, and a decrease over last installment. Number of 2010 closed short sales – 312. YTD closed in 2011 – 9….Active Foreclosure / REO listings – 60.

95610 is a section of Citrus Heights. As of right this second according to MLS, there are a total of 232 active listings there. 126/232 listings are short sales. The median price in that zip code in December 2010 was $164,000 according to Trendgraphix. The result vs. the control data? Control data was 60.3% of all active listings in 95610 were short sales, vs. 64.0% last installment, vs. 54.3% this month. DECREASE over the control data, and a decrease over last installment. Number of 2010 closed short sales – 109. YTD closed in 2011 – 1….Active Foreclosure / REO listings – 57.

95826 is a section of Rosemont and College Greens. As of right this second according to MLS, there are a total of 143 active listings there. 73/143 listings are short sales. The median price in that zip code in December 2010 was also $161,000 according to Trendgraphix. The result vs. the control data? Control data was 62.2% of all active listings in 95826 were short sales, vs. 51.5% last installment, vs. 51.0% this month = DECREASE over the control data. Number of 2010 closed short sales – 57. YTD closed in 2011 – 1….Active Foreclosure / REO listings – 36.

95864 is a section of Sierra Oaks, Arden Park, and Arden Manor. As of right this second according to MLS, there are a total of 134 active listings there. 57/134 listings are short sales. The median price in that zip code in December 2010 was $248,000 according to Trendgraphix. The result vs. the control data? Control data was 17.0% of all active listings in 95864 were short sales, vs. 29.7% last installment, vs. 42.5% this month. BIG INCREASE over the control data and last month. Number of 2010 closed short sales – 37. YTD closed in 2011 – 0….Active Foreclosure / REO listings – 12.

95818 is a section of Midtown, Land Park, and Curtis Park. As of right this second according to MLS, there are a total of 87 active listings there. 24/87 listings are short sales. The median price in that zip code in December 2010 was $307,000 according to Trendgraphix. The result vs. the control data? Control data was 16.0% of all active listings in 95818 were short sales, vs. 16.9% last installment, vs. 27.6% this month. INCREASE over the control data, and increase over the last installment. Number of 2010 closed short sales – 23. YTD closed in 2011 – 0….Active Foreclosure / REO listings – 6.

95819 is a section of East Sacramento. As of right this second according to MLS, there are a total of 78 active listings there. 18/78 listings are short sales. The median price in that zip code in December 2010 was $391,000 according to Trendgraphix. The result vs. the control data? Control data was 19.7% of all active listings in 95819 were short sales, vs. 21.1% last month, vs. 23.1 this month. INCREASE over the control data, and over the last installment. Number of 2010 closed short sales – 15. YTD closed in 2011 – 0….Active Foreclosure / REO listings – 6.

So in summary – of the six Sacramento area zip codes I am tracking for my experiment, 3 of them experienced a decrease in the number of active short sale listings from last installment, while 3 experienced an increase over the control data…interesting. It appears that areas with higher median sales prices are starting to show an increase in short sale activity, while the areas with the lower median prices are showing a decrease in short sale activity. AND while I have not specifically been tracking this data, it appears that there are an increasing number of Foreclosure / REO listings on the market. Since I just started tracking that statistic for this little project, we will have to see how those numbers compare in the future. My phone definitely keeps ringing and I continue to receive emails – I am fielding lots of inquiries from homeowners looking for more information and insight from my short sale experience…buyers too are really curious about the short sale process since they are encountering so many short sale listings in our marketplace. Also (you will be aware of this if you follow me on Twitter or Facebook), I closed many of my own short sale listings since the last installment of Erin’s Sacramento Short Sale Experiment…until next time!

Erin’s Sacramento Short Sale Experiment, Part I
Erin’s Sacramento Short Sale Experiment, Part II
Erin’s Sacramento Short Sale Experiment, Part III
Erin’s Sacramento Short Sale Experiment, Part IV
Erin’s Sacramento Short Sale Experiment, Part V
Erin’s Sacramento Short Sale Experiment, Part VI

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If you follow me on Facebook or Twitter, you will know that today I attended the Officers & Directors Installation Luncheon at the Sacramento Association of Realtors. Our new President for 2011, Doug Covill (a Realtor with Coldwell Banker) was sworn in, along with the President-Elect, the Secretary-Treasurer, and the members of the Board of Directors…I was actually elected to serve on the SAR Board of Directors for a 2-year term starting this year (2011-2012). Pretty neat. I am very excited to serve the members of the association at this level.

