Monthly News
Wimberley Valley News & Views, December 2010
What you don't see could be a problem.
When buying a property in an as-is agreement, there might be issues with repairs that you cannot see. In an as-is sale, the seller attempts to place all the risk of purchasing the property on the buyer and could contradict the provisions of the Texas Deceptive Trade Practices Act. An effective as-is agreement is a combination of contract wording and the totality of the circumstances surrounding the transaction. Contrary to what some Sellers may think, an as-is sale is not an excuse for the Seller to avoid disclosing existing defects and of which the seller is aware and may put the Seller in a compromising position if undisclosed repairs turn up after closing.
Reasons why sellers can sell as-is: 1) Sellers who do not know about the condition of the property (estate sale) or do not live in the property (out of town investors) 2) Foreclosures 3) Third Party Relocation Companies.
Reasons why some Sellers want to sell as-is: 1) Seller can not afford or does not want to make repairs. 2) Seller is either physically incapable of making repairs or is not mentally prepared to interview contractors and supervise repairs. 3) Seller wants the convenience to walk away and just lower the price to an amount that might cover repairs.
Best way for Buyers to avoid buying a “money pit”: 1) Exercise the Option Period, making the offer contingent on the Buyer’s approval of a professional inspection by a licensed inspector. 2) Meet the inspector to discuss any surprise defects or extensive repairs that might not have been anticipated. 3) Thoroughly inspect all aspects of the property. 4) Get professional bids on the major repairs and negotiate for reasonable allowances. The Buyer may want to negotiate for a repair allowance so that the repairs will be done according to the buyer’s standards. Or, the Buyer can agree to have the repairs done before closing by the seller.
The best Seller precautions when selling a house as-is: 1) Obtain a professional home inspection before listing the home for sale. In my experience, this has always been a marketing advantage and takes away the element of surprise and anticipation during the Option Period. 2) Disclose all known defects on the Seller’s Disclosure. C. Make as many repairs prior to listing as possible and then let the buyers decide whether to buy the property or not.
Advantages for the buyer: Getting into a house for a lower price with the ability to make repair expenditures in the future according to the buyer’s standards.
Advantages for the seller: Convenience.
Cautions: You will be searching for a buyer willing to accept the risk of discovery and responsibility of making all repairs, which could result in a longer time on the market.
An as-is Sale is legally more complicated than it sounds and has liability risk for both Seller and Buyer.
Information Sources: Austin Real Tour® Legal Topics: John McGill/ Hancock & McGill/ Attorneys at Law.
Wimberley Valley News & Views, November 2010
New Real Estate Tax Laws Are Not Robin Hood’s Philosophy
Congress passed a bill on August 4th giving FHA the authority to change the amount charged to borrowers for both the Up Front and the Annual Mortgage Insurance Premiums.
Although the upfront amount has decreased and the annual amount increased, the net effect is a higher monthly payment for borrowers. Even with these recent changes FHA still provides a great opportunity for consumers wanting to achieve home ownership. FHA loans are not as credit score restrictive and only require 3.5% down payment. Call your favorite lender Nora Slyter: Capstar Lending, Cell: 512-757-2713
or search (http://govtrack.us/congress/bill.xpd?bill=h111-5981)
Higher tax rates for Investors and Savers: When Congress passed the Health Care Bill this year; it included revisions to several Real Estate tax laws. The capital gains tax will rise from 15% in 2010 to 20% in 2011. The tax on the net investment income of high-income persons: People with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to this tax. The tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home. By 2013 the rate will rise an additional 3.8 %. (FactCheck.org )
The return of the Death Tax: This year, there is no death tax. For those dying on or after January 1 2011, there is a 55 % top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones. (Americans for Tax Reform www.atr.org )
This will raise every Buyer’s monthly payments who is using an FHA Government loan program to purchase or invest in a home or rental property beginning October 4th, 2010. Here's what you need to know:
Wimberley Valley News & Views, September 2010
Whether it’s from rain or your plumbing system, water is the source of many repairs and can be hard to detect prior to major damage.
The four most common water damage issues are: leaking shower stalls, burst washing machine hoses, leaking icemaker valves/water line and water heaters.
Leaking shower pans have become less of a problem since builders have been installing one piece molded plastic or vinyl shower pans instead of having them site built and tiled over. If you have an all tile shower with a tiled seat, be sure it is backed with a water proof seal and the seat slopes a little toward the front. Standing water can seep into the walls and create mold and moisture that is unnoticed for years.
Check your washing machine hoses and replace them every 4-5 years. Homes today have high water pressure (80-100psi) which causes premature hose failure, especially on the hot water hose. Stainless steel hoses are safer than the basic black rubber type. When you leave town, turn off the water to your washing machine.
Wood floors in the kitchen are an accident waiting to happen. If the icemaker or dishwasher starts seeping water under the flooring, you won’t know it until the floor start to buckle. Because of the damage, the house might have a water claim attached to it which may cause insurance problems when you sell. You can purchase a water sensor that beeps when it gets damp ($12 at Lowes plumbing dept.) place behind the fridge and under the dishwasher. These also work well for the attic mounted water heater and A/C for the same reason.
