I read a piece this morning by one of my favorite bloggers, Katerina Gasset. Katerina says cash is king in her part of the world. She's in Florida. She has left out a component to that story, though. Like Katerina, I am also a short sale agent and I work with sellers of short sales in Sacramento, which makes me a Sacramento short sale agent.
I see many offers from various types of buyers in Sacramento because I manage a large inventory of listings. In my world, cash is not always king. Cash buyers seem to think they can get a better price on a short sale simply because they are a cash buyer, but it's all cash to the bank in the end. Plus, the bank typically has little incentive to allow the home to be sold as a short sale. That's the part investors forget.
Some guy in town is inserting weird verbiage into his listings. He says that buyers should make an offer, any offer, because you never know what will happen in a short sale. He sounds desperate. From my perspective, this guy is selling his sellers short. He's making himself work twice as hard as he needs to work, and for nothing. You're much better off figuring out what it will take to get the bank to accept your offer, and then sending that offer to the bank. Some short sales are a steal, some not.
But what you can't take out of the equation is the fact a short sale seller has emotional ties to the house and cares about who buys it. Many of these sellers would rather see their home sold to an owner occupant, a first-time home buyer, than an investor. And sellers are still in the driver seat. It's their home. It's not the bank's home. The sellers get to pick who buys their home, as long as they are not discriminatory or violate the Fair Housing Act.
Investors right now like real estate because it is a long-term hold vehicle. Real estate has throughout history surpassed other types of returns on investment. Prices are very depressed in Sacramento right now, which makes it a great place to buy. When you think about other places an investor could put her money, the rates of return are not so hot. The stock market is volatile. Mutual funds aren't faring so well. Money market rates are in the toilet -- .5%! Savings accounts are a joke at .001% or whatever.
If an investor can buy a home for $100,000 and rent out that home for $1,000 a month, that's a 12% return on their money. That's cash flow! Double that sales price and take out a 50% mortgage, and it's still CASH FLOW. It's cash flow that is king. Not cash. Not to mention, a first-time home buyer can buy a home for less than rent. Buying a home puts extra money into a home buyer's pocket every month, too. That's cash flow!
If you can buy a home with an $800 monthly mortgage that would otherwise rent for $1,300, you're saving $500 a month. My friend and terrific Sacramento agent Cathy McAlister, shares that first-time home buyer story. See, sometimes I can't get past the home page of ActiveRain to make it to my account to write a blog in the morning. I never know what I'm going to write until my fingers hit the keyboard. If nothing strikes me, I write about what happened yesterday, but you can see this morning I got sidetracked.
Photo: Manzanar National Historic Site, California, by Adam Weintraub, the last photo sent before he returned home
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Certified HAFA Specialist
My Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
Lyon Real Estate is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.
The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice. It could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.