Along with the installation, there was an awards ceremony to recognize outstanding association members for their contributions in 2010. I was honored to be one of about a dozen association members to be recognized! I received an award for “Oustanding Service in Association Activities.” As I mentioned in my final blog post of 2010, last year I helped raise over $26,000 for charitable causes through different “Masters Club” and “Young Professionals CouncilSacramento Association of Realtors fundraisers.

This was a nice way to start 2011!

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So, if you follow me on Twitter or Facebook, you will know that several days per week, I tour the newest home listings that come on the market in different Sacramento neighborhoods.

Why do I do this? Well, it makes me a more effective Realtor. I find that I am better able to service the needs of my buyer and seller clients if I am familiar with the listing inventory in the areas that I work in. If I see something that one of my buyer clients may like, I immediately make arrangements to show the home to them. Or if I am listing a property, actually having first hand knowledge of the recent comparable home sales in the neighborhood helps me to guide sellers with regard to proper pricing. Of course, when I list a home, I open it up to other agents to tour it as well….it’s good exposure.

In addition to making me a more effective Realtor, there are a couple other reasons I enjoy touring.

The first reason is – touring is a good opportunity to network and briefly socialize with other agents. The listing agent is usually present during these “broker open houses” and often times other (good, productive) agents are touring the homes at the same time. The Sacramento real estate community is really a small world…so, when I know an agent on the other end of one of my transactions, it makes for a much smoother process as there is a spirit of cooperation, and that ultimately makes for a less stressful process for my buyer or seller client.

The second reason is – sometimes the homes on tour are a little…unique. Or they have unique features. Or unique furnishings. Or unique decor. At least once every week I am pleasantly entertained (or completely disgusted?) by something found in homes on tour. What were these people thinking when they did that!? I occasionally tweet these photos, but until now have not put them on my blog…well since it seems that I run across these things so frequently, I thought I would start a regular blog feature to “showcase” the oddities that people do to or with their homes…Of course the property itself will remain unidentified. Let’s start with a favorite of mine. Yes, this is a rug in a really gorgeous Sierra Oaks home, and yes it’s real.

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Early last year I wrote a blog post about HUD’s one-year suspension of the FHA “Anti-Flipping” Rule that began on February 1, 2010. Well, in just a little under a month from now, that suspension is supposed to be lifted…what does this mean? It means that buyers seeking to finance a home with an FHA loan may have issues purchasing property that has been owned by the current seller for less than 90 days.

As you can probably guess, a “Flipped” home is one that someone purchases with the intent to resell it within a short time period for a profit. Also, one thing that many people do not realize, is that the flipping rules for lending can also apply to transfers of title from placing the property in a living trust, adding a family member to title before listing it for sale, etc….not just investors looking to profit from flipping.

The “Anti-Flipping”rule had been that a buyer using an FHA loan can not purchase a flipped home until the title to the home has been held by the current seller for 90 days or more. A couple years ago, HUD excluded bank owned properties from this rule, as there is a change of title from the foreclosed owner to the bank. Often times however, investors who are flipping property do some improvements to the property and list it within days or weeks of taking title to the property….before the Anti-Flipping rule was suspended, it was not uncommon when searching MLS for properties to show a buyer to see an agent-only remark stating something like, “Sorry, no FHA loans until 2/15/2010 due to anti-flipping rule.” In fact, in 2008 I wrote a blog post about the anti-flipping rule when one of my buyer clients expressed interest in purchasing a flipped home.

So for nearly the last 11 months, buyers (and sellers of properties meeting the “Flipped” definition) have enjoyed the ability to use FHA financing on properties that meet the definition of a flip…I have not heard anything to support the continuation of this suspension of the “Anti-Flipping” rule. We shall see what happens when this suspension ends on January 31, 2011. If you are an FHA buyer looking for a Sacramento property and are looking at flipped homes, you may want to accelerate your home search.

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When I speak with prospective sellers about the value of their home as we get ready to list it, I always review the recent comparable sales from the neighborhood to assist to determine the listing price. Often, sellers will tell me things like, “Well I saw that house when it was for sale, and even though it’s the same floorplan, we have new wood floors. We spent $9,000 on the floors so our house is worth $9,000 more than the house that sold.” Or ” We put in a $65,000 swimming pool, so our house is worth $65,000 more than the house across the street.” Nope, sorry, that is just not how it works. You can not just simply add the cost of the improvement project to the perceived value of the house…generally, and depending on the project, you will only recoup a percentage of the cost of the improvements to the actual “appraisable” value of the house. An appraisal is what a mortgage lender will use to determine the value of the house in order to lend money to a buyer who will purchase your home.

