It was love at first sight. While showing homes, some will be OK, most will be discounted from consideration and eventually my clients find one that they really like enough to write an offer. It’s always a pleasant surprise when my clients discover a home that matches their personalities, expectations and price. But this time I knew that this one home was really special, as did my client. While she was oohing and awing about all the upgraded features I was trying to figure out why the home was priced so low.
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I had spotted the new listing in Cameron Park that morning while making a last minute search of the MLS. Although I had already scheduled showing appointments for the day, I decided to add the home at the last minute. The listed price was under what my client could afford, the house was vacant and the home wasn’t a bank REO or a short sale. Besides, I didn’t have all that many homes to show.
A clear sign that the real estate market has changed from a buyer’s market to a seller’s market is when there are very few homes for a buyer to preview. What’s happening with inventory in Cameron Park is indicative of the market changes in the entire county.
My client, a single career woman, was qualified up to $300,000. She wanted a three-bedroom, two-bath, single-level home with at least 1,500 square feet and one that didn’t require too much work. She liked Cameron Park where she had friends but would also consider El Dorado Hills and Folsom. Cameron Park had six single-level homes listed for sale less than $300,000 but two were fixers in need of repairs and one was located adjacent to the runway at the Cameron Park Airport. El Dorado Hills had two homes barely priced less than $300,000 meeting our specifications and Folsom had three but one was rented and was unavailable for showing. That left only seven homes for previewing. Last summer there were three times as many.
My last-minute decision to add this new listing was fortuitous but puzzling. When a home looks that good and is priced under market value I get suspicious. So while my client was mentally moving in I was dialing the listing agent. I didn’t want my client to get her heart set on a home that she would never own.
“Hi, I’m calling on your listing on Sterling. Could you update me with the status of your listing?”
Most agents are not sitting at their desk waiting for the phone to ring so I was surprised when the listing agent answered my call. She explained that she thought she had priced the home at market value but had already received a number of enthusiastic inquires and expected soon to have an offer. Today multiple offers on well-priced homes are more common than not and another sign we are in a seller’s market.
The other homes we previewed that day were pretty average. They were all inferior and priced well-above the Cameron Park home. It was time to get serious. Returning to my office I studied the most recent sales and determined that the home was significantly under-valued. Its condition was far superior to anything we had previewed near $300,000 and the location on a greenbelt was a premium.
My client was prepared to pay $300,000 for this home. I prepared an offer at $20,000 over the listed price which put us at $265,000. I could easily justify the $265,000 and reasoned nobody was going to offer that much over listing price. Wrong! During the first 48 hours of the home’s appearance in the MLS, it was shown 32 times. The owners looked at 18 offers. Fifteen were over the listing price. The seller countered eight offers, including mine. It was time for another call to the listing agent.
“If my client accepts your counter offer can we wrap this up and open escrow?”
“No. There are other counter offers outstanding. We will review all of them over the weekend.”
“If the house doesn’t appraise for the agreed upon sales price, can we renegotiate?”
“No, the counter offer eliminates the appraisal contingency.”
“Our offer was contingent upon a loan approval. What happened to that contingency?”
“We will only consider offers without any contingencies.”
My client accepted the seller’s counter offer as written and waited out the weekend.
Traditionally, contracts have certain “standard” contingencies for the buyer’s protection. The most common are the appraisal meeting the agreed upon purchase price, the loan contingency and the buyer’s property inspection rights. Sellers are now limiting or completely eliminating these buyer contingency rights.
Another signal that sellers are flexing their new-found negotiating muscles is their unwillingness to pay the majority of the buyer’s closing costs and few sellers are discounting their listing price for cash. The once revered “full-price, all-cash” offer is now subordinate to offers “over listed price” without any contingencies.
Of the 200 home sales last month, half sold within the first 30 days of the listing period at or above the listing price. With only 650 county homes showing as active listings, prices are positioned to rise. That’s good news for homeowners and long overdue. And, yes, my client opened escrow on that home Monday.
Ken Calhoon is a real estate broker in El Dorado County. He can be reached through his website at www.kencalhoon.com.