Don’t wait until your water heater fails to replace it. Once it fails, you are not only out of hot water for at least 24 hours, but now you have water damage and possibly a lot of it, even if your tank is in the garage. Inspectors usually suggest replacing a hot water heater if it is 15 yrs. old or more.
On A/C Units which are in the attic always have a backup drain or automatic shut off switch to protect against an overflow. Units in closets rarely do unless they’re relatively new. Do yourself a favor; pay your A/C man $100 to install a float switch in the drain line. If it gets clogged, the switch will shut the equipment off. Make sure your drain line drains to the exterior of the house.
A little precaution can save you a lot of money and keep your house in better shape to sell.
Wimberley Valley News & Views, July 2009
Land Appreciation Slows to a Trickle
Land markets tend to change slowly rather than with a bang. The typical dynamic is a dwindling activity level with rising prices as buyers concentrate on fewer high-quality properties, leaving the more ordinary land to linger.
Dr. Gilliland, a research economist with the Real Estate Center at Texas A&M University, states that this has proven true now that we are at the end of the second quarter of 2009.
During 2008 the volume of land sales lagged 31% behind 2007 levels. Ranch land sales dropped 30% or more. Buyers are now resistant to current prices and properties are sitting on the market far longer han anticipated, even after price reductions.
Historically, uncertainty in financial and investment markets compels people to seek a safe haven for their capital. Investors may gravitate toward land in the current economic environment, just as hey did after 9/11. As the national recession drags on into 2009, Texas is experiencing the painful reality of a declining land market. The extent of the exposure lies partly in the financial strength of current owners to hold the land until the market turns. Gilliland observes, “The potential for a long-term correction in land markets has increased substantially. Market observers predict sales volume will diminish and prices will stagnate in the short term.”
How does this affect you if you don’t own a ranch or acreage? Many residents of Wimberley have two or more acres included in their homestead. In the last few years I have watched some land double in price. Hays County tax valuations have doubled and tripled in some cases. The structure of the house has a 10% cap on the amount that the tax valuation can be raised for one year. Not so for the lot or acreage land valuations. If you did not protest your taxes this year, prepare for next year.
If you are considering selling your property, most of your property appreciation in the last few years is a result of your land holding it’s value to a greater degree than the house structure. This makes a difference in the appreciation to relatively two equal houses, one on a .25 acre and the other on five acres. The land values have carried the Wimberley area appreciation.
Investing in land consistently seems to be the stable, slow to appreciate and slow to depreciate investment for long term value. As in all real estate investments, timing is everything.
Credits: Tierra Grande Magazine, Jan.2009. Texas A&M Real Estate Center. Austin and Central Texas MLS Systems.
As of June 15th, 2009, Jackie was #1 in Dollar Volume Sales and #1 in Units Sold in the HW area. Stats from the Austin MLS System. With over 20 years of experience in real estate, Jackie brings local knowledge and a dedication to her clients and her real estate business in Wimberley.
Wimberley Valley News & Views, June 2009
Appraisals Define Our Market
Sometimes you just don’t know how good things are until they change. The way Appraisals are ordered and the regulations Appraisers have to follow have changed. The Home Valuation Code of Conduct (HVCC) is an agreement entered into by Fannie Mae and Freddie Mac and their regulator the Federal Housing Finance Agency and went into effect on May 1, 2009. This has affected the outcome of several of my recent sales for the buyer and the seller.
The last 6 months of recorded sales is very low. This can make it difficult to satisfy the FNMA/FJLMC guideline that requires 3 comparable sales within the last 6 months. Appraisers must use one true “like” comparable. For example, if your subject property is a 2 bedroom house, the appraiser must use a least 1 other 2 bedroom home that has sold in the past 6 months. The most recent sale located the closest to the subject property sets the bar for the next appraisal. Value adjustments are watched very closely. These are percentage adjustments appraisers make when comparing homes. Typical adjustments are for acreage, views, type of garage, condition, to name a few. Each line adjustment cannot be more than 10% of the sales price. The Net adjustment cannot be more than 15% of the sales price. The Gross Total adjustment cannot be more than 25% of the sales price.
The new Home Valuation Code of Conduct (HVCC) regulates lender’s appraisal practices more closely. Lenders cannot ask appraisers to pull comparables before they complete the appraisal. Mortgage brokers will have to use an appraisal management company to order their appraisals. Gone are the days when an agent could meet the appraiser with comparable sold property information in hand, or could call and offer help to an appraiser who was having a hard time making the value of a sold property. Gone is the ability to choose your own appraiser if you are the Buyer. Gone are the days when Buyers could depend on an appraiser knowing the area market and the quirky valuations that occur in Wimberley.
A request for a field review appraisal is becoming more common. This is a second appraiser who reviews the first appraisers’ work. The review has to be originated by the underwriter if there are issues with the first appraisal. Of course, a second appraisal involves time, expense and may not produce the result you want.
A helpful regulation is that the Borrower is required to have his appraisal for review at least three days before their closing. Change has come very fast to the Real Estate industry so stay informedand do not be caught off guard by assuming every house is going to appraise for what the buyer and the seller agree the sales price should be.