Certain home improvements will yield a stronger “return on investment” than others. The actual cost of the remodeling versus the actual increase in value of the home are two different figures. Obviously if you are a homeowner, your enjoyment of the upgrades you make to your home is really important, but you will never get dollar-for-dollar increase in your home’s value.

Remodeling Magazine does a study every year regarding the home improvements that will give you the best return on the money you spend for the upgrades. Because trends are different regionally, they have separated different geographic areas in their report — so here is the data for Sacramento specifically.

So what are the top 5 Sacramento home upgrade projects that give you the best return on investment (ROI)?

  1. Replacing your front Steel Entry Door; the average cost to do this is $1,464, and the average actual value of this upgrade is $1,641 (112.1% ROI).
  2. Replacing your Garage Door; the average cost to do this is $1,514, and the average actual value of this upgrade is $1,461 (96.4% ROI).
  3. Wood Deck addition; the average cost to do this is $13,827, and the average actual value of this upgrade is $11,956 (86.5% ROI).
  4. Minor kitchen remodel; the average cost to do this is $23,603, and the average actual value of this upgrade is $19,854 (84.1% ROI).
  5. Window replacement; the average cost to do this is $14,431, and the average actual value of this upgrade is $12,016 (83.3% ROI).

You can read the full report here.

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I can not believe 2010 is coming to an end in just a matter of hours! It just does not seem that long ago that I wrote my final blog post of 2009, and I remember writing my final blog post of 2008 while waiting for a flight to Phoenix…I have been doing a lot of reflection on 2010 lately – from both a personal perspective and a professional perspective.

In 2010, professionally I feel like I accomplished a lot in terms of my transaction productivity, education, media exposure, awards and honors, fundraising, and more. So, professionally, I:

I have set many new professional goals for myself for this year, including increasing my production, possibly hiring another assistant agent to work with me, and much more…look out 2011!!

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I can not believe 2010 is coming to an end in just a matter of hours! It just does not seem that long ago that I wrote my final blog post of 2009, and I remember writing my final blog post of 2008 while waiting for a flight to Phoenix…I have been doing a lot of reflection on 2010 lately – from both a personal perspective and a professional perspective.

In 2010, professionally I feel like I accomplished a lot in terms of my transaction productivity, education, media exposure, awards and honors, fundraising, and more. So, professionally, I:

I have set many new professional goals for myself for this year, including increasing my production, possibly hiring another assistant agent to work with me, and much more…look out 2011!!

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I receive several calls per week from homeowners that are looking for information regarding Sacramento short sales, and aside from wanting to know about the process itself, one most common questions I get from them pertain to if the sale will cost them anything out of pocket, if so, then how much, and generally, who pays for what fees. Having successfully closed several short sales, I will tell ya’ll what I know to be true based on my experiences.

-Who pays the real estate agent commissions? In a short sale scenario, the lender(s) who agree to forgive debt and allow a short payoff of the loan(s) pay for the real estate agent (or Realtor) commissions – generally by absorbing the costs of the commissions out of the proceeds of the sale. As a side note, often times these commissions are re-negotiated by the lender(s) during the process. For example, if the seller and listing agent agree to a 6% total commission initially when the property is listed (usually then split in half to 3% to the listing agent, 3% to the selling agent), the lender may re-negotiate that fee later to perhaps 5% total (2.5% / 2.5%) or less. Note: Real estate commissions are always negotiable and NOT set by law or local custom.

-Who pays title insurance, escrow fees, and transfer tax fees? These are negotiable between buyer and seller when the offer is initially negotiated (before it is submitted to the lenders for approval). For example, perhaps the buyer and seller agree initially that the seller will pay for 100% of title insurance and escrow fees, 100% of county transfer tax, 50% the city transfer tax. The lender(s) may negotiate that the buyer pay a different split of these fees…however the portion that is paid by “the seller” is absorbed in to the overall debt forgiveness and short payoff. Occasionally you will see a lender agree to pay one of these fees, up to and not to exceed a certain amount (for example, they may agree to cover up to $750 of the escrow fee that costs $1200). Generally then, the buyer would cover the unpaid portion of that fee. So basically, again, the lender(s) will absorb many of those types of fees.

