Elizabeth Weintraub • Sacramento Short Sale Agent • Land Park

Yesterday, I posted the last 15 months of homes for sale, pending and sold in Sacramento County through November of 2008. Below, is the chart that shows the last 15 months of bank-owned homes. There are a couple things I find interesting between the two charts. First, 33% of Sacramento County's housing inventory (homes for sale) in November were bank-owned homes, homes that have gone through foreclosure. Second, 72% of the closed sales in November were foreclosures. That translates to almost 1 out of every 4 homes sold in November was a foreclosure.

But look at the light green bars on top. These indicate the number of foreclosure homes for sale in Sacramento County over the past 15 months. The red line shows the number of pending sales, and the dark green bars are closed foreclosure transactions. It's almost like somebody looked at this chart last April and decided to hold the inventory steady. There is very little change in the number of homes for sale from April through November, yet the pending sale numbers have continued to climb, right along with the closed sales.

Hmmm . . . if I wanted to level out sales prices, the first thing I would do is hold off on releasing more inventory to the market. Lower the supply. Below is the chart reflecting supply of foreclosure homes in Sacramento. Check this out:

Sacramento County had 9.6 months of inventory in September of 2007. We are now down to 1.8 months of inventory. This means it would take less than 2 months to sell every foreclosure home on the books. There is no inventory. Yet, interestingly enough, the number of trustee deeds (the document that transfers title to the bank in a foreclosure) are rising. According to DataQuick, banks repossessed 14,054 homes through September.

As a result, home buyers will find themselves continually competing against each other (and against investors) to buy a home now. Multiple offers are the norm. The frenzy will be further fueled by the fact that mortgage rates are at a four-year low. But it also means that great deals are out there. I advise buyers to hire an experienced and knowledgable real estate agent versed in foreclosures to win those offers. Otherwise, you'll end up throwing offers at a wall and they won't stick.

If you need help buying a foreclosure home in Sacramento County, you can call Elizabeth Weintraub at 916.233.6759. I've been doing this for 34 years and doing it well. Almost every home I have in escrow right now is a result of a multiple-offer situation. My buyers are winning.

The Short Sale, by Elizabeth Weintraub, coming from publisher Archer Ellison in January 2009.

Chart images: Trendgraphix, used with permission.

I believe it's good practice to insist that home buyers choose an offering price because it's their money and their investment, whether the property is a home or a 500-unit apartment building. I give buyers enough information about the neighborhoods we tour, the market trends and facts for the area, coupled with comparable sale data to help them make a decision. Yet almost every buyer pushes that issue and says, "But that's why I hired you as my agent -- I want you to tell me what to offer."

It's human nature. I take that to mean they want my opinion, so I will eventually spit out a suggested price, making it clear that the price I am tossing into the mix is what I would offer, not what they should offer. Because I often know the listing agent, I may have other reasons for naming a certain figure. Much depends on the type of property, how long it has been on the market, the terms under which it is listed, competing offers from other buyers and so on.

Earlier this week, I showed a bank-owned home to a buyer. A bunch of bank-owned homes, actually. But one stuck in his mind. Let's say it was listed at $200,000, to protect the identity of the parties involved. It was on the market zero days. I explained to the buyer that it made no sense to call the listing agent because the listing agent does not answer his phone. I've been in other deals with this agent and know how he works. Still, after touring homes all morning, the buyer singled out this particular Sacramento home. His plans are to buy, fix-up and sell several homes in Sacramento, so it would be an investment for him.

We discussed the price at great length. He asked me again to call the listing agent. I explained that the agent has warnings plastered all over his web site and attached to each listing that says the standard, "Don't ask us how much the bank will accept because we do not know; don't ask us how many offers we have received because we will not tell you. MLS is current."

He pressed the issue on price, insisting I give him a figure. OK, I suspect a few offers will come in under list price, a few at list price, and quite a few above list price because that home was definitely priced way under market value. By at least a $100,000. That's a big spread. And the profit margin upon resale would be enormous because fixed up it would be worth $500,000.

Finally I told him I would offer $230,000.

"I'd like to offer $250,000," he replied.

"Are you sure? I don't think you have to go that high," I cautioned.

"Let me think about it and call you back."

An hour went by and the buyer called again. "Yes, I want to offer $250,000."

OK, I submitted the offer to the listing agent.

Couple of hours later, the buyer called back. "I would like to change that offer to $230,000."

Well, he could do that, but it would weaken his negotiations because the offer was already emailed to the bank. He decided to stick with his original price.

Fortunately, the bank accepted his offer among the highest and best. He's excited. And I guess that's all that really matters.

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However, as some Sacramento real estate investors have discovered, it pays to investigate the company before handing over cash to buy into a tenants in common project. Not only is checking out the company essential, but finding out whether the investment is registered as a security might save you scrutiny by the SEC.

One such company, Sacramento-based Heaven Investments Holding Corp., filed for bankruptcy in August, listing assets of $21.6 million and liabilities of $30.6 million, and it's presently being investigated by regulators.

The experts say if you're going to participate in a tenants in common 1031 exchange, make sure you're dealing with a registered representative who has a Series 7 (or Series 22) and Series 63 (or Series 66) license because such transactions, although real estate, are actually securities.

The way a tenants in common 1031 exchange works is instead of trading property A for property B, investors can exchange their equity by buying a fractional interest of a much larger, perhaps commercial, project. These investments are typically offered through a private placement memorandum. Investors are advised to select a company with a proven track record and work with a tenants in common specialist who has performed due diligence.

Some of the advantages of a Tenants in Common 1031 Exchange are:

• Preservation of wealth
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• Cash flow possibilities
  
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Read more about Tenants in Common 1031 Exchanges.

The Short Sale, by Elizabeth Weintraub, coming from Archer Ellison in January 2009.

Photo: Big Stock Photo