-Who pays for a home warranty? This is negotiable between buyer and seller when the offer is initially negotiated (before it is submitted to the lenders for approval). Generally though, I would prepare any buyer of a Sacramento short sale property to expect to pay for this cost, even if you ask the seller or short sale lender to cover it. In my experience, this is paid by the short sale lender in less than 20% of my approved short sales.

-Who pays for inspections or certifications? These are negotiable between buyer and seller when the offer is initially negotiated (before it is submitted to the lenders for approval). Again, most short sale lenders will not agree to cover things like pest or termite inspections, roof inspections, sewer line inspections, or any corresponding certifications. A lot will depend on the circumstances with the condition of the property, how many loans are involved, the buyers‘ loan program, if the property is in default, the length of time of negotiation, etc. As a safety net – buyers, do not expect that lenders will grant these requests. Generally short sale properties are sold “as-is” and sellers can not afford to make repairs anyway.

-Will the lender(s) give the buyer credits for closing costs? These are negotiable between buyer and seller when the offer is initially negotiated (before it is submitted to the lenders for approval). I have seen this vary widely from the short sale lender(s) agreeing to pay up to 6% closing costs for the buyer (including an instance of seller-funded downpayment assistance…which is no longer possible thanks to past legislation), to the short sale lender(s) rejecting those requests. Again, much will depend on the circumstances surrounding the sale of the property.

-Who pays delinquent property taxes or liens? Sellers – if you have not been paying your property taxes or county utilities, you really need to let your agent know this ASAP! I work closely with the title company on this to make sure that we know of any lien issues in advance, but because it can take several weeks or months to get approval, new liens may pop up during the lender negotiation process. When I negotiate short sales, one of my worst fears is that after the short sale is approved an unexpected lien will pop up. This has happened to me before, and for lack of a better way of describing it – this sucks! If you can let your agent know in advance that these items are unpaid, it will save lots of headaches all the way around. IF WE KNOW in advance that these liens exist, there is a great chance that the short sale lender will absorb these costs into their overall debt forgiveness and short payoff. IF WE DO NOT KNOW in advance that liens exist, once the short sale is approved – this will halt the transaction until we can find a way to pay these liens. The seller is often financially unable to pay them, the buyer does not want to pay, the agents commission has already been reduced, and the short sale lender has already taken a loss on the loan. Sellers – please save everyone a headache and communicate with your agent.

To make a bit of a sweeping generalization, the seller usually pays nothing out of pocket to close the transaction unless specifically asked to by the lender(s).

In perhaps one instance out of every six short sale transactions I close, the lender will request that the seller make a cash contribution to close the short sale. In these instances that I have negotiated, the sellers have had cash in the bank and were financially able to make that contribution…in those instances, the lowest cash contribution one of my short sale sellers has contributed was $1,000, and the highest was $5,000.

Also, you should note that in some short sale scenarios, the short sale lender will actually pay the seller “relocation assistance” to close the short sale. I have seen this in the range of $1,000 – $5,000. Not every Sacramento short sale transaction will qualify though.

Hope that answers some frequently asked short sale questions…cheers!

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I wrote about it earlier this year, and I think it is worth mentioning again…not all Sacramento area condo communities are eligible for purchase with FHA and VA loans. I get maybe 2 or 3 inquiries per week from excited buyers who see the prices of Sacramento area condo listings in the +/- $100k range (in fact, the average condo selling price in Sacramento County for November 2010 was $102,000), however most of them are looking to make purchases with FHA or VA loans…which isn’t possible with every condo community. Many condos must be purchased with conventional financing (20% downpayment) or all cash.

In order to qualify for FHA and VA loan programs, condos must meet certain criteria, and communities / entire associations must be approved by The US Department of Housing & Urban Development for FHA, or The US Department of Veterans Affairs for VA, in advance. At one point in time, there were “spot approval” processes where an individual unit could be approved on a case-by-case basis…but unfortunately those options just do not exist anymore.

So how do you find out if a condo is VA or FHA approved? There are two online tools that buyers (or sellers, for that matter) can use to look up approved condo communities. The tool to look-up approved condo communities for FHA loans is here, and the tool to look-up approved condo communities for VA loans is here. I use these tools all the time, and find them to be invaluable!

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